Las Vegas City Wire

A Las Vegas hotel general manager recently appealed to his congressional representative to stop lenders use of "vulture tactics" to prey on borrowers hard struck by the COVID-19 pandemic's economic impact.

Lenders "are well within their legal rights" to hover over the pandemic-distressed properties, Embassy Suites Las Vegas general manager Tom Spoto said in his April 2 letter to U.S. Rep. Dina Titus (D-NV).

In a copy of the two-page letter obtained by the Las Vegas Record, Spoto told Titus that the lenders' schemes are "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," Spoto continued in his letter. "The negative impact to hotel owners and their employees of these vulture tactics will be long lasting."

Embassy Suites Las Vegas is a 220-room hotel on University Center Drive.

Titus, co-chair of Travel and Tourism, and the Gaming caucuses, praised passage of the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act that President Trump signed late last month.

"I'm proud to support this bill because it will provide more resources to hospitals and patients, more help to small businesses and the unemployed, and more oversight of CEOs," Titus said in a statement issued on her House website on March 27. "Most Americans will see tangible benefits from this recovery package, including in the form of direct payments."

The CARES Act provides some foreclosure relief, mostly for family-owned properties.

In addition, some states have set up foreclosure moratoriums and stays, often covering small and large properties from lenders' actions to seize assets when payments are not made during the pandemic.

Nevada is one of those states. thanks to Gov. Steve Sisolak's emergency declaration issued March 29, which bars the initiation of foreclosure and evictions based on mortgage default for the duration of the emergency. However, the emergency declaration appears to cover single family homes, rather than larger properties.

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)."

Spoto 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," he 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."

Spoto said the 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.

"Representative Titus, I urge you, Congress, the Federal Reserve and other governmental agencies to move quickly to address this situation before hotels across this country are mercilessly foreclosed on due to no fault of their own," Spoto said. "To the extent additional legislation related to COVID-19 is proposed, I would recommend adding language that introduces an 18-month moratorium on ALL foreclosure proceedings for ALL lenders to hotels. This should give hotels the time they will need to come up with reasonable solutions and strategies with their lenders to ensure that they have their loans paid off and avoid unnecessarily enriching hedge fund vultures."