Commercial Lender behavior during "the recession"
Hi.
I did not experience the last recession as an investor, because I'm newer. Can those of you that did share what commercial lenders did, or did not do to affect new or existing loans?
I have heard things like:
- no cash out refinancing
- very hard to originate loan (less than 70% LTV, high debt service coverage ratio)
- cash call from the bank, or increased monthly payments, or new fees on on existing mortgage payments
This last one in particular was surprising to me. I was talking with a lender at a small bank, and he said something like this "if we originate a loan today at 75% LTV, and the recession hits, and the property value drops, you will be below 75% LTV. And because the banks are regulated, we will need to get back up to the 75% LTV minimum, therefore, we will ask the owner to make a large lump sum payment. When owners couldn't make those lump sum payments last time, they handed keys over. Then the banks had properties to sell."
Is this true?? Why can't the bank let you ride out the recession if you are still able to make payments allowing you to make the agreed upon monthly payments (assuming you have a fixed rate for a for more years).
Thanks all.