Fallout Risk


DEFINITION of 'Fallout Risk'

The lending risk that occurs when the terms of a loan are confirmed simultaneously with the terms of a property sale. Because the mortgage terms are set but the sale is not finalized, there is a risk that the transaction may not be completed. This represents a risk to the mortgage pipeline, as the loan may not be issued.

BREAKING DOWN 'Fallout Risk'

When a mortgage originator confirms the details of a loan, it expects the lending process to be completed. Arrangements are usually made to package the loan for resale in the secondary mortgage market. With fallout risk, the deal might not be completed and the loan will fall out of the mortgage pipeline.

  1. Secondary Mortgage Market

    The market where mortgage loans and servicing rights are bought ...
  2. Mortgage Originator

    An institution or individual that works with a borrower to complete ...
  3. Mortgage Pipeline

    Mortgage loans that have been locked in with a mortgage originator ...
  4. Mortgage Fallout

    A term used to describe the percentage of loans that do not close ...
  5. Primary Mortgage Market

    The market where borrowers and mortgage originators come together ...
  6. Encumbrance

    A claim against a property by a party that is not the owner. ...
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