A mortgage loan officer is found to have provided false documentation that resulted in a lower interest rate on a loan approved for one of her friends.The loan was subsequently added to a loan pool,securitized and sold.Which of the following risks applies to the false documentation by the employee?

Question

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The risk in this scenario is operational risk, which refers to the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. The false documentation provided by the mortgage loan officer is an example of inadequate internal processes and people. It can result in financial loss to the institution and potentially impact its reputation.

A Mortgage Loan Officer Is Found to Have Provided False