Bad debt and mortgage assets from different aspects

Following reports of Financial Supervisory Commission announced that prequalify for mortgage bad debt ratios of the banking system is 8.6% of the debt, equivalent to 202 trillion, problem solve bad debt are is hot topic for today. A notable figure from mortgage loans in this little report is referred to as the collateral value of this debt by 134.8% loan value.

Firstly, according to the formula to extract backup set R = (A-C) xr (where R is the value estimate is quoted, A is the value of the loan, C is the asset value guarantees and is the rate quote created backup) it's clear when the collateral value is higher than the loan value rising bad debt also does not affect the profitability of banks. This partly explains the fact that mortgage loan officer from all banks are interest rate report until this time despite the bad debt burden are Bank beyond capital.

Second, according to newspaper reports, the value of mortgage assets may be liquidated to recover the arrears up to 270 trillion. According to the share of the Bank's leader, has long been the very limited bank loans trust that required business/individuals must have collateral, in which 2/3 estimate the collateral is real estate.

Problem for banks is the recovery of the property forever, not simply due to the complexity of the related legal procedure, on average it takes 2-3 years to complete.

Also, if bad-debt to survive, the collateral value have been preserved, while weak liquidity currently influence to the collateral value, banks will suffer great risks, this was a "dilemma". However, at present not less domestic and foreign investors are "check out the" giant collateral blocks. The "buy bad debt" is annexed the debtor or buy mortgage assets has long been an extremely lucrative "market" in developed countries.

Currently proposed NPL home mortgage refinance disposal get the most attention is the establishment of the company buying and selling bad debt (AMC). However, the problem has not resolved at present is the role as well as the rights and responsibilities of AMC.

If the AMC to use State budget to "bad" debt collectors and (according to affirm the AMC is active units for profit) then seek to transfer debt or/and collateral to make a profit then here is how to treat the disease "from the flame". The nature of the bad debt is still the bad debt, the purchase of go sold the debt does not create added value that only increases home mortgage refinance the "cost" of debts due to operational costs and profit expectations of AMC.

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