Credit Risk Assessment: The New Lending System for Borrowers, Lenders, and Investors
Existing credit risk assessment methods have put too much of an emphasis on past loan performance and historical market conditions and not enough on borrower capacity, new mortgage product risk characteristics, and economic cycles. According to industry practitioners Clark Abrahams and Mingyuan Zhang, the housing market bubble boom and burst and the subsequent financial crisis could have been prevented had these underwriting gaps been properly addressed.Credit Risk Assessment: The New Lending System for Borrowers, Lenders, and Investors equips you with an effective comprehensive credit assessment framework (CCAF) that can provide early warning of risk, thanks to its forward-looking analyses that do not rely on the premise that the past determines the future. Revealing how an existing credit underwriting system can be extended to embrace all relevant factors and business contexts in order to accurately classify credit risk and drive all transactions in a transparent manner, Credit Risk Assessment clearly lays out the facts.This well-timed book explores how your company can improve its current credit assessment system to balance risk and return and prevent future financial disruptions. Describing how a new and comprehensive lending framework can achieve more complete and accurate credit risk assessment while improving loan transparency, affordability, and performance, Credit Risk Assess-ment addresses:How a CCAF connects borrowers, lenders, and investors—with greater transparencyThe current financial crisis and its implicationsThe root cause to weaknesses in loan underwriting practices and lending systemsThe main drivers that undermine borrowers, lenders, and investorsWhy a new generation of lending systems is neededMarket requirements and how a comprehensive risk assessment framework can meet themThe notion of an underwriting gap and how it affects the lenders' underwriting practicesTypical issues associated with credit scoring modelsHow improper use of credit scoring in under-writing underestimates the borrower's credit riskThe ways in which the current lending system fails to address loan affordabilityHow mortgage and capital market financial innovation relates to the crisisWhether you are a borrower, a lender, or an investor, Credit Risk Assessment enables you to better understand the weaknesses in today's loan underwriting and to better cope with financial weaknesses toward fostering a new generation of credit models that possess greater transparency.