Rep. Lance Gooden (R-TX) is encouraging legislative action to stop some Commercial Mortgage-Backed Security (CMBS) lenders that are taking advantage of the government lockdown by charging their hotel borrowers exorbitant fees.
“The special servicers representing the CMBS lenders seem to be solely focused on ensuring the CMBS lenders are satisfied instead of taking the borrowers’ needs into account,” Gooden told Lone Star Standard. “They simply want to grab the assets, sell them for any amount, take the cash, and be on their way. It’s shameful to me that these lenders don’t seem to care how their actions are affecting so many small business owners and employees.”
Hotel owners and major commercial property owners in other industries have come together to urge Congress to take action against the predatory practices of the CMBS lenders and to recommend new lending standards and immediate aid for businesses. The hospitality industry has been particularly hard hit by the COVID-19 pandemic.
Rep. Lance Gooden (R-TX) with Texas Gov. Greg Abbott
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The Miami Courant wrote that Rialto Capital Management allegedly is demanding that Ashford Hospitality pay every nickel back from its loan with hefty fees added.
“They’re owned by a private equity group in New York called Stonepoint Capital,” Gooden said. “I have reached out to them several times to hear their side of the story, but they have refused to visit with me. I suspect this is because they know their actions are questionable.”
Rialto is known as an asset management platform focused on investing in the commercial real estate capital structure.
“I’ve even heard of situations where lenders are charging exorbitant fees,” Gooden said. “Many borrowers aren’t able to afford their own overhead or debt service and are struggling to make ends meet. It seems unimaginable to me that lenders would further take advantage of these borrowers by charging these fees given the current circumstances.”
Rialto CEO Jeffrey Krasnow did not immediately respond to requests for comment.
“I am discussing these concerns with Chairwoman Waters and requesting that bad actors be brought before the House Financial Services Committee to answer our questions in person,” said Gooden.
Congresswoman Maxine Waters (D-CA) is chairwoman of the House Financial Services Committee.
Other special servicers include Midland, Wells Fargo, Trimon, Keybank, and LNR.
“In many cases, the CMBS lenders are operating behind the scenes advocating for their own interests,” Gooden said. “Nobody benefits when small businesses go under and we must put protections in place to ensure this doesn’t happen."
If Congress does not intervene, there will potentially be a record number of foreclosures across all types of real estate.
“We are already heading in that direction but it isn’t too late to correct course,” Gooden said. “It’s a shame Congress would even need to be involved but if we can’t come together to help our country recover economically, we may need to step in.”
