Which factor is NOT a risk mitigating factor for a simultaneous second loan?

The correct choice is based on the principles of risk assessment in lending. A high housing expense ratio indicates that a borrower is spending a large portion of their income on housing costs, which can elevate the risk of default, especially when combined with a simultaneous second loan. In contrast, mitigating factors like a high credit score, low loan-to-value (LTV) ratio, and low debt-to-income (DTI) ratio generally signal that a borrower is financially stable and better positioned to handle multiple loans.

Having a high credit score reflects a borrower’s strong credit history and reliability, while a low LTV indicates that the borrower has a significant amount of equity in their property, reducing the lender’s risk. Additionally, a low DTI ratio means that the borrower has a manageable level of debt compared to their income, which supports their ability to meet loan obligations.

In essence, while high credit scores, low LTV, and low DTI ratios serve to mitigate risk, a high housing expense ratio does not provide the same advantage and instead raises concerns about the borrower’s financial capacity, making it the correct answer to indicate a lack of risk mitigation.