Standardization as a way to reduce the risks of commercial mortgage lending

Ushanov Alexander

A loan secured by commercial real estate (commercial mortgage), being one of the most popular types of corporate loans, has a number of undeniable advantages over other types of borrowing. At the same time, this product is characterized by specific risks, which are often the reason for refusal of lending or their implementation in the course of debt servicing: unacceptable for the lender level of capitalization and liquidity of collateral, the degree of occupancy of commercial real estate and indexation of rates under lease agreements; whether the object is not suitable for commercial use; whether the accepted collateral is encumbered with other obligations, etc. One of the ways to improve the process of commercial mortgage lending in order to reduce transaction risks is to standardize it. In the article, as part of the proposal to develop a Standard for the process of lending secured by commercial real estate, a Matrix of requirements for the components of this process is provided, reflecting the best practices of leading domestic banks working in the field of commercial mortgages.

Keywords:commercial mortgage, credit risk, process approach, business process of the Bank, the standards of banking activities.