Will the Government step up for CMBS Borrowers?
At Hart Advisors, we are your ally in providing information and solutions for your CMBS loan. We continue to gather information from lobbyists and trade organizations to assist our clients in the most favorable options for protecting their property and providing debt alternatives to survive through this unprecedented time. Within the last two weeks, there has been continued (and very fluid) information surrounding government relief in Washington and clarity around the new Oregon House Bill 4204. There is a strong movement in Washington DC to include some type of relief for commercial real estate in the next round of stimulus (assuming there will be one). The Fed, Treasury, and Congress collectively acknowledge that CRE has been overlooked in the initial stimulus and are hopeful for some upcoming relief. One of the most suitable methods of providing relief is a technical change in the current CARES Act. While there are still more questions than answers, there is a glimmer of hope for Borrowers in the future. In addition, Oregon House Bill 4204 was signed on June 30, 2020. The bill generally stops Lenders (and in some way the legal system) from taking negative actions against Borrowers who miss or have missed periodic payments as a result of the COVID19 pandemic. It does have an option to be extended past the current deadline of September 30, 2020. The overall consensus is that this emergency bill was well intended to help real estate owners; however, the uncertain consequences and broadness of the bill might cause more issues than solutions. The bill’s key provisions are as follows:
Borrowers and Lenders should try to reach an agreement on satisfactory terms due to the pandemic; however, Borrowers who notify Lenders that they have had a loss of income resulting from the COVID19 pandemic can expect the Lender to defer qualifying payments until maturity (as outlined in Section 3A of the bill).
Lenders (and further, the legal system) are prohibited to exercise remedies (i.e. default interest, foreclosure, cash management and charging of legal fees associated with these actions). Basically, the loan must be treated as if it is not in default.
The current effective period covering the bill is March 8, 2020, through September 30, 2020. It does have an option to be extended past the current deadline of September 30, 2020.
The concern is that other states will enact similar emergency bills which could cause confusion and further negatively impact relief efforts for Borrowers.
Tanya Hart Little Founder and CEO Hart Advisors
If you have a CMBS loan and have been impacted by the current economic events, please reach out to us for a complimentary evaluation (www.hart-advisors.com).