Explained
Another factor for lenders to consider is the ‘opportunity cost’ of money. By having funds tied up in problematic loans, lenders are unable to lend them on to new borrowers”
In the wake of Covid-19, how will property receivership evolve during the rest of 2020?
How can brokers and lenders be best prepared for the postpandemic era?
DR: We’re working through an uncharted era of change but, as the much anticipated ‘new normal’ gradually takes shape, property receivers can still be engaged, and different appropriate actions remain open [and] have the potential to ensure the best possible outcome for all parties. These are intended to [make certain] that recoveries are as far advanced as possible, even though it has been difficult to arrange face-to-face meetings due to Covid-19 restrictions. This has been accomplished by entering into discussions with borrowers at the earliest opportunity via web-based platforms or telephone calls and, where possible, by issuing pre-action correspondence and possession proceedings online. In short, it’s vital for receivers to be highly proactive and agile in the coming months. Maximum transparency must also underpin every decision that’s taken; the need to be absolutely crystal clear with borrowers about what’s happening during this difficult time is imperative. This will [make sure] that borrowers do not incorrectly assume that no enforcement can take place at present—simply because the courts’ part in proceedings is stayed. The reason for this is simple: this approach will ultimately expedite the swiftest possible resolution at the right point in time. Given the underlying economic conditions, it is inevitable that there are going to be an increased number of defaults—not least because Covid-19 made it initially impossible to get valuations carried out to support refinances or sales. But, at the end of the day, lenders simply have too much to lose by not taking the swiftest recourse, and we are aware that many have been actively talking to their customers about this issue and discussing extensions and refinancing options.
EG: Lenders must remain as customer focused as ever throughout these exceptional times. Otherwise, there’s a risk that they could alienate clients which will, in turn, make brokers’ roles far more difficult when ‘normality’ returns. For borrowers who find themselves in default, there remains a real need for open dialogue from lenders at the earliest opportunity—and to subsequently maintain this level of communication. Another factor for lenders to consider is the ‘opportunity cost’ of money. By having funds tied up in problematic loans, lenders are unable to lend [them] on to new borrowers. To my mind, this means that there’s now an even greater incentive for lenders to recover more difficult loans as the rates on new lending appear to be increasing in line with market uncertainty. The courts will resume hearing repossession cases from 24th August 2020, although it could feasibly be extended by the government if further Covid-19 clusters emerge. It’s worth stating at this point that any lender authorised or regulated by the FCA needs to follow the regulator’s guidance and avoid either commencing or continuing possession proceedings until 30th October. Nonetheless, proactive receivers are currently working tirelessly on behalf of lenders operating in the unregulated market by issuing claims, in full knowledge that they’ll be stayed up to 23rd August. And there’s wisdom in this approach. The court system is likely to become stretched extremely quickly once the [pause] is lifted, and those cases with the appropriate paperwork in place will be the ones that progress [quicker]. Ultimately, this should mean that these loans are the ones that get returned to lenders in the shortest timeframe— and that’s good for everyone.
78 Bridging & Commercial