Collateral evaluations are a critical tool in the review of a bank's overall financial picture, particularly following the impact of the housing crisis, and give an up-to-date picture of lenders' current financial standing in relation to the outstanding loans in their portfolios.
Lenders have seen the assessed value of their loan portfolio shrink considerably since many of the loans were made, putting a strain on banks' ratio of loaned capital to collateral properties.
In a volatile real estate market, price trends and inventory levels can change rapidly, significantly altering the relative value of the property in relation to what else remains available on the market.
The impact of all of the distressed assets in a local area can also play a substantial role in the health of the real estate market. These distressed assets can weigh down the overall price trends present in a given market, but they may be more or less relevant depending on the quality of those distressed assets. All of these factors can significantly impact a collateral evaluation.
In some areas, declines in property values have cancelled out years of home price appreciation to create underwater loans with a higher risk of default. In areas where home price depreciation has been considerate, lenders themselves may find their portfolios as a whole are underwater.
Relying on older property valuations, even those just a few months old, to gauge the value of a specific property can be misleading. In order for lenders to keep an accurate handle on their property portfolios, data should be updated on a regular basis to account for the changing market.
With these accurate and complete reports, lenders can quickly get an up-to-date picture of the status of their loan portfolios, and see which properties have held their value and which ones have not. Thorough collateral evaluations can also show lenders how their property portfolios' standing has changed over time.
Those lenders looking to discover all pertinent financial data regarding a certain set of properties can use CRS Data's tools to review home values and conduct a quick and thorough collateral evaluation which meets the guidelines set by federal and state regulators across the country.
“The quality of our work would not be as good without CRS. And it would take hours to get the work done without CRS."
CHARLIE HARPER - Sunmark Community Bank