Risk is something that every property financier and investor must consider as part of the process of lending and investing.
One of the numerous challenges lenders face when setting lending and valuation strategies are the many facets of portfolio and individual property risk that must be considered.
Lending concentration risk
Exposure to large losses due to concentrations within their lending portfolio is a concern for all lenders. In addition to the considerations of exposure, authorised deposit-taking institutions (ADIs) have obligations under prudential and reporting standards that they must adhere to, including APS 220.
Identifying areas of concentration in the home loan portfolio, being able to set risk limits at a postcode or development level and creating on-going surveillance and reporting helps lenders to actively manage their credit portfolios.
CoreLogic can calculate and monitor a lender’s concentration per building, suburb and postcode, which allows them to recognise, manage and mitigate actual and potential concentration risks as part of their strategy to protect their lending exposure and capital position.
Portfolio reporting offered by CoreLogic enables alignment between strategic objectives and risk appetite with the support of actionable insights. The service is delivered via reports, daily alerts, platform messaging, online portal or data extract to recognise, monitor and manage concentration levels in line with a lender’s strategic objectives and RAS (risk appetite statement).
Automated alerts and real time updates are delivered via daily emails and Property Hub messaging to notify lenders if a property is over concentration risk thresholds.
CoreLogic data can also be accessed through API integration with origination and credit decisioning platforms to embed risk concentration data into lending and valuation strategies plus drive valuation type determination, credit policy and assessment process.
Environmental and structural hazards
There have always been property risks that banks and other lending institutions have been unable to easily assess digitally. Structural damage, contamination, asbestos or non-compliant cladding issues – any of these hazards could seriously affect how a potential residential investment is viewed. Equipped with vast reservoirs of property data assets, CoreLogic combines its own proprietary data with various and diverse sources of public and private sources of data to create property risk insights into structural and man-made environmental hazards.
The implications for banks are considerable.
If you’re a risk officer, it now means being able to make more informed decisions on the quality of the security. Not only can you determine whether a property breaches any pre-determined property exclusions, you can also make a better assessment on its true value and adjust LVR settings. With that kind of data, the risk of over-valuing those properties can be lowered.
If you are interested in learning more about how property data and insights can help to improve your loan origination process, overall risk setting strategy and ultimately power the home ownership experience for your customers, we would be happy to talk you through the details.