The feds step in – CRE loan workout guidance

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Abstract: With the ongoing credit crisis, even borrowers that remain creditworthy have been challenged by the reluctance of some lenders to pursue workouts for commercial real estate (CRE) loans. Federal bank regulatory agencies have responded by releasing a guidance statement which encourages “prudent” workouts. It calls for a workout plan that scrutinizes current financial information on the borrower, and lists a number of factors an examiner should consider when assessing a borrower’s repayment ability. The statement also places on lenders the responsibility for reviewing current collateral values. A sidebar to this article discusses factors that examiners should consider when valuing income-producing properties.