Risk Of Commercial Bank Of Individual Housing Loans

Housing is one of the fundamental demands for residents’ life, but now the realisticconditions adds more obstacles for most home buyers to the road of homeownership. In theshort span of the past10-plus years, house prices have increased by ten times over.Although the state has exerted several macroscopic adjustments on real estate market, thephenomenon of ever-rising house prices has not been improved effectively. Several localgovernments begin to relax its grip on the property market under the pressure of steadygrowth, which results in the signs of rebound in recent property market and flourishedbuying enthusiasm. Higher prices are beneficial to individual housing loan business ofcommercial banks, and the default rate of personal housing loan is very low. In this case,banks tend to be relaxed to guard against the credit risk. But in a volatile environment ofReal Estate, once property bubbles burst, prices will fall rapidly. Not only will bring bigrisk to the borrower and the developer, banks will also face a bigger loss. Therefore, itmust not be neglected to monitor the housing credit risk continuously and effectively.At present, most commercial banks have their own department for risk prevention andcontrol, and are equipped with a united personal credit risk evaluation system. However,holding the real situation of domestic banks, that collect and review customer’ data at thestage of pre-loan investigation sometimes just flow at the form, based on the subjectivejudgment rather than quantitative analysis. In addition, the credit review is also animportant link to ensure the safety of credit assets. In this respect, most of the banks arelack of effective technical means, or the existing risk assessment methods do not considerthe influence of market factors, thus they are unable to conduct effectively supervision oncredit risk. Combined with the limited correlative theory research at domestic, most ofthem are from qualitative perspective, few use a model to quantify the objects of study.For all this, the paper utilizes a combination of qualitative and quantitative analysis,the macroscopic and microscopic ways, the dynamic and static ways to make acomprehensive feasibility study of personal housing loan risk, especially credit risk. Itindicates that the situation of loan risk to the banks is not quite as optimistic as expected,and there are still a few flaws in its business operations. At the same time, by taking theadvantage of KMV model which can reflect market risk, a quantitative analysis ofresidential mortgage loan default risk is done on the basis of the real estate data. Researchresults show that the risk of default on loans will rise up within the first few years oflending, which is largely similar to practical experience. This has a bearing on how to carry on individual housing loan risk warning, credit policy adjustment and risk provision,among other measures for commercial banks.