A tidal wave of commercial loan workouts is expected for the next 2 or so years. Why?
Commercial real estate mortgage loans with 7 – 10 year terms are due to reset for a very large number of commercial real estate owners. The commercial estate boom started around 2002 when many buyers flooded the market. Now that all of those notes are due to reset, many owners are unable to refinance due to decreasing property values.
What option is there besides a loan default? Owners can apply for a commercial loan workout.
Most of us by now have heard of mortgage loan modifications for homeowners. But now loan modifications or workouts are starting to enter the market place.
To start the process, an overall evaluation of your commercial properties and financial situation is performed with the assistance of a commercial loan workout professional. All options are then presented so that you can make an informed decision. Lastly, a workout specialist will work to renegotiate the terms of your existing commercial mortgage loan with your lender to stop a default, increase cash flow and provide the best possible loan terms.
A commercial loan workout restructures or modifies an existing loan to improve to the terms in the owners favor. A workout as an alternative solution are expected to increase in the upcoming months. The turnaround time is between 30 to 90 days.
The ideal client for a workout has a balloon note coming due or cannot refinance.
No appraisals or credit checks are necessary! Clients who are considering a commercial loan workout can expect one or more of the following: Rate reduction, term 政府資助中小企 extension, reset balloon, forbearance, temporary interest-only payments or temporary no-payments.
A commercial loan workout restructures an existing commercial real estate loan to more favorable terms. Commercial workouts are only performed to change loan terms, not to provide funds or to refinance a commercial real estate loan. Any commercial property, such as apartment complexes, office buildings, industrial, shopping centers, store fronts and retail space is permitted for commercial loan workouts.
Because so many owners are not able to meet their mortgage obligations, commercial lenders are now willing to modify their existing mortgage loans to prevent a default. The key to preventing a default is to be proactive in contacting your lender or seek assistance of a commercial loan workout firm.
Commercial mortgage loans are much more complex than residential mortgage loans. Hiring a professional commercial loan workout firm can help you navigate through the negotiation process with your lender.
Sometimes a modification may not fly and a short sale is necessary. A short sale allows the owner to sale a property for less than the actual mortgage loan balance. This is an alternative to foreclosure. The owner must prove to the lender that a financial hardship exists.
The only problem may occur is that the difference between the amount actually owed vs. the discounted short sale amount may be a taxable gain. An experienced workout firm can help you avoid this potential time bomb.