Study On Credit Risks In Individual Housing Loans Of Chinese Commercial Bank

Boosted by the development of Chinese real estate sector, personal housing mortgage experienced a rapid growth in the past decades in China. Up till now, the aggregate amount of personal housing mortgage is nearly 6 trillion Yuan, accounting for 14% of gross domestic product (GDP),12% of the total loans of Chinese commercial banks and 39% of the personal loans. It is therefore believed that personal housing mortgage is the most important business of all the activities within Chinese commercial banks. The sound and stable development of which would exert tremendous impact on the sound development of domestic housing and national economics as a whole.Personal housing mortgage is guaranteed by the housing, and consumers who apply for personal housing mortgages usually have stable work. These two characteristics made personal housing mortgage relatively safer as compared with other types of personal loan. Personal housing mortgage in this sense is one of the most favorite business operational areas for all commercial banks. For example, the Construction Bank of China, Sichuan branch had devoted 6 hundred million Yuan in promoting the facilities of personal loan center during the year 2009 and 2010. Personal housing mortgage is relatively safer than other types of personal loans, yet it still has some risks, credit risk is one of the many kinds of risks. The prevailing sub-prime crisis that occurred in 2007 is one lively example. In less than one year, the sub-prime crisis turned into a global crisis with nearly all industries affected. After all, the very origin for this crisis comes from personal housing mortgage.One alerting fact is that in recent years, the price of the housing in China is soaring at an average rate of 16.8% per year, indicating potential problems in the housing financing market. According to international practice, it often takes 3 to 7 years before the potential problems are revealed to the public, based on which it is likely that personal housing mortgages in China is entering such stage of risk exposure. Such risk exposure has attracted much attention from the government, banks, and scholars as well, to study and resolve such risk exposure is now another vital issue to be learnt in our domestic financing market.Researchers from abroad have been devoted into the study of personal housing mortgage for over 60 years now, yet the sub-mortgage crisis still happened in US. The study of personal housing mortgage is in this sense a long-term and ever-new subject facing us, which can not be conquered in a short time. Domestic researchers began their study toward personal housing mortgage in the late 1990s, during which period a lot of scholars have contributed their personal insight into the issue of risk exposure of Chinese personal housing mortgage. Some scholars have put forward constructive suggestions in resolving such risk exposure and their suggestions did help in regulating and reducing risk exposure of Chinese personal housing mortgage. Nevertheless, much still needs to be done and studied. By a deeper study into the Chinese personal housing mortgage market and its current developments, it is intended to study the credit risks of personal housing mortgage facing Chinese commercial banks, by achieving the goal, proper and useful recommendations will be made.By introducing current situations in Chinese personal housing mortgage market, it is found that while this sector experienced tremendous growth in the past decades, associated internal regulations and external environments have not been able to keep pace, resulting the possibility of occurrence of credit risks of personal housing mortgage. Based on the introduction, further studies are conducted in the latter part of the dissertation, where a careful study of the targeted mortgage loaners is conducted. In all we have identified three types of personal housing loaners and the unique characteristics and general behaviors of default are studied. Based on these studies, conclusions and recommendations are put forward in the final part. Only by the combination of improving internal regulations and external credit risk management mechanism can Chinese commercial banks prevent and resolve credit risks of personal housing mortgage that are faced by them.