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An Improved Model for Risk Management
NCSHA Conference 2015September 28, 2015
Leslie McKnight, Director of Loan Servicing & Asset Management
Overview
• Recognized need for position to monitor multifamily performance portfolio
• Risk Rating Model created in 2012 to make system more proactive, as well as:– Promote efficiencies in data collection/storage
– Provide comprehensive evaluation of property performance, condition and owner/management capacity
– Provide ability to share most current site operating data between divisions to facilitate data-backed decisions
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Overview (cont.)
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• Multifamily Risk Rating Model utilizes existing staffing, software, infrastructure & reporting systems, but integrates them to maintain robust “point in time” repository of data
• Reports extracted from database have expanded proactive portfolio management in many areas:– Workout Committee analysis: problem loans, site issues,
decision-making reviews for potential loan workouts & reserve withdrawals
– Portfolio monitoring purposes
Overview (cont.)
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– Identification of trends in operating performance– Determine compliance inspections to be waived in
following year, or which ones may require increase in visits
– Comparison tool in review of proposed pro forma data on contemplated financial transactions
A Better Model for Assigning Risk
• Risk-rating system based on specific point system• Grades each multifamily property in 4
performance categories & assigns points (max of 25 points in each category) according to:– Current and historic operating– Projected financial health– Physical condition of property– Strength of management
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New Features
• 2014-2015: Added fields to further enhance ability to assess & compare developments:
- Development Type (Family vs. Elderly)- Sponsor Type (For-Profit vs. Nonprofit)- Location (City or Town)- # of buildings
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New Uses for Risk Rating Model in 2015
• Review most recent operating performance data of real estate owned by developers being considered for new tax credit allocations
• Integrated data into application review process:– Historical performance of developer’s portfolio – Allows those allocating credits to have most
comprehensive data available for financial decisions
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Data Collection
• Data comes from variety of sources within agency: Loan Servicing/Asset Management, Development, Finance, & Resident Services divisions
• Utilizing existing software (ACCESS) & Loan Servicing/Asset Management staff, initiative does not require additional infrastructure and remains cost-effective
• Bonus: Undertaking analysis using own employees results in deeper level of understanding of unique conditions at each development
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2014 Highest 25 Overall Risk Rating Scores
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For Profit Sponsors vs. Nonprofit Sponsors(with highest 25 overall scores)
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Score Change Percentages from 2013-2014
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-54
Management Companies overseeing sites with 25 lowest & highest scores
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Outcomes
• Turning point for our Loan Servicing/Asset Management division– Easy to pinpoint sites struggling financially or suffering
from physical deficiencies
• New fields allow us to watch for trends in various geographic areas & compare developments
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Outcomes (cont.)
• Collaborative interdivisional effort, which improved communication & established more evidence-based feedback
• System has streamlined processes within division and increased overall reliability of documentation & analysis
• Produces more robust reporting & executive dashboards
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Thank you!Contact Information:Leslie McKnight, Director of Loan Servicing & Asset ManagementPhone: 401-457-1184Email: [email protected]
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