What is a loan watchlist in the commercial real estate industry?
For those of you in the CRE industry in risk management type of role, what is a loan watch list? I keep getting talked about it at work and don’t really understand what it is.
[{"id": "hjba1qd", "text": "There's something happening with the loan or  property that is of concern to the lender. A missed payment, high vacancy rates, low rent/lease rates, property condition issues, etc...", "replies": [{"id": "hjbliom", "text": "Is this a good career to pursue in CRE?", "replies": [{"id": "hjbmg4v", "text": "No clue, I'm a commercial broker so I don't deal with it apart from getting buyers for those deals", "replies": [{"id": "hjbodjg", "text": "I see. So you\u2019re the guy in the cycle right before the loan servicing cycle begins?", "replies": [], "depth": 4}], "depth": 3}, {"id": "hjccbof", "text": "I mean a \u201cloan watch list\u201d isn\u2019t a career it\u2019s a loan status - loans are either performing, watchlist, servicing, or REO. The people who review the financials and determine where it goes are loan servicers (well unless the loan is in default then you aren\u2019t determining anything the loan gets moved to special servicing who might move to foreclose at which point the status is REO). Being a loan master servicer is a low paying high stress job with candidly not much career upside. Being a loan special servicer is higher paying with slightly more stress but I guess you can probably find an out to do workouts for a credit fund if you have a lot of experience, but you won\u2019t get paid like a gazillion dollars. \n\nAlso as it pertains to loans on watchlist, 75% of the time it doesn\u2019t matter it\u2019s something minor that needs to be addressed (like lender Inspection noted like $15k of FLS issues) and 25% of the time it means that something really bad is likely to happen to the loan due to asset impairment (major tenant loss, building burned down, sponsor got indicted, occupancy has fallen off a cliff, whatever)", "replies": [{"id": "hjclg61", "text": "Okay I am a primary servicer. Where do you think I can go from here? I would ideally just like to stay for like 1 year. Pay is pretty good ~$70K/year", "replies": [{"id": "hjcpl7a", "text": "Assuming you\u2019re relatively junior you should try and leverage your experience to work as an analyst for a direct lender doing construction debt, debt fund on bridge loans, or debt capital markets group. Would focus on loan asset management jobs. You might be able to finagle a loan originations job given how hot the market is. Keep an eye out for roles it\u2019s a super hot market and not a lot of analyst talent right now that has experience with this stuff. No idea where you\u2019re located but if you\u2019re with like Key (or is it wells?) in Kansas City you might have to move to a different city. Good luck!", "replies": [{"id": "hjcsygo", "text": "Well I am an analyst right now. Title is \u201cLoan Analyst\u201d and I do all the analysis that you mentioned primary servicers do. We are a firm that does investment sales, lending, and servicing. I am in the servicing department and we assist large companies such as Key Bank, Citigroup, Wells, and also JP Morgan I think. \n\nYou mentioned loan asset management. Is this like being a portfolio manager at all? And how is the money? I live in SoCal.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hjhwmzb", "text": "I\u2019m a CRE Asset Manager at a large bank for past 5 years. As an Asset manager on the debt side your primary job is to rate and monitor risk of loans in the bank\u2019s portfolio. \n\nEspecially at large banks there is a structured rating system to determine probability of default (ie; 1-10 rating with 1 being very low risk, 6 watch list, and 10 in default etc). Simply put, the rating takes into account hard metrics such as debt service coverage ratio, loan to value, debt yield and a bunch of soft qualitative metrics to arrive at a risk score. Quantitatively, if the aforementioned loan metrics that was rated a 2 starts to deteriorate and continue to slip, the loan would get downgraded until it eventually hits watchlist rating. Watch list loans have more hair because they\u2019re not performing as well and require additional  attention from the AM and requires closer contact with the borrower, Relationship Manager, and credit folks to come up with a solution to mitigate and resolve the risk.", "replies": [{"id": "hjif0w2", "text": "I am currently a primary loan servicer and I work with loans that are on a watchlist. I do analysis and research to confirm that the reason they are on the watchlist is accurate. Where can I go from here  as far as career? I would love to be an asset manager.", "replies": [], "depth": 2}], "depth": 1}]