Forbearance is a “wait-and-see” strategy for banks to reduce uncertainties associated with the recovery and flatten the loss curve. However, it cannot last forever. As the so called accommodation programs are nearing expiration dates, financial institutions need to be proactive and assess the risk of the loans involved to determine the best course of action.
- What is the current state of forbearance for residential mortgages, C&I and CRE loans?
- How can a bank use industry experience with forbearance and relevant scenarios for risk estimation?
- What types of data should be used for developing such scenarios?
- What actions should banks consider for loans in forbearance?
- How can such analysis affect banks’ loan reserves?
For answers to the above questions, please read our article in the September 2020 issue, pp. 20-27, of the The Risk Management Association Journal. https://www.rmahq.org/journalcurrentissue/