All types of lenders (whether commercial, multifamily, residential, consumer, leases or other loan types) can benefit from our strong credit and regulatory background. The Hilltop Companies provides a wide array of services to lenders including, but not limited to:
- Assessing credit policy design and effectiveness
- Testing the adherence to credit policy
- Assessing early payment defaults
- Assessing prepayment experience
- Assessing the operational performance of the loan production area
- Identifying backlogs or process “hold ups”
- Assessing costs of origination
- Testing Quality Control processes and effectiveness
- Testing regulatory compliance for lenders
- Testing investor compliance
- Assessing compliance with reps and warranties on sale of loans
- Assessing compliance with terms of any warehouse lending lines of credit
Sale of loans (capital markets activity)
- Assessing the hedging program and compliance with hedge policy
- Evaluating gains and losses recorded upon sale
Technology usage and its effectiveness
- Evaluating the use of technology in the loan origination, production and sale areas
- Identifying impact of technology on transaction speed
- Identifying impact of technology on cost of origination
Credit analysis is critical to a lender and our various compliance audit and underwriting assessment capabilities provide you as lender with early feedback on whether the loans being originated are of adequate credit quality to meet the bank’s/investors’ standard. The credit analysis performed by our teams includes addressing a number of questions. These include the following:
- How the credit policy drives certain credit performance for the underlying loans?
- Does the loan documentation support the standard requirements for secondary market delivery or the portfolio manager?
- Is the credit decision to make the loan properly supported by documentation that adequately addresses the identified credit risks?
- Are all the credit risks associated with the loan appropriately identified?
- Does on-going monitoring indicate any credit performance issues?
- Are there indicators that would cause a potential “repurchase of the loans” given reps and warranties granted by seller?
- Are the credit decisions made consistent with policy, management’s expectations and regulatory requirements?
Our Senior Management team has been involved in one of more of the aspects of loan review throughout their careers. However, the differentiator for Hilltop Advisors is that our professionals conduct such reviews from a number of different perspectives – credit policy backgrounds, risk management, accountant, auditor, bank examiner, etc. We are not just “underwriters” or “due diligence document reviewers”. We understand what each of these important players require from the loan underwriting and monitoring policies and processes, as well as, the necessary documentation for all such lending/loan servicing activities.
Our credit analysis methodology includes:
- Understanding the credit policy and expectations of management
- Reviewing loan documentation
- Reviewing the portfolio’s delinquency performance
- Assessing the loan loss mitigation efforts that are executed
- Identifying the impact of projected loan losses on the ALLL and overall financial statements
Given the unique nature of commercial and multifamily loans (i.e. they are not homogeneous like many residential mortgages), we have developed an Independent Loan Review service that is conducted to conclude on two aspects of the credit analysis:
- Determining the proper “loan rating” (pass, special mention, substandard, loss, etc.)
- Assessing the lender’s review of the borrower’s current financial and other performance data
- Assessing the borrower’s compliance with loan covenant terms and conditions
- Assessing the overall economic and financial factors that could impact the borrower’s ability to pay
- Determining other risks that may have not been identified at origination
- Continuous review efforts and rating updates by the lender
- Assessing the loan rating against the information gathered to support such rating
- Determining the potential loss related to such loan that accounting rules would require to be included in the ALLL.
Our Independent Loan Review for banks is well received by examiners due to the independent nature of the review. We can deliver the review in one of two formats:
- A project based credit and documentation review which will focus on the status of the loan
portfolio, credit policies, documentation, etc. as of a point in time
- An on-going independent review provided to the Chief Credit Officer and the Board that
monitors all loan portfolio and credit activities on an annual or other periodic basis (this is a
form of internal audit outsourcing)
If your Company is looking to assess its overall commercial and/or multifamily loan portfolio – credit analysis, documentation, policies, processes, etc. – please contact us to discuss how we may be able to assist.