Effect of Loan Value and Collateral on Value of Mortgage Default

Unram Law Review

This article aims is to acknowledge the factors of a Non-Performing Loan. Also, to acknowledge on how to settle the non-performing loan with the mortgage guarantee through the litigation or non-litigation way, as well as the obstacle on mortgage guarantee execution by the creditor (Bank). The method of this research using a normative (library) research which is the research on the secondary data. The problem approach of this research is normative juridic, the specification of this research using analysis descriptive, in the field research the writer using 3 (three) methods which is done through an interview, questionary lists and document. The location of this research is PT. Bank Danamon branch of Purakarta. The result of this research shows that the factors which causes of a Non-Performing Loan by the debtor from the internal and external factors. The internal factors are a situation where the debtor unable to pay his loan that have matured because of the burden of the installment...

2001

Housing mortgage finance in India is constrained by the maximum loan-tocost ratio and installment income ratio conditions imposed by housing finance companies. The typical reason for this behaviour is that the market for the sharing of risk in mortgage lending is not yet fully developed. Mortgage insurance plays an important role in developing this market. The objective of this paper is to present a case for mortgage insurance market in India. This paper develops a mortgage premium structure framework in which mortgage insurers charge an insurance premium that equates losses to revenue. This paper also models mortgage termination due to prepayment and defaults. We contend that the termination of mortgage in housing is not as ruthless' as OPM theory would suggest, primarily because households are not financiers in the `stricter sense'. We have used the Cox proportional hazard model to analyze prepayment and default of mortgage behaviour in India. The results indicate that financial concerns (like the option price, loan to value ratio, and monthly principal and interest to income ratio) are important determinants besides household characteristics. The cumulative prepayment or default probabilities from these models are used in the estimation of the insurance premium structure.

ERN: Credit Risk (Topic), 2017

Over the past decade, as a result of rapid growth of the loan portfolio and the financial crisis, importance of credit risk analysis has increased worldwide. After the global financial crisis, more attention has been paid to loan granting process by various researchers and financial market participants. New regulations forced commercial banks to improve credit risk management and existing statistical models. This paper, based on data obtained from three major banks of Georgia, develops logit model to examine mortgage loan borrowers’ characteristics that determine their default probability. Similar data is rarely available for developing countries, therefore findings of this study can be useful for those countries as well. According to the research, main characteristics that determine borrowers’ creditworthiness are payment to income ratio, loan to value ratio, credit history and borrower’s type (whether borrower receives income in that bank). Average prediction accuracy of the model...

2015

May-June CAUSES OF LOAN DEFAULTS IN PAKISTANI BANKS: A CASE STUDY OF DISTRICT D.G. KHAN Abdul Ghafoor Awan*, Nasir Nadeem** Falak Sher Malghani*** *Institute of Southern Punjab, Multan. Email: [email protected] cell. No. 03136015051 ** University of Agriculture, Faisalabad. Sub-Campus Burewala. Email: [email protected] Cell. No. 03338382134 ***LUAWMS Uthal, Baluchistan. Email: [email protected] Corresponding author Email: [email protected] Cell. No. 03136015051 ABSTRACTThis study investigates the causes of loan default, and its impact on the profitability of the Pakistani banking sector. To find the answers of the questionnaires 100 respondents were selected through purposive sampling. The results of the study show that major causes of client’s loan default are Lack of business management knowledge, ineffective monitoring, delayed loan approvals, poor weather conditions, poor credit appraisals, and unwillingness of clients to repay the loans. These loan defaults ...

2009

This paper empirically examines the functional role of various micro and macro economic as well as situational factors that determine residential housing demand and risk of borrower default. Using 13,487 housing loan account sanctioned from 1993-2007) data ...

Indian Journal of Economics and Development, 2019

Objectives: This study attempts to investigate the determinants of bank default in repayment of loan in the district of Bankura (West Bengal). It also looks in to the presence of wilful defaulter. Methods/Statistical analysis: We have collected the primary data during 2009-2010 from 400 sample borrowers who have taken loans from Commercial Banks, Regional Rural Banks and Cooperative banks. Here the dependent variable is probability of bank default. We employed the logit models to identify the main determinants that influence the bank default of the borrowers. Findings: In the logit model, we find that the ability to repay loans and the probability of bank default are negatively related for households in below poverty line and middle income group. But it is positively related to the probability of bank default for households in high income group. It may be due to wilful default for customer. We also find that the probability of bank default varies directly with the level of income. This is an also indication of wilful default for rich people. Ultimately this study shows that there are two types of defaulters, namely, wilful defaulters and involuntary defaulters. The reason for the wilful default includes membership of the governing body of the loan sanctioning authority. The reasons for the involuntary default include education level of the borrowers, short fall of desired level of investment, higher dependency ratio of the family, lack of proper irrigated, unproductive use of loans and inability of the borrowers to repay the loans to the banks due little income generation. Applications: This study needs coordination between the financial institutions and borrowers to increase the growth rate of income of the borrowers. It has also suggested the government to reduce the probability of bank default.

2016

While analyzing the loan delinquency behavior of home-loan borrowers of a Bangladeshi non bank financial institution, this paper investigated the determinants of home-loan delinquency. The primary contribution of the research delineated in this paper is to demonstrate the importance of borrower specific characteristics in determining the risk of credit loss on housing loan repayment for the lending institutions. It has been documented that the financial aspects of customers have significant influence on timely home-loan repayment risk. Firstly, customers with high loan to value ratio, high fixed obligation to income, higher debt burden ratio and higher installments to income ratio force the borrowers to become delinquent. Secondly, for the lending institutions the behavioral aspects should also be strongly considered, since it is evidenced in developing countries like Bangladesh, that though the customers might have high income or high property value yet they might be delinquent bec...

The aim of the empirical study is to investigate credit risk determinants in banking sectors across three kinds of South Asian economies. An accumulated sample of 105 unbalanced panel data of financial firms over the period of 2000-2015, by applying General Method of Moment (GMM) estimation techniques one-step at the difference in order to identify factors influencing credit risk. This study is inspired by two broad categories of explanatory variables which are bank-specific and macroeconomic. Bank-specific factors influencing unsystematic risk, while macroeconomic factors promoting systematic risk. The study uses a proxy of non-performing loans for credit risk in banking sectors of Pakistan, India, and Bangladesh. The empirical results have been found aligned with theoretical arguments and literature as expected. In comparison, NPLs in Pakistan is greater than India and Bangladesh, while India has the lowest ratio of non-performing loans. The study documents that bank-specific factors (inefficiency, profitability, capital ratio and leverage) have a significant contribution towards credit risk. Further, the study also finds a significant impact of macroeconomic variables on non-performing loans. While, the result in the case of Bangladesh predicts contradictions that have no significant effect on non-performing loans at various levels. The overall results indicate that credit risk is not influenced by only external factors but also affect by internal factors like bad management and skimping etc.

Journal of Commerce & Accounting Research, 2020

The number of microfinance institutions (MFIs) entering the microfinance sector increasing gradually, leading to the cutting of corners in matters of consumer protection-multiple lending, over-indebtedness, and consequently coercive collection practices. Because of these practices, defaults in microfinance loans have been increased significantly in the last decade. This research paper has studied the causes of default of microfinance loan by the adoption of cross-sectional descriptive research design. For primary data collection, a structured questionnaire was formed with thirty-seven questions. For selecting samples, cluster sampling was used initially and had taken Gujarat state as one of the clusters. Next, MFIs were selected from this cluster with certain criteria and then microfinance loan defaulters of these MFIs were chosen for the survey. A total of four hundred and sixty-three microfinance loan defaulters of MFIs were surveyed. Next, the paper evaluates the combination of different variables that could have led to loan default through cross-tabulation Next, the paper has studied the association of borrower's factors with causes of default and the loan amount to understand different characteristics that lead to a specific cause of default. Lastly, to identify the variables considered for deciding the loan amount. The frequency analysis showed that the major cause of default was another debt which highlighted the situation of multiple lending where different MFIs lends to the same borrower. The results of cross-tabulation and hypotheses tests show that MFIs were not considering demographic and economic factors of the borrower while deciding the loan amount and rather it was related majorly to the number of borrowing cycles. By analyzing the results of the study, the paper identifies preventive measures to control microfinance loan defaults.

2019

The aim of the empirical study is to investigate credit risk determinants in banking sectors across three kinds of South Asian economies. An accumulated sample of 105 unbalanced panel data of financial firms over the period of 2000-2015, by applying General Method of Moment (GMM) estimation techniques one-step at the difference in order to identify factors influencing credit risk. This study is inspired by two broad categories of explanatory variables which are bank-specific and macroeconomic. Bank-specific factors influencing unsystematic risk, while macroeconomic factors promoting systematic risk. The study uses a proxy of non-performing loans for credit risk in banking sectors of Pakistan, India, and Bangladesh. The empirical results have been found aligned with theoretical arguments and literature as expected. In comparison, NPLs in Pakistan is greater than India and Bangladesh, while India has the lowest ratio of non-performing loans. The study documents that bank-specific fact...