Credit union attorneys were being warned Thursday to prepare their clients for much tougher scrutiny from examiners on loan portfolios, performance ratios and much more given the negative economic climate.
The admonition that examiners "are becoming much more focused on concentration risks and real estate" comes from Washington attorney and CU consultant David Reed, who suggested even well-capitalized CUs will need to be wary of what he called "outside entanglements" involving high risk loans.
"That 27% drop in July home sales reported this week clearly puts the emphasis on the real estate portfolio and so attorneys, as consigliore's, need to ensure their CEOs are ready for what lies ahead since it could be more bad news," suggested Reed, a partner in Reed & Jolly, a Fairfax, Va. firm.
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