THE ROLE OF A LOAN EXAMINER
The role of a loan examiner can be one of exultation and frustration. On the one hand, the application process may go smoothly, an individual or business may realize their dream, and the loan can be paid off without issue. This makes the job of a loan officer much easier. On the other hand, while the initial approval may go well, the obligor may go the wrong way with their money and potentially cause a loss for the financial institution they used. This may post poorly for the officer who originally examined the application. This may be one of the reasons why financial groups and the Federal Deposit Insurance Corporation took time to categorize some of these loans.
The most common listing is that of a substandard loan. Here, the value of the loan is
Inadequately protected by current, concrete worth due to the obligor’s paying capacity or pledged collateral. By characterizing this loan substandard, the financial institution is notified there’s a distinct possibility it will sustain some type of loss if the deficiencies are not corrected.
Two other loan classifications which signal potential problems are doubtful and loss. A doubtful classification means that the substandard issues of the loan mean its liquidation via a full payment are both highly questionable and improbable. Loss is simply that — the loan is uncollectible and has so little value that its continuance as a bankable asset is not warranted and writing it off should no longer be deferred.
The last of these is Special Mention. This is a loan which requires closer scrutiny in order to avoid further deterioration. This may be a situation where a loan was regularly paid but the payments suddenly stopped. Corrections need to be made on these types of loans in order to fulfill all agreements.
In situations where the bank may wish to collect on its loan or the obligor wants to battle the bank due to potential issues, the case may go to court. And this is when a financial expert witness may be asked to provide information. These experts, like Michael F. Richards, use their intense knowledge of the financial world to help either party come to a solvable solution.