Business Problem-solving Case: HSBC`s Mortgage Lending Decisions: What went wrong?

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Student No. 0908964                                                                    Submission date:  25th April

        

                                                                 

 Programme: -                                               Business Information systems

                [BIS]

 

 MoudleTitle: -                                               ICT for strategic Advantage

                                                                   [3006]

 

Assignment Title: -                         Business Problem-solving Case:

                      HSBC`s Mortgage lending

                      Decisions:

                      What went wrong?

Student number: -                                             0908964

Marking tutor: -                                          Mildred Brown-Houston 

Submission Date: -                                        7th June

                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Answer to the question no.1:-

        HSBC is one of the biggest banking & financial services organization in the world. In That case study, HSBC Faced subprime mortgage loan crisis in 2007. HSBC was the major player in this crisis as it becomes the biggest lenders in the field of subprime mortgage sector in United States in the year of 2006. Subprime mortgages are mainly offered to the customers who often got bad credit reports, low incomes and others fault which means they got risk in default and also they got a higher probability of failure to pay the loan in future. But HSBC was interested about sub prime mortgages in order to gain good business opportunities and profit. Infect in united state in the year between 2001 and 2006, subprime customers do not require providing any down payment and also have very low introductory rates which become so common during that time. Because of all these HSBC faced the crisis when the customers were unable to pay the high interest.

Numbers of reasons were responsible for the HSBC subprime loan crisis like people, technology and organizational factors. In the chart below, people, organization and technology is connected with information technology which influenced the ultimate business solution in an organization.

Source: Lecture Sheet (1)

In the case study, HSBC faced mortgages loan crisis and for that people technology and organizational factors were mainly responsible. Which are explaining below:

Organizational Factors of HSBC:

  • The risky lending system was the main trouble for HSBC subprime loan crisis. With the coinciding rise of the interest rate, many borrowers were not able to pay their interest payments and defaulted on their loans. And furthermore the number of delinquent and defaulted accounts grows but they were unable to find the level accurately.

  • HSBC participated in a complicated business that involved more than a simple lender-borrower relationship. One unit of HSBC mortgage services originated mortgages, often of the subprime variety. HSBC flipped some of these loans to other companies, but kept others as investments. The ones HSBC kept provided revenue from the interest they generated, assuming the borrowers kept current with their payments but later on, the borrowers fell behind the defaulted and for that HSBC suffered the losses.

  • HSBC brought lots of subprime loans for higher revenue from other sources. Most of these loans were piggy back loans, which means home owner s who are not able to pay the down payment for a house would be Qualify for a mortgage by borrowing the down payment amount, therefore that sort of loans were totally involved with risk which makes HSBC to fall into problem.
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People factors of HSBC:

  • HSBC accepted the loan of the wholesalers based on their income and credit scores which has to be HSBC standard, but due to the extreme competitions for mortgages and also for the HSBC analysts and executive level decision, they started giving state-income loans. For these sorts of loans borrower just needs to declare his or her income with providing any documentation to verify. As a result, they can easily get the approval of the loans which are much higher than their actual afford. Therefore the people who were Dealings with the loans and customers did ...

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