When you are considering a commercial loan default on a income producing project, here are some valuable tips you should know about before calling your bank. These suggestions are the most common mistakes business owners make when going through a loan default or loan workout.
You can avoid these potential problems if you are aware of their risks before you go to your bank.
A loan default can create an emotional strain on the borrower / lender relationship, often causing an emotionally charged backdrop which can prevent a direct resolution between the parties.
As experienced real estate professionals, Venture Solutions understands the micro and macro issues affecting the cash flow and value of all types of commercial properties. As former bankers, we can effectively and unemotionally articulate these issues in a language that lenders understand and appreciate.
Due to our extensive commercial mortgage financing experience and our real-time knowledge of the capital markets, we have the advantages of knowing the right time and the right lender to refinance your existing troubled loan.
Under a default scenario, we may then decide to take the property to the debt marketplace to explore a refinance. After thoroughly surveying the debt market and determining that a refinance is not feasible, we will share our results with the existing lender to compel them to entertain loan workout discussions.
Our members have successfully restructured over $2 billion in distressed real estate debt on all property types.
With the proliferation of securitized lending over the past decade, commercial real estate financing has evolved largely from a relationship business to a transactional business. CMBS lenders have placed greater emphasis on underwriting cash flow than to getting to know their borrower. Even if you have a relationship with the loan officer at your CMBS lender, that individual cannot help you when problems arise after closing
The unfortunate and unintended consequence of a securitized loan is that most borrowers today have no relationship with, let alone know the names of, those individuals empowered to administer loan workouts on behalf of the bondholders who hold their mortgage: the Special Servicers.
We know that you can often feel like a stranger in a strange land when dealing with these servicing agents. Furthermore, most borrowers have little understanding as to the complicated fiduciary responsibilities that these servicers have with the multiple classes of bondholders that comprise a REMIC. More importantly, borrowers are not aware of the latitude that servicers have in terms of a restructure. It is understandable that borrowers are left feeling alienated, frustrated, and confused when negociating a loan modification with Special Servicers.
We have both the insight and experience to help you navigate through the maze of bureaucracy that typifies a loan modification with a Special Servicer.
Even in the unlikely event that a loan restructuring cannot be achieved; we will proactively expose your property to our vast sources of private and institutional joint venture equity investors, buyers and lenders. We will make every effort to help you avoid a foreclosure and to achieve the best possible sale, refinance or recapitalization for your property. See the Prevent Foreclosure section
Well, according to the data that was released on Friday, only about half of the loan modifications that made to the end of the year actually reduced payments by more than 10%. This data comes from the Office of the Compiler of the Currency and the Office of Thrift Supervision. They apparently analyzed nearly 35 million loans worth more than $6 trillion.
President Obama’s $75 billion plan to promote loan modifications is mainly for the average homeowner and does not provide for commercial loan workouts. Although, there are just as many commercial loan defaults, in comparison, as there are home loan defaults.
Several years ago I bought a business. I got a commercial secured loan to pay the person who sold me the business. After a few months I found out that things were not as she said, so I in turn sold the business to my landlord for a big loss. However, I still owed on the original loan. I spoke to the bank and we changed the loan from secured (business and all items inside the business) to unsecured. Now a year later I am wondering what will happen if I just stop paying on this loan. Can they take my house away from me or anything like that?