ILS Proposal

Edward was asked to write a proposal for the bankers in the Philippines inviting them to participate in the launch of Ingram's Lending and Savings (ILS) models for housing finance. It could have been anywhere. It makes no difference. It applies to lending in any nation. This is the document. Not only are ILS Home loans designed to benefit lenders and their clients, but there are major benefits to the host nation's economy if they re used. In that connection this document might be read in the context of the ABSTRACT of this paper..

A profile of Mr Ingram can be found at the end of this proposal, on a separate continuation page.

Creating a stable bank lender
in an unstable environment
By Edward C D Ingram
Skype: edwarding2

These are the most worrisome systemic risks that lenders face in the home loans sector:     

1. Interest rate volatility causing collateral values to crash and borrowing demand to fall dramatically whilst arrears and repossession rates climb rapidly.

2. Reserves failing to stay close enough to the market rate of rising liabilities.

3. Failure to manage the cash flows.

4. If a fixed interest option is on offer, there is the risk of having interest rates move against the position that the lender has taken in the market.

5. In the event of an economic slowdown with deflation, fixed rate loans can be a disaster waiting to happen.

The mathematics of risk management which I have done is new and revolutionary. I have created the General Equation for Lending which applies to all regular repayment models. It reveals why the current systems in use are prone to failure in unnecessary ways.

This study has given rise to a package of new lending models which have been tested against past data from various nations including India, South Africa, and a few developed economies. Some earlier studies looked at Iceland and its period of extreme inflation.

Additional tests were run based upon standard tests which are used by engineers to test the dynamic responses of a system and its ability to stay on target in any conditions.

The findings came to the conclusion that if a bank were to be stress tested in any of these ways, and they were using any of the new Ingram Lending and Savings (ILS) models, they would do better than any other known model for lending.

I would be happy to run such tests for your consideration on past and imaginary conditions for a Philippines Lender.

The data I would wish to have includes the (at least) annual data for the past 30 years on:
#1 National Average Earnings
#2 Similar data for any sector that might behave differently and to which lenders may wish to lend
#3 Gross (nominal) interest rates levied on home buyers – the lowest rates for the most secure borrowers.
#4 Index-performance data for the most used local investment markets including equities and property.
#5 An index of home property values, if there is one available and preferably done on a basis similar to the Shiller index in the USA, but this time for the Philippines.

Read More

No comments:

Post a Comment