What Is Mortgage Credit Risk?

Banking loans are a traditional business and the main and most direct way for banks to make profits. However, bank loans face the effects of many risk factors, such as national risk, market risk, operating risk, and moral risk. Various risk manifestations of lenders are fed back to the operation of the banking industry, leading to bad debt losses in the banking industry. In order to prevent loan risks, the banking industry, in accordance with legal regulations, takes effective mortgage guarantees on loan assets to restrict the behavior of borrowers. However, when there is a problem with the loan, it often occurs that the value of the mortgage cannot be recovered, or that the value of the collateral is insufficient during the settlement.

Loan mortgage risk

The reasons for the loan mortgage risk are as follows: ^[1]

The loan mortgage risks involve mortgage contracts, fair registration and mortgage certificates, as well as various aspects of mortgage quality, storage, and disposal, including the following aspects. ^[2]

According to the loan mortgage risk analysis, risk prevention can be carried out from the following aspects. ^[2]

Scrutiny. Strict review of mortgages, property rights relations, mortgage contracts and related documents is a fundamental measure to prevent loan mortgage risks.

As for the collateral itself, the credit officer must review the authenticity of the collateral right certificate, and verify the authenticity of the collateral (such as the house, land use right, etc.) corresponding to the right certificate through field inspection. Second, the credit officer must also strictly follow Relevant laws and regulations review the collateral to see if the collateral is permitted by relevant laws and regulations and whether it belongs to the scope of collateral approved by the bank.

As for the property rights of the mortgaged property, if it is joint property (such as a house), the authorization letter of the remaining co-owners must be mortgaged, and if it is the property of the partnership, the authorization letter of the remaining partners must be mortgaged. If it is a collateral of a state-owned enterprise or a collective enterprise, it must have the authorization certification documents in charge of the SASAC and the Staff Representative Conference. Mortgage authorization document.

For various types of certificates of collateral, the credit personnel must strictly review and require relevant certificates to be available. This requirement must be based on specific collateral, such as importing a car mortgage loan, which requires a number of procedures such as operating licenses, product certifications, purchase and sales contracts, customs declarations and invoices.

For mortgage contracts, credit personnel must strictly review the relevant conditions of the loan contract, especially its additional effective clauses and the scope of business of the borrower's business license. In addition, it is important to note that the validity period of the mortgage contract must cover the validity period of the loan contract.

Make a good record of registration. According to the "Guarantee Law", real estate, forest trees, aircraft, ships, vehicles, and corporate equipment and other movable property must be registered according to law, and the mortgage contract will take effect from the date of registration. Therefore, banks must pay special attention to whether mortgages need to be registered to take effect when handling mortgage loans. In addition, it is necessary to confirm whether the loan contract and guarantee contract need to be notarized according to relevant laws and regulations.

Do a good value evaluation. Mortgage valuation is the most common way to prevent the risk of mortgage loans. To this end, banks must first establish a complete set of internal management systems for collateral value evaluation, and carry out regular collateral value evaluation work. Units with conditions and needs must also set up a daily mark-to-market system and focus on personnel Training work. Secondly, it is necessary to strengthen the connection, understanding and evaluation of asset appraisal companies, and to prevent the risk of fraud in the outsourcing of collateral value appraisal business. Thirdly, the government department that issues the property right certificate of the mortgage cannot be completely ignored, especially to analyze whether there is a possibility of the borrower buying through the key personnel of the government department and issuing false property right certificates or repeated mortgages.

Do a good job of asset preservation. The asset preservation work of bank loans involves the disposal of collateral. In the event of a default by the borrower, the bank shall seal the collateral in time to protect its rights as the first beneficiary. When disposing of collateral, efforts should be made to coordinate the relationship with relevant stakeholders, taking full account of disposal costs, taxes and fees, interest losses after loan default, etc., and preventing the risk of collateral being sold cheaply.