Is it that difficult to google "Subprime mortgage crisis" ?QUOTE
The U.S. subprime mortgage crisis was a set of events and conditions that led to a financial crisis and subsequent recession that began in 2008. It was characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages. These mortgage-backed securities (MBS) and collateralized debt obligations (CDO) initially offered attractive rates of return due to the higher interest rates on the mortgages; however, the lower credit quality ultimately caused massive defaults.[1] While elements of the crisis first became more visible during 2007, several major financial institutions collapsed in September 2008, with significant disruption in the flow of credit to businesses and consumers and the onset of a severe global recession.
How to define subprime in USA ?QUOTE
In finance, subprime lending (also referred to as near-prime, non-prime, and second-chance lending) means making loans to people who may have difficulty maintaining the repayment schedule, sometimes reflecting setbacks such as unemployment, divorce, medical emergencies, etc.[1] Historically, subprime borrowers were defined as having a FICO scores below 640, although "this has varied over time and circumstances."
FICO scoreQUOTE
The FICO score is the best-known and most widely used credit score model in the United States. It was first introduced in 1989 by FICO, then called Fair, Isaac, and Company. The FICO model is used by credit reporting bureaus such as Experian, Equifax, and TransUnion to produce a FICO score. Because a consumer's credit report may contain different information at each of the bureaus, FICO scores can vary depending on which bureau provides the score.
Makeup of the FICO score
The approximate makeup of the FICO score used by US lenders
Credit scores are designed to measure the risk of default by taking into account various factors in a person's financial history. Although the exact formulas for calculating credit scores are secret, FICO has disclosed the following components:[3][4]
35%: Payment history—Late payments on bills, such as a mortgage, credit card or automobile loan, will cause a FICO score to drop.[5] Bills paid on time will improve a FICO score.[6]
30%: Credit utilization—The ratio of current revolving debt (such as credit card balances) to the total available revolving credit or credit limit. FICO scores can be improved by paying off debt and lowering the credit utilization ratio.[7] Alternatively, applications for and receiving the credit limit increase will also drive down the utilization ratio. Alternatively, opening new lines of credit will have the same effect (keep in mind the "Average age of tradelines" and "Hard inquiries" matrices on the last possibility). The closing of existing revolving accounts will typically adversely affect this ratio and therefore have a negative impact on a FICO score.
15%: Length of credit history—As a credit history ages it can have a positive impact on its FICO score.[8]
10%: Types of credit used (installment, revolving, consumer finance, mortgage)—Consumers can benefit by having a history of managing different types of credit.[9]
10%: Recent searches for credit—hard credit inquiries, which occur when consumers apply for a credit card or loan (revolving or otherwise), can hurt scores, especially if done in great numbers; often three to five points per inquiry. Individuals "rate shopping" for a mortgage or auto loan over a short period (a fortnight or 45 days, depending on whether old FICO or FICO 08 are used) will likely not experience a large decrease in their scores as a result of these types of inquiries, as automated computer algorithms attempt to detect when a consumer is rate shopping (and not attempting to receive many new lines of credit), and roll all of the hard inquiries into one; this can often take several months, and isn't always effective, although a consumer who believes he or she has received many hard inquiries on their report while searching for one loan (where the automated system has failed to detect it as such) can dispute these with the credit bureau in question.[10] While all credit inquiries are recorded and displayed on personal credit reports for two years (their effect decreases at the six-month and one-year mark; they have no real effect after the first year), credit inquiries that were made by the consumer (such as pulling a credit report for personal use), by an employer (for employee verification) or by companies initiating pre-screened offers of credit or insurance do not have any impact on a credit score: these are called "soft inquiries" or "soft pulls", and do not appear on a credit report used by lenders, only on personal reports.
BNM strict rulings and CCRIS checks essentially is the malaysia version of FICO. I suspect the current stringent of credit granting has cause the score to move to the 90s.
1. Payment history - those "0s" in CCRIS report
2. Credit utilisation - have you repaid down the outstanding loans. How many years to go
3. Length of credit history - to determine whether you are good paymaster
4. Types of credit used - list down the CC, car loan, personal loan, property loan
5. Recent searches for credit - all your existing application (not yet approved) are reflected in CCRIS
On top of that, BNM also has LTV 90%/70%, net income ruling, top up loan limited to 10 years, personal loan limited to 10 years etc
You guys judge for yourself if there is any resemblance of malaysian property loan to US subprime mortgage
Jan 26 2014, 05:49 PM
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Works everytime
Especially the comparison on landed vs high rise psf price
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