Safety and soundness in lending is an important topic when it comes to lending. Because some loan practices have been blamed for the economic downturn, many banks and other lenders have found a renewed focus in conservative lending practices. Further, lenders should be sure that a property does not include any further impediments that could act as hindrances on a home loan and that the home value has been properly determined.
To ensure a property does not pose increased risk, lenders should ensure that no additional liens or claims of ownership are attached to it. A thorough search of the property records can help to shed light on any additional encumbrances that were not uncovered during initial proceedings. This can include claims by former spouses, children or others financially tied to a seller. Property tax records may also be a signal that a lien may be in place.
Because such liens can become the responsibility of a new buyer, and subsequently their lender, it is essential that banks and investors ensure that a deed is free of encumbrances before a loan is given.
Lenders may also want to determine the assessed value of a home is correct before signing off on a loan. During the housing bubble, some home values were inflated and did not reflect safety and soundness in lending. County property records can provide a firm basis for lenders to justify the loans they make.
This can be done by comparing several key elements that factor into a home's value. A property's past sales prices, along with those of properties nearby may also shed light on what a home's proper value should be. Lot history should also be reviewed when determining home value. Previous problems and recent upgrades for which permits were filed provide added justification for property valuations..
Typically, lenders would need to consult many different resources to gather all of this information to come to a decision on a loan application. However, banks can now reserve their resources by using CRS Data's Bankers Suite, which compiles all relevant real estate information in one place for easy access. This may help banks to ensure they are making sound lending decisions.
“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