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Tool Responds To Loan Portfolio Toxicity Assessment Demand

More options are becoming available to banks and investors looking for a tool that objectively valuates market viability of commercial real estate.

XSite Validation, a Farmington Hills, Mich.-based provider of commercial real estate market viability analysis, has created one such tool bankers and mortgage servicers can use to screen the overall toxicity of commercial property loans in a portfolio.

"We're presenting the site for what it is. It takes out potential toxicity for special servicers," said XSite senior vice president Stuart Dorf. "With this tool, servicers are slowly but surely releasing that stagnation [from their loan portfolios] causing the continual credit freeze. We are then able to stimulate growth through proactive screening." XSite said the Loan Portfolio Toxicity Analysis Report ranks all performing, nonperforming and REO properties from "first to worst," allows for quick reassessment of the concentration of types of properties within loan portfolios and provides the "best use" evaluation of every loan portfolio property by presenting the top five potential uses of each property.

Plus, XSite's Loan Portfolio Toxicity Analysis Report enables mortgage lenders and servicers to analyze, stabilize and ultimately revitalize their commercial loan portfolios.

"We've boiled down the 10 core denominators that commercial real estate purchasers look at," Mr. Dorf said. "We use GIS technology and are able to use commercial real estate aggregators, and we draw from the root source down, draw from two dozen sources and analyze 5,000 data elements and analyze within two to three minutes the commercial market viability."

According to Mr. Dorf, the new Loan Portfolio Toxicity Analysis Report also checks the address to see how the site has been used before. For example, if the site was a gas station or deli beforehand, it's clearly a drive-by site, not something suitable for a commercial retail or office building.

XSite asks its servicer clients if they've got any other concerns and items they want to see in the analysis and see how the servicer wants to weigh the performance/nonperformance viability of loans.

For every property in a financial institution's portfolio, XSite uses its XRI Scoring System, which assesses the "market viability of a property for its current or proposed commercial use, in conjunction with the financial institution's own loan grade/risk factors, to create a unique Composite XRI Score.

Comparable to a FICO score for personal credit, XSite's Composite XRI Score gives banks a single measurable that joins the financial viability and the market viability of the commercial property into one "go/no-go" decision-making factor. Using the Composite XRI Score, XSite's Portfolio Toxicity Analysis Report can then quickly present a ranked view of the entire portfolio, or just a portion of the portfolio, from which properties can be identified as most likely to sell or repurpose.

"The dam is broken, but it hasn't fully flooded. Special servicers need to maximize value for bond holders," Mr. Dorf added.