Prompted by the current residential real estate crash, The Board of Governors of the Federal Reserve banking system issued and adopted a policy statement last October on Prudent Commercial Real Estate Loan Workouts. The Federal Reserve and the other financial regulators issued this policy statement to update longstanding guidance regarding the workout of Commercial Real Estate loans. Government regulators have found that prudent CRE loan workouts are often in the best interests of the financial institution and the borrowers.According to the experts in the field, there is roughly 3.5 trillion dollars worth of commercial real estate debt in the US and about half is in the hands of community and regional lending institutions. Almost all of this debt is in jeopardy because the refinance markets are currently non-existent. Add to that the plummeting value of these properties and you have a commercial debt crisis like we have never experienced before in this country.The only practical answer on the horizon is a commercial loan modification which is what the Federal Reserve is hoping for. The Obama administration is already planning incentives for commercial lenders to avoid the multi-trillion dollar crises that looms. Many lenders look favorably upon commercial mortgage modifications, and are more willing to work with qualified businesses on problem loan workouts. A commercial mortgage modification is an alteration to your existing loan that would make the terms easier for a business to afford. A commercial mortgage can be secured by hotels, golf courses, shopping malls, apartment complexes, office buildings, shipping warehouses, or any other type of commercial property that does not fall into the 1-4 unit residential property definition.A Commercial Loan modification is not an easy thing to secure and must be negotiated by an attorney familiar with the industry and one who has the supporting documents necessary to be able to approach your lender with a feasible workout solution. A workout solution can take the form of a rate reduction, term extension, principal forgiveness, temporary forbearance, short refi option or any combination of these.If your business has struggled and / or has a note coming due, contact a reputable and seasoned commercial mortgage modification specialist. It can be the difference between bankruptcy and financial health moving forward.
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The Loan Process for Commercial Income Property
With commercial income property being such an important sector of the real estate industry, it is important to have access to high quality loan broker training. In this article we run through the loan process for commercial income property.The loan broker, sometimes referred to as the correspondent lender in the industry, is required to carry out several tasks in their professional role. These tasks involve: finding new clients, building a rapport with them, assisting with their loan application, understanding their financial circumstances and reviewing their business proposals.The first step of the loan process is to find clients. This may involved marketing or advertising in publications that are appropriate for the audience that you can secure them from. For example, business for sale websites and publications are ideal, alternatively investment publications also reach this type of market.Once a potential commercial loan client has been identified, the broker will work together with their client to put together the loan package. This will involve analysis of financial information and completing the application for the loan. The correspondent lender will then liaise between the client and the lender. It is important at this stage for the correspondent lender to understand which lenders and products may suit the circumstances of the client.Gathering of information would now commence with the client providing financial information and history to the correspondent lender. The broker will need to assess the situational and financial circumstances of the client in order to present the best case to the lender of the commercial real estate loan. It is now key not to overwhelm the client with a barrage of financially related questions, as they may feel under pressure, but to be able to find out information for the application.Support and knowledgeable guidance should be interwoven into conversations with the client. This will go a long way with the client feeling as though they have selected a correspondent lender with the expertise and experience to take them through a successful commercial loan transaction.With homework, and by asking the right questions, it is possible to discover and record all information that will enable the client’s application to be completed within one meeting. Meet with the client wherever they keep their financial documents, this may be at home or their place of business. This enables the correspondent to be able to immediately assess and review the information as it will be at hand to the client.Careful guidance of the commercial income property transaction will need to be provided by the correspondent lender. Commission from the lender will not be paid until the transaction has been agreed and closed. Keeping a positive mind during a transaction is essential for there to be a positive ending. It might be that there are several possibilities to explore with the client and / or lender as the process is underway.