8. For each applicant:
- Use the appropriate loan model to evaluate the applicants information (for mortgage loans use information to check hurdles, for consumer loans calculate the score)
- Determine whether the loan should be granted (yes or no) and why (if no)
- For the consumer loan applicants, calculate what interest rate will be offered for the loan
Note that the process/rules are different for each type of loan, and that each applicant is applying for a specific type of loan. Fill in the blank values in the table provided in the Excel file. The first applicant (Phil Farmer) has been completed for you as an example.
Applicant Name Phil Farmer B. Student J. Doe Hugh Manor Loan Purpose Land Purchase Purchase home electronics Travel - vacation Major home remodeling Loan Type Mortgage Consumer Consumer Mortgage Gross income $60,000 $15,000 $65,000 $100,000 Loan amount requested $120,000 $1,500 $7,000 $70,000 Length of loan 30 years 2 years 1 year 10 years Current annual fixed debt payment obligations $16,000 $0 $0 $20,000 Value of Project/Use $160,000 $1,500 $7,000 $100,000 0.7 LTV 0.75 Not applicable Not applicable $6,940 Not applicable Not applicable $8,630 Annual Mortgage Loan Payment Other credit lines (#) 12 Debt History Perfect Previous bankruptcy Perfect Past due on one loan a) $16,800 (28% of income) b) $21,600 (36% of income) Score/Hurdle Grant Loan? NO (6,940 + If no, why? because of b) 16,000) > 21,600 Interest Rate 4% 4% Mortgage Loans Model: Calculate loan payments with 4% annual interest rate (you need to do this first and add to other loan payments to check the restrictions below). Remember you use Capital Recovery (CR) to calculate loan payments. Maximum loan size (hurdles) restricted such that: a) Mortgage Debt Payments 80,000 History Category Perfect Past Due history 2 Bankruptcy 0 Make loan up to 10% of annual income if SCL > 6 at an interest rate of: r=prime rate + (10 - SC1%. The current prime interest rate is 5.5%. Applicant Name Phil Farmer B. Student J. Doe Hugh Manor Loan Purpose Land Purchase Purchase home electronics Travel - vacation Major home remodeling Loan Type Mortgage Consumer Consumer Mortgage Gross income $60,000 $15,000 $65,000 $100,000 Loan amount requested $120,000 $1,500 $7,000 $70,000 Length of loan 30 years 2 years 1 year 10 years Current annual fixed debt payment obligations $16,000 $0 $0 $20,000 Value of Project/Use $160,000 $1,500 $7,000 $100,000 0.7 LTV 0.75 Not applicable Not applicable $6,940 Not applicable Not applicable $8,630 Annual Mortgage Loan Payment Other credit lines (#) 12 Debt History Perfect Previous bankruptcy Perfect Past due on one loan a) $16,800 (28% of income) b) $21,600 (36% of income) Score/Hurdle Grant Loan? NO (6,940 + If no, why? because of b) 16,000) > 21,600 Interest Rate 4% 4% Mortgage Loans Model: Calculate loan payments with 4% annual interest rate (you need to do this first and add to other loan payments to check the restrictions below). Remember you use Capital Recovery (CR) to calculate loan payments. Maximum loan size (hurdles) restricted such that: a) Mortgage Debt Payments 80,000 History Category Perfect Past Due history 2 Bankruptcy 0 Make loan up to 10% of annual income if SCL > 6 at an interest rate of: r=prime rate + (10 - SC1%. The current prime interest rate is 5.5%
