HSBC 2007 Annual Report Download - page 220

HSBC HOLDINGS PLC
Report of the Directors: The Management of Risk (continued)
Credit risk > Areas of special interest > US personal and mortgage lending
218
Mortgage lending products
(Unaudited)
At 31 December 2007 At 31 December 2006 At 31 December 2005
HSBC
Finance1 Other Total
HSBC
Finance1 Other Total
HSBC
Finance1 Other Total
US$m US$m US$m US$m US$m US$m US$m US$m US$m
Total mortgage lending2 .... 90,787 199,805 290,592 99,150 189,348 288,498 85,662 171,491 257,153
Interest-only (including
endowment) mortgages3,4 – 34,425 34,425 – 33,190 33,190 – 27,418 27,418
Affordability mortgages,
including ARMs ............. 19,218 60,426 79,644 30,169 60,106 90,275 25,244 56,396 81,640
Other ................................. 85 1,078 1,163 – 295 295 – 388 388
Total interest-only and
affordability mortgages .. 19,303 95,929 115,232 30,169 93,591 123,760 25,244 84,202 109,446
As a percentage of total
mortgage lending ........... 21.3%
48.0% 39.7% 30.4% 49.4% 42.9% 29.5% 49.1% 42.6%
Second lien mortgages ...... 16,820 4,704 21,524 19,420 4,938 24,358 15,338 4,526 19,864
As a percentage of total
mortgage lending ........... 18.5% 2.4% 7.4% 19.6% 2.6% 8.4% 17.9% 2.6% 7.7%
Negative equity
mortgages5 ...................... 11,360 997 12,357 12,347 2,450 14,797 14,168 2,328 16,496
Other loan to value ratios
greater than 90 per cent6 . 42,121 13,317 55,438 45,712 19,608 65,320 35,514 20,468 55,982
53,481 14,314 67,795 58,059 22,058 80,117 49,682 22,796 72,478
As a percentage of total
mortgage lending ........... 58.9%
7.2% 23.3% 58.6% 11.6% 27.8% 58.0% 13.3% 28.2%
1 HSBC Finance is shown on a management basis and includes lending in Canada and the UK and loans transferred to HSBC USA Inc.
which are managed by HSBC Finance.
2 Total mortgage lending includes residential mortgages and second lien mortgage lending reported within ‘Other personal lending’.
3 Excludes introductory interest-only loans.
4 Some mortgage lending products are included in more than one, or none, of the types of mortgage specified in this table.
5 Negative equity arises when the value of the loan exceeds the value of available equity, and is generally based on values at origination
date.
6 Loan to value ratios are generally based on values at origination date.
HSBC Finance mortgage lending
(Unaudited)
HSBC Finance held approximately US$91 billion of
residential mortgage loans and advances to personal
customers at 31 December 2007, 18 per cent of the
Group’s gross loans and advances to personal
customers.
At 31 December 2007, the balance outstanding
of introductory interest-only loans in the US
mortgage services business was US$4 billion,
compared with US$6 billion in 2006, a decline of
36 per cent. No such loans were advanced in the
consumer lending business.
The outstanding balance of ARMs in the US
mortgage services business at 31 December 2007
was US$16 billion, a decrease of 41 per cent,
compared with the end of 2006. In the consumer
lending business, adjustable-rate loans fell by
16 per cent to US$3 billion following the decision to
cease the sale of these products in August 2007.
Second lien loans extended through the
mortgage services business decreased by 33 per cent
to US$7 billion, while the consumer lending
business recorded a 6 per cent increase to
US$7 billion.
The balance of HSBC Finance’s stated-income
mortgages was approximately US$8.3 billion at the
end of 2007 (2006: US$11.8 billion), all of which
were held by mortgage services. The consumer
lending business did not originate any stated-income
mortgages in either period.