THE ACCURACY OF MORTGAGE VALUATION AS A LENDING REQUIREMENT FOR SELECTED BANKS IN KADUNA METROPOLIS

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THE ACCURACY OF MORTGAGE VALUATION AS A LENDING REQUIREMENT FOR SELECTED BANKS IN KADUNA METROPOLIS

CHAPTER ONE

1.0 INTRODUCTION

Landed property constitutes often major portions of company assets acceptable as collateral securities for corporate lending. According to Babawale et al (2013), real estate valuations are vital for financial institution, particularly banks, for no less than two reasons. First, valuations are frequently required during the underwriting or renegotiating of mortgage loan advances, where valuations ought to give a reasonable evaluation (future) market estimation of the property that will serve as collateral for loan. Second, valuations are required if the organization or bank needs an updated assessment of collateral values for outstanding loans it holds on its asset report. Moneylenders constantly require an exact appraisal of worth for every situation. This is on account of they have to realize that they can recover their credit by offering the property if the borrower defaults and they need to take ownership. The financial services authority likewise obliges lenders to guarantee that there is sufficient security for their credit by guaranteeing that the property is worth at any rate what is being loaned on it. Incidentally, the valuation additionally serves to ensure the borrower against unexpectedly borrowing more than their property is worth.

Credit transaction between financial institution and investors grew to such an extent that securities such as shares and bonds, debenture, unit trust, Treasury bill, property are required as prerequisite for advancement of capital for whatever purpose the investor may require it for, since Investment have become a driving force of future income generation to individual, corporate organization and government as well, people are so eager to invest most especially In real estate but most of the investors are either having half of what they need to invest or not having at all which will lead to borrowing from financial institution, at this junction valuation is the only determinant of fair market value of the mortgage property which will serve as security for loan.

Practically, finance sourcing is a major component of every investment programs. And the need to have tangible and sustainable collateral before capital advancement seems to be a big task to investors. Bonds, Treasury bill, shares and stocks were alternatives collateral securities required by mortgage debt provider before loan were advanced. But due to the insecurity of the collateral during default in loan payment, property is now regarded as better alternative since one of its many characteristics is hedge against inflation.

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