Pub. 9 2019-2020 Issue 6

6 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S www.coloradobankers.org BY TOM DOLPHIN SPENCER FANE LLP I’m Baaaack — but I’m Here to Help: Lessons Learned from the Great Recession of 2008 Proactive Strategies for Financial Institutions to Prepare for the COVID-19 Recession. H ey, remember me? Yes, I’m the good old Great Recession of 2008. I’m pretty sure that you have held me in the back of your memory since that time, wondering if I would ever show my ugly face again. Well, look — I’m not here to gloat, I swear. I’ll bet you didn’t think the economy would stop growing, did you? After all, it has been on a rampage for almost 11 years now. I’ve had to do a lot of emotional growth since being knocked off from my perch of being the most severe economic depression since the height of the Great Depression in 1932. Just like you all had to recover, so did I. I know exactly how Mike Tyson felt after getting knocked out by Buster Douglas. Now that people like Janet Yellen, former chairman of the Federal Reserve, are telling people that this COVID-19 thing could bring a recession even greater than the one I brought in 2008, I feel like I should try to do some good after ravaging somany unsuspecting people. People keep saying that these are uncertain times, but if you’re a financial institution, you know for sure that you need to be as proactive as possible with making sure that you’re as prepared for what lies ahead as you can possibly be. Since I’ve made such strides in the emotional growth department and realize that I can also do some good, I’ve decided to share this article to remind you lenders of what you should be doing right now to prepare yourself for the effects an economic downturn will have on you as it relates to your borrowers. Credit Committees. I know all of your financial institutions out there have credit committees that discuss the loans you make to borrowers before you make them. There should be a good sense of familiarity with the borrowers to whom you have loaned money. You should be using similar committees to identify borrowers and industries that are most susceptible to this economic downturn. It’s entirely likely that just about every borrower you have will be affected in some way, but you have to focus on borrowers who will be and are being hit the hardest and soonest. Loan Files. Once you’ve identified the borrowers likely to be hit hard and fast, it’s time to dig into those loan files physically. Check your loan documents and the security documents that secure those loans. This means that you have signed documents (promissory notes and guaranty agreements) and perfected security instruments (filed/recorded deeds of trust, mortgages, UCC- 1 financing statements). Here’s a quick list of documents you will want to confirm are executed and recorded/filed with the appropriate source: