“Defaults and Housing Trends: Data-Driven Risk Spotting”
I recently had the pleasure of speaking on the Defaults and Housing Trends panel at the final NPLA Conference of 2025 in Scottsdale. It was a great opportunity to join other leaders in the private lending industry and take a deeper look at a timely and important issue:
How can lenders better insulate themselves from loan defaults at a time when they seem to be increasing?
We discussed several potential solutions, each tied to data-driven insights. One key takeaway stood out:
Smarter loan docs equal stronger loan portfolios. Lenders need to embed intelligence into every covenant, transforming loan documents into an early warning system that can detect signs of stress before defaults occur.
Loan docs need to capture borrower and property-level risk mitigation factors upfront. This is because the difference between a performing loan and a default often comes down to how early you can see signs of stress.
That means moving beyond boilerplate covenants. Docs must include customized covenants that track the most relevant metrics for each property type, whether that’s DSCR and LTV tests with re-balancing provisions, or specific reporting requirements, including annual property operating statements or rent rolls. These “living test” covenants serve as triggers, connecting directly to the lender’s monitoring process and providing real-time visibility into loan health. Done right, your loan docs function as predictive stress tests, resulting in stronger portfolios and happier investors.
At the same time, lenders can’t afford to slow down origination or sacrifice speed to manually bolster covenants. The solution is sophisticated loan doc automation technology that efficiently includes these intelligent covenants into documents in a way that aligns with the lender’s business decisions, loan purpose, and property type.
This is how lenders can achieve both speed and strength, closing competitive deals while building healthier portfolios. At GoDocs, we’re proud to provide the software that makes this possible.
Senior Director of Legal and Compliance at GoDocs
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