tag:blogger.com,1999:blog-235433516644980443.post1134399718657593706..comments2024-03-27T05:08:10.195-04:00Comments on Jeff For Banks: What's With Regulator Agita Over Bank Commercial Real Estate Lending?Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-235433516644980443.post-59038811839069431682017-07-15T06:01:43.180-04:002017-07-15T06:01:43.180-04:00This comment has been removed by a blog administrator.Nabeel Ahmedhttps://www.blogger.com/profile/01344079950042842875noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-43715399305220818152017-05-20T12:51:23.572-04:002017-05-20T12:51:23.572-04:00Anonymous,
I'm also concerned about regulator...Anonymous,<br /><br />I'm also concerned about regulators taking only a piece of the guidance such as the 300% threshold and encouraging bankers to buck market demand of land outside of their expertise.<br /><br />Awesome comment!<br /><br />~ Jeff Jeff Marsicohttps://www.blogger.com/profile/12153599647481141591noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-13315969913242014122017-05-20T12:47:34.386-04:002017-05-20T12:47:34.386-04:00This comment has been removed by the author.Jeff Marsicohttps://www.blogger.com/profile/12153599647481141591noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-7446496790856907352017-05-20T11:38:16.207-04:002017-05-20T11:38:16.207-04:00It is remarkable that regulators continue to focus...It is remarkable that regulators continue to focus on CRE despite clear and convincing statistical evidence that the risk profile (especially when excluding CLD and including 5+ multifamily) is superior not only to C&I but also to portfolio 1-4 residential product (net chargeoffs run slightly lower as you showed above but nonaccruals run much higher and economic cost to collect running through the income statement is really high as a % of loan size and often never collected even if the loan is paid off at par via sale or foreclosure). When you think about it, the reason for this profile is fairly clear - NOO CRE tends to have multiple sources of repayment (principal sponsor plus multiple cash flow streams from property plus optionality to retenant if tenant businesses fail plus option to access collateral as lender and sell) whereas C&I loans generally have no diversified support (sponsor is business owner, collateral of uncertain value if any, any pledge of personal real estate costly and lengthy process to get at) which is why C&I loans tend to have binary outcomes (when they fail, high percentage of balance charged off). I think many smart regulators - particularly at working and mid level - acknowledge this, but there seems to be strong institutional commitment at higher level to certain elements of the guidance, almost religious in its ahistoricism and aversion to data.Anonymousnoreply@blogger.com