Commercial Loan Restructures:
THE TIMES
This economy presents unique challenges to commercial real estate borrowers and holders of CBMS loans. Many borrowers have defaulting loans. A good percentage of these defaulting commercial loans are not the result of poor business decisions, but more a product of the year they were initiated. In fact, the rate of such defaults accelerated from 1-10% in 2008 and is expected to double in the next year. A common scenario involved is a retail property that lost tenants and therefore cash flow that it depended on to repay the loan. This results in a loan that’s greater than the property is worth.
ALTERNATIVES TO FORECLOSURE
What are your alternatives to foreclosure? There may be many choices – such as Payment Relief, Debt Deferral, Debt Forgiveness or Extensions – but it can be difficult to know which modification or combination of debt restructuring is right for your situation. Creative hybrid variations are also sometimes available. The process to figure this out, however, can be an overwhelming and confusing experience. To better understand, a restaurant scenario is offered, below.
ANALOGY – A MYSTERIOUS RESTAURANT
Players : Restaurant/Chef & Menu (Loan Restructuring Options)
Waiter (Special Servicer who services defaulted loans)
Customer (Borrower)
Knowledgeable Friend (Borrower Advocate)
Waiter (Special Servicer who services defaulted loans)
Customer (Borrower)
Knowledgeable Friend (Borrower Advocate)
THE BORROWER is a customer in an unfamiliar restaurant. The restaurant advertises serving great food that the BORROWER-customer needs and wants. The RESTAURANT/CHEF represents that MENU of options to service that defaulting loan.
The WAITER is the key to accessing the MENU that the restaurant serves, but the WAITER is not providing the BORROWER-customer with the restaurant’s menu. The WAITER is the Special Servicer to a defaulting loan. This is the party that a loan is transferred to when it’s defaulting/defaulted. The WAITER-SPECIAL SERVICER is the only party in this scenario who can offer loan restructuring when the borrower’s loan is in trouble. However, they are only a conduit to the options.
The WAITER is the key to accessing the MENU that the restaurant serves, but the WAITER is not providing the BORROWER-customer with the restaurant’s menu. The WAITER is the Special Servicer to a defaulting loan. This is the party that a loan is transferred to when it’s defaulting/defaulted. The WAITER-SPECIAL SERVICER is the only party in this scenario who can offer loan restructuring when the borrower’s loan is in trouble. However, they are only a conduit to the options.
The BORROWER-customer can just randomly ask for menu items (solutions) she’s heard restaurant’s sometime serve, hoping to land on an item that’s in season and available. But, a better and more beneficial strategy is for the BORROWER-customer to bring along a KNOWLEDGEABLE FRIEND who eats at this restaurant daily and knows everything that’s served. This KNOWLEDGEABLE FRIEND is familiar with special, custom combination dishes the chef prepares , as well.
So, the BORROWER-customer talks over his dietary needs and desires with the KNOWLEDGABLE FRIEND and figures out first what they wants to eat, then presents it to the WAITER-SPECIAL SERVICER. The WAITER presents the selections to the CHEF with priorities of dishes noted. Everyone is happy. A satiating, hit-the-right spot meal is presented. You’ve reduced the WAITERS time, the CHEF is making the dish that works best for the BORROWER-customer’s appetite, and the knowledgeable friend becomes a resource for dining again.
A KNOWLEDGEABLE GUIDE SINCE 2005
1st Service Solutions can be your knowledgeable friend at the mysterious new restaurant of restructured commercial loan solutions for CBMS loans. They assist in translating your specific loan modification needs into getting solutions best tailored for your particular situation. For more information visit: www.1stservicesolutions.com and www.facebook.com/1stservicesolutions .
1st Service Solutions serves as a Borrower Advocate in loan restructuring and assumptions. After all, it’s generally in everyone’s best interest to avoid foreclosure and find the best, most creative menu of options by which to do so.
For more information or for any other assistance , follow 1st Service Solutions on Twitter, Like us on Facebook and visit our website athttp://www.1stservicesolutions.com