feature / FEATURE: CRE Stress Testing

We're taking a tour of Blooma, one feature at a time. Let's take a tour of stress testing in the platform.

It’s not a typo. feature / FEATURE is a series where we’re giving you a tour of the what makes Blooma so great. We created Blooma in partnership with banks, and together, we’ve designed a platform made up of features that have been intelligently designed with you in mind. Join us for a quick preview of some of our favorite ways to level up your CRE lending practice.

Next in the queue? Stress Testing. Read through to learn more about what it looks like and how it works. Click the link to see it for yourself.

Unlocking the Power of Deal and Portfolio Stress Testing in Blooma

In the ever-shifting realm of commercial real estate, where market conditions are unpredictable, having a strategic tool at your disposal is imperative. Stress testing, a vital element of portfolio management, empowers commercial real estate professionals to understand, anticipate, and effectively manage risks in an uncertain economic environment. Blooma’s Stress Testing features offer a powerful solution for this pressing need.

A stress test, in essence, is a risk management tool that estimates a bank’s or credit union’s financial position over a defined period, typically two years, under various scenarios, ranging from baseline to severely adverse conditions. These scenarios are designed to evaluate the institution’s resilience in the face of economic fluctuations. Stress testing is considered a cornerstone of sound risk management, as emphasized by the Office of the Comptroller of the Currency (OCC).

As the U.S. enters an era of heightened economic uncertainty, the benefits of thorough stress testing become increasingly evident. It offers improved valuation, enhances strategic decision-making, and sharpens risk management. Stress testing provides clarity on an institution’s capital position, credit risk, and earnings outlook under different economic circumstances, empowering management to make well-informed operational decisions.

The Time to Prepare is Now

Acknowledging that stress testing can be complex, we recognize the importance of building expertise in this crucial area as soon as possible. Banks and credit unions must conduct the tests, analyze the results, and provide support for their assumptions.

To assist financial institutions in this intricate and often time-consuming process, we offer a range of solutions. In a world marked by uncertainty, we aim to be your guide, helping you navigate the challenges and make well-prepared (and sound) decisions for your institution’s future.

Deal Stress Testing — A Closer Look

Deal Stress testing is a crucial feature that empowers you to assess the impact of different scenarios on specific deals. By conducting multivariable stress testing, you can gauge how various factors, such as revenue, expenses, cap rate, vacancy, and interest rate, affect key metrics like Debt Service Coverage Ratio (DSCR), Debt Yield, and Primary Loan-to-Value (LTV).

Diving in at the Deal Level

Blooma offers a range of options to facilitate stress testing. Select from pre-set stress test scenarios categorized as high, medium, or low, or customize your own unique scenarios. By comparing the baseline LTV, DSCR, and debt yield with the calculated figures from the stress tests, you’ll gain a clear understanding of the margin of safety before your deal violates certain guidelines.

Multi-Variable Stress Testing

Powerful Insights Put You Ahead of Risk

Blooma’s deal stress testing feature equips you with tools to comprehensively evaluate deals under different scenarios. By assessing multiple variables and performing single-variable tests, you can make informed decisions and identify potential risks before they jeopardize the viability of your deals.

Portfolio Stress Testing — A Closer Look

Our portfolio stress testing features provide you with a comprehensive understanding of your portfolio’s overall health by analyzing potential changes in various variables. Multi-variable stress testing assesses the impact of altering revenue, expenses, cap rate, vacancy, and interest rate on key portfolio metrics such as Debt Service Coverage Ratio (DSCR), Debt Yield, and Loan-to-Value (LTV).

Portfolio Stress Test Comparison

Configuring Your Portfolio Stress Tests

To facilitate stress testing, we offer three preset stress test models that outline low, medium, and high-stress scenarios. Additionally, you’ll have the flexibility to configure your own custom stress test model based on your specific requirements. You can choose the preferred calculation method, whether it’s the weighted average by loan amount or the weighted average by value.

Navigating Your Portfolio Data

Blooma allows you to filter and sort your portfolio data according to your preferences, enabling you to explore various stress test scenarios and observe their effects on different segments of the portfolio. You can slice and dice portfolio data to gain granular insights into specific areas.

Visualizing Stress Test Results

With Blooma, you can visualize your stress test results in a variety of ways. Select the stress test level (LTV, Debt Yield, or DSCR) and choose from different visualization options such as bar charts, bubble charts, or tree maps to further explore your portfolio data.

Several Visualization Options Available

Get Ahead of Risk with Blooma’s Stress Testing Features

Enhancing Decision-Making in Today’s Economic Landscape

In the current economic environment, marked by uncertainty, gaining precise insights into deal and portfolio performance is imperative. Blooma provides an efficient solution that allows teams to scale their efforts, saving valuable time and eliminating the manual labor involved in auditing loans. With this capability, users can swiftly evaluate individual deals or their entire portfolio, equipping them with the information they need to make well-informed decisions.

Anticipating and Managing Risks Effectively

In a world where economic landscapes can shift suddenly, our deal stress testing feature equips users with the comprehensive tools necessary to evaluate deals under various scenarios. It involves assessing multiple variables and conducting single-variable tests. This approach enables users to spot potential risks and challenges well in advance of them becoming threats to the viability of their deals. By taking this proactive stance towards risk mitigation, Blooma ensures the stability and growth of your real estate investments, providing you with the advantage of foresight in a rapidly changing market.

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