Is mortgage restructuring available to you? Discuss how you think banks can change the terms of...

Is mortgage restructuring available to you? Discuss how you think banks can change the terms of a mortgage to protect their expected returns from default and prepayment risks

Expert Solution

Answer 1

Mortgage restructuring is a debt restructuring or refinancing technique when a borrower is under such financial distress that it prevents timely repayment on a loan. Here a borrower leverages a newly obtained loan with better terms to pay off a previous loan. There're defferent types of institutions which is expert in this domain will help those people with giving the instructions and advices and they're also providing agency services on a commission basis also and they make mortgage to repay it quicker and become debt free. defferent methods of Mortgage restructuring. It can be as follows.

1. Pay off the highier loan repayments regularly.

2. Pay a sum of amount before maturity.

3. Use offset account and direct it towards principle payments to save interest payments.

Answer 2

The banks can change the terms of a mortgage to protect their expected returns from default and prepayment risks.

1. The Bank can assess the borrower's ability to repayment of the loan and restrucure their Mortgage loan according to the assessment Report.

2.They can consider the current and projected rate of interest and talk them about the repayment.

3.Evaluate the borrower's financial commitments and positions.

4.Allocation of lowest possible interest rates right from the start according to the repayment capacity of the borrower.

5.They can correctly splitting of the loan between fixed and floating.

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