My view is that Crisis Example Three is most similar
to today’s crisis. Also, America seems to be getting
crises.
Benjamin Franklin said it best: “I conceive that the
great part of the miseries of mankind are brought
upon them by false estimates they have made of the
value of things.” In this crisis, the changing economic,
employment, and market conditions occurring after
the loan was made means the original appraised
value is likely no longer reliable. Loan Loss
Frequency will increase but return to normal as
borrowers become reemployed. My experience with
$402 billion in loan workouts suggests the faster
lenders move to obtain updated collateral appraisals,
the better equipped they will be to restructure loans
to minimize Loss Severity.
restored in lending and the real estate markets once
collateral has been revalued by an independent,
licensed appraiser to realistic current market levels.
Lenders, appraisers, AMCs, and all those involved in
revaluing real estate collateral should be proud that
the role they play is critically important to “Restoring
nation’s economic stability depends on it.
THOMAS INSERRA
banks. He held leadership roles with the RTC/FDIC during two USA bank crises, helped to manage,
value, and restructure $400 billion in distressed loans and advised banks throughout Asia in the
of Banking, a BS degree from Purdue University, an MBA from University of Phoenix, and MAI/SRA
designations.
APPRAISAL BUZZ FALL 2020 | 29
1918-1920 (Spanish) Flu Pandemic:
This health pandemic reportedly infected 28% of
the USA population and resulted in approximately
500,000 to 675,000 deaths. GDP was thought to
have been adversely impacted by -0.5% and the
rate of bank failures for that period:
YEAR BANK FAILURES
1918 47
1919 62
1920 167
1921 505
1922 366
Lessons learned:
• Health crises can come in waves, last several
years, and impact GDP and markets.
• The overall economic impact seems to be less
severe than the other two crises.
• My Great Grandmother in Pittsburgh survived
and spoke of the Spanish Flu crisis as
describing it as the only time she had been
hospitalized and being quite terrible. She
subsequently survived the Great Depression,
the S&L Crisis, and lived to be 98 years old.