With our nation facing another financial crisis, lenders are undoubtedly experiencing a case of déjà vu. Yet, in an article for New York Law Journal, New York partner Alan F. Kaufman and his co-author Kimberly Pierro underscore parallels between the Great Recession of 2008 and today’s COVID-19 crisis that can help lenders navigate these uncertain times and mitigate their risk for litigation.

The article, entitled “Issues for Lenders to Consider Before Being Caught in a COVID Catch-22” draws attention to the CARES Act as particularly relevant to lenders. Like the Home Affordable Modification Program (HAMP) and the Troubled Asset Relief Program (TARP) that were created in the Great Recession, the CARES Act offers relief for some borrowers experiencing a hardship due to COVID-19. However, lenders should be mindful of the lessons learned from HAMP and TARP that could come back to haunt them. Kaufman and his co-author write that lenders are not only obligated to provide options under the CARES Act, but also that “there is a true desire to help, while balancing practical and financial realities.”

In addition to the CARES Act, lenders must consider each borrower and loan’s unique situation, including whether a state-issued moratorium further complicates matters. From the Great Recession, Kaufman and his co-author urge lenders to consider that while there are common issues that everyone in the lending process should be aware of, “there is not one cookie-cutter solution for every borrower.” As a result, they explain, “forbearance/modification programs will require different considerations, which will invariably lead to uncertainty amongst borrowers and presumably litigation, despite efforts to avoid such issues.”