Mortgage Business Research Articles

Bank scandal contagion: Evidence from the Wells Fargo cross-selling scandal

In the event of a negative reputation shock or scandal, do consumers' anger and mistrust in the scandal-affected products spill over to seemingly unrelated lines of business that the scandal did not directly reach? Our paper looks into Wells Fargo's 2016 “cross-selling” scandal to test the negative sentiment contagion effect on its mortgage business. The study finds significant negative contagion effects, but also shows that Wells Fargo was more accommodating in handling complaints, paying compensation more frequently, and successfully lowering disputes towards zero. These actions are interpreted as Wells Fargo's damage control efforts to ‘Contain the Contagion’.

PENGARUH SEKURITISASI KPR TERHADAP ASET KPR BTN DAN DAMPAKNYA TERHADAP PENINGKATAN KEPEMILIKAN RUMAH MASYARAKAT INDONESIA

Bank funding sources that are more efficient and more independent than using only third party funds that can be withdrawn at any time by depositors. One of the efforts to overcome the dependence of third party funds for Home Ownership Credit Financing is by securitizing KPR assets that have been financed in the stock market. Types of business industries that have implemented asset securitization as a funding instrument in carrying out their business include banking, electricity, toll roads and airlines. KPR securitization by banks is considered important because it can convert KPR receivables into liquid assets without having to wait for the return of mortgage installments for the next 20 years, and the proceeds from this securitization can be used to be channeled back into new mortgages and increase the number of home ownership for Indonesian citizens. However, only state-owned banks such as Bank Mandiri and Bank BTN have only recently implemented KPR asset securitization. Bank BTN has been securitizing since 2009 and Bank Mandiri in 2016, so it can be concluded that in the current banking industry there is still a gap between the timeframe for the source of funds and those distributed in the mortgage business (mismatch funding).

Large Banks, Market-based Banking, and the Financialisation of Danish Mortgage Markets

ABSTRACT This paper puts forward three arguments; firstly, the origions of Danish market-based banking can be traced to the shift by a small group of large commercial banks into the mortgage lending business. Secondly, the Danish case demonstrates the centrality of housing and the politics of mortgage market liberalisation to the rise of market-based banking. And finally, that national diversity in the form of market-based banking mattered for Danish financial stability. Historically, the Danish mortgage model was characterised by cooperative mortgage associations focused on the provision of stable equitable access to housing finance. However, as we shall see, the 1986 financial crisis marked a turning point for Danish finance, and from that point on, a small group of the large commercial bank became increasingly influential. The empirical sections outline three stages to the transformation of Danish finance. In the 1980s, a financial crisis led to the creation of a new type of large commercial bank. In the 1990s, the large banks diversified into the mortgage business crowding out the traditional mortgage banks. Finally, in the 2000s, the large banks provide credit for a massive housing bubble through new forms of market-based banking.

The Market for Reverse Mortgages among Older Americans

This paper examines the usage of reverse mortgages among mortgage borrowers, as well as rejected applicants for new mortgage credit who are age 62+. We find that 17-27 percent of actual and rejected borrowers would have qualified for a HECM reverse mortgage, or nine to 14 times the size of the actual HECM market. The existence of a large number of seniors with an existing mortgage or taking out a new mortgage with quite high LTVs (57-65%, depending on the product) suggests that many seniors do, in fact utilize home equity in order to fund their retirement. Yet they choose products that require monthly payments lasting decades into retirement and rising as a share of (declining) income as they age. We consider a number of possible explanations for why seniors in the US do not spend home equity and rely on loans with high payments, including precautionary savings for health shocks, bequest motives, high costs of reverse mortgages, and the lack of brand name institutions in the reverse mortgage business.

Analisis Strategi Pemasaran Produk KPR iB dengan Akad Musyarakah Muttanaqishah (MMQ): Studi Pada PT Bank Frwrd.Tbk

The rapid development of sharia banking industry in Indonesia is inseparably from the population of 80 percent of Indonesian Muslim community. The development of mortgage business in Indonesia experienced a period of ups and downs. Especially for sharia-based KPR or commonly called the KPR iB is required to be able to take advantage of a vast market in Indonesia. But in line with its development, the condition also triggers high level of competition among fellow financial institution in similar field. This prompted the banking sector to continue to innovate in developing KPR iB products that are easily accepted by many parties and in accordance with the principles of sharia. Coupled with the influence of uncontrollable external factors from outside Indonesia, spurred PT Bank FRWRD Tbk to continuously evaluate strategies and breakthroughs in order to survive and continue to develop, formulate new strategy forms, in order to improve the competitiveness of companies and winning superior. This research begins by analyzing the internal and external environmental conditions of the company. In analyzing used SWOT analysis method to weight the degree of importance of each actor and factor. From the IE Matrix test, obtained competitive position PT Bank FRWRD Tbk on quadrant or cell IV IE Matrix, with growth concentration strategy through horizontal integration. By looking at the position: (1) compete; (2) strength; (3) weaknesses; (4) opportunities; and (5) threats. In this case PT Bank FRWRD Tbk should use the strategy: (1) market penetration; (2) market development; and also (3) horizontal integration strategy in addition to creating creative innovations should also be done

Auditors in the financial meltdown: an examination

Purpose This paper aims to investigate the financial crises and the role of auditors in those crises. The paper is concerned with the banking system, as the last financial crisis in 2008 was provoked by the mortgage business and the big banks and risks management. Design/methodology/approach The paper choses to use data from corporations, practices and professional websites. The authors use interviews that were available and related to the subject matter. Academic works are also used to discuss the literature review and various issues. Findings The paper explores the auditors’ responsibilities and finds that there is a growing concern for auditing. This research is complex, as it discovers that corporate executives in the banking business should be more responsible; this is confirmed by the high risks in the financial area that still persists. Research limitations/implications This is a very complex topic; however, the authors designed it so that it can be read and used by non-accountants, that is to say, CEOs and governmental agencies that are in charge of the regulatory system. Further research studies are needed to ensure ongoing discussions about the financial crisis. The Word is not free from such bad economic events. Practical implications The contribution is important; this research can be used by organizations, governments and academics. Social implications The paper includes implications for the banking and auditing industries. It extends to the public interest. Originality/value This paper contributes to the literature for academic and can be used for teaching purposes. Students can understand the paper, as the authors did not use a regression model.

Steering Consumers to Affiliated Financial Services: Evidence from Brokered Housing Transactions

We use artificial intelligence to identify financial steering activity in residential mortgage markets. Using mortgage data on bank sold properties and linking those to a unique data set that allows us to observe private information exchanges between listing and buyer agents, our results provide some interesting insights linked to steered mortgages. We find that over 50 percent of mortgages on bank sold properties involved steering activity. The underlying properties when listed for sale had selling constraints requiring financed buyers to be cross-qualified by an affiliated lender even if they had already been pre-qualified with another lender. Furthermore, while steering appears to give lenders selling foreclosed properties an advantage in capturing the mortgage business of new borrowers, we find evidence that steering might actually benefit borrowers.

IPTEKS LELANG BARANG JAMINAN PADA PT. PEGADAIAN (PERSERO) CABANG KAROMBASAN MANADO

PT. Pegadaian is an institution that runs a mortgage business, where an item or securities can be used as collateral to borrow some money. And if the pledge giver does not fulfill the obligations of an agreed time, PT. Pegadaian (Persero) will give a warning to repay the loan immediately. If the warning does not get clarity or confirmation of repayment from the mortgage provider, PT. Pegadaian (Persero) has the right to take repayment of its receivable by auctioning off collateral for money pawn under it’s control. This study ains to determine the implementation of the auction at PT. Pegadaian (Persero) Karombasan branch in Manado. Also to find out the obtacles to the auction at PT. Pegadaian (Persero) The data analysis technique uses descriptive analysis.Keywords: auction, constraints, implementation, mortgage goods

Mortgage Spreads, House Prices, and Business Cycles in Emerging Countries

We investigate an unexplored link between the US mortgage spread and business cycle and house price fluctuations in emerging market economies (EMEs). An increase in the US mortgage spread leads to substantially lower output, investment, consumption, house and stock prices, and to an improvement in the trade balance-to-output ratio in EMEs. We find that the financial channel is the main transmission mechanism through which US mortgage spread shocks affect business and house price cycles in EMEs. The US mortgage spread remains a key driver of aggregate economic activity in EMEs when extending the baseline model with alternative domestic and foreign variables, such as global financial risk, and considering alternative country subgroups.

The Return of the Loan: Commercial Mortgage Investing after the 2008 Financial Crisis

Zoe Greenwood, vice president at Foundation Investment Advisors, was glancing through the offering memorandum for a new commercial mortgage-backed securities (CMBS) deal on April 1, 2010, a time when the opportunities for commercial mortgage investors had been bleak to the point of comical. This new CMBS deal represented the first opportunity to buy CMBS backed by loans to multiple borrowers since credit markets had shut the securitization pipeline in June 2008.The offering gave Greenwood a new investment opportunity to suggest to her firm's latest client. She had planned to recommend an expansion in her client's traditional commercial mortgage business, but these new bonds looked intriguing. Could the new CMBS offer her client a superior risk-return tradeoff compared with making individual mortgage loans?After students have analyzed the case they will be able to: –Learn how to construct promised cash flows from both commercial mortgages and commercial mortgage-backed securities –Understand the benefits and costs of direct lending versus indirect lending (purchase of mortgage-backed bonds) –Underwrite commercial mortgage loans issued by others to identify potentially hidden risks –Evaluate at what price a mortgage-bond investment makes financial sense

Benchmarking the loss given default parameter for mortgage loan portfolios under stress

In this paper, we analyze the impact of a decline in property prices that leads to stressed recovery rates for collateral on the loss given default (LGD) parameter in portfolios of mortgage loans. After discussing the shape of a portfolio's loan-to-value (LTV) distribution, we prove that the average LGD's stress sensitivity depends on the LTV distribution, and we derive a closed-form solution for portfolio LGD under the assumption of beta-distributed LTV ratios. Further, we present numerical evidence that the relationship between LTV distribution and portfolio LGD is crucial for understanding the stress resilience of banks involved in the mortgage business. Our formula appears to be a meaningful starting point for benchmarking analyses by regulators, rating agencies and risk managers.

Benchmarking the LGD Parameter for Mortgage Loan Portfolios Under Stress

In this paper, we analyze the impact of a decline in property prices that leads to stressed recovery rates for collateral on the loss given default (LGD) parameter in portfolios of mortgage loans. We prove that the average LGD’s stress sensitivity depends on the portfolio’s loan-to-value (LTV-) distribution and we present numerical evidence that this relationship is crucial for understanding the stress resilience of banks involved in the mortgage business. Furthermore, we derive a closed-form solution for portfolio LGD under the assumption of beta-distributed LTV-ratios and we check the robustness of this approximation for several hypothetical bank portfolios. The formula seems a meaningful starting point for benchmarking analyses by regulators, rating agencies and risk managers.

The U.S. Financial System in 2011: How Will Sufficient Credit Be Provided?

This paper uses Flow of Funds data on the level of net new credit extension to construct a bird’s-eye view of what the financial market landscape might look like once the turmoil subsides and the economy has begun to recover. The paper targets two related questions: (1) How much credit must be extended in order to return the economy to its long-run trend growth? (2) What roles will the major credit providers likely play in that process? The mix of sources supplying credit for the home mortgage, consumer, and nonfinancial business sector markets is different, and so we consider each of those markets separately. We focus on the roles of banks, traditional nonbank credit providers (such as finance companies and pension funds), the corporate bond and commercial paper markets, and structured finance, including government-sponsored enterprise (GSE) mortgage-backed securities (MBS) issuance, consumer (i.e., nonmortgage) asset-backed securities (ABS) issuance, and the commercial mortgage-backed securities (CMBS) market. As a reasonable assumption as to how the credit market may develop we start by positing a “baseline” scenario under which banks return to their long-run trend level of financing for home mortgage, consumer, and business sector borrowing. We then examine the extent to which other major providers of credit are likely to fill the remaining demand for credit. We consider what would happen if various of these credit providers were unable to meet the credit supply role asked of them in order to fulfill credit demand. We conclude that the revival of structured finance is crucial for home mortgage, consumer, and business sector credit provision if sharp adjustments in the cost of credit and major structural adjustments in credit markets are to be avoided. Specifically: (1) in the home mortgage market, GSE’s sales of MBS sufficient to support about half of borrowers’ credit needs are required for banks and private-label securitizers to operate at normal levels; and at least a modest role for private label MBS issuance is probably necessary to ensure adequate mortgage credit availability at a normal interest cost, (2) for consumer borrowing, without a substantial revival of the ABS market, banks and nonbank credit providers would not likely make up for the resultant shortfall without a sharp rise in the cost of consumer credit, and (3) for business sector credit, the re-emergence of the CMBS market is likely essential for adequate provision of commercial mortgage credit since, in the absence of large changes in the price of credit, banks are unlikely to make up for a large shortfall of CMBS-supported business sector credit extension. In contrast, banks and other credit channels likely would replace a credit shortfall resulting from a moribund commercial paper market without an undue rise in the cost of business credit.

The Impact of Global Financial Crisis on Mortgage Pricing and Credit Supply

This paper uses high frequent product-level data to study the pricing and sales of home mortgages in Australia, focusing on the impact of the Global Financial Crisis (GFC). The study finds responses to a monetary shock vary substantially across financial institutions and big banks lead in price setting. The GFC significantly changed the pricing behavior, showing substitution between short-term interest rate adjustment and long-term error amendment throughout the GFC. The effects of the GFC on a bank’s pricing strategy and mortgage business expansion are closely related to its size, asset base and deposit sources and these effects are more prominent for big banks.

Electronic systems of trust in retail lending: new application areas

The last few decades have seen retail banking experiencing unprecedented change. One of the major transformations refers to the nature of trust between lenders and borrowers. Under the new regime, trust is established on the basis of standardised borrower information, which is analysed by appropriate electronic systems of knowledge. This paper seeks to examine the introduction of these systems in two new application areas, namely mortgage and small business lending, and to identify the possible implications for both lenders and borrowers.

The crash reaches the universities

You could call it the Billion Dollar Endowment Club: its members are those US universities—both private and public—that have at least US$1 billion in endowments from alumni, corporations and other investors. Over the past five years, the number of members in this exclusive club has doubled to 76 and, increasingly, these elite universities have come to rely on the returns from their endowments not as rainy‐day funds, but as routine revenue streams. Head of the class was Harvard University (Cambridge, MA, USA) with a jaw‐dropping US$36.9 billion in endowments as of June 2008 (Faust & Forst, 2008). Harvard's legendary fund managers, emulated and envied throughout US academia, seemed to defy the laws of gravity—and economics—as they built up the fund at a double‐digit pace. > In December 2008 […] the financial disasters finally hit Harvard's hoard, which had contributed 35% of the university's operating budget That was BC; before the financial crash of September and October 2008 when the stock market fell, the subprime mortgage business imploded, oil prices soared, and investment banks and major insurers collapsed. In December 2008, the US Bureau of Labor Statistics acknowledged that the US economy had gone into recession and the financial disasters finally hit Harvard's hoard, which had contributed 35% of the university's operating budget. The endowment took an US$8 billion—or 22%—hit and Harvard began planning its future with endowment losses of up to 30%. Drew Faust, Harvard's President, and Edward Forst, its Executive Vice‐President, told university deans in a letter in December 2008, “[t]o put a loss of that size in historical context, over the last at least 40 years, Harvard's worst single‐year endowment return was a negative 12.2 per cent in 1974, and at that time our endowment stood at less than US$1 [billion] and funded a much less significant proportion of …

Jennifer Parks at Pillarpoint Home Loans: Developing a New-Growth Initiative

Jennifer Parks, a newly appointed business development officer at PillarPoint Home Loans, is given a mandate to identify and develop a new-growth initiative for her company, a small mortgage division of one of the largest U.S. credit card issuers. The company has more than 60 million accounts worldwide and a reputation as a leader in direct marketing and online services. After studying the industry, Parks identifies what she believes is a high-potential growth opportunity: a home mortgage product aimed at high-net-worth customers of the parent company. As she gets ready to present her idea to PillarPoint's executives, what should she propose as the next steps for moving the initiative forward? Excerpt UVA-ENT-0102 Rev. Jun. 29, 2015 Jennifer Parks at PillarPoint Home Loans: Developing a New-Growth Initiative In the summer of 2007, Jennifer Parks, a newly appointed business development officer at PillarPoint Home Loans, was given a mandate to identify and develop a new-growth initiative. Her company was a small mortgage division of PillarPoint Financial—one of the largest credit card issuers in the United States; it had more than 60 million accounts worldwide and a reputation as a leader in direct marketing and online services. Besides credit cards, PillarPoint Financial offered a variety of financial services, including auto loans, small-business loans, home-equity loans, and second mortgages. It did not, however, offer first mortgages. Although Parks had experience in IT development and operations, she was new to the mortgage business. For several months, she had immersed herself in the ins and outs of the mortgage industry. She soon identified what she believed was a high-potential growth opportunity: a home mortgage product aimed at the parent company's high-net-worth customers. . . .

Compensation and Incentives in the Mortgage Business

John Quigley, a Berkeley economics professor and an expert on housing markets, argues that poor incentive contracts in the mortgage industry helped cause the present mess and suggests simple steps to align industry incentives with the public interest.

North Fork Bancorporation, Inc. (Mattituck, N.Y.)

AbstractCommercial Banking (MIC: 8.1 SIC: 6022 NAIC: 522110)North Fork Bancorporation is a bank holding company with assets of S57.62 billion as of Dec 31 2005. Co.'s principal bank subsidiary, North Fork Bank, operated 353 retail bank branches in New York, New Jersey and Connecticut. Co. also operates a nationwide mortgage business, GreenPoint Mortgage Funding Inc., headquartered in Novato, CA. Through non‐bank subsidiaries, Co. offers financial products and services including asset management, securities brokerage, and the sale of alternative investment products. Co. also operates a second subsidiary bank, Superior Savings of New England, N.A., that is focused on telephonic and media‐based generation of deposits principally in the Northeast U.S.

North ForkBancorporation, Inc. (Mattituck, N.Y.)

AbstractCommercial Banking (MIC: 8.1 SIC: 6022 NAIC: 522110)North ForkBancorporation is a bank holding company with assets of $60.76 billion as of Dec 31 2004. Co.'s principal bank subsidiary, North Fork Bank, operated 355 retail bank branches in New York, New Jersey and Connecticut. Co. also operates a nationwide mortgage business, GreenPoint Mortgage Funding Inc., headquartered in Novato, CA. Through non‐bank subsidiaries, Co. offers financial products and services including asset management, securities brokerage, and the sale of alternative investment products. Co. also operates a second subsidiary bank, Superior Savings of New England, N.A., that is focused on telephonic and media‐based generation of deposits principally in the Northeast U.S.