COLLATERAL RISK
COLLATERAL RISK
WHAT IS IT, AND WHO CARES?
APPRAISAL BUZZ FALL 2020 | 13
BY TED DURANT
So, what exactly is collateral risk, and
who cares? This may seem like an odd
question to ask in a publication
associated with Appraisal Buzz, but an
occasional revisit to fundamentals can
be a useful reminder of the value of
what we do.
The Corporate Finance Institute says
“Collateral is an asset or property that an
security for a loan. It is used as a way
to obtain a loan, acting as a protection
against potential loss for the lender
should the borrower default in his
payments. In such an event, the
collateral becomes the property of the
lender to compensate for the unreturned
borrowed money.” This should sound
familiar to anyone involved in residential
mortgage lending, which is secured by