Difference between revisions of "Pipeline Risk"

From Open Risk Manual
(Created page with "== Definition == Pipeline Risk denotes a specific type of price risk that may occur in the process of Financial Product origination, where the terms of the contract may ha...")
 
(No difference)

Latest revision as of 17:39, 11 September 2019

Definition

Pipeline Risk denotes a specific type of price risk that may occur in the process of Financial Product origination, where the terms of the contract may have been agreed but the client still has the option not to close the transaction[1]

Mortgage Pipeline Risk

When a retail borrower submits a loan application, a mortgage bank normally grants them the option of “locking in” the rate at which the loan will close in the future. The lock-in period commonly runs for up to 60 days without a fee. If the borrower decides not to lock-in at the current established rate, the loan is said to be “floating.” Locked in pipeline commitments subject the bank to Price Risk, while floating rate commitments do not.

References

  1. Mortgage Banking, Comptroller's Handbook, 1998

Contributors to this article

» Wiki admin