One of the factors of expert witness testimony is assessing problem loans in a case. In financial litigation, once a bank has designated a loan as a problem, a new set of regulations and policies need to be analyzed. All problem loans have an adverse classification, thus understanding these classifications is the key to arguing your case. Of course, these pertain to larger loans and not to consumer credit.
Where Do Problem Loans Go?
Most large banks transfer problem loans to specialized departments for handling. These departments have special names like “Work-Out Departments,” “Special Assets,” or “Credit Services.”
Expertise Can Analyze the Classifications
A banking expert providing expert witness testimony is able to breakdown the classifications of problem loans and interpret what each might mean to your case. For example, a Special Mention asset is not adversely classified and doesn’t expose an institution to sufficient risk. However, this asset can have potential weaknesses that can result in the deterioration of repayment prospects. This is one example how a banking expert can translate some of these complicated regulations and classifications.
Allowance of Loans and Lease Loss
Another vital component to analyzing bank loans is the Allowance for Loan and Lease Loss (ALLL). In short, the ALLL is maintained by the bank for the overall loan portfolio. Once a loan is adversely classified, a specific analysis and problem loan report is maintained on each credit status. This information should be requested during discovery, since most litigation involves loans that have been identified by the bank.
Knowing Problem Loans Now Helps Later
Having professional expert witnesses understand adverse classifications and assess ALLL to determine the impairment on each loan can greatly assist in a settlement, mediation period, or expert witness testimony. Early involvement in a case is also essential, because if discovery did not cover aspects like ALLL or loan reports, yet an expert is called in only two weeks prior to a court date, ignoring those components can harm rather then support your case.
Michael F. Richards has delivered expert witness testimony in 27 states and 79 cases, for both plaintiffs and defendants. He has extensive experience in writing expert witness reports that meet Federal Rule of Civil Procedure 26. His comprehensive background in the banking industry and extensive court appearances mean that he offers amazing expert witness testimony. Call him now for a consultation.