Borrower Accommodations for COVID-19 Impacts

[Mike Hartzog]

We have some performing loans in the portfolio and have been contacted by a two of our borrowers (so far) who are currently out of work due to COVID-19 lock downs.  They are asking about skipping payments until they can start working again.  I contacted our loan servicing company (Madison) to understand the scope of what can be done in this regard quickly and easily.  The two things mentioned were waiving late fees for a period of time, and deferring payments.

I chose to go with the payment deferral approach because it provides the assistance they need.  Deferring payments essentially pushes the next due date forward for a predefined number of months.  The payments are still due, but due at a later time.  Interest does not accrue over this period, and there are no late fees and charges.  It essentially puts the loan on pause for a time.  The downside here is that the last payment in the amortization schedule pushes out past the maturity date of the note (or as defined by the last modification), so at some point in the future a mod or extension agreement would need to be executed to true that up.

I would be interested in hearing about any other strategies folks are using.

[Bob Malecki]

Hi Mike, we intend to provide a 3 month forbearance agreement if a borrower needs assistance AFTER they complete a forbearance questionnaire for them to state their hardship and provide proof of loss of income such as a termination letter or documentation from the unemployment office. If they are self employed we would require more info such as a financial statement and info on family members, and if they have any IRA or 401K accounts from which they can draw.