Summer 2010, Vol. 35, No. 2

Abstract: This case study takes a looks at four Italian banks and the methods and procedures implemented by them in valuing real estate used as collateral for loans both in the loan origination and credit monitoring process. Impetus for the study was generated by the “disastrous results” of the holdings of mortgages and mortgage derivatives in U.S. banks, and this article takes a look at whether the same risk factors could be at work in Italian banks, which hold an even greater percentage of assets in residential mortgage loans. The authors provide recommendations which may be helpful in evaluating an institution’s own policies and procedures related to mortgage lending and, ultimately, in avoiding disastrous bank failures.