What is Subprime Lending?

Lehman collpased. HBOS (Halifax Bank Of Scotland) and Merrill Lynch sold out. AIG in doldrums. The recent news of the global financial crisis made me open google and explore about the reasons, which knocked down these titans. As far as I could understand the primary reason for the Lehman's demise was Subprime Lending. Since that term was gibberish to me I did another google search to find out the meaning of that. Here is what I could understand.

Everyone and anyone in this world is in need of extra funds at some point in time. It may be for buying a house, buy an HDTV, a car etc. Suppose, I need to buy a house. Since a house is a pretty big investment, I don't think I can afford to make a down payment of the entire cost. So I look for a financial institution, which can give me a loan as per my financial eligibility or credit score. The credit score is a key factor to determine

• Whether or not I am eligible for a loan?
• If I am, then what would be the loan amount?
• What would be the interest rate on the loan?

Now if my credit score is below than the minimum required by the lending institution then I would be denied a loan. So I have been denied a Prime Lending.

I would look for another institution like Lehman, which is willing to lend to me even with my low credit score. This is called Subprime Lending (Since in this case my house would be mortgaged until I pay back the entire loan amount, it would be called Subprime Mortgage Lending). Of course, I would be charged a higher rate of interest for the loan amount because I am a Subprime Borrower and as per my credit score I have higher risk of defaulting. Besides sub-prime lending rates are also higher because more applications are rejected and marketing costs are higher.

Some subprime lenders are independent but mostly they are affiliates of the mainstream lenders functioning under different names.

Subprime market has made mortgages (and home ownership) available to a segment of the population that otherwise would have been shut out of the market, which is a positive development. The bad part is that some borrowers who are eligible for loans from mainstream lenders end up in the subprime market. They are prime borrowers but they pay subprime prices.

This happens partly because of the difficulties some borrowers face in determining whether or not they qualify in the mainstream market. The main reason some prime borrowers end up paying sub-prime prices is that they are solicited by subprime lenders and go along with the deal pitched to them without ever contacting a mainstream lender. This is referred to as "steering".

I guess thats enough for the definition of Subprime Lending. In case you have any queries, you can always shoot them to ravinder.rawat@gmail.com

Qualit Assurance vs Quality Control

A couple of days back I came across this article, which mentioned the terms Quality Assurance and Quality Control. Though the write up mentioned the terms it did not say anything about the difference between the two.

I googled and found out the following:
Quality Assurance aims to assure that the quality work and quality deliverables will be built before the work is done. QA activities are focused on the processes used to create the deliverable.

Quality Control aims to determine that quality work and quality deliverables did occur after work was done. QC activities are focused on the deliverable itself. Testing, Reviews and Inspection are few of the QC activities.

Nice One

The Dream is not what you see in sleep...., Dream is the thing which does not let you sleep....

Spring Autowiring tip

How to exclude a bean from being available for auto wiring?

When configuring beans in configuration file, the 'autowire-candidate' attribute of the element can be set to 'false'; so that this bean can not be made available for auto wiring infrastructure.

For example : <bean id="foo" autowire-candidate="false">
would not allow bean "foo" to be autowired to another bean referring "foo".

Cheers

An open source BI tool - Pentaho

Since I have come up with the (stupid) idea of creating the blog, let me break the ice as well.

Nowadays I am working on this web based open source BI application called Pentaho. "Working" is not the right term for describing the kind of job I am doing because its more of an R&D kind of work. Actually I need to deliver a POC to one of our clients by customizing it for their basic requirements and hence the effort.

Pentaho provides a full spectrum of open source Business Intelligence (BI) capabilities including reporting, analysis, dashboards, data mining, data integration and a BI platform. Don't be overwhelmed with all those terms as I myself don't knw about a couple of them.

You can find more information about Pentaho on their website http://pentaho.com/. In case any of you come across a sitution where you need to familiarize yourself with this product you can get in touch with me. Though I am still a novice, I might be able to give you a few leads, which could save you a little but precious time.

Cheers!

Let's share

I have created this blog to provide a platform to share knowledge, ideas, tips, learnings and views about things, which we think have helped us grow professionally or personally and thus would be useful for rest of us as well.

n please, please, please don't be hesitant in putting stuff here just because you think that it may appear trivial to rest of us. It could well be the most important piece of information for some of us. So drop all the inhibitions and JUST SHARE.

I hope everybody would make a conscious effort to contribute and share, which in turn, would definitely make each of us a more learned person and professional.

Amen