ATM :: Risk-based Lending: A new Era in Home Loans?


Sukanya Kumar – Director, RetailLending.com | Jun 13, 2016 | on LinkedIn

ATM

Nityanand Bajaj is a successful businessman and well-known in his business circle of dealing in exotic fruits. His counter-sales is upwards of 50,000/- per day, plus his fruits go to retails shops in Mumbai and Pune. He is planing to expand his business into exporting, and this trading business is reaping him benefit since the last 20 odd years.

All seems good, right? Not for a home loan lender, but. Bajaj does not show his cash sales completely in books and files a nominal income tax return file.

Category: No or low income documents.

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Prahlad Tanti is buying a property in outskirts of Mumbai where most developers are making only holiday homes, as it is too far from the main city to travel daily. Prahlad will have his parents staying there as they desire a home of their own, and Prahlad can’t afford one within the main city-limits. Lenders were not comfortable lending even when he had the loan eligibility.

Category: Beyond approved geographical limit

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Asokan V. has been brought up in a joint family in Chennai. When his grandfather expired, his five children, 4 sons and 1 daughter decided to sell the ancestral house in village, as no one was going to stay there. With the sum received, they had also decided to buy a new home in the city for renting it out and share the rental income equally. So far, so good. Sounds like a real fairytale. When they had shortage of fund and approached lenders, they all rejected as there were ‘too many owners’.

Category: Too many co-borrowers

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Rajat Acharya was buying a huge penthouse from a highly reputed developer in Delhi. The price of the South Delhi property is close to about 24 crores and he needed 15 crores in loan. This was as per the advise from his CA, and not that he couldn’t afford it. Most bankers denied giving him the loan and the couple who agreed to, wanted additional securities.

Category: Loan amount too high

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Shalini Bhagwat works in Delhi and she wanted to gift a small house in Allahabad to his parents who are currently staying in Nagpur. Why Allahabad? Because her mother was originally from that city and has her childhood memories attached to that house. Shalini incidentally found that same house to be on sale and could not keep her excitement of buying that for her mom. Lenders, however, do not share the same spirit.

Category: Property located in a city where the borrower is neither employed nor stayed ever.

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Wondering what is this story about? Nityanand, Prahlad, Asokan, Rajat and Shalini fall in the same category. A risk-based profiling by the lender. Their rate of interest will have to be higher than other general applicants, processing fee will swell up and there will be more scrutiny while proceeding for sanction. If you find yourself in any of the above categories, I would suggest that you seek service from an experienced mortgage broker who will do the research for you, basis their experience and contacts and let you apply with the solo lender who will surely approve your loan. Getting your loan application rejected is definitely not a good experience.

Risk-based lending is a product of all lenders, depending on the risk appetite of a particular lender but it is crucial for you to know before you apply. Applying in multiple banks/NBFC-s will not only make you feel dejected, will also lower down your credit score.

But does this mean unlimited expenditure in the name of rate, fees etc.? Not any more. RBI has recently made a policy that all lenders will have to submit a range for a particular category, wherein they will have to lend with that span. For example, if for self-employed businessmen the range is 9.50-9.90%, then under no circumstance, for sake of #RiskBasedFunding, can be given a rate higher than 9.90%.

Source: https://goo.gl/JFrGgW

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