As the financial crisis continues to grind along many hotel and motel owners are seeking relief by obtaining hotel loan modifications. Hotel loan modifications are a specialized area of the larger commercial loan modification industry.

Almost every type of small business has been hurt over the past few years by what is now being called “The Great Recession”, however, one segment of the small business economy that has seen its fair share of pain has been those people who own small or medium sized hotels and motels. Many of these owners are now seeking hotel loan modifications. As the unemployment rate has reached as high as 20% in some major economic areas such as Detroit and 10% average for the nation as a whole many hotel owners have seen their occupancies drop by as much as 80% in some areas. This is understandable considering the fact that a lot fewer families have the excess capital available to spend on vacations or travel. Business travel has all but dried up as a result of the economic downturn. Many hotel and motel owners have found that they can no longer afford to keep making their full mortgage payments and many others have decided to stop paying their mortgages all together.

According the many real estate analysts commercial real estate prices have declined by 40% on average. In some areas of the country this number has reached as high as 60% and we have even reviewed specific hotels and motels that have lost as much as 80% of their 2007 values. Almost every hotel or motel owner who purchased their property in the past 5 to 7 years now finds themselves owing more on their property than what it is worth and in the middle of the worst recession that the U.S. has ever seen.

Solutions for hotel owners are not easy to come by. It is now almost impossible to find financing for hotel and motel properties as most commercial lending institutions have either stopped lending entirely or changed their underwriting guidelines so drastically as to exclude all but the best deals from being financed. To make matters even worse, the Congressional Oversight Panel released their February report entitled “Commercial Real Estate Losses and the Risk to Financial Stability” where they predict that over 500 billion dollars of commercial balloon notes will be coming between now and 2011. Meanwhile, there are no banks sitting on the sidelines to refinance these properties.

The current economic times leave few options for hotel and motel owners who are in financial distress. The most recent hotel owner client of Commercial Capital Advisors, LLC is an nationally flagged chain hotel in Orlando, Florida. They purchased their property in 2007 for 4.25 million dollars. The most recent appraisal for the property came in at 1.5 million dollars. This represents a loss of over 2 million dollars in equity in just a three year period of time.

For many hotel and motel owners facing a similar situation, the best option they have is a hotel loan modification. In many cases a successful hotel or motel loan modification will be able to lower interest rates, give an extended period of forbearance, extend the balloon date for the note and occasionally reduce the balance of the mortgage.

For more information please visit: Hotel Loan Modification

Commercial Loan Modification

Become a Commercial Loan Modification Referral Partner

Over the next two years there will be eight hundred and eighty five billion dollars of commercial mortgages that will be coming to term. Even with major stimulus from the federal government there are still only fifty billion dollars available from banks for commercial lending. This leaves eight hundred and thirty billion dollars of commercial loans that can not be refinanced or renewed. Unfortunately, not all of these commercial property owners will be able to hold on to their properties. Many of them will unsuccessfully try negotiating with their banks on their own. A larger number will probably just throw up their hands and walk away from their property. However, most commercial real estate owners that we have worked with are desperate for an affordable solution that will allow them to hold on to their property and stay in business.

As a commercial loan modification agent you will be helping American business owners stay in business while teaming up with a group of seasoned industry professionals including a commercial real estate broker and CCIM with over 20 years of successful experience performing commercial loan workouts for dozens of national banks.

1) Find a Commercial Property Owner in Distress

Many of our referral partners are commercial real estate professionals who already have a large database of prospective clients. However, we have had referral partners successfully transition their skill to this niche from many different industries. As a referral partner for our company we will share with you how to find commercial property owners in your local area and across the United States. We will also supply you with marketing materials including direct mail letter templates, sample emails, a brochure template and a business card template.

2) Fill out the two Page Intake Form

Once you have found a prospect who owns a commercial real estate property in distress your next step is to fill out our two page intake form. The intake form gives our underwriters the essential details about the subject property and describes the hardship that the owner is experiencing.

3) Submit the Intake Form to our Underwriter for Approval

Our underwriters will take between 24 to 48 hours to review the intake form before making an approval decision.

4) Deliver the Contract to the Client.

Once the file is approved, our underwriters will prepare a contract that you will deliver to the prospect by email. The contract is a legal description that describes the commercial loan modification process that will take place and what is expected of both parties.

5) Collect Signed Contract.

The next step is to collect the signed contract from the client. The contract will instruct the client where to wire funds to pay the fee. All fees will be held in a verifiable escrow account as outlined in the client contract. As a referral partner you will be paid according to the terms outlined in our “Client Referral Form”.

6) The Modification Process Begins

Once the contract is returned and the payment made, the loan modification process begins.

For more information on how to become a Commercial Loan Modification Agent visit our website.

Alternative Financing Options for Commercial Real Estate

Despite the fact that banks are not lending they used to on construction projects and commercial real estate there still exist many alternative financing options for the commercial real estate investor who is willing to do some leg work and research. The following are a list of alternative funding sources that are being used in today’s market.

1. Commercial Loan Modification Bank loans are simply not an option for many commercial real estate owners who have seen the values of their properties drop between 30% and 50% over the past two years. Many commercial property owners now owe more on their commercial loans than the property is worth. The most affordable solution for commercial real estate owners who want to stay in business and hold on to their commercial property is a commercial loan modification. A commercial loan workout can lower the interest rates on the commercial loan by as much as 5%, convert the loan to interest only, defer payment all together and lower the balance on the loan. Banks do not want to take back commercial loans. They are more amenable than ever to facilitating workouts that allow them to keep a conforming loan on their books and avoid default.
2. IRA and Retirement Accounts. It is now easier than ever to tap into retirement accounts for the purchase of real estate. There are legal services that give business owners and real estate investors the ability to transfer money from their 401(k) and IRA to a C corporation. Once the funds are deposited into a C corporation they can used to purchase real estate without paying taxes or penalties due to the transfer. It is important to seek the counsel of a tax professional to ensure that you are abiding by all laws and regulations.
3. Stimulus Money. There are many stimulus programs now available from the state and federal governments that may assist the commercial real estate investor, developer or business owner. Low income multi-family projects may qualify for tax breaks and grants from the county or city government where they are located. The American Recovery and Reinvestment Act of 2009 set aside funds for small companies working in alternative energy.
4. U.S. Small Business Administration (SBA). While most other kinds of traditional financing have seen major cutbacks, SBA loans are actually increasing in today’s economy. Government guarantees have increased all the way to 90% as part of the recovery act. The SBA’s 504 program is a useful investment vehicle for owner-occupied business real estate which allows the owner to put down as little as 10%.
5. Seller Financing. Many commercial real estate owners are finding that they need to sell properties to cover the expenses of maintaining another property that under performing. These owners are forced to sell many times because they are unable to find refinancing. Many of these commercial real estate owners will also be open to the prospect of offering seller financing at a very affordable rate.
6. Friends and Family. It can often be awkward and uncomfortable to ask a relative for a loan. However, they often will trust you and now there are social lending websites that will create a formal loan document between the lender and borrower.

How to Pick a Commercial Loan Modification Company

Knowing how to pick a commercial loan modification company can be a difficult task. There are many factors to consider and the most important is to first decide whether you are good candidate for a commercial loan modification. Many commercial real estate owners have seen their property values decline between 30% and 50% depending on where their properties are located in the country. The major reason for the decline in commercial property values for most people is the vast increase in vacancies seen for multifamily properties, office buildings and retail centers.

The economic recession has forced many businesses, large and small into bankruptcy and many renters in apartment buildings have decided to take on roommates or move back in with family. The second reason for falling commercial property values is the fact that it is now extremely difficult to find financing for any kind of commercial real estate. For example, just a few years ago it was common to see commercial loans underwritten with loan to value ratios of 85%, now the new standard is 60%. Most commercial loans are 5 or 10 year loans that balloon. This means that in 2010 there will be a record high number of loans ballooning and no banks or lenders ready to provide financing on these properties. For many commercial property owners the best option that they have is to initiate a commercial loan modification. The apartment building owner who has seen his occupancy fall from 85% to 50% has no chance whatsoever right now of refinancing his property without resorting to a hard money lender whose rates average between 10% and 20%. Hard money loans for most business owners under financial hardship are not a realistic solution that will allow him or her to stay in business.

A commercial loan modification offers the property owner the possibility of extending the terms of his or her loan with the lending institution while lowering the interest rate dramatically and occasionally even lowering the loan principal. Compared to losing the business or paying astronomical interest rates with a hard money lender, a commercial loan modification is the commercial real estate owner’s best option. However, before signing on the dotted line, a commercial real estate owner must do their homework and find out exactly who will be negotiating with their lender and how much experience that company or person has actually performing successful commercial real estate loan modifications.

Experience is the key to success in commercial loan modifications. If you type in “Commercial Loan Modification” into the Google search engine you will find dozens, if not hundreds of companies that are now offering commercial loan modification services across the United States. As of right now, this is an unregulated industry that doesn’t require any kind of licensing or qualifications. This means that literally anyone can put a sign on their door and call themselves a commercial loan modification company or expert. It is truly a case of caveat emptor. The commercial real estate owner is wise to begin his search by investigating the background and experience of each company that he is considering doing business with. Remember, the best salesman may not do the best job on your commercial loan modification.

Ask these questions about the commercial loan modification company:

1) Does the commercial loan modification company have lawyers on staff?

2) Does the company only do commercial loan modifications or is most of their business conducted doing residential loan modifications?

3) Does the commercial loan modification company have references from successful commercial loan modifications that have been performed?

4) What are the backgrounds of the key executives? Do they have a long career and track record in the commercial real estate industry?

5) Does the company offer a money back guarantee on their services?

6) Does the company have qualified and experienced lawyers on staff?

7) How is the Google reputation of the company? What kind of information comes up in the search results for Google when you type in the company name?

Has the company published articles or information in any recognized industry journals or websites?

Ask these questions of the person who will be performing your commercial loan modification negotiation:

1) Who is the actual person that will be negotiating with the bank on my behalf?

2) How many years of commercial real estate experience does this person have?

3) Does the commercial loan modification negotiator have any industry designations such as the Certified Commercial Investment Manager (CCIM)?

Commercial loan modifications are now a viable solution for commercial real estate investors who are currently behind on their mortgage payments or have a hardship such as a decrease in property values due to increasing vacancies or other economic factors. A commercial real estate owner can benefit from a commercial loan modification because of its ability to increase cash flow and avoid foreclosure. When deciding whether to initiate a commercial loan modification the property owner should begin by determining what kind of financial institution is holding his or her commercial mortgage. Most commercial loans are issued by one of four different institutions including: commercial mortgage backed securities (CMBS), Fannie Mae, life insurance companies or commercial banks.

In their most recent quarterly report from December of 2009, the Mortgage Bankers Association has reported that loans held by CMBS have now reached an all time high default rate of 4.06%. For commercial property owners who are considering the commercial loan modification of their CMBS held loan there are some very important facts and figures that must understood before they decide to attempt negotiating modified terms for their CMBS. The commercial loan modification process for CMBS can be a very complicated and lengthy process that involves negotiating with more than one party.

When CMBS are created they are designed to anticipate a predicted rate of default. The big issue that the industry is facing now is the fact that defaults have already reached levels well beyond what anyone had anticipated earlier. This has left the owners of CMBS scrambling to find a solution. There are two separate bondholder groups that must be negotiated with during a CMBS commercial loan modification. The first group are the banks and institutions that have a senior level position. The second group are the investors who hold a secondary position to the senior bondholders, known as the junior bondholders. The junior bondholders took on more risk than the banks and therefore expected a greater rate of return. The rights of bondholders are spelled out in a Pooling and Service Agreement (PSA). The PSA gives voting rights to junior bondholders.
The differing interests between senior and junior bondholders can make a commercial loan modification a difficult and lengthy process.

For example, a retail strip center owner might have a loan balance of $10 million, but the real value of the strip center in today’s market is now only $8 million. The owner might have the ability to pay the debt at the new market price of $8 million if the additional $2 million is written off. The senior bondholders would probably agree with this solution but the junior bondholders, in a weaker position, would be forced to take the losses of $2million and would probably oppose such a commercial loan modification. In fact, if the junior bondholders were to be faced with a few of these situations at the same time then they might face the prospect of losing all of their money.

When searching for a company to facilitate a CMBS commercial loan modification it is extremely important that you find someone who has experience doing commercial loan workouts specific to CMBS.
If you would like more information about commercial loan modification please visit: Commercial Loan Modification USA

Commercial Loan Modification Special Report