NoRegretsCoyote
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Hi Coyote
Very interesting
Is this saying that banks recover only 12% of the value of mortgages on which they take legal action?
Brendan
The data collection enabled the calculation of the recovery rate based on the ‘gross recovery amount’ and the ‘net recovery amount’ as numerators and the ‘notional amount outstanding at time of default’ as denominator.29 The variable ‘gross recovery amount’ variable was defined as the NPL’s notional outstanding amount that had been recovered by the bank (or where applicable, by an external debt collector) only through the formal enforcement process before or after its completion (i.e. before any deduction of costs, including the sales proceeds or total cash recovered and costs incurred). Sales proceeds may include real estate sale after repossession or loan sale
Where non‐judicial debt settlement (i.e., voluntary sale/surrender of property) is a prominent feature of workout in national financial systems distressed debt workout, judicial enforcement benchmarks will not reflect work out recovery rates, costs, or duration.
Recovery could be estimated as zero
the standard Loss Given Default is ~45% and stressed LGD ~70%,
That is roughly what I would have expected.
So the 11% recovery must be wrong or, at least, it means something else.
By the way, what is the difference between the standard and the stressed?
Brendan
The loans population used in the final report encompassed all loans from participating banks: loans for which the enforcement process was completed over the last 3 years (from 2015 to 2018), independently of when the enforcement process was initiated (i.e. before 2015 or during the 2015‐2018 period), and the loans for which the process has been initiated over the 3 year period (i.e. between 2015 and 2018), even if the process was not completed by 31 December 2018.
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