Mortgage Banking

Mortgage Banking is better known as the housing finance sector and according to the latest reports the present worth of the mortgage banking sector is nearly US $ 18 billion. Mortgage banking in India is done with the help of the private sector as well as the public sector.

The significant aspect of mortgage banking in India has been the initiation and attraction of investments from the private sector in order to carry on the process of social up gradation. The concept of mortgage banking is comparatively novel in India but has been able to grab the attention of the Indian citizens.

Facts about Mortgage Banking:

The public sector has been able to grab only 25 % of the share of investment made towards housing finance. The importance of commercial banks have been grown immensely now a days, on account of its increased participation in the direct housing finance sector.

The percentage of participation in the direct housing finance sector has jumped from approximately 27 % in the financial year 2000 to nearly 57 % in the financial year 2003. Mortgage banking is presently being done by a large number of cooperative banks, private companies dealing with housing finance, non-banking financial companies and so on. The companies providing housing finance have gained immensely from the mortgage banking sector.

Foreign Banks in Mortgage Banking:

The phenomenon of economic liberalization and globalization have aided the foreign banks to enter the banking sector in India and presently various foreign banks have started their mortgage finance segments in India. The most prominent banks dealing with mortgage banking in India are:

  • Standard Chartered Bank
  • The Hong Kong and Shanghai Banking Corporation
  • ABN Amro Bank

Some of the significant financial companies of the United States have also entered into the banking sector in India and are involved in asset securitization.

Indian Banks Mortgage Banking:

According to the recent survey the commercial banks are going to further push back the other financial institutions in the race for grabbing more housing finance investments. The prominent commercial banks dealing with mortgage banking in India includes:

  • The Industrial Credit and Investment Corporation of India (ICICI) Bank
  • Housing Development Finance Corporation (HDFC)
  • Life Insurance Corporation (LIC) Housing Finance Limited
  • State Bank of India (SBI)

Latest developments in Mortgage banking:

The main cause behind the rise in investments in housing finance, that has grown rapidly at a compound rate of growth of 78 % per annum from the previous figure of 45.6 %, is the increase in the quantity of loan takeovers. The major development in the mortgage banking sector is the financing package of $ 200 million which is granted by the International Finance Corporation to Housing Development Finance Corporation. This loan has been granted to upgrade the financial sector in India like supplying funds to people who fall within the middle class income segment of India.

Kinds of Mortgage Banking:

Mortgage Banking can be of several kinds, though it is new in India, yet it is the best option to finance private projects the world over. To understand the mortgage banking schemes thorough research about the schemes is essential. The list of common mortgage banking kinds include:

  • Participation Mortgage
  • Assumed Mortgage
  • Bridge Loan
  • Blanket loans
  • Commercial Loan
  • Non-Conforming Mortgage
  • Fixed rate mortgage loan
  • Reverse Mortgage
  • Adjustable rate mortgage loans
  • Budget Loan
  • Seasoned Mortgage
  • Blanket loans
  • Equity Loan
  • Jumbo Mortgages

These loans are generally stretched over a period of 15 years and in special cases they might stretch to even 30 years and there are two accomplished ways to calculate the rate of interest like the fixed rate interest and adjustable rate interest. The repayment of the mortgage loans has been classified into a number of types, the first type is the procedure in which the capital amount and the amount of interest has to be paid off completely, the second procedure involves the repayment of the amount of interest only, the third liberates the borrower from the payment of the principal amount or the interest amount. The fourth one necessitates the partial payment of the principal amount and the complete payment of the interest amount, the fifth type occurs when the borrower fails to repay the loan then the mortgage lender seizes the collateral and sells it to recover the loan amount from the sale proceeds.

Last Updated on 5/26/2011