Most commercial banks already use commercial evaluations on loan originations up to the $500,000 federal limit (or $1,000,000 for small business real estate loans). But an increasing number of savvy banks have discovered that they can further enhance profits – without increased collateral risk – by dialing back their emphasis on Appraisals.
How does that work? These lender clients capitalize on Boxwood’s FieldSmart Evaluations for renewals and other subsequent transactions above that dollar cap. And, by the way, they still conform with all interagency guidelines.
Many of our clients have ratcheted up their use of evaluations on lower-risk, small-balance loans of several million dollars when valuing collateral for a host of nonfinancial transactions like loan renewals, modifications, extensions, credit reviews, monitoring and special servicing. Not only have they achieved positive risk management outcomes, but bank officers are also thrilled by the efficiency gains and cost savings.
Some have seen savings running into the tens of thousands of dollars over the course of a single year.
As one practical bank officer recently said, “We know how to walk and chew gum at the same time. We’ve also learned how to extensively use Boxwood’s evals and be conservative and prudent lenders at the same time.”
Despite this success, we know that other lenders continue to lean heavily on Appraisals above the $500,000 exemption ceiling for loan renewals and the like. Their reasons vary, but it typically comes down to a few different factors, such as the complexity of certain property types, a bank’s loan classification or grade, or simply departmental policies that dictate a reliance on Appraisals out of an abundance of caution.
