商业银行管理全套配套课件英文PPT教师手册习题习题答案 Chap018.ppt 40页

ChapterEighteenConsumerLoans,CreditCards,andRealEstateLending KeyTopicsTypesofLoansforIndividualsandFamiliesUniqueCharacteristicsofConsumerLoansDodd-Frank,theConsumerProtectionBureau,andCARDEvaluatingaConsumerLoanRequestCreditCardsandCreditScoringDisclosureRulesandDiscriminationConsumerLoanPricingandRefinancing IntroductionConsumerdebthasbecomeoneofthefastestgrowingformsofborrowingmoneyNearly$14trillioninvolume(includingbothmortgageandnonmortgageconsumerdebt)intheU.S.Themoderndominanceofbanksinlendingtohouseholdsstemsfromtheirgrowingrelianceonindividualsandfamiliesfortheirchiefsourceoffunds–checkableandsavingsdepositsConsumercreditisoftenamongthemostprofitableservicesalendercanofferHowever,servicesdirectedatconsumerscanalsobeamongthemostcostlyandriskyfinancialproducts TypesofLoansGrantedtoIndividualsandFamiliesConsumerloansareclassifiedbyPurpose–whattheborrowedfundswillbeusedforType–whethertheborrowermustrepayininstallmentsorrepayinonelumpsumResidentialLoansCredittofinancethepurchaseofahomeorfundimprovementsonaprivateresidenceUsuallyalong-termloan,typicallybearingatermof15to30yearsSecuredbythepropertyitselfMaycarryeitherafixedinterestrateoravariable(floating)interestrateBanksaretheleadingresidentialmortgagelenderstoday TypesofLoansGrantedtoIndividualsandFamilies(continued)NonresidentialLoansInstallmentLoansShort-termtomedium-termloans,repayableintwoormoreconsecutivepayments(usuallymonthlyorquarterly)Usedtobuybig-ticketitems(e.g.,automobiles,furniture,andhomeappliances)ortoconsolidateexistinghouseholddebtsNoninstallmentLoansShort-termloansindividualsandfamiliesdrawuponforimmediatecashneedsthatarerepayableinalumpsumMaybeforrelativelysmallamountsandincludechargeaccountsthatoftenrequirepaymentin30daysorlessMayalsobemadeforashortperiod(usuallysixmonthsorless)towealthierindividualsandcanbequitelarge TypesofLoansGrantedtoIndividualsandFamilies(continued)CreditCardLoansandRevolvingCreditOneofthemostpopularformsofconsumercredittodayisaccessedviacreditcardsCreditcardsoffertheirholdersaccesstoeitherinstallmentornoninstallmentcreditApproximatelytwo-thirdsofallcreditcardshavevariableratesofinterestInstallmentusersofcreditcardsarefarmoreprofitableduetotheinterestincometheygenerateCardprovidersalsoearndiscountfees(usually1to7percentofcreditcardsales)frommerchantswhoaccepttheircards TypesofLoansGrantedtoIndividualsandFamilies(continued)NewCreditCardRegulationsNewcreditcardregulationsappearedearlyin2003toslowtheexpansionofcardofferstocustomerswithlowcreditratingsTherewasevidencethatsomecustomerswerechargedhighfeesbutencouragedtomakeonlylowminimumpaymentsResultedinnegativeamortizationRegulatoryagencieswarnedlendersthatfederalexaminerswouldbeginlookingforexcessiveuseoffeesandunreasonablyliberalcreditterms TypesofLoansGrantedtoIndividualsandFamilies(continued)NewConsumerRegulations:Dodd-Frank,CARDAct,andtheNewConsumerProtectionBureauTricksandTraps–TheCARDActandRevisedRegulationZAppearDespitetherepeatedeffortsofcreditcardregulatorstodealwithproblemsinthecreditcardindustry,consumercomplaintscontinuedCongresspassedtheCreditCardAccountability,Responsibility,andDisclosureAct(“CARDAct”)inMay2009ThenewlegislationrestrictedcardissuersfromraisingAnnualPercentageRates(APRs)unlessadequatewrittennoticeofaratechangewasgiven TypesofLoansGrantedtoIndividualsandFamilies(continued)NewConsumerRegulations:Dodd-Frank,CARDAct,andtheNewConsumerProtectionBureauTricksandTraps–TheCARDActandRevisedRegulationZAppearCustomersmustbetoldthereasonswhycredittermswerebeingchangedCardcompaniesarerequiredtoposttheircontractsontheInternetsocustomerscan“shoparound”CardholdersmustreceiveperiodicbillingstatementsatleastthreeweeksbeforemonthlypaymentsaredueAnexpanded“box”mustbeincludedoneachmonthlybillingstatement,indicatingtheamountofinterestpaidandtheconsequencesofpayingtheminimumamountFallwithintheFederalReserveBoard’sRegulationZ TypesofLoansGrantedtoIndividualsandFamilies(continued)Dodd-FrankReformsandProtectionsPushtheRulesFartherDowntheRoadTheDodd-FrankWallStreetReformandConsumerProtectionActNamedafterSenatorChrisDoddandCongressmanBarneyFrankWassignedintolawbyPresidentObamainJuly2010CreatestheConsumerFinancialProtectionBureau(CFPB)Thenewbureauisdirectedtowritenewrulesapplyingtosuchfinancialservicesas:MakingofconsumerandcreditcardloansWarningconsumersofpossibledamagingfinancialpracticesthatcouldresultinlossesPromotingfinancialliteracyamongconsumersImprovingtheclarityandtransparencyoffinancial-servicecontractsforthebenefitofthepublic TypesofLoansGrantedtoIndividualsandFamilies(continued)Dodd-FrankReformsandProtectionsPushtheRulesFartherDowntheRoadTheDodd-FrankWallStreetReformandConsumerProtectionActThenewCFPBistobehousedwithintheFederalReservebutoperateindependentlywithitsownbudgetTheconsumerprotectionbureauisexpectedtobecontroversialbecauseitmustwritehundredsofrulesthatwilllikelyimpacttheconsumerservicessideoffinancial-serviceproviders CharacteristicsofConsumerLoansLendersregardconsumerloansasprofitablecreditswith“sticky”interestratesContractinterestratesoftendonotchangereadilywithmarketconditionsasdointerestratesonmostbusinessloansAsaresult,manyconsumerloansaresubjecttosignificantinterestrateriskConsumerloansareusuallypricedsohighthatmarketinterestratesonborrowedfundsanddefaultratesontheloansthemselveswouldhavetorisesubstantiallybeforeconsumercreditswouldbecomeunprofitable CharacteristicsofConsumerLoans(continued)Whyareinterestratessohighonmostconsumerloans?ConsumerloansareamongthemostcostlyandmostriskytomakeperdollarofloanablefundscommittedtothemConsumerloanstendtobecyclicallysensitiveHouseholdborrowingsappeartorelativelyinterestinelasticTheyaremoreconcernedaboutthesizeofthemonthlypaymentratherthantheinterestratethattheyarechargedEducationandincomelevelsmateriallyinfluenceconsumers’useofcredit EvaluatingaConsumerLoanApplicationCharacterandPurposeKeyfactorsinanalyzinganyconsumerloanapplicationarethecharacteroftheborrowerandtheborrower’sabilitytopayConsumerlendersnearlyalwayscheckwithoneormorecreditbureausconcerningthecustomer’scredithistoryInthecaseofaborrowerwithoutacreditrecordorwithapoortrackrecordofrepayingloans,acosignermayberequestedtosupportrepaymentManylendersregardacosignerasprimarilyapsychologicaldevicetoencouragerepaymentoftheloan EvaluatingaConsumerLoanApplication(continued)OtherImportantItemsForLendersIncomeLevelsDepositBalancesEmploymentandResidentialStabilityPyramidingofDebtHowtoQualifyforaConsumerLoanHomeownershiporownershipofanyformofrealpropertyMaintainstrongdepositbalancesThemostimportantthingtodo–truthfullyansweralloftheloanofficer’squestions CreditScoringConsumerLoanApplicationThebasictheoryofcreditscoringisthatlendersandstatisticianscanidentifythefinancial,economic,andmotivationalfactorsthatseparategoodloansfrombadloansUnderlyingassumption–thesamefactorsthatseparatedgoodloansfrombadloansinthepastwillseparategoodloansfrombadonesinthefuturewithinanacceptableriskoferrorSuchanautomatedcreditdeterminingsystemremovespersonaljudgmentfromthelendingprocess CreditScoringConsumerLoanApplication(continued)TheFICOSystemDevelopedbytheFairIsaacCorporationMostfamousofallcredit-scoringsystemscurrentlyinuseScoresrangefrom300to850withhighervaluesdenotinglesscreditrisktolendersFICOscorearebasedonfivedifferenttypesofinformation(mostimportanttoleastimportant):Theborrower’spaymenthistoryTheamountofmoneyowedThelengthofaprospectiveborrower’scredithistoryThenatureofnewcreditbeingrequestedThetypesofcreditthattheborrowerhasalreadyused LawsandRegulationsApplyingtoConsumerLoansNumerouslawsandregulationslimitingtheactivitiesofconsumerlendinginstitutionshavebeenenactedTheselawsfallintotwocategories:DisclosurerulesMandatetellingtheconsumeraboutthecostandothertermsofaloanorleaseagreementAntidiscriminationlawsPreventcategorizingloancustomersaccordingtotheirage,sex,race,orotherirrelevantfactorsanddenyingcredittoanyonesolelybecauseofmembershipinoneormoreofthesegroups LawsandRegulationsApplyingtoConsumerLoans(continued)CustomerDisclosureRequirementsTruth-in-LendingActFairCreditReportingActFairCreditBillingActFairDebtCollectionPracticesActOutlawingCreditDiscriminationEqualCreditOpportunityActCommunityReinvestmentAct LawsandRegulationsApplyingtoConsumerLoans(continued)PredatorylendingAnabusivepracticeamongsomelenderswherelendersmayrequireexcessivefeesaswellasunnecessaryandexcessiveloaninsuranceSubprimeLoansGrantingloanstoborrowerswhohavebelow-averagecreditscoresTheHomeOwnershipandEquityProtectionActwaspassedin1994toprotecthomebuyersfromloanagreementstheycouldnotaffordSubprimelendingisdifficulttoregulate RealEstateLoansDepositoryinstitutionsandfinanceandinsurancecompaniesmakerealestateloanstofundtheacquisitionofrealpropertyHomes,apartmentcomplexes,shoppingcenters,officebuildings,andlandOneofthemostrapidlygrowingareasoflendingoverthepastdecadeRealestatelendingisdifferentfromotherloansRealestateloanscanbeamongtheriskiestformsofcreditextendedtocustomers RealEstateLoans(continued)DifferencesbetweenRealEstateLoansandOtherLoansTheaveragesizeofarealestateloanisusuallymuchlargerthantheaveragesizeofotherloansMortgageloanstendtohavelongermaturitiesversusothertypesofloansMaturitiesof15yearsto30yearsaretypicalforsingle-familyhomesWithrealestatelending,theconditionandvalueofthesubjectpropertyarenearlyasimportantastheborrower’sincomeAppraisalsarecriticaltotheloandecisionandmustmeetindustrystandardsandgovernmentregulations RealEstateLoans(continued)FactorsinEvaluatingApplicationsforRealEstateLoansTheamountofthedownpaymentpledgedbytheborrowerrelativetothepurchasepriceofmortgagedpropertyThehighertheratioofloanamounttopurchaseprice,thelessincentivetheborrowerhastohonorthetermsoftheloanLendersmaybewillingtogiveamortgageloancustomeralowerloanrateforapledgethatthecustomerwillusethelender’sotherfinancialservices RealEstateLoans(continued)FactorsinEvaluatingApplicationsforRealEstateLoansOtheraspectsofeachcreditapplicationthatrequireassessment:Amountandstabilityoftheborrower’sincomeTheborrower’savailablesavingsandwheretheborrowerwillobtaintherequireddownpaymentTheborrower’strackrecordincaringforandmanagingpropertyTheoutlookforrealestatesalesinthelocalmarketincaseofrepossessionofthepropertyTheoutlookformarketinterestrates RealEstateLoans(continued)HomeEquityLendingHomeownerscanborrowtheequityintheirhomesEquityisdefinedasthedifferencebetweenahome’sestimatedmarketvalueandtheamountofthemortgageloansagainstitTwomaintypesofhomeequityloans:TraditionalHomeEquityLoanLinesofCreditAgainstaHome’sBorrowingBase RealEstateLoans(continued)TheMostControversialofHomeMortgageLoans:Interest-OnlyandAdjustableMortgagesandtheRecentMortgageCrisisWhenhousingpricesweresoaringupwardduringtherecenthousingboom,howcouldlendersmakeextravagantlypricedhomesaffordable?MakehomemortgageloansmorereadilyavailabletofamiliesofevenmodestmeansMorefamilieswereencouragedtosignupforadjustable-rateloans(ARMs)duringaperiodwhenmarketinterestrateswereathistoriclows RealEstateLoans(continued)TheMostControversialofHomeMortgageLoans:Interest-OnlyandAdjustableMortgagesandtheRecentMortgageCrisisWhenhomepricescontinuedtorise,clevermortgagelenderscameupwithyetanotherfinancialinnovation–theinterest-onlyadjustablehomemortgageloan(optionARM)WiththistypeofcreditthehomebuyerisobligatedtopayonlytheinterestonhisorherhomeloanforaninitialperiodAfterthatinitialtimeintervalpasses,thehomebuyerwouldhavetopaybothprincipalandinterestuntiltheloanwasfinallypaidoffLookedlikepredatorylendingagainstlower-incomefamiliesInanenvironmentofrisingmarketinterestrates,manyhomebuyerswithadjustable-rateloansfacedhigherinterestpayments RealEstateLoans(continued)TheMostControversialofHomeMortgageLoans:Interest-OnlyandAdjustableMortgagesandtheRecentMortgageCrisisNowlendersmustdisclosemoreabouttheactualtermsofahomemortgageloanandnotrepresentaloan’stermsas“fixed”whenthosetermscanbechangedovertimeDodd-FrankWallStreetReformandConsumerProtectionActresultedintoughnewrulesLenderswhoarepoolingandsecuritizingmortgageloanstheycreateandsellareresponsibleforatleast5percentofthecreditriskattached(qualifiedmortgagesareexempt)Previouslylenders“washedtheirhands”ofanyresponsibility ARevisedFederalBankruptcyCodeasBankruptcyFilingsSoarHouseholdsinrecordnumbershavesoughtprotectionfromtheircreditorsundertheU.S.bankruptcycodeBankruptcyAbusePreventionandConsumerProtectionActSignedinApril2005byPresidentGeorgeW.BushMadefilingforbankruptcymoreexpensiveandtime-consumingBeforefilingforbankruptcy,applicantsmustcompleteacertifiedcreditcounselingprogramIntendedtodiscourageconsumersfromtakingontoomuchdebtandincreasingtheirriskprofile ARevisedFederalBankruptcyCodeasBankruptcyFilingsSoar(continued)AmeanstestdetermineswhetheranapplicantmustfileunderChapter7orChapter13ofthebankruptcycodeMeansTest-anaverageofadebtor’spastsixmonthsofgrossincomeTestdeterminesifthedebtorhasenoughincometopaysomeofthedebtUnderthepreviousbankruptcycode,mostindividualsfiledforChapter7WipedoutallormostdebtsandgenerallyallowedforafreshstartMakesitharderforapplicantstoapplyforChapter7Moreapplicants,asaresultmustfileunderChapter13Stipulatesthatatleastsomedebtsmustberepaid PricingConsumerandRealEstateLoans:DeterminingtheRateofInterestandOtherLoanTermsAfinancialinstitutionpriceseveryconsumerloanbysettinganinterestrate,maturity,andtermsofrepaymentTheInterestRateAttachedtoNonresidentialConsumerLoansTheCost-PlusModel PricingConsumerandRealEstateLoans:DeterminingtheRateofInterestandOtherLoanTerms(continued)AnnualPercentageRate(APR)AnnualizedinternalrateofreturnthatequatesexpectedtotalpaymentswiththeamountoftheloanTakesintoaccounthowfasttheloanisbeingrepaidandhowmuchcreditthecustomerwillactuallyhaveuseofduringthelifeoftheloanUndertheTruth-in-LendingAct,lendersmustgivethehouseholdborrowerastatementspecifyingtheAPRAllowsborrowerstocompareaparticularloanratewiththeloanratesofotherlenders PricingConsumerandRealEstateLoans:DeterminingtheRateofInterestandOtherLoanTerms(continued)SimpleInterestRateAdjustsforthelengthoftimeaborroweractuallyhasuseofcreditIfthecustomerispayingofftheloangradually,thisapproachdeterminesthedecliningloanbalance,andthatreducedbalanceisthenusedtodeterminetheamountofinterestowed PricingConsumerandRealEstateLoans:DeterminingtheRateofInterestandOtherLoanTerms(continued)TheDiscountRateMethodRequiresthecustomertopayinterestupfrontInterestisdeductedfirstandthecustomerreceivestheloanamountlessanyinterestowedTheAdd-OnLoanRateMethodOneoftheoldestloanratecalculationmethodsAnyinterestowedisaddedtotheprincipalamountoftheloanbeforecalculatingrequiredinstallmentpaymentsOnlyiftheloanispaidoffinasinglelumpsumattheendwilltheadd-onrateequalthesimpleinterestrate PricingConsumerandRealEstateLoans:DeterminingtheRateofInterestandOtherLoanTerms(continued)Ruleof78sAruleofthumbtodeterminehowmuchinterestincomealenderisentitledtoaccrueatanypointintimefromaloanthatisbeingpaidoutinmonthlyinstallmentsImportantespeciallywhenaborrowerwantstopayoffaloanearlyRulearisesfromthefactthatthesumofthedigits1through12is78Todeterminetheborrowingcustomer’sinterestrebatefromearlyrepaymentofaninstallmentloan,totalthedigitsforthemonthsremainingontheloananddividethesumby78 PricingConsumerandRealEstateLoans:DeterminingtheRateofInterestandOtherLoanTerms(continued)Ruleof78sExampleAcustomerrequestsaone-yearloantoberepaidin12monthlyinstallmentsCustomerwouldalsoliketorepaytheloanafteronlyninemonthsInterestrebatethatthecustomerisentitledtoreceivebackThelenderisentitledtokeep92.31percentofthefinancecharges PricingConsumerandRealEstateLoans:DeterminingtheRateofInterestandOtherLoanTerms(continued)InterestRatesonHomeMortgageLoansSincethe1930s,mostloanstofinancethepurchaseofnewhomeswerefixed-ratemortgages(FRMs)In1981,adjustable-ratemortgages(ARMs)wereauthorizedforofferingbyallfederallychartereddepositoryinstitutionsCreatedinresponsetothepressureofinflationandvolatileinterestrates PricingConsumerandRealEstateLoans:DeterminingtheRateofInterestandOtherLoanTerms(continued)InterestRatesonHomeMortgageLoansWhetheracustomertakesoutaFRMorARM,theloanofficermustdeterminewhattheinitialloanratewillbeandwhatthemonthlypaymentswillbeTheformulatocomputemonthlymortgagepaymentsis PricingConsumerandRealEstateLoans:DeterminingtheRateofInterestandOtherLoanTerms(continued)ChargingtheCustomerMortgagePointsHomemortgageloanagreementsoftenrequireborrowerstopayanadditionalchargeupfrontcalledpointsPointsareprepaidinterestandmaybedeductibleashomemortgageinterestForexample,supposetheborrowerseeksa$100,000homeloanandthelenderassessestheborroweranup-frontchargeoftwopoints QuickQuizWhataretheprincipaldifferencesamongresidentialloans,nonresidentialinstallmentloans,noninstallmentloans,andcreditcardorrevolvingloans?Whataretheprincipaladvantagestoalendinginstitutionofusingacredit-scoringsystem?Arethereanysignificantdisadvantagestoacredit-scoringsystem?Whatlawsexisttodaytogiveconsumersfullerdisclosureaboutthetermsandrisksoftakingoncredit?Whatishomeequitylending,andwhatareitsadvantagesanddisadvantagesforbanksandotherconsumerlendinginstitutions?Whatoptionsdoesaloanofficerhaveinpricingconsumerloans?Howistheloanratefiguredonahomemortgageloan?Whatarethekeyfactorsorvariables?