Is it time to dust off your CRE risk mitigation playbook?
The New Normal
As we view 2020 in the rearview mirror, and the full reality of the pandemic’s punch is still felt across every sector of the Commercial Real Estate Industry, it’s time to look beyond the Paycheck Protection Program and plan for what could be a reset for the CRE lending industry.
The “re-opening” of the economy is happening and the Lending industry – along with the world – is adjusting to what this “new normal” means. All mortgaged properties are not created equally. Certain types of property – offices, hotel/retail, multifamily and industrial – have been hit harder than others. Numerous loans have delinquency rates in the double digits, remote working is here to stay, thousands of our favorite restaurants have closed for good, and permanent change is all around, even as the pandemic dust has yet to settle.
A Hard Reality
Considering all the challenges lenders face now, a decision to foreclose on a default loan is the last thing you want, and yet it might be the only option. It’s a calculated move based on your lending policy with action steps you must take to avoid liability, minimize risk, and quickly divest the property. If foreclosure is inevitable, taking firm command of the default property’s environmental compliance is the lender’s responsibility.
So, what should you do if you find yourself in this situation? First and foremost, connect with your legal counsel before taking any action. Next collect, organize, and review all due diligence completed at the start of the loan origination for the subject property. Next, start a pre-foreclosure environmental due diligence review (EDD). By conducting an updated Phase I ESA (or All Areas Inquiry) prior to taking possession of a defaulted property. This action will provide the lender with insight on how best to divest the property from its portfolio, depending on if any new environmental concerns have been identified since the original EDD was performed. Or maybe it’s just time to run a quick review of your CRE Portfolio through our Portfolio Monitoring tool.
Either way CREtelligent is here to help with the following tools to assist with your CRE due diligence needs.