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Polish Bank Association Boles l aw Meluch Expert Real Estate Finance Committee Vice President, European Property Institute „The Role of Data Base in Mortgage Market Development, Polish Experiences” 2 nd Hypothecary Forum March 1-2, 2007 Sankt Petersburg Polish Bank Association Agenda

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Polish Bank Association

Boleslaw Meluch


Real Estate Finance Committee

Vice President, European Property Institute

„The Role of Data Base in Mortgage Market Development, Polish Experiences”

2nd Hypothecary Forum

March 1-2, 2007

Sankt Petersburg


Polish Bank Association

  • Why data bases are to be built ?
  • Standardization in Risk Management Process
  • Mortgage Loans Processes Standardization
  • Mortgage Loans Portfolio Risk Management
  • Regulatory Requirements in Mortgage Portfolio Management in Poland
  • Our achievements
  • Future (development plans)

Polish Bank Association

Standardization in Risk Management Process

1. Product standardization

2. Documentation standardization

3. Business practices standardization

4. Data and information access standardization

5. Property Appraisal Standardization


Polish Bank Association

Mortgage Loans Processes Standardization

1. Origination

2. Underwriting

3. Servicing

4. Funding


Polish Bank Association

Mortgage Loans Processes Standardization

  • 1. Origination
    • Pricing
    • Advertising and Marketing
    • Consumer Education
    • Closing of the mortgage
      • Consumer credit reporting
      • Settlement cost
        • title insurance,
        • survey,
        • appraisals,
        • credit checks,
        • loan origination and documentation
        • fees,
        • commitment and processing fees,
        • hazard and mortgage insurance
        • interest prepayments.

Polish Bank Association

Mortgage Loans Processes Standardization

  • 2. Underwriting
    • Collateral
        • Appraised value of the home
        • Down payment
    • Credit reputation
        • Credit history
    • Capacity
        • Income Verification
        • Debt ratio
        • Cash reserves (Verification of assets)
        • Taxes
    • Standard scoring methods across lenders

Polish Bank Association

Mortgage Loans Processes Standardization

  • 3. Servicing
      • Payment Processing
      • Collections
      • Customer Service
      • Loss Mitigation
      • Reporting to Credit Bureau

Polish Bank Association

Mortgage Loans Processes Standardization

  • 4. Funding
      • Source of funding
      • Cost of funding
      • Margin Determination
      • Secondary Mortgage Market Conduit Requirements

Polish Bank Association

Mortgage Loans Processes Standardization

  • In mortgage process a bank is required to analyze:
  • Mortgage loan application – borrower income is a fundamental source of mortgage payments
  • Collateral valuation
  • In proper designed mortgage loans process the final
  • approval should be based equally on borrower and
  • collateral analyses
  • In Polish practice borrower analyses is more important

Polish Bank Association

Mortgage Loans PortfolioRisk Management


Polish Bank Association

Mortgage Loans PortfolioRisk Management


Polish Bank Association

Mortgage Loans PortfolioRisk Management


Polish Bank Association

Mortgage Loans PortfolioRisk Management


Information on Origination of Loans

Information on Underwriting & Appraisals of Loans

Servicing and Collections

  • Product types and product development
    • Changes in Portfolio size and product type over last three years and brief explanation as to the reasons for change
  • Origination volume/source (like direct lending, branch network/dealer network, direct mail, brokers, portfolio acquisition, others)
    • Application process - centralised/decentralised
    • No. of applications received per day/per week (if available)
    • No. of applications handled per day/per week (if available)
  • Procedures for approval and monitoring of outside origination sources
    • Any single source which provides more than 5% of total originations
    • Rejection volume
    • Procedures for suspension or rejection of a broker
  • Key characteristics of franchising contracts
    • Copy of standard contract, if available in English
  • Required Hedging strategy
  • Reporting structure of underwriting department
  • Loan approval procedure
    • Approval limits/authority
    • Conditions tracking and funding authority
    • Use of credit scoring or other indicators
    • Any exceptions to underwriting procedure
  • Documentation
  • Fraud protection procedures
    • Experience of fraud
  • Turn-around time from origination to approval/rejection
  • Turn-around time from origination to receipt of loan by borrower
  • Percentage of approvals/rejections
  • Reasons for rejection
  • Extension/rewrite policies
    • Procedures
    • Reasons
  • Appraisal procedures
    • Appraiser requirements/approval process
    • In-house/external
    • Training/qualifications
    • Monitoring and quality control

Servicing Portfolio

  • Current loan portfolio stratified by type and geographic distribution
  • Average cost to collect a loan
  • Number of loans serviced per fully dedicated employee
  • Sub-servicing agreements
    • Listing of companies, servicing volume, and loan type
    • Procedures for monitoring and quality control of sub-servicers

Customer Service

  • Call volume/staffing
  • Automation/technology
  • Customer file maintenance/storage


  • Experience of staff members
  • Training
  • Collections enhancement tools
    • Call and notice cycles
    • Incentive programs
    • Approval limits/authority
    • Re-instatement of recovery record (outside foreclosure)
  • Prepayments
  • Prepayment procedures
  • Reasons for prepayments
  • Prepayment penalties

Polish Bank Association

Origination, Underwriting and Servicing Procedures


Data Fields Requested by Rating Agencies

Portfolio Data

    • Portfolio Cut Off Date
  • Information on the Borrower and Property
    • Borrower Name
    • Borrower Identification Number
    • Borrower Legal Form and Employment Type
    • Property Region and Address
    • Property Type/Description
    • Owner Occupancy
    • Net Rental and Total Income of Borrower
    • Rating (internal and external) of Debtor
    • Details of Court Judgments
  • Information on the Loan
    • Origination and Drawing Date
    • Loan Purpose
    • Currency
    • Loan Amount Requested
    • Original Loan Size
    • Current Loan Balance
    • Existing Charge Balance
    • Limit loan amount (for undrawn amounts)
    • Subsidised flag (yes/no, if yes subsidised amount and entity)
    • Legal Final Maturity
    • Weighted Average Life
    • Original Terms (months)
    • Remaining terms (months)
    • Payment Date, First Amortisation Date
    • Amortization Profile (bullet; amortisation rate)
  • Interest
    • Interest Rate Type (fixed/ floating / mixed)
    • Current Interest Rate
    • Conversion Option (if any Conversion Date and post Conversion interest rate)
    • Index Name/ Value
    • Marchgin
    • Interest Rate Cap/ Floor (if any)
    • Payment Date
    • Payment Frequency (Monthly/ Quarterly/ Semi-Annual / Other)
    • Interest Day Count
    • Interest Rate Reset Frequency
  • Security
    • Type of Security
    • Valuation of Security Amount
    • Valuation of Security Date
    • Lien Position/ Lien Value (for Mortgage Loan)
    • Other Guarantees on Loans/ Insurance
  • Performance Status
    • Arrears Balance, Total Arrears
    • Bankruptcy
    • Current Principal Due, Current Interest Due
    • Number of days/periods the loan is in arrears
    • Arrears Multiple
    • Amount of arrears repaid without losses
    • Arrears gone into possession

Polish Bank Association

Rating Agency Portfolio Data Requirements

legal framework requirements

Polish Bank Association

Legal framework requirements
  • 20 July 2000, General Inspectorate of Banking Supervision - Recommendation J - creation by banks database about real estate market
  • 10 December 2001 (amended on 10 of December 2003) Minister of Finance Ordinance about principles of creating reserves on risk with activity of bank
  • New Capital Accord – Basel II
  • March 2006 - Recommendation S
  • 2006 - Banking Supervision Committee’s Resolution on loans currency exposure - draft
realities in banking sector

Polish Bank Association

Realities in banking sector
  • Fragmentary databases
  • Differentiated range of information
  • Traditional form
purpose s of system amron

Polish Bank Association

Purposes of System AMRON
  • Implementation by banks of supervisory regulations’ requirements ,
  • Effective management risk,
  • Depending on current market rate value estate prediction
  • Rationalization of bank activity cost,
  • Cutting costs incurred by clients.
s ystem s functionality

Polish Bank Association

System’s Functionality
  • Information about all types of estate
  • Collecting and providing access to chosen data concerning the property (transactions, offers, in-kind contribution, appraisal, others)
  • Property attribute thesaurus
  • Automatic verification of important parameter in introduced record
  • Sharing analyses that present statistical data and current trends on real estate market
  • Data export to MS Excel
  • Possibility of generating individual analysis in relation with micro and macro economical data
amron s ystem attributes of housing prices

Polish Bank Association

AMRON System Attributes of Housing Prices

x1 – number of months between real estate transaction (valuation) date and 1 January of each year, i.e. the date of conducted analysis

x2– law pertaining to the considered real property

x3 – city zone

x4 – year of construction completion or recent major repair

x5 – land development

x6 – building plot area [100 m2]

x7 – facility floor area [m2]

x8– access to means of communication

x9 – shape of plot and land topography

x10– accommodation plan

x11 – attractiveness of location

x12 – location of story in the building

x13 – kind of building

x14- outfit standard

x15 – administrative and legal restrictions

x16 – degree of unit price objectivity

x17 – additional attribute – expert

x18 – source of price information

c – real estate unit price [zł/m2]

d – rent for accommodation area unit [zł/m2 x year]

analyses and monitoring

Polish Bank Association

Analyses and monitoring
  • Models of scaling of ratios of risks,
    • In free transactions of sales
    • In free transactions of sales in different intervals of times
    • In foreclosure procedures
    • In future transactions of sales
    • On base of offered property prices
  • Property value prediction models,
  • Discount rate calculation models
examples of types of reports

Polish Bank Association

Examples of types of reports
  • Report A - general, descriptive (property type, area, transaction priceetc., presented in the territorial aspect)
  • Report B - detailed, describing a particular property (full data on property gathered in the database)
  • Report C - summary – cross-section of the given real estate market (region, type).
  • Report D – presenting trends on the real estate market (generated periodically).
how system is taken advantage

Polish Bank Association

How system is taken advantage?

250 000 PLN

How much this property is worth ?

200 000 PLN

Lack of payments

Risk management

Monitoring the collateral’s (property) value during the crediting term.

Value of estate in foreclosure procedures

benefits of amron

Polish Bank Association

Benefits of AMRON
  • Access to all data on estate market
  • Increasing risk management in real estate financing market including limiting risk associated with undervalued collateral.
  • Possibility for a trustworthy verification of property appraisals through comparison of external appraisals with data from system.
  • Shortening the time of credit decision – fast verification of property value will decrease the time the client waits for the banks decision.
  • Limiting the possibility of a unfair and negligent valuation of property that might cause an undercolleralization of the loan value.
  • Possibility of monitoring the collateral’s (property) value during the whole crediting period.
benefits of amron25

Polish Bank Association

Benefits of AMRON
  • Wider access to data gathered by particular participants of the system, giving a better picture of the real estate market.
  • Possibility of predicting demand for mortgage loans from the territorial perspective.
  • Creating analyses with statistics and current trends on the real estate market.
  • Facilitating and developing the mortgage baked liabilities transfer.
  • Granting loans with high LTV values.
  • Improving data concerning the propertied legal status.
  • Decreasing costs resulting from the creation of a private database.
  • Decreasing costs of credit (Valuator 100$ / statistical methods – 20$)
amron system development plans

Polish Bank Association

AMRON System Development Plans
  • Invitation for cooperation to insurance companies
  • Creation interface between credit information, and information about client
  • Monitoring of estate market and observation of business cycle.
  • Cooperation with National Bank of Poland on market analysiscreation
  • House Pricing Index

Polish Bank Association

Boleslaw Meluch


Real Estate Finance Committee

8 Kruczkowskiego Str., 00-380 Warszawa


European Property Institute

Vice President

mobile 506-108-364