Latest Finance News

Assets are intended to earn returns and in the same line banks’ assets are also assumed to gain profits, however they are not free from various risks. Credit risk, market risk and operational risks loom over these assets and the risk proportion varies. Hence, to identify the precise amount of assets which are exposed to these risks, banks are required to calculate risk adjusted assets (RAA).

Normally, banks’ assets are in the form of cash, investments in government securities, bonds, debentures, loans to corporates / individuals etc. As government securities are backed by government guarantee, the credit risk is assumed to be less compared to debentures, loans to corporates. Thus, risk component varies among asset categories and such risk percentages are derived by approaches viz., standardized approach, internal rating based approach developed by Basel Accord. The standardized approach specifies standard risk weights for various asset categories which are usually implemented by most national regulators. Cash and short term government securities are considered risk free and a 0% risk is assigned while exposure to OECD banks is assumed to have a 20% credit risk, mortgage loans 50% and unsecured commercial loans at 100%. Lately Basel also advised banks to have 150% risk weight for loans to borrowers with low credit ratings.

Continue reading ‘Role of Risk Adjusted Assets in a Bank’s Capital’ »

I have been asked the question, “What are reverse mortgage loans?” for a few times already, and the answer that I always give is this, “Those are reverse home loans which any American senior with home equity can take part of. He or she can ask to convert it into cash for his daily expenses.” In this article, I will try to explain everything in layman’s terms so that readers, who are not familiar with mortgage lingo, can easily keep up with the discussion.

Do you really need a Reverse Mortgage Loan?

In most cases, using this loan to finance your daily needs is not the best idea. If you are thinking of spending it for your dream vacation or getaway, you might want to reconsider. Continue reading ‘When is the Right Time to Get Reverse Mortgage Loans?’ »

Are you one of those people looking for getting yourself and your family a house and are looking into the possibility of going through the process of getting FHA housing loans? Are you feeling overwhelmed by the massive number in your bills that, because of the triggered interest rates, keeps on growing like a monster on your back? And do these bills make you think that maybe there isn’t any more chance for you to get your home loan? The best thing to remember is not to lose hope. Due to the increasing efficacy of the FHA processes as bolstered by the Obama bailout fund, you can rest assured that you will indeed get the home you dream about.

So many Americans are looking for the best house for their families but still cannot obtain this dream because they are not financially capable to get the mortgage necessary for this. Traditional loans are not accessible to a lot of people who have low to medium salaries. Continue reading ‘Hope For the Hopeless – FHA Housing Loans’ »

The American dream includes owning one’s very own home. Everyone or almost everyone wants to achieve that American dream. But the fact is that those without enough earnings as well as those who do not have perfect credit and savings find it difficult to get the housing mortgage loans that will enable them to fulfill their dream of getting their own home. For these people, the FHA housing loans program offers the much-needed helping hand.

What exactly is this? The FHA or the federal housing administration gives out loans that are insured by federal funding. The FHA issues several private lenders and banks the ability to give FHA loans. By ensuring the loans, they make sure that the banks and lenders will be able to lower the risk measures that they take in fear of the borrower defaulting. There are a lot of private lenders that offer these. All that one needs to do is to look for a lender who offers the best deal. Continue reading ‘Supporting the American Dream – FHA Housing Loans’ »