Credit Risk Checklist

Pull Equifax, Experian, and TransUnion under FCRA permissible purpose. Capture the middle FICO (or lowest of two) per investor or institutional policy. Flag any 30/60/90-day delinquencies, charge-offs, public records, or fraud alerts for loan officer review before proceeding.

Collect last two pay stubs, two years of W-2s, and a verbal VOE within 10 days of close. Self-employed borrowers: two years of personal and business returns plus a YTD P&L. Watch for declining trend lines and unreimbursed business expenses on Schedule C — both reduce qualifying income.

Compute front-end (housing) and back-end (total debt) DTI per ATR/QM standards. Include the new proposed payment, taxes, insurance, HOA, and all minimum payments on the credit report. QM safe harbor caps back-end at 43%; portfolio loans may go higher with compensating factors documented.

Run UCC-1 search at the Secretary of State, county recorder lien search, and federal/state tax lien check. For commercial borrowers, include judgment and litigation search. Undisclosed liens routinely surface here and need a payoff letter or subordination before close.

For commercial: spread two to three years of business returns, balance sheet, and income statement; calculate global cash flow and DSCR (target ≥ 1.20x for most CRE). Order 4506-C tax transcripts to verify returns match what was filed with the IRS — discrepancies are a regulatory red flag.

Order through the AMC to maintain appraiser independence per Reg Z / Dodd-Frank. CRE under $500K and 1-4 family under $400K may qualify for an evaluation rather than full appraisal under FIRREA thresholds — confirm against your loan policy before economizing.

Order title commitment for real estate or VIN/title search for vehicles and equipment. Confirm vesting matches the borrower on the application, and reconcile any trust, LLC, or tenancy issues before scheduling closing.

Compute LTV against the lower of purchase price or appraised value. Compare to supervisory LTV limits per the Interagency Real Estate Lending Standards: 85% for improved 1-4 family, 75% for raw land, 80% for owner-occupied CRE. LTVs above the supervisory limit must go on the bank's exception report.

Review Schedule B of the title commitment for prior mortgages, mechanic's liens, easements, and restrictive covenants. For UCC collateral, check filing dates to confirm first-position perfection. Any superior lien needs payoff, subordination, or a documented exception.

Confirm collateral type, location, and condition fit the institution's approved loan policy. Common issues: rural land outside the lending footprint, special-use properties with limited marketability, or equipment with rapid depreciation curves that won't hold value through the loan term.

Assign a risk grade from the bank's internal scale (1-9 or pass/special mention/substandard). Grade drives loan loss reserve allocation under CECL and pricing. Document the rationale: payment history, leverage, liquidity, management strength, industry outlook.

Match amortization to collateral life and cash flow. CRE typically 20-25 year amortization with 5-7 year balloon; equipment loans match the asset's useful life; working capital lines are typically interest-only with annual review.

Use the bank's risk-based pricing matrix: index (Prime, SOFR, FHLB) + spread tied to risk grade. Document compliance with fair lending: similarly-situated borrowers get similar pricing, and exceptions are logged with a non-discriminatory rationale per ECOA / Reg B.

Standard CRE covenants: minimum DSCR (1.20x), maximum leverage, annual financial statement delivery within 90/120 days of fiscal year end, annual rent roll for income property, and no additional debt without lender consent. Match covenants to the actual risk — boilerplate covenants the borrower can't meet create unnecessary technical defaults.

Run the structure against TILA/Reg Z, RESPA, ECOA/Reg B, HMDA reporting fields, and HPML/HOEPA thresholds for consumer-purpose loans. For commercial, confirm legal lending limit (15% of capital unsecured, 25% with readily marketable collateral) and any insider/Reg O implications.

For commercial loans, owners with 20%+ stakes typically sign personal guarantees. For consumer loans with thin credit, evaluate a qualified co-signer. Note the ECOA spousal-signature rule: cannot require a spouse's signature solely because of marriage if the applicant individually qualifies.

Determine flood zone via FEMA flood determination; SFHA properties require NFIP or private flood coverage at the lesser of loan balance or maximum coverage available. Confirm hazard policy lists the bank as mortgagee/loss payee with at least 10 days' notice of cancellation.

Required for HPMLs and many secondary-market loans; optional for portfolio commercial. Calculate the initial escrow deposit per RESPA aggregate accounting, including the two-month cushion.

Set tickler dates in the core (Jack Henry, Fiserv DNA, Symitar) for annual financials, tax returns, rent rolls, and borrowing base certificates. Missed reviews are the most common criticism in safety-and-soundness exams.

Note the default triggers in the credit memo: payment 30+ days past due, covenant breach, material adverse change. Workout options: forbearance, modification, TDR (now MLM under CECL), liquidation. Pre-staging the path means faster action when the loan starts to slip.

Credit memo includes borrower summary, sources and uses, global cash flow, DSCR, LTV, risk grade, collateral analysis, covenants, exceptions to policy, and recommendation. Weak memos are the top reason loans bounce back from committee — give the rationale, not just the numbers.

Route per the bank's lending authority matrix: loan officer authority, senior officer authority, officers' loan committee, directors' loan committee. Loans above legal lending limit or with significant policy exceptions require board approval — don't try to fit a square peg.

ECOA / Reg B requires adverse action notice within 30 days of a completed application that's declined or counter-offered and not accepted. Notice must include specific reasons (not just "failed to meet credit standards"), the FCRA credit score disclosure, and ECOA non-discrimination notice.

Note, mortgage/deed of trust, security agreement, UCC-1, guaranty, and Reg Z disclosures must match the approved terms. A common NIGO trigger: rate or fee on the closing disclosure differs from the approval memo. Three-day TRID waiting period applies on consumer-purpose loans.

Execute documents, fund through the core, file UCC-1 with the Secretary of State, record mortgage at the county, and submit HMDA LAR fields. Confirm the loan boards correctly with risk grade, collateral code, call code, and CRA assessment area flags.