ALEXANDRIA, Va. — The dot.com bust and more recently, the fallout surrounding sour Florida real estate deals, are a few reminders of the importance of member business loan risk analysis, Margaret Ross, NCUA's new MBL program officer, recently said.
Speaking at Member Business Lending, LLC's Leadership Summit a few weeks ago, Ross told attendees that portfolios should be monitored continuously for changing and emerging risks. At NCUA, Ross is responsible for developing the agency's MBL examination and supervision programs.
"If a large percentage of your MBL portfolio is invested in loans to widget makers, then we should see industry studies or discussion in loan write ups on the various risks of the widget industry," Ross said. "The larger your concentrations, the less you can afford to take the position that it is a 'can't miss' proposition. Just a few years ago, dot.com companies proved that. More recently, Florida condominiums come to mind."
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Ross also said a risk rating should be established at the time the loan is approved and it should be a "primary consideration" in the pricing and structure of the loan.
"Usually it just takes one lawsuit to convince a lender just how important documentation can be," she warned.
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