Finance
What is 'interest rate risk' in Idaho mortgage lending and how do lenders manage it?
AThe risk that interest rates will not change
BThe risk that interest rates will change after a lender commits to a rate, managed through rate locks, hedging, and selling loans on the secondary market✓ Correct
CThe risk that borrowers will not pay interest
DThe risk associated with ARM loans only
Explanation
Interest rate risk is the risk that market rates will rise after a lender commits to a fixed rate, reducing the loan's value. Lenders manage this through rate locks with borrowers, hedging instruments, and selling loans on the secondary market to Fannie Mae/Freddie Mac.
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