Robert Verrone, arguably the most experienced hand when it comes to working out bad loans, said borrowers hit hard by Covid-19 shouldn’t feel a sense of entitlement when asking for forbearance on their loans.
“A lot of borrowers … feel like there’s some forbearance fairy flying around that’s just sprinkling dust on loans that are Covid-affected,” the founder of Ironhound Management told The Real Deal. “I know that’s not the case.”
Verrone was one of the leading figures of CMBS 1.0 as head of Wachovia Bank’s large loan group, only to leave in 2009 and start his own business working out busted securitized loans.
The industry veteran says that over the past few days, his team has been working on loans that were most likely teetering on the edge of trouble before the coronavirus pushed them over. His main advice for his borrower clients is that their lenders are under no obligation to share the pain.
“The problem is when borrowers think that the lender is their partner and they don’t expect the debt-and-equity relationship,” he said. “There’s a lot of borrowers that think when a property drops the lender should share 50-50 or even 100 percent in the diminution of value.”
Verrone explained that in a workout situation lenders are looking for concessions from borrowers that makes a deal more financially attractive than foreclosing on the property and taking their chances selling it at auction.
“You have to overpay a little bit to get a workout done,” he said. “I will tell you that it’s probably less than you would have to do pre-Covid.”
Contact Rich Bockmann at rb@therealdeal.com or 908-415-5229