Large Bank Supervision Forum eBook

Internal Use Only

Example of Model Assumptions for Risk Management • Tier assumptions based on loan performance (currently DQ vs possible future DQ) – Loans 30+ days delinquent, incl. foreclosure and REO • 100% default rate, 40% loss severity, 12-month recovery – Non-DQ loans w/ a debt-service coverage ratio (DSCR) < 1.0 • 75% default rate, 40% loss severity, 12-month recovery – Maturing loans with a DSCR < 1.25 or a debt yield < 6% • 50% default rate, 20% loss severity, 12-month recovery • Ideally, the maturing loan assumptions would vary by property type

© 2023, Trepp Inc.

Internal Use Only

4 Q&A