THE ACCURACY OF MORTGAGE VALUATION AS A LENDING REQUIREMENT FOR SELECTED BANKS IN KADUNA METROPOLIS
- Project Research
- 1-5 Chapters
- Quantitative
- Simple Percentage
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 3000
Background of the study
Landed property is frequently a significant percentage of a company's assets that are eligible as collateral security for corporate loans. Real estate values are critical for financial institutions, particularly banks, for two reasons, according to Babawale (2016). For starters, values are typically necessary during the underwriting or renegotiating of mortgage loan advances, and valuations should provide an acceptable appraisal (future) market estimation of the property that will serve as collateral for the loan. Second, valuations are necessary when an institution or bank requires an updated evaluation of collateral values for outstanding loans on its asset report. Moneylenders always want a precise valuation of worth for each case. This is due to the fact that they must recognize that they can recover their credit by providing the property if the borrower defaults and they must acquire possession. The financial services authority also requires lenders to ensure that there is adequate security for their credit by ensuring that the property is worth at least what is owed on it. In addition, the appraisal protects the borrower from suddenly borrowing more than their home is worth.
According to Baum and Crosby (2018), credit transactions between financial institutions and investors have grown to the point where securities such as shares and bonds, debenture, unit trust, treasury bill, and property are required as a prerequisite for capital advancement for whatever purpose the investor may require it for. Because investment has become a driving force of future income generation to individuals, corporate organizations, and governments alike, people are eager to invest, particularly in real estate.
Finance sourcing is a critical component of any investment plans. And the requirement for physical and long-term collateral prior to capital advancement appears to be a significant challenge for investors. Alternative collateral securities required by mortgage debt provider before loan was advanced included bonds, treasury bills, shares, and stocks. However, due to the instability of the collateral during loan payment default, property is increasingly seen as a superior choice because one of its numerous properties is inflation hedging. Figures obtained during valuation activities are vitally important to the customers' operations and commercial transactions; an incorrect assessment of value can cause strain in business relations.
For example, countless banks and organisations have experienced losses as a result of making loans in excess of their true worth. Proprietors were led to believe that they were profiting from resources when, in fact, they were losing money. Furthermore, many people were pushed into businesses that appeared to be productive and successful but were neither sensible or feasible (Crosby 2019). The issue of overvaluation and undervaluation has resulted in disagreements over large sums of money that occasionally reach into a few billion Naira; it has also resulted in cases of bankruptcy, investment failures, and loan grants in excess of collateral value. This issue has been the source of contention. As a result, the assertion about the dependability of valuation data and the degree of accuracy of the valuers' estimates/worth has been called into question.
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