A Study On The Credit Risk Management Of Home Mortgages

During the daily operations, the most important risk that the commercial banks need to measure, monitor and control is the credit risk. The traditional banking credit is business credit, but with the commercial banks entering into the individual market, the individual consumption credit has become the main profit-driven business for commercial banks. Among these diversified individual consumption credit products, the home mortgages product has expanded rapidly and gained a large amount of shares in the banks' total lending. Therefore, a study on the credit risk management of home mortgages is becoming increasingly urgent. Through its study, commercial banks can reduce its bad loans, enhance risk management abilities, deepen the understanding of the real estate market as well as hedge and transfer credit risk in the capital market. Five study methods have been used in this paper, namely multi-disciplinary study, qualitative study, quantitative study, model study and case study. Contents of the paper are as follows:Chapter 1 clarifies the purpose and current research of home mortgages' credit risk. It gives the research framework of this paper. Innovations and deficiencies are pointed out as well.Chapter 2 explains the relationship between credit risk and other series of risk facing commercial banks. It points out that the credit risk of home mortgages involves all aspects of commercial banks operations.Chapter 3 makes a brief introduction of home mortgages' emergence, characteristics, current and future development. It lays down a foundation for the discussion of credit risk management of home mortgages.Chapter 4 studies the credit risk management of home mortgages from the borrowers. It emphasizes more on commercial banks' internal risk management.Chapter 5 studies the credit risk management of home mortgages from the real estate market. It emphasizes more on commercial banks' external risk management.Chapter 6 studies the credit risk management of home mortgages from the securitization. It emphasizes how to transfer and diversify the credit risk of home mortgages.Chapter 7 summarizes the whole paper. It combines the management of borrowers, real estate market and securitization. It stresses the importance of inter-dependence among these three aspects rather than separating with each other. They cooperate and complement with one another to form three protective shields for commercial banks. Only by conducting effective credit risk management can commercial banks find the real solution to the problem of bad home mortgages.