Question

Introduction

This simulation will allow you to assume the role of a loan officer and make lending decisions about mortgage applications to the bank.

Once you review all the documentation and the loan applications, you will make your recommendations. You will also have a chance to review how your loans performed over the course of the next six months. Based on this analysis, you will answer a few questions and complete your analysis.

Once done, you will need to submit the results of your analysis as an assignment for grading.

Of course, there can be more than one correct decision. Please present your justification of the decisions you are presenting.

Include three approved Loans  

1.

2.

3.

Would you have made the same decisions about the loan(s) you approved now that you see how they have performed over six months? Explain.  

Are you concerned about the payments that have been made for the loan(s) you approved? What do you think will happen in the next 5 years?

summarize your findings in the one page word document

Answer 1

Three loans I will approve are as following-

1.Home loan secured by collateral.

2. Five year business loan

3. 10 year fixed rate loan

A. Yes, I would have made same decisions as they would be performing quite good because of their debt repayment capability even at the the adverse economics because they are already secured by collateral and assets will have higher realizable value after 6 months.

B.I am concerned about my business loan because there is an economic crisis which is expected to hit the economy and business will have difficulty paying the the debt repayment because it has low liquidity on its books of accounts. I think if businesses are not able to pay with their debt, I would be invoking my collateral and recovering my loan from selling off those assets.

It can be interpreted that at the time of adverse economic scenario when there is a Credit crunch in the economy and there is lack of global demand, Bank will have to face draw down on its books of accounts because of its assets turning bad as loans are not recoverable in nature so it will have to be proactive while landing and assessing the economic scenario in order to gain from these adverse economic scenarios