Quarterly report pursuant to Section 13 or 15(d)

COVID-19

v3.20.2
COVID-19
6 Months Ended
Jun. 30, 2020
COVID-19  
COVID-19

13.  COVID-19

On March 20, 2020, Governor Ned Lamont of Connecticut issued an executive order requiring all “non-essential” businesses to close effective 8:00 p.m., Monday, March 23, 2020, until further notice. During the second quarter of 2020, the State of Connecticut announced plans to re-open selected businesses pursuant to a three Phase reopening plan for those businesses deemed non-essential and closed due to the March 20, 2020 executive order. On May 20, 2020 Phase 1 of the re-opening plan was put in place and on June 17, 2020 Phase 2 was put into effect. Phase 3 re-opening has not been announced. The compliance requirements for certain businesses to operate are difficult to administer, costly and in many situations not customer friendly. If these orders remain in effect for an extended period, it could disrupt the Company’s operations in a material way, resulting in reductions in revenues, net income, and cash flow. In addition, any disruption to the operations of a borrower could impair its ability to make monthly payments of interest, payments of insurance and/or taxes or to repay the outstanding balances on their loans at maturity. Furthermore, if a liquidity crisis were to develop, borrowers may not be able to refinance their loans when due. Finally, the spread of COVID-19 is having a negative impact on the overall economy, including on real estate values. If borrowers cannot sell their properties or the values of properties securing mortgage loans decline significantly, the borrowers may not be able to repay their loans when due. In addition, the filing and preparation of loan documents with the various recording offices may be delayed and currently there is no access to the Connecticut court system to process foreclosures and evictions. Currently, of our 477 mortgages receivable, we have 23 loans in forbearance due to COVID-19, representing $6.5 million of mortgages receivable and a total of approximately $200,000 of deferred interest. Once a forbearance request is initiated by the borrower, we promptly request documentation to determine the validity of the request and if valid and reasonable, we defer the borrower’s payment of interest for a period of 90 days. A legal fee is the only charge passed on to the borrower. To qualify for forbearance, a borrower must be current on all its obligations to the Company.

If there is a re-occurrence of the virus in Connecticut or the State mandates further business closures, the Company may be compelled to take measures to preserve its cash flow, including reducing operating expenses and dividend payments until the consequences of the outbreak subside. There may be other adverse consequences to the Company’s business, operations, and financial condition from the spread of COVID-19 that have not been considered.