Memo October 23, The President; Bank of Ingenuity, Risk Mitigation Department; Bank of Ingenuity Subject: Ethical Course for the Bank of Ingenuity Following your requirement and directives to make a presentation about how the bank should proceed with regards to Henderson’s Family situation and mitigation of risks within the bank as regards mortgages and their defaulters, I am pleased to inform you that we have made considerable progress as stated herein. Real Scenario From the analysis of the mortgage situation within the Bank of Ingenuity, it is evident that there are specific issues that are still a mess.
For instance, there has been reluctance in asking for down payments and this has given homeowners who had taken mortgage loans to walk away. Consequently banks such as the Bank of Ingenuity do not have cushion over the amount they loan homeowners and this increased the risks of losing the money. On a different perspective Banks that demand down payment usually ask for an amount that is not substantial enough to cushion against such loans. The other main problem is that valuation is not done properly within the Bank of Ingenuity hence sometimes they end up offering mortgage that becomes a burden to clients.
This is the case with Henderson who after being given a mortgage to buy a house has ended up paying more that what he derived from selling one of the homes built through mortgage (Cummins & Melendez). Any financial assistance to client in terms of loans should never be a burden as it is in the case of Henderson but instead it should be an avenue to make ends meet in addition to making serious investments (Cummins & Melendez).
The Bank of Ingenuity finds it difficult to resell most of the property that loan defaulters had as a result of giving more amounts that required. In addition, it has come to our notice as the risk mitigation department that the bank holds first mortgages on seven other properties that belongs to Henderson who is currently facing problems in repaying his loan (Cummins & Melendez). From this perspective, it is evident that the bank may be forced to restate some of these properties given that all the seven under mortgage are not in default.
Consequently there will be other expenses involved and instead of loans earning interests to the bank, this mortgage will surely turn into a great loss (Cummins & Melendez). Moreover, allowing for renegotiating of the mortgage deal by Henderson is likely to encourage immoral behavior with respect to borrowing of funds from financial institutions for the purposes of investing. Thus, it is strongly prohibited for the Bank of Ingenuity to allow for such renegotiations.
This would mean that Henderson has to carry on with the burden hence creating an opportunity and avenue of scaring away other would-be borrowers (Cummins & Melendez). The risk mitigation department has also identified that if the seven of the banks mortgagors are defaulted then there is likelihood to incur a great loss. Recommendations Amidst the aforementioned problems, risk mitigation department has come up with various recommendations that if implemented the possibility of incurring a great loss will be cushioned. Some of these recommendations include; 1. There need to develop better portfolio financial valuation adjustments that will ensure that the amount of investment is bigger that amount of loan and not the vice versa.
2. We also recommend that the bank should restructure the amount of money they accept as down payment before giving out loans. Such amount should be substantial enough to cater for all expenses in case a borrower defaults. 3. The Bank of Ingenuity should reconsider renegotiating or foreclosing the principle down for particular borrowers especially those found in problems after borrowing such as Henderson. This is because such acts are likely to affect people responsible for paying their mortgage loans at the right time and manner.
4. Lastly, it will be useful if the bank tightens its rules regarding mortgages. In conclusion of this report, the department of risk mitigation would like to advice that the above recommendations be taken in serious as implemented for better, efficient, and effective performance of the bank. In case there are some areas unclear we welcome a call to come and make them clearer. This is for the betterment of the bank and its all stakeholders.
Thank you. Work Cited Cummins, Suzanne, & Melendez, Paul. What is the ethical course for the Bank of Ingenuity? University of Arizona. Web. References Abu Dhabi University to introduce new programmes. (2011, September 14). Khaleejtimes, p1. Al Bateen Executive Airport to host the region’s first general aviation exhibition. (2011, September 13). Travel Daily News, p. 1 Locker, K. (2010). Business and administrative communication. USA: McGraw Hill Publishing. Visitabudhabi. ae (2011). Travelers welcome: Abu Dhabi’s tourism website. Retrieved on September 14, 2011 from http: //www. visitabudhabi. ae/en/default. aspx