Centrant Presents Program Overview to OCC
On March 28th, Scotty Duncan of the OCC hosted Centrant’s SVP of Credit and Lending, Rocky Herring, at a quarterly gathering of approximately thirty safety and soundness field examiners in Charlotte, NC. This was a wonderful opportunity to provide examiners with an overview of the LIHTC program, a history of Centrant and its role in the affordable housing process, and details of the nature and structure of our loans. The examiners heard how Centrant underwrites and services each loan and were provided with historical portfolio performance data. The presentation was very interactive, as members of the audience asked relevant and insightful questions throughout the almost two-hour engagement.
Some key points emphasized were:
- The significant cash equity in each project.
- The last-in nature of Centant loans, which are only funded upon completion of construction and a period of stabilization.
- The presence of significant sub-debt, subordinate to Centrant’s first lien position.
- The presence of both operating and replacement reserves in each transaction.
- The multiple parties involved in the oversight of each property, including Centrant, state housing agencies, and the equity investors who purchase the tax credits.
As one would expect, the examiners were very interested in how participant banks handle and service Centrant loans. Best practices were shared, with the examiners agreeing that certain key components should be incorporated by each participating bank. Takeaways for participating banks included:
- Follow regulatory guidance as relates to participations.
- Conduct independent underwriting and risk assessment of each loan, in accordance with each bank’s standard process and policy.
- Apply the bank’s own risk grades, based upon its policies and risk grade definitions.
- Make certain that board approved loan and credit policy addresses Centrant loans, allowing for amortizations, recourse, DSCR’s, etc that may differ from that of other loan types. If there are exceptions to policy, identify them in the underwriting and loan package.
- Service and review loans as you would other similar loans and in accordance with your policies—no more and no less.
Centrant staff is available to discuss best practices and regulatory expectations with our member banks. In addition, we are glad to assist you with meeting the regulatory expectations noted above and can provide collaboration as you review your practices and policy. We are also available to make presentations to your employees and boards.