Approximately 93 percent of the institutions were active consumer lenders, and 90 percent were making business loans. Only 46 percent were active home-equity lenders. Examiners were asked to comment on specific questionable practices at institutions actively lending in each loan type. A few questionable practices were commonly noted by examiners in a number of institutions. However, examiners did not suggest that any loan type was particularly risky due to multiple deficiencies in underwriting practices.
Business loans represent a large percentage of the loan portfolio of most commercial banks.
The strength of the borrower and the quality of the collateral pledged are both important elements in business lending. While still the most common weakness cited, the incidence of this practice was somewhat less frequent for the institutions examined during the six months ending in September than for those included in the earlier results. Weakness in the monitoring of collateral for asset-based business loans also was noted by a number of examiners. Construction credits can be particularly risky as a project typically does not generate funds to repay the loan fully until its completion. Lenders have inserted a variety of terms into such loans to reduce the risk involved.