OCC Is Warry Of CRE Loans
The Comptroller of the Currency is warning national banks to size up their commercial real estate portfolios before his examiners start knocking on their doors.
Examiners are going to be taking a hard look at CRE portfolios, comptroller John Dugan said, and particularly at community banks with high concentrations of residential construction and development loans in declining markets.
In a speech to the Florida Bankers Association, the comptroller also warned that he expects to see more bank failures this year.
"There will be more criticized assets, increases to loan loss reserves and more problem banks. And yes, there will be an increase in bank failures," Mr. Dugan said.
The comptroller noted that large and small homebuilders are under stress, and the percentage of nonperforming C&D loans 90 days or more past due in Florida is 3.34%, up 70% from a year ago.
Nationally, 1.96% of C&D loans are nonperforming, twice the rate from a year ago.
"We see clear signs of credit quality declining," he said, and bank management needs to make "realistic assessments" of their portfolio's current condition and get new appraisals.
A Federal Reserve Board survey of senior loan officers found that 80% of commercial banks have tightened the lending standards on CRE loans since October. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/