credit app of u bnk 2

8/6/2019 credit app of u bnk 2

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Loan Origination&

Appraisal Techniques

AUHF - 2007 AGM & Conference Program, Ghana - September 2007

Mathew JosephSenior General Manager

Housing Development Finance Corporation Limited - India

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Why do we appraise?

Is a Selection Tool

Quantifies Risk

Aids Decision Making

Ensure Good Quality business with

excellent creditworthiness

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ABILITY INCLINATION

What is Credit Appraisal?

OBJECTIVE

KNOWLEDGE

SUBJECTIVE

EXPERIENCE

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What are we Appraising?

Capacity - The ability to service the loan by

financial resources/ income streams.

PERSON:

Inclination - Willingness to pay.

To check documents for creation of security.

To ensure end use.

PROPERTY:

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Basis of Appraisal

Security Based

Repayment Capacity Based

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Involves Risks:Identification

# Information Acquisition

# Documentation

# Customer Interface Techniques

Appraisal Process

Assessment

# Identifying key risks

# Identifying Mitigating mechanisms

# Integration , Collation of data along with

information gathered at the personal interview

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Appraisal Process

Controls/ Risk Mitigants

# Policy related

# System related

Case Representation

# Culmination of the appraisal process

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Identification

Information Acquisition Stage# Carefully designed Application Form

# Standard Document List# Credit Bureau Report# Customer Credit Verification Reports

Documentation# Standard Check-lists# Standard Approach to Scrutiny, Perusal

Customer Interface Stage# Rapport Building# Probing Techniques

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Involves Extensive Evaluation of the following parameters

1] Current Financial Condition & Paying capacity

# Income Source # Income Frequency

# Income Consistency # Income Continuity

Assessment

2] Inclination to repay# Family Background # Savings History

# Repayment trend on other liabilities

# End use of property# Authenticity of information &

documentation provided

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3] Specific Characteristics which may affect

loan repayment

4] Current value and relaisability of security

Assessment

5] Confirmation of the proposal with laid

down credit norms

6] Adherence to Financial Ratios

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Has to be comprehensive as the representationcaptures the essence of the loan and forms the

basis of approval

1] Output of the appraisal process in a standardized

Case Representation

orma

2] Describes the result of the credit assessment

3] Details the credit quality and risks

4] Makes the recommendation

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Controls - The Need

The credit appraisal process involves multiple

steps to arrive at the final decision.

It is imperative that the scope for errors/

omissions is minimized/ eliminated.

Our controls operate in the current business

environment and have to be dynamic in order

to be effective.

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Credit Controls:

1] Written polices & procedures for credit risk

s stems & controls

Type of Controls

2] Standard Credit measures

3] Policies designed to identify problem loans

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System Controls:

1] Validations and prompts inbuilt into the loan

processing systems

Controls

2] System safe guards

3] Escalation mechanisms

4] Exhaustive Information Systems

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Limit Controls:

1] Delegation of Approval powers

Controls

2] Mandatory Approvals of senior personnel incases of loan amounts being greater than loan

approvers sanctioning powers

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Appraisers Responsibility:

Data Discipline

Document Validity

Pre-Sanction

Financial Terms & structure of loan Loan Feasibility

Case Representation

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Pre-Sanction


Review of Verification Reports

Residence

Employer Tele-checks on above

Validates disclosure made by applicant

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Pre-Sanction


Review of Credit Bureau Report

Provides details pertaining to credit

facilities already availed of by a borrower

as well as his/ her payment track record.

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External Reports validate 4 Basic Types of Information

Identification Information

Employment Information

External Agent Reports

Residence Information

Payment History

Inquiries raised by other lenders

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Pre-Sanction

Double-Checkers Responsibility:

Review of Quality of Appraisal of Appraiser

Document/ Information Reliability &

Compliance Compliance with established norms &

policies.

Second Level Credit Check

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Pre-Sanction

Approvers Responsibility:

Final Sanctioning Authorities Review of all aspects of loan w.r.t.

a c a e s

Property Assessment

Business Risk

Government Policy

Industry Outlook

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Critical as these processes are a key to customer

service and maintenance of a quality portfolio

Post-Sanction Processes

ega ue gence

Technical Due Diligence

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Post Sanction Processes

Legal Due Diligence:

Specialized in-house team to whet andscrutinize Property Master File documents.

,

property master which can be referred to by

any office all over India.

Property Database maintained exclusively bythe specialized team.

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Post Sanction Processes

Technical Due Diligence:

Specialized in-house team to assess propertystructure and compliance with statutory

a rovals lan.

Outdoor, Indoor assessment of property.

Disbursement subject to the Technical

Approval.

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Preliminary Approval

Generation of File No

On Line & Physical file created

CONTROLS

INCORPORATED

Process of Scanning

Detailed Data Entry

Updation of Field Credit Investigations

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The recommendation process commences by scrutinyof the loan file and all supporting documents

Customer credit verification reports & Credit

Bureau re orts assessed & evaluated

Income & property assessment Simultaneous

procedure. Initiation of technical site visit if the

property has been identified

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Income , Obligations , assets , sources of

own contribution updated on line

Updation of special conditions , remarks.

Review of case with respect to data

authencity , policy compliance

File recommended

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Physical file handed over to the double checker

Files reviewed for the following :

1] Document validity , reliability

2] Data Discipline

3] Quality of appraisal

4] Adherence to norms & polices

File Double checked

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Approval Pool sanctions the double-checked loans

Post sanction process initiated

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credit app of u bnk 2

Documents