May 2015 - Mortgage Lending Standards


Breaking news

Dong Nam International is a member of the Southeast Appraisal and Consulting Corporation (SACC) which is a professional appraisal company, with 20 offices across Vietnam.DNI is the first international and local team with extensive services and geographic coverage in Vietnam and ASEAN.Dong Nam International announces the appointment of Leon Cheneval of Finance (MoF) certified valuer, this is real first, Leon can now undertake all valuation work and be compliant with the Ministry requirements.

 

 

National Director speaks at Ministry of finance in Hanoi                                

Topic: Securitised lending, Mortgage Valuations.

Opening the event in Hanoi was Nguyen Anh Tuan – Director of Price Management Department who thanked all Valuation Companies, Banks, VVA, MoF, RICS, AON and Lawyers for attending. The objective of the session was to discuss the issues with mortgage lending and valuing for security purposes. The attendees enjoyed both the presentation and the constructive debate. It was apparent that both banks and Valuers faced many challenges such as fraud, unskilled people and property identification problems. Both sides discussed openly the issues at hand. The parties agreed that more needs to be done to get access to reliable data sources and cadastral maps and property information. In closing Nguyen Anh Tuan thanked all who attended and in particular our director for a very knowledgeable insight into mortgage security lending issues and recommendations. He described Leon as a real expert in this field. The forum discussed the issue with residential, commercial, industrial and other types of property that a valuer reports on. Property Valuers in Vietnam have a difficult job it was emphasised that stronger diligence on both sides was a positive step forward.

Extract of the presentation

Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities… Described as bonds, pass-through securities etc… Securities backed by mortgage receivables are called mortgage backed securities (MBS), while those backed by other types of receivables are asset-backed securities (ABS)…

Private, competitive mortgage securitization is believed to have played an important role in the U.S. subprime mortgage crisis.

 

The current system of valuing 

  • Bank advises appraisal company of a Borrower requiring valuation
  • Valuer arranges directly with the Borrower
  • Fees payable directly from Borrower
  • Valuer sends valuation to the Client and or Bank
  • QUESTION: Where does your duty of care lie? Who is your responsibility to?
  • BUSINESS ISSUE: Process takes too long for the fee involved. Too much “back & forward”.

 

 

 

Valuation Standards….

  • RICS… VPGA 2 valuation for secured lending. Forms more of a guidance note and supports IVS 310… Valuations of real property interests for secured lending.
  • APINZ… Guidance notes for valuations for loans and mortgage security.
  • IVS 310… Valuations of real property for secured lending.

Banks think different they want to know about things like...

  • Risk, environmental, physical and future risk.
  • Bad features… end of a road or near a cemetery.
  • Economic pressures.
  • Market trends.
  • Location and access and egress.
  • Identification… an issue in Vietnam. LUR vs physical inspection.
  • They want to know can they sell it if they need to… the term is Saleability.

Consider other First Mortgage Security Valuation Risk Alerts…

  • Does the subject property comprise a higher risk or a non-residential property type?
  • Are the existing improvements on the property incomplete or under construction or requiring essential repairs? 
  • Are there any adverse marketability issues that would require an extended selling period of more than 6 months?
  • Is the subject property critically affected by any Heritage, Location or Environmental Issues?

 

LEON CHENEVAL
General Manager - Dong Nam International

Leon has an extensive knowledge of plant and equipment valuations and has along with the team at Dong Nam valued many varied assets. Our experience extends to sewerage plants, electrical power stations and facilities plus pig farms and feed lots. We have a vast client network of both local and international banks providing solution based services for large corporations and institutional clients in the area of securitised mortgage valuation process and risk analysis for plant and machinery. Dong Nam International strives to provide outstanding property knowledge and consultancy. Leon undertakes valuations in Vietnam on a daily basis he is an active Valuer and lecturer on residential, industrial, commercial, resort and hotel and plant and machinery sectors. As a Ministry of Finance approved valuer and as a foreigner he combines his international knowledge with local qualifications. That’s how Dong Nam International started.

Click here to download the full presentation

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