Home Foreclosure Bankruptcy filings take a plunge | WilmingtonBiz

Bankruptcy filings take a plunge | WilmingtonBiz


After the financial wear and tear of a pandemic lasting more than 18 months, one would expect bankruptcy filings to pile up.

But that’s not the case, says attorney Richard Cook of Cape Fear Debt Relief.

“Bankruptcy filings are still at levels almost never seen before,” he said in September. “The US courts last month released a note stating that bankruptcy filings are at a level last seen in 1985. I think with the moratoriums on foreclosures extended by the Consumer Financial Protection Bureau (CFPB) until December 31, 2021, it may take some time before bankruptcy filings increase.

The U.S. court report that Cook cited says personal and business bankruptcy filings fell 32.2% for the 12-month period ending June 30.

“According to statistics released by the US Courts Administrative Office, annual bankruptcy filings in June 2021 stood at 462,309, up from 682,363 cases the previous year,” the courts report said. “The data reflects the first full 12-month period to begin after the pandemic coronavirus (COVID-19) crisis rocked the national economy.

“Business deposits fell 17.7%, from 22,482 to 18,511 in the year ending June 30, 2021,” the report continued. “Non-commercial bankruptcy filings fell 32.7% to 443,798 from 659,881 the previous year.”

What caused the drop in deposits? The report pointed out that increasing government benefits and moratoriums on evictions and certain foreclosures could ease financial pressures on many households and businesses.

Small businesses may well use government assistance and a moratorium on the collection of nonperforming loans to improve their financial situation.

As the nation’s leading SBA lender and the primary loan processor for the Paycheck Protection Program during the pandemic, Live Oak Bank is able to assess the health of small business loans nationwide.

In its July 21 second quarter earnings report, executives at Live Oak Bancshares expressed optimism about the financial condition of its borrowers and therefore the company’s credit condition.

“I expected reserves to tend towards pre-COVID period levels as a percentage of loans. It turns out to be the case, and I still expect this trend to continue, ”Steve Smits, Live Oak’s chief credit officer, said on the earnings call. “I believe so because first of all, we continue to see improvements in the financial situation of some of our most affected businesses, as evidenced by the favorable trends in service status assessments.

“Second, we have also noticed that many of our worst affected borrowers have in fact been able to build up cash reserves during the pandemic, and this is due to stimulus programs and government grants,” he added. . “Third, through our service efforts, we have started to receive encouraging reports as these businesses have reopened and… people are getting back to work. Finally, the improvement in unemployment forecasts will, of course, also have an influence on our allowance. “

Smits said that at the June 30 close of its second quarter, Live Oak Bank only had 17 deferred loans and, of these, 15 were the result of COVID-related stress.

He also pointed out that SBA loan grant payments were declining; in June, 13% of Live Oak’s SBA loans received some level of SBA grant payment support, with most borrowers exhausting grant eligibility.

“At the end of June, 87% of our borrowers had resumed making regular payments, and arrears continue to be at an all time high for us, which is very encouraging,” Smits concluded.

On the residential loan side, homeowners could benefit from the latest CFPB decision which became final on June 28 this year. Called the Final Rule Amending RESPA (Real Estate Settlement Procedures Act 1974) Regulation X, it is intended as a temporary shield for borrowers from foreclosure until the end of this calendar year. It bans most new foreclosure filings until after December 31st.

Peter Gwaltney argues that it was not government incentives or mandates that prevented credit crises during the pandemic – it was the actions of financial institutions themselves.

“Since the start of the pandemic, bankers have been committed to being flexible and patient with borrowers, while fully recognizing the circumstances we all were in,” said Gwaltney, President and CEO of the NC Bankers Association. “It has continued to this day. Bankers continue to work with borrowers to help them navigate the financial history we are going through. It’s good for borrowers, good for banks, and good for the economy, which we see in the performance of the economy.

“The financial performance of borrowers – mortgages and small businesses – has been counterintuitive [during the pandemic], “he continued.” All of our member banks have braced themselves for the worst, and that just hasn’t happened. Certainly there have been some weak spots, like restaurants and hotels, but overall , businesses and mortgage borrowers have done very well. The last thing a bank wants to do is exclude a borrower. “

At least one local bank is not involved in any forbearance with regard to nonperforming loans, because it does not.

“I’ve been with First Carolina Bank for a little over four years, and have been for all this time,” said David Rizzo, First Carolina Market Manager for Wilmington.

The bank grants residential, commercial and industrial mortgages.

Rizzo said that, like all lending institutions, First Carolina maintains a bad debt reserve which is a percentage of its outstanding loans, but so far that pool has not been touched.

He said he attributes the bank’s track record to lending to “good clients” and being “fairly rigorous” in its underwriting process. Just as Live Oak Bank prides itself on closely monitoring its borrowers and detecting potential problems before they affect the health of a business, Rizzo said First Carolina encourages an early problem-solving approach when borrower feels a problem.

“The best person to get you out of a bad situation,” he said, “is the customer.”


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