ALERT

[NEED LEGAL HELP?] Call our 24/7 Helpline: 1-866-723-4855

Credit Loss Ratio

Definition - What does Credit Loss Ratio mean?

Credit loss ratio refers to a system that is used in the mortgage and lending industry that is supposed to help determine whether a specific lender is carrying too much risk. More specifically, a credit loss ratio compares the amount of credit losses that the lender has experienced to the par value of the mortgage-backed securities that the company possesses.

Justipedia explains Credit Loss Ratio

Credit loss ratio has always been important to lending and mortgage companies; however, credit loss ratio became exceptionally important after the financial crisis of 2008, which included the underwater mortgage crisis. Trying to keep a positive credit loss ratio became increasingly difficult during the time of the underwater mortgage. This is turn caused many of the lending and mortgage companies to spend a hefty amount of money to try and statistically determine how to create the highest credit loss ratio possible.

Connect with us

Justipedia on Linkedin
Justipedia on Linkedin
Tweat cdn.justipedia.com
"Justipedia" on Twitter


'@justipedia_com'
Sign up for Justipedia's Free Newsletter!

Find a Lawyer