Commercial Loan Workouts to Rescue Distressed Strip Malls From Foreclosure

For strip mall owners who are concerned that their properties may be foreclosed, salvation may come in the form of commercial loan workouts. These mini malls or shopping plazas are just some of the potential victims of the economic crisis because more people out of work means less sales and revenue for renters. The result is that a substantial number of these businesses may close shop or move to locations that allow them to have more customers. The exodus of lease holders will in turn cause a significant drop in the monthly income of the strip mall owners. For some, this is an unfortunate situation because their ability to make the mortgage payments may be severely affected and put the property on the troubled road to foreclosure.What is needed is a strip mall loan modification that will make some adjustments to help the owner avoid default. Examples of these changes are the deferment of payments for a certain period of time, a decrease in the principal amount, and the reduction of interest rates. Meanwhile, because of the potential decrease in monthly payments, banks normally do not encourage a commercial loan modification.This is understandable, especially when there is an unusually large number of applications for commercial loan workouts because of the poor state of the economy. This could result in drastic changes to the bank’s business plans. Thus, the lender has the tendency to disapprove the request, unless the borrower is able to convince the bank that it would lead to better results than a foreclosure.One of the strategies being applied by expert companies that offer their services to borrowers to make the negotiation process easier and less stressful is the use of a commercial loan audit. This is a vital step in the preparation process for negotiating with the bank. Here, the loan documents are carefully examined to find out if the lender had violated any laws that protect borrowers from unfair lending practices. This is an important step because it has been found that a substantial percentage of the loans that were offered during the boom period contained violations that were caused by the banks taking shortcuts. Because of the unusually large number of loan applications, the lenders often resorted to such shortcuts despite the fact that they are against certain laws.When such violations are discovered, the negotiating power of the borrower would be increased. There are severe penalties for such violations, aside from the resulting inability of the lender to implement the provisions of the mortgage agreement. What this means is that the bank would be unable to foreclose the property and in the event that the foreclosure process has already been started, the court will order the lender to put it on hold until it has reached a decision regarding the case. Thus, armed with such knowledge, the borrower would be in a better position when requesting for a change in the payment schedule. The bank would be more than willing to carefully examine the possibility for an adjustment to the commercial mortgage.

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