COVID-19's Potential Effect On Lender Liability

COVID-19 has not only created red tape for us—sheltering-in-place, staying six feet away from others, wearing masks in public—but it also has created new red tape for lenders. Each day new federal and state legislation, as well as executive orders, are issued establishing new accommodations for borrowers. In turn, lenders have more restrictions on protecting their own interests and enforcing their rights. Failing to properly navigate the red-tape could result in future liability litigation for lenders. Historically, after each economic downturn, the cycle is followed by lender liability lawsuits in which consumers bring myriad claims against lenders for, among other things, improperly denied forbearances, failure to consider or approve loan modifications, and declining to extend maturity dates.