Credit Evaluation School - May 2023

MATCH THE RED FLAGS TO THE EXAMPLES PROVIDED

• The person who was supposed to be filing the UCCs was not aware they needed to be submitted for recordation. Going forward, this will be corrected.

Loan Pricing May Not Reflect Risk

Incomplete Loan Documentation

• Borrower signed the note, but there was no security agreement, guaranty agreement, or borrowing resolution.

Numerous Instances of Lien Imperfections

• “Great news! Felicia just closed a $9 million loan to construct a new cruise ship! Although the borrowers have limited experience, the projections are amazing. She was even able to offer them a rate 200 basis points lower than their best offer!!”

MATCH THE RED FLAGS TO THE EXAMPLES PROVIDED

• Chuck, a longtime lender at Midtown Bank, did not understand why I asked about three missing annual reviews related to his clients. Chuck insisted it was not required by their policy and provided his well-read and worn copy of the loan manual he relies upon to support his claim. Chuck told me I should read the policy. The printed policy Chuck provided clearly stated an Annual Review was not required.

Loan Officer Unfamiliar With Lending Policies and Procedures

Lending Staff Do Not Understand Loan

• Can be any type of loan, but these are often: Participations, SBA, USDA, and HUD.

• Our loan officers choose which loans they would like to review annually. However, if the loan performing as agreed, it is not reviewed unless it becomes past due.

Inadequate Loan Review Process