Abstract
This paper investigates the risk management for residential mortgage in China. The paper finds out that the Chinese commercial banks have to take all the risks of residential mortgages. By examining a causal model of Chinapsilas mortgage market, the paper reveals that with relatively tight financial regulations by Chinese central bank, commercial banks have to solely depend on the credit system to screen out potential default loan applicants. Therefore, it is urgent for commercial banks to build an effective screening system to reduce the risk introduced by loan defaults. The paper reports an analytic study based on a real dataset of 641,988 observations provided by a Chinese commercial bank. The outcomes suggest that the classification model is effective for credit scoring with the data collected at China, and, however, the quality of the data needs to be improved for more precise default risk management.
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