Tag: Risk

An Early Warning For Bank Multifamily Rent Trends

Multifamily Lending Perofrmance

One of the most underappreciated commercial real estate trends in banking is the remarkable stability of multifamily rents during this pandemic. As of last week, according to the National Multifamily Housing Council (NMHC), 77.4% of renters in an 11.4 million sample size of professionally managed apartment complexes were making their rent payment which compares to 79.7% during the same time as last year and an average of about 82% for the year (summer delinquencies are usually higher).

How To Prepare For The Next Pivot

Inflationary Risk

During the last ten years of economic expansion, prudent bankers were planning for the next downturn. Everyone knew that the economic expansion would end, but no one could be sure when or how. Smart bankers managed their business by accepting that all expansions do eventually reverse. None of us can predict the future, but enterprising bankers were conducting business to craft better results for their banks by understanding that an economic pivot would come.

How to Set Up For PPP Forgiveness

PPP Forgiveness Application

As you wind down and clean up Round 2 of the Paycheck Protection Program (PPP) and before you produce your 1502 report to the SBA, it now merits thinking about how to best set up for the wave of forgiveness work that starts immediately after funding. Obtaining forgiveness is critical to both the bank and the borrower as it increases profitability, enhances cash flow, aids in liquidity and removes the risk for both parties. Unlike the origination process, banks now of the luxury of some time to get this process right.

The Stimulus Package and CARES Act Bank Playbook

CARES Act and Payroll Protection Program Tactics

Go to any Trader Joe's market and then go to a competing market, and you will be likely to find a significant difference. Trader Joe's has produced a COVID-19 response that is thoughtful, practical, relatively inexpensive, and caring.

The Status of Commercial Real Estate Values

Commercial Real Estate
CRE UNDERWRITING

Recent data, just released from Real Capital Analytics, shows that since the start of the year (month-end April), commercial real estate (CRE) has appreciated 2.6% in 2019. This is good news for banks as it shows that every significant loan sector likely has improvements in both debt service coverage and loan-to-value. In major markets, this appreciation has been closer to 4.9%, and in secondary markets, price appreciation has been 1.5%. In this article, we take a look at the details to help banks better manage their pricing and risk.

 

Why You Are Watching The Wrong Lending Competitors

Credit management - graphic of man looking through binoculars
CREDIT MANAGEMENT

No doubt, you hear all about how your competitors are winning deals because they are more aggressive when it comes to underwriting. While banks must always ask if they are taking the right risks and the right amount of risk, it is probably the competitors that you are not watching that is causing you the greatest risk. In this short article, we explore one often overlooked aspect of competitor surveillance and how this one technique can help protect your bank.

 

The One CRE Underwriting Metric You Are Likely Not Using, But Should

More Accurate Commercial Real Estate Underwriting
More Accurate CRE Underwriting

Whenever your bank is looking at underwriting commercial real estate (CRE), you are probably looking at a variety of macro factors such as rent and occupancy trends, absorption, and capitalization rates. However, since we see hundreds of underwriting packages a month from a variety of banks across the country, it is rare that we see banks, and even borrowers, adjust rents for new construction. In this article, we present our methodology, data, and adjustment factors that banks can use to have more accurate underwriting.

 

Do You Really Want To Lend Below A 10% Debt Yield?

PROFITABLE BANK LENDING
PROFITABLE BANK LENDING

Commercial lenders should be aware of the important factors that drive customer behavior to borrow funds. Our clients borrow from us when they refinance debt, or purchase equipment, real estate, or finance working capital. However, there are three key elements that make debt especially appealing for borrowers. Commercial lenders that understand these three elements can better position themselves for success.

 

The Three Key Elements to Borrower

 

The Current State of Commercial Real Estate Lending

More Profitable Commercial Real Estate Lending

Many banks today are satisfied to underwrite real estate secured loans on just two metrics: debt-service-coverage ratio (DSCR) and loan-to-appraised value (LTV).  Banks typically approve credits above 1.20X and below 75% LTV – with many loan-specific factors that may skew these acceptable levels either way.  For competitive reasons, we see some banks who are dipping to 1.10X DSCR, and some deals are approved at 85% or even higher LTVs.  However, in today’s business c

The State Of The Housing Market And What It Foretells For Banking

Housing and Credit

Home prices and trends are thought to be a leading indicator of bank credit, and so we pause to analyze what 2018 is telling us and how it could impact our future in the banking industry. December existing homes sales came in at 4.99 million units or below the 5.24 million units expected. That continued the trend of weaker demand in 2018. Luckily, we can correlate much of that drop in demand and pricing to higher interest rates and inflated home prices against a backdrop of flat income.

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