Question 21 (25 Marks)

Explain the Inain elements involved in the structuring of a credit facility. Explain the concept of credit scoring and its advantages in lending.

(7 marks) (6 marks)

(c) Identify the objectives of the review process for a problem loan and explain three critical steps involved in this review process. (9 marks)

(cl) Distinguish between the two types of lending interest rates generally used by banks. (3 marks)

A property that was valued at $750,000 three years ago is being held as collateral security for a loan. The bank's policy is to lend at a loan-to-value ratio (LVR) of no more than 75%. If the current loan outstanding is $487.500 and a recession occurs reducing the value of the property to $610,000;

a) I-low Inuch Inoney is the borrower required to pay to remain compliant with the bank's policy? (4 Marks)

if lhe bank prefers to accept additional collateral security instead of a payment, what is the minimunn value of the security that the borrower must present to the bank to remain compliant with the bank's policy? (4 marks)