"We take a different approach," says Jim Costello, senior economist at TWR. "Instead of looking at what's going on in one aspect of the marketplace, we look at what would impact the lenders. We look at the fundamental market risks."

In a recent FDIC report, 13 cities--including Atlanta, Charlotte, Dallas, Denver and Fort Worth--were listed as markets at risk. Eight of those markets have high rates of construction of commercial real estate across multiple property types. According to Costello, the FDIC is looking at construction and not demand. "They are trying to prevent a real estate market crash but there is a high correlation between markets that grow fast and markets that build fast. They are technically right but lenders need an economic view."

Economic forecasting is a touchy subject for regulators but, says Costello, he hopes TWR's report encourages a rethinking of the appropriate way to gauge risk. "Regulators are going to say, look at the FDIC findings, and lenders are going to have to justify things they shouldn't have to."