How often should an institution obtain new appraisals when using the collateral method?
In a recent webinar, Garrett Morris, senior credit and risk management consultant at Sageworks, discussed how often an institution should obtain new appraisals when using the collateral method of loan analysis.
From the video:
An institution should obtain new appraisals early – as often as they can. Even more sensibly, you should look at what is going to yield the most accurate reserve calculation when looking at a collateral valuation on a collateral dependent type loan. We’re looking for some discretion in terms of applying the most accurate and the most correct appraisal value on the collateral, to identify that within the documented results of the reserve calculation. That will also go against how often a reserve is calculated for an institution, whether it be monthly or quarterly. The big discernible factor is making certain that we have the correct appraisal value to achieve the appropriate reserve, based on the condition of our collateral.
For more resources on the allowance for loan and lease losses, join the ALLL Forum for Bankers on LinkedIn or download our whitepaper on valuation methods for impaired loans.
