Classification System for Mortgage Arrear Management

Due to the economic recession in the recent years, more and more mortgage customers default on the payments. This brings tremendous losses to banks and forces their arrear management departments to develop more efficient processes. In this paper, we propose a classification system to predict the outcome of a mortgage arrear. Each customer who delays a monthly mortgage rate payment is assigned a label with two possible values: a delayer, who will pay the rate before the end of the month, and a defaulter, who will fail to do so. In this way, the arrear management department can only treat defaulters intensively. We use arrear history records obtained from a data warehouse of one Dutch bank. We apply basic classifiers, ensemble methods and sampling techniques to this classification problem. The obtained results show that sampling techniques and ensemble learning improve the performance of basic classifiers considerably. We choose balanced random forests to build the ultimate classification system. The resulting system has already been deployed in the daily work of the arrear management department of the concerned bank, and this leads to huge cost saving

Clicking into Mortgage Arrears: A Study into Arrears Prediction with Clickstream Data

This research project investigates the predictive capability of clickstream data when used for the purpose of mortgage arrears prediction. With an ever growing number of people switching to digital channels to handle their daily banking requirements, there is a wealth of ever increasing online usage data, otherwise known as clickstream data. If leveraged correctly, this clickstream data can be a powerful data source for organisations as it provides detailed information about how their customers are interacting with their digital channels. Much of the current literature associated with clickstream data relates to organisations employing it within their customer relationship management mechanisms to build better relationships with their customers. There has been little investigation into the use of clickstream data in credit scoring or arrears prediction. Since the financial meltdown of 2008, financial institutions have being obliged to have mechanisms in place to deal with mortgage accounts which are in arrears or have a risk of entering arrears. A potentially crucial step in this process is the ability of an institution to accurately predict which of their mortgage accounts may enter arrears. In addition to traditional demographical and transactional data, this research determines the impact clickstream data can have on an arrears prediction model. A multitude of binary classifiers were reviewed in this arrears prediction problem. Of these classifiers, ensembles models proved to be the highest performing models achieving reasonably high recall accuracies without the inclusion of clickstream data. Once clickstream data was added to the models, it led to marginal increases in accuracy, which was a positive result

Comparative odds of variables contributing to non-subsidised homeownership in South Africa

Homeownership is widely advocated and believed to contribute towards economic activity, employment, wealth creation, economic, political, and neighbourhood stability and financial independence. Despite government’s interventions to advance homeownership there is currently a declining trend in homeownership and an increase in renting experienced in South Africa. As the government does not have the resources to provide adequate housing to all South Africans, identifying the factors which attribute to non-subsidised homeownership will assist in implementing interventions and strategies to increase access to non-subsidised homeownership and reduce reliance on government subsidised housing. The main objective of this study was to determine the comparative odds of variables contributing to non-subsidised homeownership in South Africa from secondary data obtained from a South African household survey. Compared to the heuristic model, the following variables were found to align closely with the expectation created; non-subsidised homeownership attainment was most likely for households within high-income groups and least for households within the low-income groups, more likely for households who have access to credit than those without, more likely for households with no accounts in arrears than those with accounts in arrears, more likely for households with an ability to save than those without, most likely for households consisting of seven or more household members and least likely for single member households, most likely for households where FKP (Financially Knowledgeable Person) has completed a tertiary education level and least likely for households with primary not completed education levels, most likely for households where the FKP is older (aged 65 and older) and least likely for young FKP households (aged between 18 and 24), most likely for households residing in rural areas and least likely for households residing in metropolitan areas, most likely for female FKP households and least likely for male FKP households. Unexpectedly the regression model indicated that non-subsidised homeownership is most likely for households where the Financially Knowledgeable Person (FKP) is not economically active (for example pensioners) and least likely for employed households, most likely for households from the African population group and least likely for Indian households, most likely where the FKP is never married or single and least likely for separated or divorced FKP households (which is expected) and most likely for households residing in Limpopo (which is expected) and least likely for households residing Western Cape.Financial accountingM. Phil. (Accounting Science

A lakossági jelzáloghitel LGD meghatározásának módszertani lehetőségei Magyarországon = The methodological opportunities of quantifying the retail mortgage loan’s LGD in Hungary

A CRD (Capital Requirements Directive) a bázeli ajánlásokra épülve teljesen új alapokra helyezte a teljes banki kockázatkezelést. Nem túlzás azt állítani, hogy a hitelintézetek tevékenységének valamennyi kockázati szempontból releváns területén számottevő változásokat generált, mind a hitel-, mind a működési, mind pedig a piaci kockázat vonatkozásában. A CRD bevezetésével a hitelintézetek számára lehetővé vált, hogy amennyiben a hitelkockázat vonatkozásában a belső minősítésen alapuló (IRB: Internal Rating Based) módszert alkalmazzák, akkor a tőkekövetelmény meghatározásához bizonyos hitelkockázati paraméterekre vonatkozóan saját számításaikat használhatják, ha megfelelnek a Bázel II követelményrendszerének, szabályozási elírásainak. Jelen értekezés keretében a várható veszteség számítását tekintve az egyik leginkább meghatározó komponens, a nemteljesítés esetén várható veszteségráta (LGD) kalkulációjának bizonyos aspektusait mutatom be. _________ The CRD (Capital Requirements Directive) founded on the Basel recommendations put the whole risk assessment of the banks on new bases. It is no exaggeration to state that it generated considerable changes on all risk-relevant areas of the activity of the credit institutions, concerning both the credit risk, the operational risk and the market risk. However, this thesis focus only on a fairly narrow scope not disputing that the particularly complex system of the Basel rules does not enable the dissociation of the areas so categorically. I descend to the particulars only for the proper credit risk which can be defined as the so-called default risk, and I follow this interpretation in the framework of the whole thesis

Assessing household credit risk: evidence from a household survey

This paper investigates the main individual driving forces of Hungarian household credit risk and measures the shockabsorbing capacity of the banking system in relation to adverse macroeconomic events. The analysis relies on survey evidence gathered by the Magyar Nemzeti Bank (MNB) in January 2007. Our study presents three alternative ways of modelling household credit risk, namely the financial margin, the logit and the neural network approaches, and uses these methods for stress testing. Our results suggest that the main individual factors affecting household credit risk are disposable income, the income share of monthly debt servicing costs, the number of dependants and the employment status of the head of the household. The findings also indicate that the current state of indebtedness is unfavourable from a financial stability point of view, as a relatively high proportion of debt is concentrated in the group of risky households. However, risks are somewhat mitigated by the fact that a substantial part of risky debt is comprised of mortgage loans, which are able to provide considerable security for banks in the case of default. Finally, our findings reveal that the shock-absorbing capacity of the banking sector, as well as individual banks, is sufficient under the given loss rate (LGD) assumptions (i.e. the capital adequacy ratio would not fall below the current regulatory minimum of 8 per cent) even if the most extreme stress scenarios were to occur.financing stability, financial margin, logit model, neural network, stress test.

Financial examinations

https://egrove.olemiss.edu/aicpa_guides/1656/thumbnail.jp

In duplum rule and reckless lending under National Credit Act, its impact on credit agreement.

Masters Degree. University of KwaZulu-Natal, Durban.This research deals with the common-law principle namely in duplum rule, maximum limit of interest that is charged for credit transactions. Customer’s protection has been a relatively recent development in the law sphere; the charging of the interest, however, has not. From compound interest, to simple interest, to no interest, the history of usury is lengthy. It is important, and more significantly, the dialog over how it should most effectively be regulated is equal in length and still a most contemporary topic discussion. Credit customer’s protection, being an obvious hybrid of this development, also had a fair share of academic literature devoted to it. Generally translated, in duplum means double the amount. It has been part of the South African legal system since the 1800s. It is a common law principle stating that interest on a debt will stop to run when the total amount of the arrear interest has increased to an amount equal to the outstanding principal debt. In a community where credit has become so easily accessible, the courts and legislature became obliged to develop the common law to afford more protection to the customers. For this very mission, the legislature promulgated the National Credit Act No 34 of 2005. The research also highlights reckless lending, which reckless credit lending that is used to be a new term introduced in the credit or lending market to increase customer spending, but it is currently a popular practice in the credit industry. The National Credit Act must protect customers, specifically against ever-present increasing reckless credit practices. Certain sections relating to reckless credit, however, are mostly unclear. In South Africa, the legislature failed to make the statutory in duplum rule understandable and easy to apply, and instead complicated it by adding the costs of credit to the interest so that a need to calculate and determine which amounts would be considered in the "double" arose. The South African judiciary and legislature are obliged to educate the populace of the existence of the rule, as most transactions will not come to court and this may leave most debtors still over-indebted

An analysis of the payment of municipal services by the Department of Roads and Public works in the Eastern Cape

The research study sought to analyze the payment of municipal service by the Department of Roads and Public Works in the Eastern Cape. Factor’s affecting the payment of municipal services by the DRPW is a great challenge in the Eastern Cape but not mainly in this province only. The purpose of the study was to help decision makers of the department in their strategic planning to be aware of the challenges in the payment of municipal services. The researcher selected qualitative method of research. The primary data for research study was collected through semi structures interview and the questionnaires. The findings of the study were obtained from the responses provided by the respondents and negatively affect the department’s ability to meet its obligation to pay municipal services. Recommendations are provided that could assist the Department of Roads and Public Works to improve in the payment of municipal services. Recommendations will hopefully help to improve the financial status for the betterment of the municipalities of this province. Research recommends centralization of municipal utilities from the client department to the owner and to improve intergovernmental relations and stakeholders management