Will all banks halt loans?

Question

What are the odds all banks will put a pause on our investment loans? I’ve got two Freddie loans and seven loans through my credit union. I’ve got some reserves for this, but I could be out of a job soon myself and could use a little help if my tenants say they can’t pay.

I won an eviction case for one of my tenants on Monday in court. They’ve been terrible tenants for months not paying the last month and a half, and turned the house into a squatter/drug house with a ton of unauthorized guests living there. But now I’m stuck with them for a couple more months at least with no rental income with the evicting freeze.

Three of my other tenants just told me they got laid off and can’t pay rent. I’ve got 6 months reserves for this kind of thing, but being laid off myself as a pilot for 22 years with my company wasn’t something I thought was even remotely a possibility as of a week ago. If banks could put a pause on things for just a couple months it would help many of us immensely to reorganize to save our hard earned investments. Thoughts?

Jill F. · Answer

None of  the courts around here are hearing foreclosures now so effectively there is a hold.  But I think at this point, the SBA disaster loans look promising if you reach out to your lender for relief and other financing is not available. I'd probably wait and see who actually pays and how long the regular schedule is on hold before reaching out for fear that my loans might get 'downgraded'

Lauren Kormylo · Answer

@John Morgan  I don't know about where you are, but the grocery stores here in Phoenix are hiring for stockers,  Fry's Grocery stores sent me an email about that, and Safeway is hiring too.  Send your renters info on any jobs you hear about, make it known you expect them to find a job if they can.

Michael Noto · Answer

Currently have 5 deals in the pipeline as an agent scheduled to close in the next 2-3 weeks, 4 of them are FHA loans and the other is conventional fannie/freddie backed and things are progressing as usual with all of them.

Kirk R. · Answer

@john Morgan

empathize a little with you.  my w-2 income just shutdown.  Hopefully this pandemic gets under control.  All my renters are up to date.  have to see if it's the same next month.

hopefully maybe small business loan but not for sure might only be for businesses with employees?

trying/Doing mental math of how long I can go before my net worth starts going down.  back to the spreadsheet!

Andres A. · Answer

Talk to your lenders and see if you can work something out.

https://www.npr.org/2020/03/19...

Anthony Wick · Answer

Well, as long as a conviction takes to carry out, a foreclosure takes even longer. Much longer. Not saying you'd want to go that route of course, but playing catch up on your mortgages is better than panic selling. And I highly doubt mortgage companies are going to give any leeway, unless the gov't says they have to.

Brian Ploszay · Answer

@John Morgan

To survive as a landlord, we need to preserve cash and make those reserves go further.  This is all new, so I am accumulating information and am beginning to formulate a strategy.  My portfolio could be considered somewhat "recession proof."  But this downturn is unique and different.

1.  Rent forgiveness.  All need to document that they have been laid off.  You should have an application of sorts that they will fill out.  Then offer a rent discount.  Some of these people will re-perform.  They are happy they got the discount.  And they reach to savings, friends and family to help them out.

2.  It is important that any tenant document their hardships.  Human nature has it that some will declare they have problems, when they still have financial strength to pay rent.

3.  I suspect if this goes on long enough, there will be some relief from government authorities.  Probably a temporary  decrease in real estate taxes.  Or forebearance of mortgages.  Let's all stay on top of this.

4.  Leasing.  Not much has been said about this topic.  But I expect I will have almost no one moving in the near future.  Big plus for me if the tenants continue to pay.  And my vacant units might have to sit for awhile.  I take social distancing seriously and do not want to bring the public out to my properties.

5.   Paying bills.  I am stopping paying certain bills such as real estate taxes due.  Just for 60 days, even if I have a late fee.  I need to preserve cash.

Also no new capital improvements.  And I tell tenants that certain repair requests that are non essential are "on hold."

6.  New Loans.  A week really changes things.  They were open and frantically doing business 7 days ago.  As the economy rapidly deteriorates, banks will inevitably prefer to have larger cash reserves.  And thus not lend.  The federal government has been working proactively to prevent this.  Banks should be underwriting this new reality.  And thus people will need to have larger reserves to prove they can withstand this downturn.

We will overcome this.  This is not a permanent disruption of real estate.  Rather one that will run its course.

Henry Lazerow · Answer

I closed a deal friday and have 2 more in next few weeks. Res loans are the same as before where there may be issues is 5+ unit financing. At the title company they are only allowing attorney+those who need to sign in the building.

Wesley W. · Answer

@John Morgan

From what I heard mention during the press conference yesterday and what I have read online hence, it looks like the forbearances will be available to SFR FHA loans.  So I believe the short answer, at least at this point, is investors are SOL.

Richard Scholtz · Answer

I agree with the above - FNMA type loans are still fine - Plan on delays for appraisals and some counties are not recording loans but rates have moved up from Feb lows and you will need 20% DP on rentals.  It is the creative Bank Statement Loans and No Doc Loans Hard Money loans that got crushed.  I know of at least (7)  Seven of the NON-QM - Institutional lenders that have quit the D.S.C.R loans //No Doc Loans // Professional Investor loans. Had one do that with docs in Escrow :-(    Flagstar was the largest bank warehousing those  --They quit providing warehouse lines for Non-QM lenders - Home Express -TheLender- New Rez- Royal - DeeepHaven - Carrington - Angel Oak, etc - That all was securitized and investors have totally redefined risk. Find a lender/investor that has already tightened their LTV's and credit score requirements and you should be good for a few more months and they will adjust. Personally, this is an opportunity as banks tighten up we will see loans that would never have needed us 6 months ago. Reminds me of doing Blackstone deals in 2009 when they were the only Hedge Fund lending on rentals and rental portfolios. Travel Well Richard

Will all banks halt loans?

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