An Introduction to Impaired Loans

By Stephen J Izzi

Introduction

Stephen J. Izzi currently serves America Realty Solutions (ARS), LLC, in the position of chief executive officer (CEO). In this position, Stephen J. Izzi assists the company and its personnel in streamlining disposition and liquidation services of foreclosed real estate and impaired loans.

In the finance and banking world, a number of business assets can become impaired. Technically speaking, an asset can be termed impaired once the established market value falls below the amount listed on the company’s budget sheet, leading to a write down.

Impaired Loans

In the banking industry impaired assets often take the form of loans.

Keeping in line with the general definition of an impaired asset, a loan can be considered impaired once it becomes clear that future cash flow and amounts due associated with the loan will not live up to the contracted figures outlined in the loan agreement. In most cases, a loan is officially labeled impaired once it has demonstrated activities characteristic of loans classed as doubtful or as losses. At this point, the bank must officially begin impairment analysis processes.