The coronavirus pandemic and the new normal that came with it have brought on many challenges for everyone, including the people in the commercial real estate industry. It forced mortgage lenders to adapt and tweak their operations to keep mortgage deals rolling while they deal with the continually changing circumstances.
When workforces were directed to work from home, lenders were tested on their capabilities to keep their businesses running as smoothly as before. While this was going on, they had to face the unexpected surge of customer support, especially during the first announcement of mortgage deferrals. The pandemic tried these lenders’ ability to innovate at just a moment’s notice while doing their best to provide continuous service to their clients and mortgage brokers.
This means that you, as a borrower, must adapt to these changes and challenges as well. As lenders have transitioned from desktops to laptops to allow their people to work from home and hold virtual meetings, you also need to get used to working with your lender from the comforts of your home. This means using all the technology you have on hand like your cellphone, tablets, and laptops. You also have to expect for your transactions to happen online.
So, here are several ways you’d have to work with your commercial real estate lender to deal with the challenges brought on by the new normal:
Put Technology to Use
As mentioned earlier, you’d have to expect your lender to adopt a more digitized process regarding transactions. This would include getting digital signatures for such documents as pre-authorized debit forms, commitment letters, and even closing documents, among others.
Online applications and software would have to be launched like income verification tools and real-time chat and voice customer support. You can even expect them to automate the process for mortgage deferral management to get rid of long wait times to get through to them.
Understand Your Lender
Aside from using technology, there is also another important factor that you’d have to employ in working with your lender during these challenging times. You’d have to understand their perspective in reevaluating the way they lend out money. Expect them to reprice loans based on the new expectations when it comes to borrower risks and occupancy levels, which have drastically changed since the start of the coronavirus.
Most, if not all, lenders don’t really want to be in the business of owning tons of commercial real estate. This means that while they may be more stringent now, they are willing to enter into sensible negotiations with borrowers so foreclosures can be avoided.
If you are still in the process of getting financing for a new commercial real estate venture, then you have to know that this is not going to be easy at this time. As can be expected, a lot of lenders are now more conservative and cautious in lending money, especially for multifamily properties due to the market uncertainty brought on by CoViD-19. They will have to protect themselves from potentially bigger risks, so expect for the loan to value (LTV) thresholds to plummet. Before the pandemic, this could have been anywhere between 7%, and 80 LTV thresholds are at 65% to 75%, which means higher down payments and lower returns.
Be Fully Prepared
Determine all of the causes of your business’s challenges and be ready to give a complete picture of this to your lender. Your goal is to address each issue completely so that any modifications or restructuring done to your loan can address all issues comprehensively. If you can reach an agreement with your lender, you must be ready and know of the other options you can get from other investors or lenders. The same scenario applies if you are a first-time borrower as well.
Get Yourself a Legal Counsel
Although this may cause additional expense on your part, this will ensure that you are covered in all angles. If you have an experienced legal counsel representing you and giving you advice, you will be able to protect your interests when it comes to your business with your lender. Remember that you may only get one shot in entering into an agreement with your lender that will allow you to retain control over your assets or to get the financing you need, so you have to make it count.
As you can see, there are several things you now need to work with, considering the challenges posed by the pandemic on the commercial real estate industry. As this will become the new normal not just for you but for everyone, you will have to adapt quickly to rise above all difficulties. This is the only way you and your businesses can thrive.
For More Information, Contact:
John (Adam) Watson, CEO, CanCap Mortgage Group Inc.
Email: firstname.lastname@example.org Tel: 416-452-5281