search.noResults

search.searching

dataCollection.invalidEmail
note.createNoteMessage

search.noResults

search.searching

orderForm.title

orderForm.productCode
orderForm.description
orderForm.quantity
orderForm.itemPrice
orderForm.price
orderForm.totalPrice
orderForm.deliveryDetails.billingAddress
orderForm.deliveryDetails.deliveryAddress
orderForm.noItems
WHEN A BANK EVALUATES A LOAN REQUEST, IT USES SOME KEY METRICS TO GAUGE THE CREDIT RISK OF THE ASSOCIATION. THE FOLLOWING ARE SOME FACTORS THAT A BANK MAY CONSIDER DURING THE UNDERWRITING PROCESS.


1.) Delinquency • Number of accounts and total amount of delinquencies.


• Many banks have a maximum rate of 10% for number of units aged 60+ days. • Strong credit – Delinquency rate less than 5%.


2.) Liquidity • Amount of cash in the association’s operating and reserve accounts as a percentage of annual assessments and annual debt service.


• Many banks have a minimum liquidity requirement of 20% of the association’s annual assessments. • Strong credit – Liquidity levels greater than 50% and at least one year of debt service payments.


3.) Size


• More units/homes provide a diversified cash flow stream. 4.) Assessment Increase


• Large increases may cause delinquencies to rise. • Strong credit – Increase of less than 25%.


• If a large increase is necessary, implementing it before applying for the loan can mitigate risk. 5.) Annual Assessments/Market Value


• Annual assessments should not be greater than 10% of the unit value. • Strong credit – Annual assessments less than 2% of market value.


6.) Owner Occupancy and Concentration


• A high % of investors not living in their respective units is considered riskier. • Strong credit – Over 80% owner-occupied; multiple unit owners control less than 10% of the units. • Weak credit – Less than 60% owner-occupied; multiple unit owners control greater than 20% of the units.


7.) Management and Capital Planning


• Strong external professional management company with experience in managing similar projects is desirable. • Professional reserve study that is at least partially funded indicates prudent financial planning.


54 | COMMON INTEREST® • Summer 2019 • A Publication of CAI-Illinois Chapter


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60