Coronavirus Stifling Lending

In many respects, processing is at the heart of the flow of information and tasks that lubricate our business transactions. While analysts and financial experts make the investment decisions that lead to successful loan transactions, it’s the small army of support people–processors, inspectors, appraisers, sometimes even loan officers themselves, that need to get out and see the property, press the flesh with owners, tenants, and others. With an abrupt end to economic activities in many parts of the country due to attempts to control the spread of COVID-19, buyers, sellers, brokers, banks, appraisers, and other parties are trying to keep transactions moving while protecting themselves against infection.

THE FRONT LINE
Jonathan Miller, President of Miller Samuels, a prominent, national real estate appraisal firm based in New York recognized the problem early on. “Several weeks ago, as news of the virus spread,” he says, “we asked our office staff to work from home as they saw fit. Now we have a policy that when we get an order for an appraisal from a client,” usually a bank, “we call the owner of the subject property and if the owner is willing, we do an inspection with the proper precautions.” Those precautions of course include a mask, gloves, and hand sanitizer. “Over time it has become obvious to the lenders and to us that sellers are at least as concerned about contamination as we are.

Miller continued that he has suggested to lenders and other clients that his firm would do drive by or exterior inspections on a contingent basis with an internal inspection to be completed at a later date. Perhaps due to legal requirements, lenders have been lukewarm to this idea.

Ken Ramirez is a real estate appraiser in the Palm Springs/Coachella Valley area in California. He reports that his company has set up a step-by-step protocol to protect both the appraisers and the property owners. Similar to those parameters set up by Miller in New York, the company presents both the appraiser and the property owner with a questionnaire about current health. They must be transparent about their status. No hand shaking or touching of doorknobs etc., is permitted. All doors are left open and lights turned on to facilitate easy access to rooms and for picture taking. Everyone wears a mask and gloves. “It all feels very odd,” says Ramirez.

LENDERS’ CONCERNS AND ACTIONS
Mary Alex Blanton, a senior vice president with The National Cooperative Bank says, “We are still processing and closing transactions, but things are changing daily. NCB has a robust business continuity plan for all contingencies.” They continue to do closings, but remotely. Closings for co-op buildings are done by mail with electronic signatures.

Blanton explained that they are awaiting guidance relative to regulatory guidelines with regard to appraisals and inspections of all types. They are also contemplating mortgage relief for existing borrowers on a case by case basis. Blanton indicated again that things are changing daily and she expects NCB to be in the vanguard of dealing with the crisis.

FROM THE LEGAL WORLD
Mark Hakim, a director with Schwartz Sladkus Reich Freenberg and Atlas, describes the bottleneck attorneys are facing as the crisis grows. “Existing commercial and residential lending and transactional deals are pushing at the proverbial light speed to close while the personnel are available. New or unsigned pending deals, including non-essential construction projects, which were in the works and looked like a sure thing a week ago, are being delayed or cancelled altogether while everyone contemplates where they will be, personally, and where the industry may be in a few weeks or months. Existing deals are being delayed indefinitely or renegotiated, while everyone absorbs the information and tries to assess the possibilities of what may be ahead.”

Hopefully, this crisis will pass quickly. In the meantime, banks, borrowers, appraisers, and others are pushing forward to keep business moving.