Readjusting Trade-Offs Among Criteria in Internal Ratings of Credit-Scoring: An Empirical Essay of Risk Analysis in Mortgage Loans

Abstract

Abstract. Credit-scoring becomes increasingly important in poor economies and recessions. Decreasing liquidity due to reduced access to both money and debt markets has induced banks to impose restrictions on offering credit, including credit for mortgage loans. In this paper we analyze the internal rating system used by one of the top-five banks in Portugal, and propose a methodological framework which, based on an application of the Delphi technique, allows adjusting trade-offs among evaluation criteria and provides decision makers with a fairer, more accurate and transparent mortgage risk evaluation system.

A Fuzzy Knowledge-Based Framework for Risk Assessment of Residential Real Estate Investments

“…From an economic development standpoint, it is worth noting that, due to the current economic instability (which affects the real estate market, reducing the purchasing power of households and, consequently, motivating falls in private consump-tion, housing included), financial institutions have become more demanding in approving loan applications and, as a result, have reduced lending concessions by imposing higher credit underwriting standards to compensate the risk they face (cf. Ferreira et al 2013a).…”

“…It is in this sense that bank loans stimulate the economy of a country; i.e. they encourage property acquisition by householders, strengthening the construction sector and, consequently, increasing employment, money circulation and GDP growth (for further discussion, see Ferreira et al 2013a).…”

Evolutionary Patterns and Development Prospects for E-Government: A Delphi-Based Approach to Perceptions of the Administrative Agent

“…According to Ferreira (2003) and Ferreira et al (2013), Delphi results are obtained through a function G = G j (I, E, R), which projects the response of a given group of experts G j to an event E, where I is the number of experts, E is the event space (which can be continuous or discrete), and R is the domain of answers, which allows for an estimation for each event and expert of the group. The results may, however, be presented based on different statistical measures (e.g.…”

“…The Delphi technique is no exception, and different considerations of its pros and cons can be found in the literature (e.g. Dalkey, Helmer 1963;Dalkey 1969;Hsu, Sandford 2007;Ferreira, Monteiro Barata 2011;Ferreira et al 2013). Figure 4 identifies some of the most discussed advantages and limitations of the Delphi technique.…”

Barriers to Real Estate Investments for Residential Rental Purposes: Mapping Out the Problem

“…The residential rental market has been increasing in many European countries since the global financial crisis, because buying is typically associated to bank credit, access to which has become more difficult in recent years (Ferreira, Spahr, Gavancha, & Çipi, 2013). Both lenders and borrowers have been faced with increased risk since the crisis, which has put greater pressure on the cost of financing a property (Winger, 2002).…”