Problem Real Estate Loans
Problem Real Estate Loans is designed for lenders who may experience problem real estate loans in their portfolios. Explore the underlying business drivers for commercial real estate, the reasons for problem loans in real estate, and common factors leading to problem loans. This course provides an analytical framework and outlines various options for dealing with problem real estate credits, including the advantages and disadvantages of workouts, various workout strategies, and deed-in-lieu and foreclosure considerations.
Participants are expected to have taken an introductory real estate loan course or to have knowledge of basic commercial real estate underwriting concepts such as vacancy factors, capitalization (cap) rates, net operating income (NOI), legal structures for business entities, and construction finance basics.
Who Will Benefit?
Commercial lenders, private bankers, loan administrators, and credit personnel who want a deeper understanding of real estate problem loans and the options for dealing with them.
Upon completion of this course, participants will be able to:
- Identify the various sources of real estate lending risk from an operational, credit, and real estate collateral standpoint.
- Recognize the effects of volatility and leverage inherent in real estate markets and calculate their effects on value and income.
- Explain the complex relationships in lending between real estate, people, and credit.
- Identify and cite key causes and indicators of potential problem real estate loans.
- List the three levels of problem loan analysis and the components of each.
- Formulate a proposal for a problem loan solution that considers loan restructure, discounted payoff, or ownership as possible strategies.
- Weigh the advantages and disadvantages of workout versus foreclosure/ownership.
- Recognize and describe potential sources of liability and litigation risk.
- Describe the regulatory requirements for the treatment of classified assets including how these can financially impact the bank.
Problem Real Estate Loans uses scenarios and case studies. This hands-on approach ensures more active involvement by participants, which in turn increases retention. Participant involvement also facilitates their ability to apply course content back at the workplace. The following case study is described in this course:
- Spaulding Medical, LP deals with a borrower selection issue. The project has some problems, most of which can be resolved, but the borrower is the key reason why the loan becomes a problem. Participants must select a resolution strategy and outline an implementation plan.