Currently, Iowa clerks of court have been directed to reject filings of actions for foreclosure. In her March 22, 2020 Proclamation, Governor Reynolds “suspend[ed] the regulatory provisions of Iowa Code chapters 646, 654, 655A, and 656 allowing for the commencement of foreclosure proceedings, or the prosecution of ongoing foreclosure proceedings, on residential, commercial, and agricultural real property located in the state of Iowa.” Governor Reynolds further directed the Iowa Division of Banking and the Iowa Division of Credit Unions to immediately identify tools, means, and methods that may be used to relieve foreclosure issues.
Also on March 22, six federal agencies released guidance for financial institutions on how to work with borrowers in the new world which has been affected by COVID-19. All financial institutions are encouraged to work “prudently” with borrowers who are unable to make payments because of the effects of COVID-19. Importantly, this is for borrowers who are unable to pay because of the “effects” of COVID-19, not just borrowers who have been diagnosed with COVID-19. It is difficult to imagine a single borrower (individual or corporate) which has not been effected by COVID-19. The guidance also promises that the agencies will not criticize financial institutions that work with borrowers during this time, and that short-term modifications based on COVID-19 issues generally are not to be considered troubled debt restructurings.
It may be the understatement of the year, but each financial institution is likely to face the question of how to deal with borrowers affected by COVID-19. Each institution ought to be familiar with the Governor’s proclamations on what recourses are limited to institutions, and each institution should also be aware of the resources and guidance available to it for how to handle troubled loans.