COMPARATIVE STUDY OF HOMELOANSCHAPTER 1 INTRODUCTION TO SUBJECT Home loans work like any other debt. That is, loans are simply specific money that we borrow from a bank, a private lender, or some other type oflender. Afterwards, we must repay our debts with interest. However, unlike other types of loans, home loans are different in several respects. Owning a piece of land or property is a lifetime dream for every individual. There are many home loans provider in the market. There are different type of home loan i.e. Home Purchase Loans Home Improvement Loans Home Construction Loans Home Extension Loans Home Equity Loans Land Purchase Loans Bridge Loans
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Home purchase loans: These are the basic forms of home loans used for purchasing of a new
home. With about a million home lenders and mortgage brokers it's becoming a tough challenge as the
days are progressing. But at the same time, when the sites are coming up with all the latest tools and
relevant information for us, and with all such conveniences, obtaining a home purchase loan or
mortgage has become really pretty simple. However, at the same time though, we may be flummoxed
to look so many attractive rates and offers in the market, not to forget the hidden costs associated with
each of them.
Home improvement loan: Home improvement loans are used to finance improvements and add
on to the existing set of credentials of beauty on your owned house, recently purchased property or
rented accommodation. Home improvement loans are used to maintain or enhance the value of your
house. In general it includes: repairs, remodeling, energy-related items (permanent in nature), repairs, a
new kitchen, a new bathroom, terrace, an extension or general property improvements. Luxury itemsand fireplaces are generally not eligible, though. Many improvements in landscape and even swimming
pools are nowadays considered to be a part of home improvement.
Home construction loan
Home construction loans are used to finance for the construction of our newlyacquired home or if we are planning to build a home.The factors include in calculations for house building costs?
Design of the house
Construction cost
Financing Cost
Buildable site
All the above mentioned costs will help us to determine the amount we mayneed toborrow. For example, besides calculating the construction costs, we may alsobe
required to consider the total expenditures to develop the site in order to build.Eachsite is unique requiring different expenditures so this specific rupee amountwill varyfrom site location to site location.Payment: Before the house starts getting build, we will be required to pay adepositto your builder as well as paying a deposit for the land if we are buying land.As work progresses you will need to make payments to the builder. Certain loans canbestructured for progress payments to be made during construction.
Home extinction loan
Home extension loans are used by customers to get loans from the banks toextend
their houses, by adding more rooms, kitchens, wash rooms, terraces, or anyotherrooms for your growing family. It may also be used to enclose openbalcony/terracespace, or constructing a Puja ghar.
Maximum Amount of Home Extension Loans
Banks generally offers about 70-85% of the total amount of home extension asloan.The amount of loan sanctioned also depends on a number of factors such asthe age of the applicant at the time of loan, tenure of the loan, repayment capacity of theborrower; his/her credit history etc.
Home equity loans helps customer to encash the market value of the commodity by taking a loan
by mortgaging the property. So, Home equity loans are availed by customers, who wish to
mortgage his/her property to the bank for taking some loan for some other purpose. Then, it's up
to the bank's discretion to consider the market
value of the property and accordingly decide how much to pay to the customer.
Both the residential as well as non residential property can be considered for the
approval of the loan, provided the mortgager is a licensed title holder and the land is
free form any kind of dispute.
Home equity loans don't restrict one to use the loan money in specific investments. It
might also be used in marriage, higher education, medical expenses, etc. However it
should not be used in any illegal or speculation purposes.
Land purchase loan
Land Purchase loans are used by customers who wish to purchase aplot of land for commercial or residential purpose. Everyone hashis/her dream perfectly sketched in his souls and so is his ambitionto get his house erected on the exact location he dreamt that to be. If you have found and shorlisted the piece of land, and have arrivedhere for finance, you have come to the best place you could havearrived in the web. Now, that you have decided to purchase a land as
an investment or for your own dream home, you will realize that aland purchase loan is one you will cherish. Loans that are strictly forland purchase can be as scarce as good residential plots.While many lending firms around the nation compete to providemortgages for the purchase of a house on a lot, only local institutionstypically will be interested in lending for an empty lot.
Bridge loansare designedfor peoplewho wish tosell theexistinghome andpurchaseanother one.The bridgeloans helpfinance thenew home,until a buyeris found forthe home.Bridge loansare used bycustomers asan effectivevehicle tocapitalize ona purchaseopportunity.
It can be considered as a short term financing scheme which is generally expectedto be paid back, within the range of 6-36 months, till the time the borrower getsmore permanent and lower cost financing. So, bridge loans, (or swing loans asthey are otherwise said) is a short term loan providedby various banks like Bank of India, Citibank, ICICI etc. often used forcommercialreal estate purchases, retrieve real estate from foreclosure. Bridgeloans incorporate finance is called gap financing, and are used to cover the timebetween redemption of issuance of one bond and its replacement by a new issue.They can also be operating loans for periods between LOI and quisition, or quiet
period and IPO.Bridge loan may contain a decent proportion of prepaid interest,sometimes as much as six months. If the home gets sold before that time, you mayreceive interest payments back, but if it hasn't sold, you may be required tocontinue payments.
HISTORY Banking in India has a long and elaborate history of more than 200 years. The beginning of this
industry can be traced back to 1786, when the country‟s first bank, Bank of Bengal, was
established. But the industry changed rapidly and drastically, after the nationalization of banks in
1969. As a result, the public sector banks began experiencing numerous positive changes and
enormous growth. Then came the much-talked-about liberalization and economic reforms that
allowed banks to explore new business opportunities and not just remain constrained to
generating revenues from mere borrowing and lending. This provided the Indian banking
scenario a remarkable facelift that only continues to get better with time. However, even today,
despite the foray of foreign banks in the country, nationalized banks continue to be biggest
lenders in the country. This is primarily due to the size of the banks and the penetration of thenetworks. The Indian banking system can be classified into nationalized banks, private banks and
specialized banking institutions. The industry is highly fragmented with 30
banking units contributing to almost 50% of deposits and 60% of advances. The Reserve Bank of
India is the foremost monitoring body in the Indian Financial sector. It is a centralized body that
monitors discrepancies and shortcomings in the system. Industry estimates indicate that out of
274 commercial banks operating in the country, 223 banks are in the public sector and 51 are in
the private sector. These private sector banks include 24 foreign banks that have begub their
operations here. The specialized banking institutions that include cooperatives, rural banks, etc.
form a part of the nationalized banks category.
Opportunities:The Banking sector is considered the most lucrative option in today‟s job market. In
the industry, a position in Treasury or Forex is considered right on top and this is
followed by careers in Private Banking, Investment Banking and Retail Banking. One
could work in a variety of areas in banking industry including Recurring Deposit account,
bankingofficer, probationary officer, loan officer, assessor, personal loan
officer, home loan officer, home loan agent, loan manager, mortgage loan underwriter,
loan processing officer, accountant, product marketing and sales executive, and
customer service executive among others.In the Financial Services, some of the important jobs include that of a stockbroker
who is essentially a person who buys and sells securities on behalf of individuals and
institutions for some commission. While some brokers like to practice with individual
clients others work for institutions. Brokers who work for institutional investors are
often called securities traders. Many prefer to work as dealers, advisors and securities
analysts. Security analysts are those who advise companies on floatation‟s of shares
as they are expected to have sound knowledge of capital markets.
Investment analysts are the backbone of the financial services sector. They study the
financial reports of companies, assess various statistical information, profitability
projections, compare financial results, survey the industry as a whole and on the basis
of the available information, and finally conclude to a decision. Equity Analysts do jobs similar to investment analysts and research the equity markets and makepredictions.
GrowthThe limit for foreign direct investment in private banks has been increased from 49%
to 74%. In addition, the limit for foreign institutional investment in private banks is
49%. Liberalization and globalization have created a more challenging environment
in the banking sector as well as in the other segments of the financial sector such as
mutual funds, Non Banking Finance Companies, post offices, capital markets, venture
capitalists, etc.Research and Markets has announced the addition of 'Indian Retail Banking, 2006' to
their offering. Indian Retail Banking continues to redefine the credit growth in the
country. It grew by a whopping 44.4% in 2005-06 to touch Rs 3,538 billion. This leap
was despite the increase in risk weight by RBI for housing and real estate loans during
August, 2005. Housing, which constitutes more than 52% of all retail loans, grew at a
robust rate of 44.35% during 2005-06. In order to help banks in India to understand
the market and competition and plan future strategies, we have just come out with an
Industry Insight on Indian Retail banking - 2006 edition.
Finally, it seems Reserve Bank of India's (RBI) flurry of measures to restrain the
home finance market is paying off. With tightening of interest rates by the RBI and a
simultaneous increase in real estate prices in a few markets, the banking sector is
witnessing a decline in the growth of its home loan portfolio.
The home loan industry is experiencing a growth of 25% this year, as against 30%
growth in home loans earlier. Rajiv Sabharwal, senior general manager, ICICI Bank, which has
recorded the highest incremental growth in home finance segment in recent
past, said, “The real estate prices have become very high in few markets, which has
resulted in the fall in growth rates for home loans for the banking industry. Home loan
growth has reduced to 25% from its earlier growth rate at 30% and since we are an
integral part of the industry, there will be some impact on us too.”
He added that the bigger impact had come from real estate prices, but obviously
interest rates hikes will also have an impact. He, however, declined to disclose the
bank‟s current home loan growth rate. Echoing a similar view, a senior official of
State Bank of India (SBI) said the home loan market is showing some signs of
slowing down.
PNB Bank is a leading home loan lender of the country with about 30% market share.
Retail lending comprises 70% of the total loan portfolio of the bank, of which the
home loan lending is about 50%. In the first half of fiscal 2007, the bank experienced
total home loan disbursements of Rs 13,400 crore.
TOP 10 PLAYERS IN BANKING &
FINANCE
State Bank of India
HDFC bank
Citibank
ICICI Bank
Punjab National bank
UTI Bank
Hongkong & Shanghai Banking Corp.
Kotak Mahindra Bank
Sundaram Bank
Oriental Bank of Commerce
TOP 10 PLAYERS IN INSURANCE
Life Insurance corporation of India
Bajaj Allianz General Insurance
ICICI Prudential Life Insurance
ICICI Lombard General Insurance
Birla Sun life Insurance
Tata AIG General Insurance
New India Assurance Co.
Iffco Tokia General Insurance
Oriental Insurance Co.
HDFC Standard Life Insurance
MAJOR PLAYERS
The financial sector in India has become stronger in terms of capital and the number
of customers. It has become globally competitive and diverse aiming, at higherproductivity and efficiency.Exposure to worldwide competition and deregulation in Indian financial sector has ledto the emergence of better quality products and services. Reforms have changed theface of Indian banking and finance. The banking sector has improved manifolds interms of capital adequacy, asset classification, profitability, income recognition,provisioning, exposure limits, investment fluctuation reserve, risk management, etc.
PROFILE OF THE ORGANISATION
PUNJAB NATIONAL BANKPunjab National Bank (PNB) was registered on May 19, 1894 under the Indian Companies Actwith its office in Anarkali Bazaar Lahore. The Bank, founded by Dyal Singh Majithia and LalaHarkishen Lal, is the second largest government-owned commercial bank in India with about4,500 branches across 764 cities. It serves over 37 million customers. The bank has been ranked248th biggest bank in the world by Bankers Almanac, London. Total Business of the bank forfinancial year 2007 is estimated to be approximately US$60 billion. It has a banking subsidiary
in the UK, as well as branches in Hong Kong and Kabul, and representative offices in Almaty,Shanghai, and Dubai.We offer a wide range of retail credit products including housing loans, personal loans andautomobile loans. We cater to the financing needs of the agricultural sector and have createdinnovative financing products for farmers. We also provide significant financing to other prioritysectors including small scale industries. Through our treasury operations, we manage our balancesheet, including the maintenance of required regulatory reserves, and seek to maximize profitsfrom our trading portfolio by taking advantage of market opportunities.Our revenue, which is referred to herein and in our financial statements as our income, consistsof interest income and other income. Our securities portfolio consists primarily of Governmentof India and state government securities. We meet our statutory liquidity reserve ratiorequirements through investments in these and other approved securities. We also holddebentures and bonds issued by public sector undertakings and other corporations, commercialIncome and expense are affected by fluctuations in interest rates as well as the volume of activity. Our interest expense is also affected by the extent to which we fund our activities withlow interest or non-interest deposits, and the extent to which we rely on borrowings.
Our non-interest expense consists principally of operating expenses such as expenses for wagesand employee benefits, rent paid on premises, insurance, postage and telecommunicationsexpenses, printing and stationery, depreciation on fixed assets, other administrative and otherexpenses. Provisioning for non-performing assets, depreciation on investments and income tax isincluded in provisions and contingencies. We use a variety of indicators to measure our performance. These indicators are presented in tabular form in the section titled “Selected
Statistical Information” on page [·]. Our net interest income represents our total interest income(on advances and investments) net of total interest expense (on deposits and borrowings). Netinterest margin represents the ratio of net interest income to the monthly average of total interestearning assets. Our spread represents the difference between the yield on the monthly average of interest earning assets and the cost of the monthly average of interest bearing liabilities. We
calculate average yield on the monthly average of advances and average yield on the monthlyaverage of investments, as well as the average cost of the monthly average of deposits andaverage cost of the monthly average of borrowings. Our cost of funds is the weighted average of the average cost of the monthly average of interest bearing liabilities. For purposes of theseaverages and ratios only, the interest cost of the unsecured subordinated bonds that we issue forTier 2 capital adequacy purposes (“Tier 2 bonds”) is included in our cost of interest bearing
liabilities. In our financial statements, these bonds are accounted for as “other liabilities and
provisions” and their interest cost is accounted for under other interest expenses.
Since 1969, when we became a public sector bank, we have managed to continue to grow ourbusiness while maintaining a strong balance sheet. As of September 30, 2004, our total depositsrepresented 85.9% of our total liabilities. On average, interest free demand deposits and low
interest savings deposits represented 43.8% of these deposits in the first six months of fiscal2005.These low-cost deposits led to an average cost of funds excluding equity for the first sixmonths of fiscal 2005 of 4.7%. As of September 30, 2004, our gross and net non-performingassets constituted 7.65% and 0.30% of our gross and net advances, respectively. In fiscal 2004our total income was Rs. 96.5 billion and our net profit was Rs. 11.1 billion before adjustmentand Rs. 10.6billion after adjustment as part of the restatement of our financial statements for thisIssue. In the first six months of fiscal 2005 our total income was Rs. 51.9 billion and our netprofit was Rs. 7.4billion. Between fiscal 2002 and 2004, our total income grew at a compound
annual rate of12.5%, our unadjusted and adjusted net profit grew at a compound annual rate of 40.4% and37.4%, respectively, and our total deposits and total advances grew at a compoundannual growth rate of 17.1% and 17.2%, respectively.We intend to maintain our position as a cost efficient and customer friendly institution thatProvides comprehensive financial and related services. We seek to achieve this by continuing toadopt technology which will integrate our extensive branch network. We intend to grow by crossselling various financial products and services to our customers and by expanding geographicallyin India and internationally. We are committed to excellence in serving the public and alsomaintaining high standards of corporate responsibility.
Type- Public (BSE, NSE: SBI), (LSE: SBID)Founded- Calcutta, 1806 ( as Bank Of Calcutta)Headquarters- Corporate centre, Madam Cama Road,Mumbai 4000 021 IndiaKey people- Omprakash Bhatt, Chairman
State Bank of India (SBI) (LSE: SBID) is the largest bank in India. It is also, measured by thenumber of branch offices and employees, the second largest bank in the world. The bank tracesits ancestry back through the Imperial Bank of India to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a60% stake, and renamed it the State Bank of India. In 2008, the Government took over the stakeheld by the Reserve Bank of India.SBI provides a range of banking products through its vast network in India and overseas,including products aimed at NRIs. With an asset base of $126 billion and its reach, it is aregional banking behemoth. SBI has laid emphasis on reducing the huge manpower through
Golden handshake schemes and computerizing its operations.The State Bank Group, with over 16000 branches, has the largest branch network in India. It hasa market share among Indian commercial banks of about 20% in deposits and advances.Regional office of the State Bank of India (SBI), India‟s largest bank, in Mumbai. The
government of India is the largest shareholder in SBI. The bank has 52 branches, agencies oroffices in 32 countries. It has branches of the parent in Colombo, Dhakka, Frankfurt, HongKong, Johannesburg, London and environs, Los Angeles, Male in the Maldives, Muscat, NewYork, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, andSingapore, and representative offices in Bhutan and Cape Town.SBI operates several foreign subsidiaries or affiliates. In 1990 it established an offshore bank,State Bank of India (Mauritius). It has two subsidiaries in North America, State Bank of India
(California), and State Bank of India (Canada). In 1982, the bank established its Californiasubsidiary, which now has seven branches. The Canadian subsidiary was also established in1982 and also has seven branches, four in the greater Toronto area, and three in BritishColumbia. In Nigeria, it operates as INMB Bank. This bank was established in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. It nowhas five branches in Nigeria. In Nepal SBI owns 50% of Nepal SBI Bank, which has branchesthroughout the country. In Moscow SBI owns 60% of Commercial Bank of India, with CanaraBank owning the rest. In Indonesia it owns 76% of PT Bank Indo Monex. State Bank of India
Punjab National Bank (PNB), has announced that it has completed 100% corebanking implementation at all its 4604 branches and extension counters through theFinacle Universal Banking Solution from Infosys, on Sun infrastructure and theOracle Database setting a significant milestone for themselves and a new benchmark for the Indian banking industry.
At the second ASIA‟s BEST EMPLOYER BRAND AWARDS held in Singapore on22nd July, 2011, Motilal Oswal Financial Services bagged awards in two categories:Award for Excellence in HR through Technology & Award for Managing Health atWork.
Motilal Oswal in association with Zee Business, hosted the first of its series of
seminars under its investors education initiative called Investor Ki Kahani Usi KiZubani on July 2, 2011 at BSE in Mumbai. The seminar saw a colossal turnout withmore than 750 investors attending the session.
Motilal Oswal AMC organized the first edition of Motilal Oswal MOSt Shares ETFConclave 2011 at NSE, Mumbai on 15th June, 2011. The event was telecast LIVE viawebcast and the panel discussion was telecast LIVE by CNBC TV18.
Mr. Raamdeo Agrawal was honoured with an award for Special Contribution toIndian Capital Market by Zee Business at the „INDIA‟S BEST MARKET ANALYST
AWARDS 2011 on April 29, 2011.
Our Analysts Mr. Dhirendra Tiwari & Mr. Harshad Borawake won the Best MarketAnalyst Award for the categories Equity-Sectoral-Infrastructure and Equity – Sectoral –
Energy respectively at „INDIA‟S BEST MARKET ANALYST AWARDS 2011organised by Zee Business on April 29, 2011.
Motilal Oswal Asset Management Company becomes India‟s 1st AMC to ring The
NASDAQ Stock Market Opening Bell on 30 March 2011, to celebrate the launch of Motilal Oswal MOSt Shares NASDAQ 100 - India‟s First US Equities Based ETF.
Motilal Oswal MOSt Shares NASDAQ 100 - India‟s First US Equities Based ETFgets listed on NSE and BSE on 31st March, 2011
Motilal Oswal Securities won 4 awards at the ET Now Starmine Analyst Awards2010-2011. This puts MOSL amongst the Top 3 Award winning Brokers at the ETNOW Starmine Analyst Awards 2010-2011
Our analyst Mr. Alpesh Mehta was awarded Top Earnings Estimator – Overall, at the
ET NOW Starmine Analyst Awards 2010. He also received an award for TopEarnings Estimator for Financial Sector along with our analysts Mr. HarshadBorawake being awarded Top Stock Picker for Energy Sector and Mr. SiddharthBothra being awarded Top Stock Picker for Real Estate Sector.
1. Lipper Award-The Lipper India Awards 2008.2. ICRA-Mutual Fund Awards 20083. Outlook Money-NDTV profit Awards.4. Awaaz Consumer Awards 2007 and many more……..
SBI Card reaches three million milestone: SBI Card, a joint venture between State Bank of India and GE Money, announced yet another landmark achievement of crossing the three millioncardholders-mark. Roopam Asthana, CEO-SBI Card, said, "This milestone is even moreremarkable as we have added one million cardholders in just ten months. Our objective is toaccelerate the pace of growth by extending the benefits to a broader range of consumers in TierII cities, along with improved value propositions for the urban affluent customers." SBI Cardrecently signed up Indian cricketer Yuvraj Singh as its brand ambassador.
2.6 Section
PRODUCT RANGE OF COMPANY/INDUSTRY
The products and services provided by the SBI and PNB are in various fields, such as:
Banking services
NRI services
International banking
Corporate banking
Agricultural banking
International banking
2.7 Section
PERFORMANCE OF COMPANTY IN LAST FIVE YEARS
PNB performance in last five years: 1st Quarter Net Income UP 48% Year-on-YearTaking-off from a breakthrough performance in 2007 with a registered net income of P1.5 billion, PNB continues to reap the benefits from its efforts to strengthen corebusinesses, reduce non-performing assets and manage costs. Net Income for the 1stQuarter of 2008 registered P457 million, up 48% from P308 million of the sameperiod last year. This performance bucks industry trends for the 1st quarter of 2008based on published income reports.Even as the operating environment proved volatile where negative trends are expected,
PNB still managed to reflect a 136% growth in foreign exchange gains year-on-year,from P242 million to P571 million. A relentless focus in generating low-cost fundsfrom deposits and other funding sources led to a reduction in total interest expense byas much as 27%. Total deposits closed firm at P180 billion.Operating expenses were down 23% despite investments made in systemsenhancement and upgrading of facilities. The Bank has recently implemented a newgeneration core banking system: Flexcube – an end-to-end solution designed toautomate both corporate and retail banking businesses; and effectively in-source coreoverseas operations to its global data center in the Philippines. PNB‟s Japan, Singapore, Hongkong and United States branches as well as the London subsidiaryhave already been converted and the rest of the Bank is expected to go live soon.As of March 31, 2008, PNB‟s consolidated total asset size remained strong at P242 Billion, up P2.7 billion versus end-2007. With the significant strengthening of itsbalance sheet over the past few years, PNB has been able to concentrate on generatingnew client relationships in the corporate segment, both in the large and SMEcategories. The contribution from the consumer finance business has likewise
continued to register accelerated growth. Total consumer loans portfolio stood at P3.3 billion, up25% from end-2007. Combined new bookings for the 1st quarter 2008already reached the half- billion mark. PNB‟s Net Loans and Receivables closed P77 billion.As of March 31, 2008, PNB‟s Capital Adequacy Ratio under Basel II remained formidable at 18.51%, still way above the 10% ratio required by the Bangko Sentralng Pilipinas. Subject to appropriate approvals and clearances, PNB is going to thecapital markets to raise a minimum of P3 billion of Tier 2 Capital in preparation forits maturing subordinated notes in February 2009.PNB will emerge as the 4th largest domestic bank in the country in terms of asset sizeonce its planned merger with Allied Banking Corporation (ABC) is completed. The
respective Board of Directors of PNB and ABC passed resolutions last April 30, 2008approving the plan to merge the two banks. This transaction is subject to the approvalof shareholders and regulatory authorities and is expected to be completed by the 3rdquarter of 2008.SBI performance in last five years: State Bank of India (SBI) is all geared up toincrease its business per employee and profit per employee as it thinks that for SBI,these two parameters are among the lowest in the industry.On one hand, the bank is trying to reduce its staff strengthwhich would eventually improve the ratios; but on the other, the bank is also goingflat out to increase its customer base."Our business per employee and profit per employee is one of the lowest in the
industry," SBI had recently said in a joint statement issued by the management andunions.SBI's generates Rs 2.99 crore of business per employee, while its profit peremployee is just about Rs 2.17 lakh. By contrast, majority of the large public sectorbanks are better in terms of both these parameters.For instance, Canara Bank has a business per employee (BPE) of Rs 4.42 crore, whileUnion Bank of India's BPE is at Rs 4.36 crore and Bank of Baroda's (BoB) Rs 3.51crore. These are according to their respective annual reports for 2005-06.
Federal Home Loan Bank Lending to Community Banks,are TargetedSubsidies Necessary? The Gramm-Leach-Bliley Act of 1999 amended thelending authority of the Federal Home Loan Banks to include advancessecured by small enterprise loans of community financial institutions. Threepossible reasons for the extension of this selective credit subsidy tocommunity banks and thrifts are examined, including the need to: subsidize \community depository institutions, stabilize the Federal Home Loan Banks,and address a market failure in rural markets for small enterprise loans.They empirically investigate whether funding constraints impact the small-business lending decision by rural community banks. Specifically, theyestimate two empirical models of small-business lending by community banks.The data reject the hypothesis that access to increased funds will increase theamount of small-business loans made by community banks.
2) In December 2006 Fulbag Singh and Reema Sharma had studied about thehousing Finance in India. Housing, as one of the three basic needs of life,
always remains on the top priority of any person, economy, government andsociety at large. In India, majority of the population lives in slums and shabbyshelters in rural areas. From the last decade, the Government of India has beencontinuously trying to strengthen the housing sector by introducing varioushousing loan schemes for rural and urban population. The first attempt in thisregard was the National Housing Policy (NHP), which was introduced in 1988.The National Housing Bank (NHB) was set up in 1988 as an apex institutionfor housing finance and a wholly-owned subsidiary of Reserve Bank of India(RBI). The main objective of the bank is to promote and establish the housingfinancial institutions in the country as well as to provide refinance facilities tohousing finance corporations and scheduled commercial banks. Moreover, for
the salaried section, the tax rebates on housing loans have been introduced.The paper is based on the case study of LIC Housing Finance Ltd., whichanalyzes region-wise disbursements of individual house loans, their portfolioamounts and the defaults for the last ten years, i.e., from 1995-96 to 2004-05by working out relevant ratios in terms of percentages and the compoundannual growth rates. A relevant chart has also been prepared to highlight theresults.
3) In May 18, 2007 Michael LaCour-Little had studied about the Economic FactorsAffecting Home Mortgage Disclosure Act Reporting. The public release of the 2004-2005 Home Mortgage Disclosure Act data raised a number of questions given the
increase in the number and percentage of higher-priced home mortgage loans andcontinued differentials across demographic groups. Here we assess three possibleexplanations for the observed increase in 2005 over 2004: (1) changes in lenderbusiness practices; (2) changes in the risk profile of borrowers; and (3) changes inthe yield curve environment. Results suggest that after controlling for the mix of loantypes, credit risk factors, and the yield curve, there was no statistically significantincrease in reportable volume for loans originated directly by lenders during 2005,though indirect, wholesale originations did significantly increase. Finally, given a
model of the factors affecting results for 2004-2005, we predict that 2006 results willcontinue to show an increase in the percentage of loans that are higher priced whenfinal numbers are released in September 2007.
4) In may 1991 Stephen F. Borde had studied about the “Is the Savings and Loan Industry Facing Extinction?” This article tells about the Saving and loan crisis.Proposed solutions are discussed in the context of the industry as it currently stands.With a somewhat similar liability structure to that of banks (mainly short-termdeposits), the asset structure of S&Ls is quite different. Whereas banks assetsconsist of short-term loans, S&L assets consist largely of long-term loans, such ashome ownership mortgages. Therefore, in the absence of adequate hedgingmeasures, S&Ls are more vulnerable to interest rate risk, which can lead to lowerprofits when interest rates rise.
5) In June 29, 2001 Joshua Rosner had studied about the Housing in the NewMillennium: A Home Without Equity is Just a Rental with Debt.
They studied about the prospects of the U.S. housing/mortgage sector over the nextseveral years. Based on our analysis, we believe there are elements in place for thehousing sector to continue to experience growth well above GDP. However, webelieve there are risks that can materially distort the growth prospects of the sector.Specifically, it appears that a large portion of the housing sector's growth in the1990's came from the easing of the credit underwriting process. Such easing includes:* The drastic reduction of minimum down payment levels from 20% to 0%* A focused effort to target the "low income" borrower* The reduction in private mortgage insurance requirements on high loan to valuemortgages* The increasing use of software to streamline the origination process and
modify/recast delinquent loans in order to keep them classified as "current"* Changes in the appraisal process which has led to widespread overappraisal/over-valuation problemsIf these trends remain in place, it is likely that the home purchase boom of the pastdecade will continue unabated. Despite the increasingly more difficult economicenvironment, it may be possible for lenders to further ease credit standards and morefully exploit less penetrated markets. Recently targeted populations that havehistorically been denied homeownership opportunities have offered the mortgageindustry novel hurdles to overcome. Industry participants in combination with easedregulatory standards and the support of the GSEs (Government SponsoredEnterprises) have overcome many of them.
If there is an economic disruption that causes a marked rise in unemployment, thenegative impact on the housing market could be quite large. These impacts come inseveral forms. They include a reduction in the demand for homeownership, a declinein real estate prices and increased foreclosure expenses.These impacts would be exacerbated by the increasing debt burden of the U.S.consumer and the reduction of home equity available in the home. Although we haveyet to see any materially negative consequences of the relaxation of credit standards,we believe the risk of credit relaxation and leverage can't be ignored. Importantly, a
relatively new method of loan forgiveness can temporarily alter the perception of credit health in the housing sector. In an effort to keep homeowners in the home andreduce foreclosure expenses, holders of mortgage assets are currently recasting ormodifying troubled loans. Such policy initiatives may for a time distort the relevancy of delinquency and foreclosure statistics. However, a protracted housing slowdowncould eventually cause modifications to become uneconomic and, thus, credit qualitystatistics would likely become relevant once again. The virtuous circle of increasinghomeownership due to greater leverage has the potential to become a vicious cycleof lower home prices due to an accelerating rate of foreclosures.
6) In dec 2002 Melissa B. Jacoby had studied about the Home Ownership Risk Beyonda Subprime Crisis: The Role of Delinquency Management. They studied that Publicinvestment in and promotion of homeownership and the home mortgage market oftenrelies on three justifications to supplement shelter goals: to build household wealthand economic self-sufficiency, to generate positive social-psychological states, and todevelop stable neighborhoods and communities. Homeownership and mortgage
obligations do not inherently further these objectives, however, and sometimesundermine them. The most visible triggers of the recent surge in subprimedelinquency have produced calls for emergency foreclosure avoidance interventions(as well as front-end regulatory fixes). Whatever their merit, I contend that a systemof mortgage delinquency management should be an enduring component of housingpolicy. Furtherance of housing and household policy objectives hinges in part on theconditions under which homeownership is obtained, maintained, leveraged, and - insome situations - exited. Given that high leverage or trigger events such as job lossand medical problems play significant roles in mortgage delinquency independent of loan terms, better origination practices cannot eliminate the need for delinquencymanagement.
One function of this brief essay is to identify an existing rough framework formanaging delinquency. Legal scholarship should no longer discuss mortgageenforcement primarily in terms of foreclosure law and instead should include otherdebtor-creditor laws such as bankruptcy, industry loss mitigation efforts, and third-party interventions such as delinquency housing counseling. In terms of analyzingthis framework, it is tempting to focus on its impact on mortgage credit cost andaccess or on the absolute number of homes temporarily saved, but my proposedanalysis is based on whether the system honors and furthers the goals of wealthbuilding, positive social psychological states, and community development. Becausethose ends are not inexorably linked to ownership generally or owning a particularhome, a system of delinquency management that honors these objectives should
strive to provide fair, transparent, humane, and predictable strategies for home exit aswell as for home retention. Although more empirical research is needed, this essaystarts the process of analyzing mortgage delinquency management tools in theproposed fashion.
7) In 1999 Yoko Moriizumi had studied about the Current Wealth, Housing Purchaseand Private Housing Loan Demand in Japan.Japanese households accumulate wealth for downpayments at a high rate. Therefore,
current wealth plays an important role in home acquisition as public loans whosedirect mortgage lending is a strong support for home purchasers. We estimate thewealth effect on private mortgage debt as well as housing consumption by applying amodel where mortgage debt demand is derived from house purchase decisions andis determined jointly with housing consumption. We use a simultaneous equationTobit estimation method. Wealth effects on private mortgage debt, likelihood of borrowing, and housing consumption are not elastic. On the other hand, a change inhousing consumption affects the likelihood of borrowing elastically much more thanthe private mortgage amount of borrowers. Housing and private mortgage marketsfluctuate very closely with the number of participants in the mortgage market.Therefore, the number of housing starts is linked strongly to the private mortgagemarket.
8) Robert B. Avery and Allen N. Berger had studied about the Loan commitmentsand bank risk exposure. They studied about the Loan commitments increase abank's risk by obligating it to issue future loans under terms that it might
otherwise refuse. However, moral hazard and adverse selection problemspotentially may result in these contracts being rationed or sorted. Dependingon the relative risks of the borrowers who do and do not receive commitments,commitment loans could be safer or riskier on average than other loans. theempirical results indicate that commitment loans tend to have slightly betterthan average performance, suggesting that commitments generate little risk orthat this risk is offset by the selection of safer borrowers.
9) Sumit Agarwal,Souphala Chomsisengphet and John C. Driscoll had studiedabout the Loan commitments and private firms. They studied that, Most loansare in the form of credit lines. Empirical studies of line demand have been
complicated by their use of data on publicly traded firms, which have a widemenu of financing options. We avoid this problem by using a uniqueproprietary data set from a large financial institution of loan commitmentsmade to 712 privately-held firms. We test Martin and Santomero's (1997)model, in which lines give firms the speed and flexibility to pursue investmentopportunities. Our findings are consistent with their predictions. Firms facinghigher rates and fees have smaller credit lines. Firms with higher growthcommit to larger lines of credit and have a higher rate of line utilization. Firmsexperiencing more uncertainty in their funding needs commit to smaller creditlines. Almost all firms convert unused credit line portions into spot loans andtake out new lines.
10) Faik Koray and Eric T. Hillebrand had studied about the Interest Rate Volatility andHome Mortgage Loans . they studied that The U.S. economy has experiencedsubstantial fluctuations in real and nominal interest rates since the 1970s. Thispaper investigates empirically the relationship between home mortgage loansand volatility in mortgage rates for the period 1971:02 through 2003:03.Contrary to common wisdom, we find a positive relationship between mortgagerate volatility and home mortgage loans. Further investigation indicates that
this is due to volatility in the bond market. In times of high interest volatility,households disinvest in government securities and invest in real assets, whichyield a positive relationship between mortgage rate volatility and homemortgage loans.