Financing Access to Property

Sarah Simon

10 min Read Time | September 16th 2021

Key Takeaways

1

Mortgage loans are financial opportunities that allow individuals to borrow money to purchase a home.

2

It is important to demonstrate why mortgage loans are important to society, and how the company is contributing to this impact, by including the total mortgage loan amount and how many people benefitted from being a homeowner.

3

The analysis should only treat residential property. Therefore, be wary of mixing residential with commercial property loans.

What is it?

A mortgage is a financial loan from a bank (or any other lender) that enables the borrower to purchase a home.

Mortgage loans bring a multitude of benefits to its customers. Amongst others, owning one's home brings financial stability and protection; it allows people to build a "safe haven" - which is a place where they feel protected from all major life risks, and it contributes to building the family history, such as the place where kids grow.

Sources

https://www.jchs.harvard.edu/s...

https://www.incharge.org/housi...

SDG choice

SDG 8
SDG 10

Impact assessment

The topic addresses the impact of products and services that enable access to mortgage loans. The analysis should focus on why mortgages/housing are critical and how the company is essential to providing that product or service.

Headline

The headline should include a figure on the total number of people that benefit from access to the property through the company’s mortgage loans.

Introduction

The introduction should describe the broader impact issue to set the stage for the reader. Why is accessing mortgage loans critical for society? How are financial institutions benefiting individuals by being homeowners?

The introduction should explain the benefit for people in buying rather than renting in the first place.

First, it enables people to build capital that they can transmit to their heirs, and second, it may end up being cheaper than renting thanks to a tax deduction on interest payments.

You may take the exact introduction of the key example. However, please keep in mind the specific country of the company.

Read more on how to build a strong introduction in this article.

Core analysis

To include:

  • The company’s total loan portfolio.

  • The total mortgage loans and their percentage of the total.

  • How many people in total have benefited from being a homeowner. If the exact number is not reported, then an extrapolation can be made.

  • If the financial institution is a global one, what markets does it have its greatest mortgage presence in?

You always need to make sure that the number of people benefitting from mortgages directly needs to be clear. If the number does not exist directly (from the financial institutions' reports), we can make an approximate calculation and make it clear that it is an estimation and round up or down.

Soft Threshold: We have established a soft threshold of 100,000 individuals benefiting from mortgage loans.

The exception would be small companies that do not necessarily impact 100,000 beneficiaries, but residential loans are a huge part of their loaning activities. The percentage of the mortgage loan out of the total loan portfolio must be significant and the majority (so minimum 50% of their total loan portfolio).

When we look at the impact of a small bank, by definition, it will only have a limited number of people benefiting from their mortgages. Yet, that impact is still relevant for the company even though it is limited to society.

Example 1:

A small bank provides millions of dollars (amounting to 30% of their total loan portfolios) to provide mortgages but reaches only tens of thousands of people; then, it is insignificant.

Example 2:

A large commercial bank has minimal activity in residential property loans; then, it is not considered significant enough to write about unless the number of people benefiting is above 100,000 people.

Extrapolating the number of beneficiaries: [Median/average loan divided by median/average house price]

Find the median/average loan for the country the company is in or where the greatest mortgage market share is.

Then, divide by the median/average house price to find the total number of beneficiaries and round up or down, i.e., if the calculation results in 612,854 beneficiaries, you can round down to 600,000.

If the company is global, you should also dedicate a sentence to show the global number of beneficiaries.

How to avoid mixing commercial and residential property:

Caution: Do not include multi-family loans + Commercial Real Estate loans in the analyses, as they are not loans for private individuals.

Residential property and commercial property are the two general categories of real estate. Not all multi-family property is residential. The difference is whether the property’s main purpose is a return on investment. If it is, then it’s commercial property. That includes apartment buildings and mixed-use buildings.

The real estate industry considers any property with five or more housing units to be commercial. Any property with four or fewer housing units — and no commercial units — is by convention residential. These include duplexes, triplexes, quadplexes, townhouses, and semi-detached homes. Apartment buildings and complexes, though, are commercial.

*Sharestates’ functional definition of multi-family property veers from the widely accepted one described here. When Sharestates lists an investment as a “multi-family property,” it has at least five units.”

Source: https://www.sharestates.com/glossary/multi-family-property/



To describe the scale of the impact, taking into account:

1/ The breadth of the impact

  • Is the impact local, national, or global?

  • How many people are concerned? Thousands? Millions? Billions?

2/ The depth of the impact

  • Is the life of people concerned deeply affected, or does the issue just marginally impact them?

  • Are the changes brought by the issue profoundly changing society or the planet?

3/ The persistence of the impact

  • How long would the impact described last for? Months? Years? Decades?

  • How reversible is the impact described in the impact analysis? Can it be easily stopped/extended?


In your analysis, make sure you add value to your readers and go beyond the company’s CSR report by not merely reporting data from the company’s report but going the extra mile of providing additional metrics, studies, and sources to make your analysis robust and the impact value and scale are clear.

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