There are times when banks ask their borrowers to leave. This can happen when banks are:
- rebalancing their portfolio due to high concentrations of certain property types in certain geographic areas.
- altering their lending criteria such a FICO scores or credit quality.
- experiencing increased special servicing and looking to reduce their workout load.
Even if a borrower is a decent credit risk a bank may cast them out if they’ve been challenging to work with. In these situations, the bank encourages the borrower to find a new lender within a certain time period before the bank is forced to foreclose. Borrowers can be left to their own devices to find a new lender. This can be particularly challenging if there is an environmental concern (leaking underground storage tank, messy automotive services, long term dry cleaner or manufacturing) on their property.
These scenarios can dissuade takeout lenders due to the unknowns of the problem. Shouldn’t there be a way for the takeout bank to get comfortable with environmental concerns for it not to crater the deal and to allow the borrower to migrate to the new lender?
There is. Let me tell you about it.
The Bell Oldow Environmental Primer is a brief and informative document that prospective borrowers can provide to potential lenders. It summarizes known and potential environmental issues. The Environmental Primer delivers to potential lenders:
- A summary of the environmental concern is presented in easy-to-understand, business-friendly language. No need to fumble through technical scientific jargon to marginally figure out what all those reports mean.
- The magnitude of the issue is clearly defined. Good or bad.
- The cost-to-cure and time-to-cure are present directly or with scenarios if different outcomes are possible.
- A realistic roadmap to get to the end of the process and to gain regulatory closure.
With the Environmental Primer in hand the new lender can quickly determine their appetite for the deal including the environmental issue rather than discovering bits and pieces of information in the deal’s file room or from the borrower as they underwrite. Originating banks are engaging Bell Oldow to complete Environmental Primers so they can provide them to their exiting customers who in turn pass them onto the new lender who can avoid wasted time and focus on originating the new loan.
Contact us for more information.
Photo by Jakob Cotton on Unsplash