- The borrower has the proven financial capacity to perform on the terms of the loan; and
- The value of the collateral pledged to back the loan exceeds the amount of the loan.
Looked at through the prism of the FDR Framework, the lack of disclosure by financial institutions and structured finance securities of all useful, relevant information further reduces bank willingness to lend.
How does a lack of disclosure impact a bank's ability to value the collateral?
The largest source of collateral is real estate and there are significant doubts about what residential or commercial real estate is worth.