Best practice methods for estimating sustainable long-term value for lending purpose

Abstract

Mortgage lending creates risks for consumers who resort to loans as well as for credit institutions that make lending decisions. One way to ensure that the potential risks associated with mortgage lending are properly managed is through the value and price of the mortgaged object. This article refers to the new requirements of the European Banking Authority, to determine a prudential value different from the market value as the security for a credit exposure, which takes into account the long-term sustainability aspects of real estate - Sustainable long term value (LTV-S or MLV). Value, which should become a credit risk management tool, and which would provide some protection over time.

Keywords

• mortgage
• real estate
• banking risks