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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

Fannie Mae Initiates Commercial Loan Modification Program

Fannie Mae is now offering a new program aimed exclusively at commercial real estate owners who are unable to make their monthly mortgage payments. The new program called the Payment Reduction Plan (PRP) comes as welcome relief to many apartment building, office building and shopping center owners who have seen drastic decreases in vacancies over the past twelve months. These vacancies have seriously impeded commercial property owners’ ability to pay their mortgages. PRP allows commercial owners to negotiate with their loan servicer for up to a 30% reduction on their commercial mortgage payments.

According to the Fannie Mae website the “The PRP provides a borrower with temporary payment relief while the servicer and borrower work together to find the appropriate permanent foreclosure prevention solution. PRP offers an additional foreclosure prevention solution for borrowers who are ineligible for the Home Affordable Modification Program (HAMP).”

Under the PRP monthly commercial loan payments can be reduced up to 30% off of the total principal and interest only. The program is strictly for non owner occupied and investment properties.

The Fannie Mae website explains that “during the maximum six month period of forbearance, the servicer should work with the borrower to identify the feasibility of, and implement, a more permanent foreclosure prevention alternative. The servicer should evaluate and identify a permanent solution during the first three months of the forbearance period and should implement the alternative by the end of the sixth month.”

Commercial real estate owners who are considering hiring an attorney to handle their commercial loan modification should investigate the background and experience of the person they hiring so that they know in advance what to expect.

In my experience as a commercial loan modification specialist I have found that many attorneys who advertise themselves as commercial loan modification attorneys actually have very little experience performing successful loan workouts. Unfortunately, as many people know, there is an over supply of attorneys in the United States. This forces many lawyers to follow the latest and hottest trends in order to get new business and survive. You may see the same people who used to do accident and injury work now advertising their services as loss mitigation specialists because it has become such a needed service. For this reason the commercial real estate owner should definitely do their homework and research the actual experience of the person they are hiring.

What You Should Expect from a Commercial Loan Modification Attorney:

1. A Money Back Guarantee: Is your attorney willing to give a complete refund if he or she is unable to successfully modify your commercial mortgage?  Very few commercial loan workout companies are offering a money back guarantee but it is will worth the research to find a company or attorney that is willing to offer a written money back guarantee if they are unable to modify your loan.
2. A Written Plan or Proposal:  Make sure that your commercial loan workout attorney gives you a very detailed written proposal of all of the services that he or she is going to perform on your behalf.  Commercial loan modification can be a complicated process that requires many hours of work and research.
3. Satisfied Clients. Ask your commercial loan modification attorney if they can give you the contact information for any clients that they have successfully helped to modify their commercial loans.  They may not be able to give you any references because of their privacy policy or because of attorney client privilege but it can’t hurt to ask.  An attorney who successfully modified the commercial loans of many clients surely must have one or two who would agree to attest to the experience and results that had with the attorney who helped them.
4. Who Does the Work? Find out if your commercial loan modification attorney will be doing the negotiating and processing him or her self.  Many attorneys are too busy to actually perform the important work themselves and they may be outsourcing your commercial loan modification to a third party.  You may be able to save money and time by cutting out the middleman and going directly to the company that performs the negotiation and works with the bank.
   

Over the past six months, commercial banks and lenders have been watching as defaults increase on their loans and commercial mortgage backed securities.

Commercial property owners are now taking prudent early steps to avoid their commercial loans going into default.  They are looking ahead at upcoming maturity dates.  Many commercial property owners that we deal with are merely victims of the general downturn in the larger economy and the recent dramatic decrease of commercial real estate values across the United States.  Commercial property owners have begun to contact their banks and lenders directly to try and modify their commercial loans.  This approach, unfortunately, is usually unsuccessful.

When commercial property owners call their lenders in an attempt to facilitate a commercial loan modification they are usually frustrated by speaking with someone at the bank who is actually not in a position to approve a loan modification in the first place.  Many people that I speak to actually report the sad fact that they are unable even to have their phone calls returned by anyone at all.  Those property owners who eventually are able to speak to someone that has the authority to approve a commercial loan modification have told me that they are usually dismissed handily and are not even taken seriously by the lender.  The reason that many lenders are unwilling to negotiate the terms of a commercial loan modification with most borrowers is because the banks are inundated every day with calls from unscrupulous commercial real estate owners who are attempting to modify their commercial loans without any real economic hardship.  In other words, the banks are being bombarded with requests from owners to modify their commercial mortgages who have no real need to modify their commercial loans.  These owners are trying to take advantage of the current economic situation for their own benefit.

At Commercial Loan Modification USA we work with commercial property owners in all fifty states to facilitate effective commercial loan modifications for our clients. We use the following guidelines while working on your behalf:

1. We identify the proper contact. Many times lenders will assign a servicer to handle regular loan management. This is usually the case for CMBS-originated loans.  Once a loan is in default it is sent to a special servicer that might consider an extension or modification.   Knowing who to call from the beginning can make all of the difference between a successful loan modification and an eventual foreclosure.
2. We clearly present a case for the borrower’s hardship. Calling the bank and demanding a new interest rate just because you can’t pay the mortgage is not the way to begin negotiations.  After interviewing the property owner and clearly examining the economic situation surrounding the property we create a detailed report explaining the reason for economic hardship.
3. We treat your lender as a partner, not an adversary. A commercial loan modification that allows the owner to continue to stay in the property and not enter default is in both party’s best interests.  Therefore, it is our practice to treat the lender as a partner by demonstrating how the owner’s business model, asset structure and operations have been changed to help them survive temporary market conditions.

Find out how if  commercial loan modification is right for you by requesting our free report “Commercial Loan Modification — is it Right for me?”

What is Obama’s commercial loan modification plan? This plan is only for the residential marketplace. So, what does a Commercial Property owner do?

Commercial Properties, although not as widely publicized as their younger sibling the residential modification,  still represent a very large market place. More and more commercial notes are coming to fruition and need to be refinanced.

Many commercial loans were cast at the time when the economy was in a much better place. And because not even the best analysts could have imagined the bottom, most banks and private investors were able to loosen their requirements for a commercial property owner to secure a loan. By doing this, they were able to charge higher rates and balloons. What none of these lenders ever imagined is that they would be sitting on all this bad paper. And in an effort to control losses are willing to negotiate the loan on their books. What this means for a commercial property owner is the bank or lender in an effort to avoid for closure is now willing to recast a commercial property owners loan in the hopes that this will allow the property owner to continue to make timely payments and in the long run out live this recession.

Commercial property owners need to take advantage of this bad economy by trying to renegotiate the terms of there loan while, as they say “the iron is still hot!” It is always wise for a property owner to seek the help of a commercial loan broker/ firm to do the renegotiating of your loan. With the right help you could be looking at a substantial decrease in the rate of your loan and the monthly payments. Commercial loan modifications are a great way for a struggling commercial property owner to re adjust their current loan and reduce their monthly payment, thus increase their cash flow.

How to Pursue a Commercial Loan Modification

A commercial loan modification is when the bank or commercial lender agrees to alter or modify the conditions of your commercial loan to make the monthly payments more affordable. This is done through the lower of the interest rate, extending the life of the loan, lowering the amount of principal owed or temporarily accepting interest-only payments. Commercial loan workouts are designed to be a permanent solution opposed to a temporary fix, only delaying the inevitable. For that reason, in order to be approved for a commercial loan modification, your bank or commercial lender needs to be confidant you will adhere to the new loan agreement.

The best way to convince your bank or commercial lender to agree to a commercial loan workout is to attack the problem right away. As soon as you realize your business is in serious financial trouble, you need to contact a commercial loan modification professional to look over your loan agreement and contact your lender. It is best to pursue a commercial loan modification before you begin missing payments. A bad payment history will not work in your favor when the lender is considering your commercial loan workout. However, unless your business is already foreclosed on, it is not to late to try a commercial loan modification.

Commercial loan modifications take time to negotiate and work out, not to mention taking the time to make sure you qualify for a commercial loan workout. Although it is not impossible, waiting until you are several months behind in payments to pursue a commercial loan modification will make it harder for your commercial loan modification professional to find a resolution you can afford and the lender will agree to.

What is the Commercial Loan Modification Process?

Do you or someone you know own an apartment building that is under performing? Are you behind on your commercial loan payments? Is the bank threatening a commercial loan foreclosure?
Learn how an apartment building or commercial real estate loan modification can help you save your property.

When you hire a commercial loan modification professional, it is important to know what to expect. The first step is to go through a consultation and analysis. The commercial loan workout professional will look over your loan papers. They assess your business’ financial situation, and they will explain what they can do for you. In order to get a commercial loan modification, you must qualify with the lender for the new loan agreement. Your commercial loan workout professional will pre-qualify you based on the information you provide them.

Once your commercial loan modification professional pre-qualifies you for the commercial loan modification, they will go to the bank or commercial loender to make sure you are officially qualified. Simply put, they will make sure the lender is willing to discuss options pertaining to your current commercial loan agreement. After you are qualified the negotiations begin.

During the negotiation process, your commercial loan modification professional will represent you and work to get you the best possible commercial loan workout. The commercial loan modification professional may be able to negotiate a better interest rate, an extension on the life of your loan, or possibly lowering the principal amount still owed on the commercial loan. The commercial loan modification professionals at: Commercial Loan Review will not back down. They will reach a commercial loan modification agreement or you have a money back guarantee. Finally, the negotiations will result in the final modification or restructuring of the loan. A new loan agreement will be written up, and you will sign it agreeing to the new loan. Once the papers are signed and processed the new terms of the loan go into affect.

Request your special report Is a Commercial Loan Modification Right for me?.