How to get out of a bad loan
Robert Verrone, arguably the most experienced hand in bad debt settlement, has said borrowers hit hard by Covid-19 should not feel entitled to when they ask for forbearance on their loans.
“A lot of borrowers… feel like there’s a forbearance fairy flying around that just sprinkles dust on loans affected by Covid,” the founder of Ironhound Management told The Real Deal. “I know it isn’t.”
Verrone was one of the leading figures of CMBS 1.0 at the head of the large Wachovia Bank lending group, leaving in 2009 and starting his own business working on broken securitized loans.
The industry veteran says that over the past few days his team have been working on loans that were most likely on the verge of trouble before the coronavirus pushed them back. His main advice for his borrowing clients is that their lenders are not required to share the pain.
“The problem is when borrowers think the lender is their partner and they don’t expect a debt-equity relationship,” he said. “There are a lot of borrowers who think that when a property goes down, the lender should share 50-50 or even 100 percent of the decrease in value.”
Verrone explained that in a turnaround situation, lenders seek concessions from borrowers that make the deal more financially attractive than seizing the property and taking a chance by auctioning it off.
“You have to pay a bit too much to do a workout,” he said. “I’ll tell you it’s probably less than what you would have to do before Covid.”
Contact Rich Bockmann at [email protected] or 908-415-5229