How a Commercial Loan Modification Works

how loan modification works

Christopher Hills Mortgage and Lending North Andover, MA (508) 488-9186 Contact Profile

According to Elizabeth Warren, chairperson of the TARP Congressional Oversight Panel, about half of all commercial real estate mortgages will be underwater by the end of 2010.

“They are mostly concentrated in the mid-sized banks,” Warren told CNBC. We now have 2,988 banks-mostly mid-sized, that have these dangerous concentrations in commercial real estate lending.”

As a result, the economy will face another “very serious problem” that will have to be resolved over the next three years, she said, adding that things are unlikely to return to normalcy in 2010.

Between now and 2012, more than $1.4 trillion worth of commercial real estate loans will come due, according to real estate investment firm ING Clarion Partners. Analysts at Deutsche Bank estimate that borrowers will have trouble rolling over as many as three-quarters of the loans they took out in 2007, the most toxic vintage.

Due to the impending events that will take place in the CMBS and commercial real estate markets between now and the next few years, IN-VISION FINANCIAL has become an approved business referral partner to a law group that specializes in modifying commercial mortgages. They have a dedicated Distressed Real Estate Response Team within their organization that is comprised of experienced lawyers and commercial underwriters ready to assist with the unique issues facing investors and clients. They deal directly with lenders, servicers and special servicers of CMBS assets, creditors’ committees, portfolio lenders and other parties in interest throughout the country. They are a legal advocacy group specializing in commercial loan restructuring.

Commercial mortgage brokers, such as our firm, and their borrowers are currently struggling with how to effectively deal with maturing commercial mortgage backed security (CMBS) loan transactions. Many owners of commercial properties are not currently able to refinance their properties under any circumstance. The solution for many may be a commercial debt restructure or modification. Our law group can help with the restructuring of the borrower’s term, modify their rate and payment, discount their note and in some cases reduce their unpaid principal balance.

Borrowers need to demonstrate to their servicers and lenders their ultimate payoff

plan or why it is in the lender or servicer’s best interest to extend, modify or reduce their current debt obligation. These waters can be very difficult to navigate. Commercial modifications are complex and have numerous legal ramifications. A successful commercial modification is usually negotiated with the help of an experienced law firm, familiar with the intricacies of CMBS transactions.

Whether the borrower is trying to reduce the interest rate, short sale the note or property, restructure the amortization, reduce the principal balance to complete a refinance or extend the maturity date on your note, our law group can help. As part of these services, they prepare a case file that includes capitalization values, demographic market reports, rental and vacancy analytic reports, and a Net Present Value analysis on the property. These characterizations are all included in the file submitted to the current lender, reducing the workload on the servicer. Our law group also identifies the benefits of the proposed workout to the current lender with supporting documentation for each claim. The lender's Loss Mitigation department quickly realizes the difference in dealing with a law firm that understands the various financial factors that need to be considered. The majority of lenders are willing to negotiate a loan workout or modification if a modification provides benefits outweighing those of foreclosure. With every foreclosure the credit rating of the institution is at risk so lenders are becoming increasingly more willing to modify commercial notes.

In summary, we believe that we, along with our affiliates, have a remarkable opportunity to capture significant market share in the inevitable business of commercial loan modification. As outlined above, it is essential to have commercial modifications negotiated and handled by proven attorneys that have, in one way or another, been in this industry. Which is the underlying reason we at IN-VISION FINANCIAL, believe being partnered with our law group assures us the most success. Please feel free to contact our office by email: or call Chris Hills at: 508-377-5872 x704 to discuss this opportunity further and see how you can be paid for referring clients to our company.

By Christopher Hills Mortgage and Lending

Posted on April 13, 2010 10:01 AM


Category: Credit

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