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Risky lending practices dragged down the U.S. economy during the Great Recession, but banks back on solid financial footing more than a decade later are looking to save businesses driven to the brink of collapse by the coronavirus pandemic.
On top of Maine banks processing close to 26,000 forgivable federal loans worth $2.6 billion to local small businesses, they have been canceling fees and deferring some loan payments for those pinched for cash.
Mortgage loan payment deferrals are making an immediate difference to businesses. Tourism businesses such as hotels have emerged as big takers of deferrals helping to offset income lost from the virus-delayed start of their season. Hotels often defer mortgage payments by three months, and in most cases, that time will be added onto the end of their loan.
Experts also expect residential deferrals on all types of loans to increase in the coming weeks. Credit scores aren’t affected by deferrals. Some 3.8 million U.S. homeowners are in forbearance plans, according to the Mortgage Bankers Association in Washington, D.C.
“Most people probably made their April payment,” said Greg Dufour, president and CEO of Camden National Bank. “It’s when they make their May or June payment that the residential side will start to pick up.”
Camden National already has deferred payments on more than 1,500 loans of all types with a total outstanding balance of almost $550 million. The bank shifted nine employees with other duties onto the teams handling the large number of deferral requests.
“The majority of the deferrals are from hospitality and lodging in terms of dollars so far,” Dufour said. The bank’s total loan portfolio is $3 billion, so deferring close to 20 percent of that money is “a pretty big percentage,” he said.
Dufour expects more deferral requests as Gov. Janet Mills’ gradual economic reopening plan, which began May 1, continues. The plan would lift restrictions on restaurants and hotels from June through August, including 14-day quarantines for out-of-state visitors that have waylaid reservations in the tourism industry.
That industry is a major part of the Maine economy, contributing $8 billion last year. Dufour said there…