I always find it amazing at how much money the credit card companies are able to make on the interest and fees. I look at the settlements that the credit card companies are able to do receiving only 40% of the balance. It shows how much they are able to make that they can afford to settle for a small percentage that is probably around the original purchase price on many of the items. Explain© BrainMass Inc. brainmass.com October 16, 2018, 11:07 pm ad1c9bdddf
First, it is important to examine the caliber of the debt. It is unsecured which makes it high risk. Then the borrowers are not properly vetted.
Compare that kind of debt to getting a house loan, for example, where you have to prove your income and debts. In a normal home loan application, an appraisal of the property is required to verify value. Income and debts of the borrower will be confirmed, and ratio analysis will be applied to the personal ...
The solution compares credit card debt to other forms of consumer debt in assessing the interest rates and delinquencies. A simple business model is presented which easily justifies a 15% interest rate on credit card debt.
HSBC's Mortgage Lending Decisions and the Big Melt Down
1. What problem did HSBC face in this case? What people, technology, and organization factors were responsible for the problem? Did HSBC management correctly identify the problem?
2. HSBC had sophisticated information systems and analytical tools for predicting the risk presented by subprime mortgage applicants. Why did HSBC still run into trouble?
3. What solutions are HSBC relying on to deal with its problem going forward? Will these solutions be sufficient to turn the subprime mortgage business around? Are there additional factors for which HSBC has not accounted? What are they?
4. HSBC made a decision to pursue subprime mort-gages as a segment of its business. Explain how this was a structured, unstructured, or semi structured decision. Then, present your opinion about where in the decision- making process HSBC went wrong. Finally, apply the decision quality concepts of accuracy and comprehensiveness to this case.
5. Do you think one solution to HSBC's poor risk management practices is more and better information supplied to decision makers, or is something else required to improve its risk management?View Full Posting Details