Tag: Loan Loss Management

Understanding Liquidation Timing To Limit Loan Losses

Bank Loan Loss Timing

When it comes to dealing with commercial property, understanding the timing of liquidation in relationship to a loan’s maturity and the time of default is important on several levels. Knowing the data allows banks to make better loan pricing and loan workout decisions. For example, loss severity is greater for loans with 75% loan-to-value (LTV) than with 100% LTV. This is counterintuitive but can be accounted for by understanding that bankers move faster to liquidate properties that have higher LTVs.

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