Asset Quality Control &
Credit Administration Practices:
independent evaluation of the ratings and portfolio assessment
of asset quality are reviewed within the context of local and
regional economic conditions that might impact performance. In
addition, any systemic weaknesses, as opposed to isolated
problems are given appropriate consideration under the following
assessment guidelines and reporting conditions:
The adequacy and
consistency of underwriting standards, credit administration
practice, and appropriateness of risk identification practices.
and quality of the loan portfolio.
Concentrations - (common enterprise & common control)
Concentrations - portfolio mix, industry types, and geographic
The adequacy of
internal loan controls and management information systems.
The adequacy and
objectivity of policy, procedure, and consistency in practices.
Volume and nature
of policy and credit documentation exceptions
Lender Test (FIDICIA) portfolio economic distribution (for
Performance of key
areas with benchmark comparisons to peers, regional and national
Asset Quality Control - Residential Lending
uniqueness by design of our Quality Control Review Program has
been found to be an effective tool in managing risk while
complying with the guidelines set forth by regulation and
secondary marketing standards. The process of selection is
achieved through a stratified sample of at least 10% of the
total annual production, or the total of annual secondary market
mortgage production from all product lines, at varied dollar
amounts, geographic locations, and higher risk characteristics.
Most importantly, our process warrants that the selected sample
is representative of the full scope of your organizations
portfolio, production and fully compliant with FHLMC & FNMA
Selected loans are
review for completeness and accuracy of information in the
mortgage origination/closing processes.
documentation are reviewed for respective disclosures and
compliance to secondary marketing requirements and applicable
financial analysis are conducted for conformity to your
organizations/secondary market sources underwriting guidelines,
credit policy and prudent lending practices.
The integrity of
input information and testing is performed for respective FNMAs
Desk Top Underwriter and FHLMCs “Loan Prospector” documentation
and credit scoring system
Control - Servicers of Residential Mortgages
review of governing documents for securitization trusts.
borrower’s that are at risk of default.
and assessment of capacity and mitigation strategies.
prudent loss mitigation techniques.
Mortgage-Servicing Assets (MSAs)
- A review of regulatory
required comprehensive documentation standards to substantiate
and validate the initial carrying amounts assigned to each pool
- Periodic reviews of each
asset’s subsequent carrying amount and fair value.
- Proper accounting treatment.
- MSA impairment analysis.
- Comparison of assumptions used
in the valuation models with your actual experience.
- Comparison of models utilized
including valuation, hedging, pricing, and bulk
- Appropriate amortization
practices of the remaining cost basis of MSAs.
- Timely recognition of
- Review for FAS 140 compliance.
A review of the accuracy of
reporting systems, controls, and limits.
- Tracking of quality control
- Examination of credit quality,
loan characteristics, demographics, trends, and sources of
- Track and review
front-end-closing and post-closing mortgage documents to insure
sale in the secondary market.
- Identification of any control
Commercial Real Estate (CRE)
Acquisition, Development, and
Construction (ADC) Lending
The level and complexity of
risk-monitoring techniques and coverage for CRE & ADC lending is
commensurate with the level of real estate activity and the
nature and complexity of your institution’s market. The process
of review follows the guidelines set forth under Interagency
Guidelines for Real Estate Lending Policies (Appendix A to Part
365). In addition, encompassing the same techniques and review
standards outlined under the internal loan review segment -
covering an independent loan-by-loan review of all relevant
credit factors, and underwriting standards, to include:
primary, secondary, tertiary, and global repayment sources.
lending review of alternative repayment sources other than the
project being funded
capacity of the borrower/guarantor(s) under each scenario of
identified sources of repayment.
Appraised value of
the property meeting appropriate appraisal standards.
creditworthiness of the borrower/guarantor(s).
Level of equity or
hard equity invested in the property or project and LTV.
Inspection of all
administrative, credit, legal, and collateral documentation for
its integrity, inclusion, perfection, and compliance to
applicable laws and regulation.
property inspections and ongoing inspections during the
specifications, and budgets.
Overview Review of:
CRE / ADC
segmentation and portfolio diversification
Level of pre-sold
or other types of take-out commitments.
CRE / ADC
inventory aging by portfolio and borrower
market / submarket and geographic dispersion
exceptions (number and volume by justification and trends)
exceptions in accordance with Interagency Appendix A to Part
liquidity, stress testing, and sensitivity analysis
loans and portfolio are reviewed in accordance with
best-practices guidelines, prudent assets quality standards, and
the interagency guidelines for “concentrations in commercial
real estate lending, sound risk management practices,” “real
estate lending policies,” and “appraisal and evaluation
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