Valuation of mortgages: The inadequacies and workarounds
Valuation of collateral is an important activity for banks. Asset valuation is the basis for decision making for lending, investment, capital contribution, financing of projects, contributing to limiting bad debt and credit risk. However, this valuation activity is weak due to many factors such as valuation staff lack of initiative, creativity, lack of information from the market ...
The inadequacies in mortgage asset valuation
In today's commercial banks, collateral (TSTC) is a condition to limit credit risk. However, valuation services, especially valuation for commercial banks (CBT) Vietnam is still limited. The constraints that this activity has not developed are as follows:
The appraisal firms and appraisers are very few. In 2016 only 183 enterprises and nearly 900 appraisers are licensed, the number of enterprises and appraisers in the previous years is less. In addition, material facilities, databases for valuation in general and valuation of assets in particular are newly formed not long ago and not yet fully.
On the other hand, when most borrowers provide collateral for banks to self-assess their property without professional advice or refer to unofficial sources. This greatly influenced the collateral valuation process.
Moreover, the valuation of collateral in the bank is mainly carried out by the credit department. At present, banks have established an independent valuation unit, but each bank has its own method and procedure for valuing its collateral, so there is no agreement among banks. Therefore, the implementation process is very difficult due to conflicts of interest or limited experience, leading to the valuation of TSTC is too low or too high not true.
The need for independent mortgage asset valuation organizations
Bad debts from banks, especially real estates (real estates), account for a high proportion, or due to incorrect valuation of assets.
In view of these inadequacies, in 2015 the SBV issued Circular 14/2015 / TT-NHNN regulating the selling price of NPLs at current market value. This is also a good move to handle bad debt faster. But to secure credit, the solution is to tighten TSTC conditions, especially mortgage real estate. More than that, there should be independent stand-alone organizations in valuing TSTC so that TSTC values are properly evaluated and credit protection is maintained.