As a new fiscal year starts in the lending industry, with the many stakeholders still finding their foot around the post-pandemic events, several mortgage lenders are being cautious of a potential wave of bankruptcy filings on the horizon. However, recent events within the industry, such as the high likelihood of increased bankruptcy filings, a drastic increase in rent payment defaults, high likelihood of evictions and foreclosures if moratoriums are lifted, have given enough reasons for lenders to start engaging in several preparations ahead of this shockwave.
Some of the steps which a mortgage lender could take to reduce the effects of bankruptcy filings on their business are:
- Go over the loan terms and ensure you have all the necessary loan documentation to back up your claim.
- Gather and examine servicing history, including any correspondence with the borrower and the borrower’s representatives, as well as internal notes about talks with the borrower.
- Compile and verify payment history to guarantee adherence with loan terms, including payment application and evaluation of fees and expenses, default interest conditions, and notice demands.
- Make sure you have a clear line of assignments to prove that you control the debt.
- Find out if the borrower has ever filed for bankruptcy protection, and if so, when and where.
It is critical for businesses, particularly lenders, to safeguard their investments to the greatest possible extent while ensuring that outstanding loan debts are collected as much as possible. To read more about bankruptcy filings and the several regulations surrounding them, click here.
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