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Aftershocks Coming? Anticipating Borrower Defaults and Defenses When Stimulus Ends
By Eric W. Anderson and Bryan E. Bates
When the world turned upside-down a year ago, many predicted that the severity of the damage to the U.S. economy would usher in a period of borrower defaults, business failures and bank foreclosures. Rapid government intervention, including bank regulatory easing, has prevented that series of events, for now. Those policy measures will surely come to an end before long, at which point lender enforcement activity will likely increase.
Due to the severity and novelty of the pandemic’s effects on many businesses, lenders can expect that borrowers will assert myriad defenses to their defaults, claiming that their failures should be blamed on the unprecedented public health crisis. This article will examine both the current regulatory posture that is helping calm the waters and early court interpretation of several defenses raised by borrowers so far in the pandemic.
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