An AHP-based approach to credit risk evaluation of mortgage loans

    Fernando A. F. Ferreira Info
    Sérgio P. Santos Info
    Vítor M. C. Dias Info

Abstract

Mortgage loans for home purchase require careful analysis by all parties involved in the transaction, and credit-scoring is usually adopted to assist the decision process. From a credit institution standpoint, credit-scoring for mortgage loan risk evaluation becomes even more important in scenarios of economic turbulence and recession, primarily because of the severe restrictions imposed on credit availability that result from reduced access to both money and debt markets and subsequent decreasing liquidity. Employing an AHP – Analytic Hierarchy Process – based approach in the creditscoring system used by one of the major banks in Portugal, this study proposes a methodological framework conceived to adjust trade-offs among evaluation criteria and provide decision makers with a more transparent mortgage risk evaluation system. Practical implications of our framework are also discussed.

First Publish Online: 21 Mar 2014

Keywords:

AHP-based approach, Credit-scoring, MCDA, Mortgage loan risk analysis, Trade-offs

How to Cite

Ferreira, F. A. F., Santos, S. P., & Dias, V. M. C. (2014). An AHP-based approach to credit risk evaluation of mortgage loans. International Journal of Strategic Property Management, 18(1), 38-55. https://doi.org/10.3846/1648715X.2013.863812

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March 21, 2014
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2014-03-21

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How to Cite

Ferreira, F. A. F., Santos, S. P., & Dias, V. M. C. (2014). An AHP-based approach to credit risk evaluation of mortgage loans. International Journal of Strategic Property Management, 18(1), 38-55. https://doi.org/10.3846/1648715X.2013.863812

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