Ourlenders are big on cross-collateralizing properties. As far as appraisal rules, flood and SLTV -do you treat cross-collateralized property the same as if it were your collateral or do you treat like ABC?

Crossing collateral depends on many factors (collateral values, cash flow, net worth, repayment history with the bank).

Say your customer owns commercial real estate valued at $500,000. Your Loan A is for $100,000 or a 20% loan to value. Should you cross that loan to Loan B in the amount of $150,000 you still only have a combined loan to value of 50%. You would only consider the pledged r/e as ABC if your officer documents the file that pledged r/e is ABC because he would make the loan to the customer unsecured based on net worth, cash flow.....

Say your customer owns commercial real estate value at $500,000. Your Loan A is for $350,000 or a 70% loan to value. Should you cross that real estate to Loan B in the amount of $300,000 your combined loan to value would be 130%. Does Loan B have any other collateral. Say Loan B has first collateral of accounts and inventory with a current value of $450,000 and your officer is crossing the existing real estate as ABC based on current values on the accounts and inventory.

One thing to be careful of is documenting real estate as ABC to a customer that would not quality for unsecured debt. You wouldn't want to get critized for trying to go around appraisal requirements.

Did that help?

Also, SLTV does come into consideration, unless there is an Exemption (workout, ABC, gov't guaranteed....).

All loans secured by that property must be part of your ltv calculations, including those at another institution. Should the total amount of all loans secured by that property exceed SLTV all of your indebtedness must be included in your bucket and report to Board.

Thanks, that does help.

I guess I still don't totally get it.

We have a loan secured by lots valued at 800,000. Our loan is for $650,000 - 81.25% LTV - over the 75% LTV for improved lots. So the lender adds a house valued at $950,000 with a first lien here of $350,000 - 36.8% LTV. So -

1. Do you add a junior to the house to cross-collateralize and include in the collateral section of your note?

2. What is the new LTV? I came up with $360,000, but that can't be right, right?

Help!

Bump! I hate to be a pest, but I could really use help on this - they want to close this loan today.

1. This will be based on your State's real property laws and you need an attorney to answer that specific question.

2. $1,400,000 in total collateral - loans total $1,000,000 = 71.43% for both loans.

It looks like you have mixed collateral on this so you would need to determine the "lendable" amount in order to determine the supervisory LTV requirement.

I'll assume the "house" is owner occupied.

I would do it this way:

(A) Developed lot value of $800,000 x 75% = $600,000
(B) Owner occupied house value of $950,000 x 90% = $855,000
Total lendable amount = $1,455,000

Loans = $650,000 + $350,000 = $1,000,000 total loans

Since the total amount you could loan would be $1,455,000 and total loans are less than that at $1,000,000 you would have two conforming loans. If loans were more than the "lendable" amount you would have two non-conforming loans.

If the house is non owner occupied you would use 85% instead of 90% in determining the lendable amount that could be loaned and still be within the supervisory LTV limits.

Thank you!