Insurance Business ReviewJUNE 20258IN MY OPINIONThe Analyst's Gut Feeling and Initial ReviewA lender called a Credit Analyst asking why a loan in process was taking so long. Surely, the analyst can have the financial spreads completed and ready for review before too long. After all, competitors in the market can get loan applications turned around in minutes let alone days. And this was a potential new customer in a market the Bank is looking to expand. Time was of the essence.Yet, something stood out to the Analyst. A strange gut feeling when working through the financial statements. The borrower's credit scores were above 750, the cash flow was at a qualifying level and the borrower had enough cash to support a downside scenario. This gnawing, unidentifiable concern about the potential customer kept the Analyst in a stasis over the loan for more than a day. Time was spent re-examining existing financial statements, pouring through different documents and trying to see if anything was missing. After some effort, the Analyst called the lender back.Deeper Analysis and DiscoveryThe Analyst described the borrower as a credit-worthy customer but, unfortunately, this credit extension would not make sense. See, the specific request was to do a cash out refinance of the borrower's existing residence, but refinancing the loan from a 4% rate to the 6.75% rate just to take some additional cash out didn't seem to make immediate sense. The lender had rightfully claimed that the borrower came over to the bank due to the personal relationship they had built up and they wanted to use some of the cash to do some renovations around their house. But then, why not a 2nd DOT rather than a full refinance of the mortgage? This question led the Analyst to do some addition digging.Upon examination of the borrower's cleaning business, which generated most of the cash flow, it was clear that margins in the CREDIT RISK AS CUSTOMER SERVICEBy Clayton Dexter, Underwriting Manager, Vice President, ANB Bank
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