As the nation’s housing market and overall economy has struggled to get on track, the impact to commercial loans has been severe.
Declining values, which have been such a prominent problem in the housing industry, have dealt a blow to numerous commercially-owned properties.
What has happened is that in difficult times, numerous businesses have had to either closed their doors or dramatically cut back. As a result, commercial property owners have seen their rent rolls dramatically reduced leading to less income which of course means less ability to pay the mortgage.
It’s similar to when an individual loses his or her job and no longer has the same money to pay back a home loan that was otherwise affordable.
Because values are so closely tied to how much money the building can make, these commercial properties aren’t getting the same valuation when the owner applies for a refinance. This causes it to get turned down and the owner has a loan that is simply not affordable in current market conditions.
Using Commercial Loan Modification to Remedy the Problem
The idea of commercial loan modification is the same as with homes. Modify existing terms that are otherwise impossible to remedy through negotiations with the lien holder.
The entity backing the mortgage has incentive to modify in order to avoid foreclosure while the owner needs a solution to keep the building operable.
With $1.4 trillion in commercial loans coming due between 2010 and 2014 and a large percentage (reportedly as much as 65%) of these loans being impossible to refinance, modification is essential to not only individual property owners, but the nation’s economy as a whole.
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