Lending
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Making Headlines – Credit Trends and Risk Management Take Center Stage
As credit stresses grow and borrowers face cash flow stress, lower income, and higher costs, financial institutions should consider adjusting their strategies for underwriting, managing, and monitoring credit risk.
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Proposed Regulations Clarify Bad Debt Deductions for Regulated Financial Companies
This blog was authored by my colleague Trevor Huisman, a tax principal within our financial services group. On December 27, 2023, the IRS and Treasury released proposed regulations (REG-121010-17) that would update the standard used to determine when a debt instrument held by a regulated financial company or group would be considered worthless. The proposed […]
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Revisiting Loan Portfolio Management Fundamentals
This blog was authored by my colleague Erica Crain, a principal within our financial services group. As the economic environment shifts with increased interest rates and credit weakening projected while liquidity sources are highly scrutinized, it is important for financial institutions to revisit the significance of loan portfolio management fundamentals. Effective loan portfolio management involves […]
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ICYMI- Fannie Mae Implements Changes to Prefunding and Post-Funding QC Requirements
In March 2023, Fannie Mae released a Seller Guide Announcement introducing upcoming policy enhancements to the prefunding and post-closing quality control review process. These changes include accelerating the post-closing QC review cycle timeline and establishing minimum prefunding volume requirements. Though lenders were encouraged to adopt the new guidelines immediately, the changes became mandatory on September […]
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Impacts of the Initial Adoption of CECL
This blog was drafted by my colleague Tessa Brockie, a manager in our Financial Services Group. At the start of 2023, the vast majority of financial institutions adopted CECL. The impact of adoption varied for institutions based on asset size as well as the makeup of the loan portfolio. Although there are conclusions you can […]
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Reporting Loan Modifications with the Implementation of CECL
As a part of the adoption of CECL, institutions are also adopting ASU 2022-02 Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. This standard eliminates the concept of a troubled debt restructuring (TDR). As a result of this elimination, it removes the requirement to individually evaluate TDRs for impairment as CECL is already calculating lifetime losses for all loans in the portfolio. Under CECL, you are allowed to individually evaluate loans for allowance levels, but this evaluation is no longer predicated on the prior definition of an impaired loan. However, the standard did not eliminate the requirement for institutions to disclose information about loan modifications where the borrower is experiencing financial difficulty.
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CECL – Post Adoption Considerations
Over the last ten years, financial institutions have discussed and debated the Current Expected Credit Loss (CECL) accounting standard. Many of the larger financial institutions adopted the standard in 2020 with the majority of smaller, community financial institutions adopting on January 1, 2023. With adoption behind us, here are some items to consider during 2023 to position your financial institution for success in your next regulatory exam or external audit.
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As Rates Continue to Increase, So Does Refinance Risk
When with a group of senior lenders and chief credit officers recently, the question was asked – what keeps you up at night? The answer: refinance risk. Simply put, refinance risk is the risk that a borrower will not be able to refinance their existing loan at favorable terms when it becomes due which could negatively impact their ability to repay the debt.
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CECL Blog Series – Part #3
This blog post continues our CECL blog series, where we hope to answer your CECL questions one blog at a time.
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CECL Blog Series – Part #1
Welcome to the CLA CECL Blog Series, where we’re hoping to answer you your CECL Questions one blog at a time!