China's Commercial Bank Housing Loans To Individuals Credit Risk Research

Residential mortgage in China was derived from the housing policy reform. In 1998, China's government decided to change the welfare housing distribution to Residential mortgage, reaching the goal of purchasing house on people's own. However, there was a conflict between people's low income and high price in real estate market, which produce residential mortgage.In China, residential mortgages increased quickly and had become the fastest-growing component of consumer loans in commercial banks. But at the same time, some problems appeared, because of the characteristics of residential mortgages: long term, small amount and lenders multiplicity. So the risk management of residential mortgages has become a big challenge for China commercial banks. This paper focuses on credit risk of residential mortgages in commercial banks.This paper includes four parts: firstly, the author outlines residential mortgages and its credit risk, then analyzes the reasons of credit risk and the factors which produce credit risk in residential mortgages services of commercial banks. In the third part, this paper introduces the credit analysis system of banks in USA, then gives one example of credit rating system of residential mortgages in commercial bank of Chengdu, finally, based on the analysis of differences of individual credit scoring system between two banks, this paper gives some suggestion to China's banks.In the last part, based on the successful credit risk management of residential mortgages in American banks, the author introduces gives six methods to prevent residential mortgages from risk: build up perfect individual credit system, improve present individual credit scoring system, supervise the process of residential mortgages in banks, constitute insurance policy of individual housing mortgage and implement mortgage-backed securitization.