http://www.commercial-modification.com

The commercial loan review has two contrasting meanings for the lender and the borrower when they are attempting to reach an agreement on loan modification.  The loan workout is supported by financial regulators, such as the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, because they realize that this kind of deal will be beneficial for both parties.

It is the contention of the financial regulators that many of the commercial property owners are only experiencing a temporary setback in their finances and that they are actually willing to go on paying for the mortgage if this is made possible.  They also realize that offering the borrowers a chance to recover would benefit the banks and the economy in the end.  Of course, the regulators also clarified their support for loan workouts by pointing out that this does not mean that the lenders will approve all applications without applying standard methods for evaluating risks.  It would not benefit anyone if a commercial loan modification is provided to a business that has lost its viability and when the foreclosure is unavoidable.

Basically, what the bank regulators are suggesting that banks should do is to expand their creativity when trying to look for ways to help the businesses that still have a chance of surviving the crisis.  This is where the commercial loan review comes into play.  This is the procedure for assessing the capacity of the borrower to repay the loan if the terms were adjusted.  Some of the factors that the lenders have to consider include the payment history, the flow of cash into the business, the availability of guarantors that can take over if the borrower fails to pay, and the condition of the market.  Thus, the commercial loan review will have a vital role in the decision making of the bank for or against the loan workout.

However, for the borrower, the commercial loan review is something that is usually done by a loss mitigation expert or consultant.  This activity will focus on the original loan agreement because experts have discovered that 80 percent of the loans that were released for commercial properties during the prosperous years in real estate contained flaws.  These flaws are transgressions against the laws and regulations that have been put in place to protect the borrowers from the abusive practices of some lenders.  The point is that the corresponding penalties for these flaws are usually severe, such as requiring the lender to return to the property owner all interests that have been paid since the beginning of the mortgage.  Moreover, the bank would not be able to apply any of the provisions contained in the original agreement and this includes repossession or foreclosure of the property.  Thus, this could be a powerful tool for the borrower in the event that such violations are actually found in the documents.

If such violations are found, this will also assist the property owner even if the process of foreclosure has already been initiated.  The court will freeze the proceedings until such time that a decision has been made regarding these accusations.  The commercial loan review is therefore a very potent weapon for the property owner in convincing the lender to grant a loan workout.

Read more at http://www.commercial-modification.com

Tagged with: • • • • • •

Filed under: Uncategorized

Like this post? Subscribe to my RSS feed and get loads more!