CRE Underwriting Slipping

When acting Comptroller of the Currency Julie Williams criticized national banks July 13 for letting their underwriting standards slip on commercial loans, she was also pointing to deteriorating standards for commercial real estate loans, an OCC official has told MortgageWire.OCC examiners are seeing higher loan-to-value ratios, longer maturities, and less guarantor support. At the same time, more CRE loans are underwritten based on projected cash flows and expectations that the economy will remain strong, the OCC official said. The OCC is expected to release the results of its recent survey of bank underwriting standards later this summer. However, Comptroller Williams gave a preview of the findings in her July 13 speech. Banks are "accepting greater risk of loss" at a time when the "downside risk in the commercial loan market seems to be increasing," Comptroller Williams said.