North Gwinnett News

Lenders are using "vulture tactics" to prey on borrowers hard struck by the COVID-19 pandemic's economic impact, a Buford hotel general manager said in a recent letter to his congressional representative.

The lenders hovering over the pandemic-distressed properties "are well within their legal rights," Buford Hampton Inn general manager Sagar Barhe said in an April 2 letter to U.S Rep. Rob Woodall (R-GA).

In the copy of the two-page letter obtained by the North Gwinnett News, Barhe told the representative that lenders' scheme is "unconscionable from a moral perspective and stand starkly against the principles that we share here in the United States."

"Frankly, to take advantage of this crisis for the sake of better returns for some New York hedge fund strikes me as unAmerican," Barhe continued in his letter. "The negative impact to hotel owners and their employees of these vulture tactics will be long lasting."

Barhe urged that Woodall and his fellow congresspeople, the Federal Reserve and other regulatory agencies "address this situation before hotels across this country are mercilessly foreclosed on due to no fault of their own." Among other things, Barhe called for an 18-month moratorium on foreclosure proceedings to allow hotel owners "time they will need to come up with reasonable solutions and strategies."

Woodall maintains a COVID-19 page on his House website.

The $2 trillion CARES Act passed by Congress late last month provides some foreclosure relief, mostly for family-owned properties.

In addition, some states have created foreclosure moratoriums and stays, often protecting both small and large properties from lender asset seizure when payments are not made during the pandemic.

Georgia is currently not one of those states.

Larger properties received some protection in an interagency statement issued March 22 by the Federal Reserve, FDIC and other regulatory agencies that encouraged the nation's banks to work proactively with borrowers hit hard by the COVID-19 pandemic.

"The agencies encourage financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19," the statement said. "The agencies view loan modification programs as positive actions that can mitigate adverse effects on borrowers due to COVID-19. The agencies will not criticize institutions for working with borrowers and will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as troubled debt restructurings (TDRs)."

Barhe called the interagency statement "undoubtedly a step in the right direction" but said not all borrowers have loans from FDIC-insured banks.

"However, billions of dollars of hotel loans in our country come from unregulated non-banks such as hedge funds and other investment funds," Barhe's letter said. "Since the Federal Reserve and the FDIC have no direct oversight of these firms, they are unlikely to follow the previously mentioned guidance. They are more likely to take a different approach: the use of vulture tactics to extract as much 'value' out of the hotel as possible without any regard for the current crisis or the hotel employees or hotel owners involved."

Those vulture tactics include accelerating the foreclosure process to gather as many COVID-19-distressed properties as possible, using "small technical ways" to rush loan defaults, denying borrowers existing escrowed funds and slowing reimbursements on collateral, Barhe said.

North Gwinnett News reached out to 20 lenders and banks. Only two responded, saying they were not authorized to speak to the press.