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Commercial Real Estate Scorecard

 

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  • The challenge
  • The solution

Assess Commercial Real Estate Portfolio Risk

Commercial real estate (CRE) exposures represent a large share of credit portfolios for many financial institutions, including banks, insurance companies, and asset managers. For these institutions, the risk that borrowers fail to pay either the interest and/or principal on these CRE loans poses a significant challenge, as significant credit loss from commercial mortgages can wipe out capital cushions. Given these challenges, credit risk management of CRE exposures in critical.

Assess Commercial Real Estate Portfolio Risk

Our Commercial Real Estate Scoring Tool (CREST) Scorecard offers a single-source solution for CRE loan credit risk needs which consolidates Probability of Default (PD) and Loss Given Default (LGD) scoring for multiple property types.

  • The challenge
  • The solution

CREST Scorecard Coverage

CREST Business Applications

CREST provides a granular, objective, consistent and transparent framework for the measurement and assessment of loan credit risk, helping to meet regulatory needs around internal risk rating systems and model risk management. It facilitates multiple business applications, including loan origination and surveillance, credit pricing and portfolio management

Helping to Evaluate Commercial Real Estate during COVID-19 Pandemic and Post-Crisis Recovery

The credit downturn caused by COVID-19 has been abrupt and severe, with an especially pronounced impact on some commercial real estate segments. Under the current conditions, financial institutions need to be able to detect which of the loans in their portfolios are at increased risk of default. This report highlights how to monitor credit risk across CRE property types in the context of COVID-19 using S&P Global Market Intelligence Commercial Real Estate Scoring Tool (CREST) Scorecard.

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Features & Benefits

Comprehensive coverage of commercial real estate lending which includes coverage of acquisition, development and construction financing, transitional and income-producing real estate across property types, financing structures and geographies.

Outputs (credit scores) are mapped to S&P Global Market Intelligence PD and LGD rates and broadly align with credit ratings issued by S&P Global Ratings. The Scorecard links empirical default and recovery rates to key explanatory variables at both the property/loan level and market level.

CREST enhances consistency and transparency of internal rating systems and facilitates validation of Scorecard use. Analytical transparency of the methodology, is supported by granular scoring criteria and extensive user and technical documentation.

Facilitates multiple business applications and helps meet regulatory needs around internal risk rating systems and model risk management. CREST outcomes are used for estimation of expected credit losses within loan origination and surveillance, credit pricing and portfolio management, or as key inputs for CECL estimation.

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