Housing Loan Practices of a Commercial Bank

Abstract

The study intends to assess the effectiveness of housing loan practices of a commercial bank. The descriptive-survey method of research was used in this study. The respondents were composed of 1,100 housing loan borrower of a commercial bank, which came from 10 Metro Manila branches. Based on the findings, the effectiveness of housing loan practices of a commercial bank in terms of character, capacity, capital, collateral and condition were evaluated as ‘effective’ by the respondents. The study also reveals that there are several significance differences on the effectiveness of housing loan practices of a commercial bank in terms of age, civil status, highest educational attainment, and terms of loan payment. The researcher recommends that the bank should propose a surety, which undertakes directly for the payment once the principal debtor makes default, to the borrower. Second, the bank should consider increasing the interest rate in able to minimize the risk exposure of the bank. Third, the bank should require the borrower to have mortgage redemption insurance. This will protect the borrower’s surviving household in the event of sudden death or disability of the loan borrower. Fourth, the bank should consider projecting the industry of the borrower in 5 to 10 years. The projection on the industry will serve as a basis on giving a cap or maximum loanable amount or the bank can suggest the borrower to pay higher down payment to minimize the risk exposure. Finally, future researchers should conduct a study on the housing loan through public sector such as PAGIBIG and GSIS. This will help the borrower to compare the housing loan of the public and private sectors.