Mike Affuso, the director of government relations for the New Jersey Bankers Association, makes two things clear:
- Banks aren’t looking to foreclose on commercial properties;
- Banks already have programs that can help if you can’t pay your mortgage.
So, if you own a business — and you’re trying to figure out how to pay your employees, let alone your rent — you’re not done for. And you’re certainly not alone.
Banks, Affuso said, are eager to work with businesses. They have to be, he said.
“The last thing in the world that a lender wants to do is foreclose on a commercial loan and get a piece of property that they don’t want in the first place,” Affuso told ROI-NJ. “They would much rather push out a loan or renegotiate the terms and have a payer than not.”
The only thing Affuso said is hardly likely to happen is complete loan forgiveness.
“You just can’t say, ‘Nobody has to pay anything,’” he said. “That doesn’t work. And, besides, all businesses are in a different position.
“Businesses need to work with their lenders. They will work with you.”
Affuso answered a number of questions on banks and business. The following Q&A is edited and condescend for clarity:
ROI-NJ: There is talk about having commercial mortgage forgiveness because of this downturn. What’s your first reaction to that, and how does that impact various parts of the business community?
Mike Affuso: I think, if you are a coronavirus-affected business, you should go talk to your lender. I know there are programs that lenders are doing right now. And, as far as the effect that it will have on the business community, I think the key to the whole thing is getting an idea of when we will be back. Because, if we know we aren’t going to be back, we know how big the bogey is that we have to shoot.
ROI: Worst-case scenario: This goes 3-4 months. The economy tanks. Lots of people can’t pay their people, let alone their mortgage. And, more, when they come back, they certainly can’t make up 2-3 months of back rent. What then?
MA: I think there’s all different options; perhaps you can spread it over a long period of time so you’re back-ending it. Remember, what happens on most commercial loans is they’re revolving lines of credit. So, businesses are continually refinancing as you’re moving through your business space. You’re not often quote-unquote paid off in full.
Most businesses are always coming back for additional credit. So, if you back-ended it, it would probably be beneficial to the borrower and the lender. But you really have to talk to your lender.
ROI: This is all good. But it has to happen fast. Many mortgages are due at the end of the month. What regulations are you expecting to come out that will help people make a decision three days from now, as opposed to right now?
MA: I’m expecting Fannie Mae to better articulate what their program is and push it out to lenders. And I’m expecting Fannie Mae to articulate what needs to be done with the tax payments, as well. Here’s what people don’t realize: 80% of the loans in this state are tied back to Fannie Mae. You just may not know that. What it does will have impact.
ROI: Last question: Banks and financial institutions were a big cause of the 2008 downturn. There have been a lot of rules and regulations to make them stronger since. Are they? Are banks and financial institutions in better financial shape to handle this than they were a decade ago?
MA: Back then, I think you had a situation where there was excess leverage. You had rapid deleveraging and a crisis of confidence in the entire financial system, where you had the failing of financial houses that nobody ever thought would fail.
I think, in this case, it’s a more widespread health crisis that affects all lines of business, but it doesn’t acutely affect the banking industry or the finance industry in a broader sense. It was much more acute at that time for banking and finance. That’s not the case today.