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24 Cards in this Set
- Front
- Back
- 3rd side (hint)
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the most standardized of the four major types of lending is...
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Real Estate Lending
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Which of the four types of lending rely the heaviest on the assessment of the applicant's willingness and ability to repay, the value of the applicant's collateral, and the applicant's character?
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Real Estate Lending
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Willingness & Ability to repay
Collateral Character |
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The bank's power to set the interest rate and other terms on the loan is most limited in which of the following types of lending?
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Large Commercial Lending
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The use of the borrower's statement of cash flows and a variety of key financial ratios designed to measure a borrower's ability to repay is most often used in the credit analysis of ____ loans.
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Mid-Market
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statement of cash flows
& financial ratios |
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Credit analysis of ______ loans emphasizes the borrower's capacity or cash flow, the borrower's character and the soundness of any business plan?
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Small-Business
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Capacity,
Cash flow, Business Plan |
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The assessment of the adequacy of a borrower's capital to prevent insolvency falls under which of the following Cs of credit analysis?
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Capital
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5 C's of Credit:
Character Capacity Conditions Collateral Capital |
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The legal authority to sign a binding loan contract and the adequacy of the borrower's cash flow available to service the loan fall under which of the Cs of credit analysis?
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Capacity
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5 C's of Credit:
Character Capacity Conditions Collateral Capital |
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The assessment of the seriousness of the borrower's intent to repay the loan falls under which of the Cs of credit analysis
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Character
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5 C's of Credit:
Character Capacity Conditions Collateral Capital |
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The assessment of the impact of changing economic conditions on the borrower's ability to repay the loan falls under which of the Cs of credit analysis?
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Conditions
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5 c's = Character
Capacity conditions Collateral Capital |
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The assessment of the liquidation value of a borrower's assets in the case of default falls under which one of the following Cs of credit analysis?
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Collateral
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LIQUIDATION = ??
What must be liquidated? |
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JUNK BOND
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A bond rated as speculative or less than investment grade (below Baa by Moody's and BBB by S&P) by bond-rating agencies such as Moody's.
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Below BBB
(triple B) |
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GDS (GROSS DEBT SERVICE) RATIO
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Total accommodation expenses (mortgage, lease, condominium, management fees, real estate taxes, etc.) divided by gross income.
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TDS (TOTAL DEBT SERVICE) RATIO
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Total accommodation expenses plus all other debt service payments divided by gross income.
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CREDIT-SCORING SYSTEM
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A mathematical model that uses observed loan applicant's characteristics to calculate a score that represents the applicant's probability of default.
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PERFECTING COLLATERAL
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The process of ensuring that collateral used to secure a loan is free and clear to the lender should the borrower default on the loan.
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FORECLOSURE
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The process of taking possession of the mortgaged property in satisfaction of a defaulting borrower's indebtedness and forgoing claim to any deficiency.
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POWER OF SALE
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The process of taking the proceedings of the forced sale of a mortgaged property in satisfaction of the indebtedness and returning to the mortgagor the excess over the indebtedness or claiming any shortfall as an unsecured creditor.
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EBIT
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Earnings before interest and taxes.
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EAT
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Earning after Taxes
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CONDITIONS PRECEDENT
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Those conditions specified in the credit agreement or terms sheet for a credit that must be fulfilled before drawings are permitted.
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LIBOR
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The London Interbank Offered Rate, the rate for interbank dollar loans in the foreign or Eurodollar market of a given maturity.
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PRIME LENDING RATE
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The base lending rate periodically set by banks.
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COMPENSATING BALANCE
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A proportion of a loan that a borrower is required to hold on deposit at the lending institution.
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RAROC
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an increasing popular model used to evaluate the return on a loan to a large customer.
Instead of evaluating expected future cash inflows from a loan as a percentage of the amount lent, Using this method, the loan officer balances the loan's expected income against the loan's expected risk. |
Risk-Adjusted Return on Capital
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