(PRWEB) May 10, 2012
“Declining commercial real estate property values have significantly reduced borrowers’ abilities to refinance their maturing loans,” stated Kevin M. Levine, Executive Vice President, Peak Asset Solutions (http://www.peakassetsolutions.com). “Many of those properties were acquired through lender financing in the mid-2000s, at the height of the real estate boom,” he said. “But now those loans with shorter-term maturities, due in five to seven years, are increasingly defaulting due to the refinancing barriers resulting from reduced property values. In many cases, the properties securing the loans are worth considerably less than the loan balances.”
Levine explained that a borrower may have remained current in making the loan payments. But if the loan has matured, the lender cannot renew or extend that loan without creating a problem asset reserve against the portion of the debt that is now essentially unsecured. This becomes a direct hit to the lender’s earnings in the period in which the reserve is created. And that same value decline prevents the borrower from refinancing the property elsewhere.
Levine added that, “Given the choice of renewing or extending the loan while creating the large problem asset reserve, versus foreclosing, many lenders will elect to call the loan and foreclose. Then they are at least able to gain control of the property and take such actions as they deem best to begin to restore the value.”
Levine pointed out that the borrower has a number of alternatives available to it in such a situation. “The borrower can attempt to negotiate a short sale of the property,” he said. “But the lender will have to approve the sale price and, if there is a full recourse guarantor, settle the guaranty obligation as well. Another alternative that we often recommend is that we locate a third party to purchase the loan at a substantial discount from the original lender. That third party then negotiates a reduced payment plan with the borrower.” Levine added that, if the borrower and lender cannot agree on a solution, the foreclosure usually proceeds with the end result that the borrower loses the property.
“Short sales and foreclosures negatively affect the borrower’s credit. And there can be federal and state tax liabilities for the borrower in addition to losing the property,” Levine concluded.
Peak Asset Solutions offers commercial loan modification and short sale services in California and throughout the country. The company’s personnel bring extensive commercial real estate expertise to each assignment, including market analysis, valuation, legal, and negotiation experience. Each borrower’s unique lending situation is fully-analyzed, and the borrower is assisted in preparing current operating reports and projections. Then, Peak Asset Solutions drafts and submits to the lender a loan modification proposal. That proposal may include a principal reduction, interest rate reduction, and waiver of penalty charges. In those instances where a loan modification will not work to the mutual benefit of the borrower and lender, we will attempt to broker a short sale of the commercial real estate at a significant discount from the loan balance, or will seek to negotiate a sale of the note to a third-party.
Peak Asset Solutions is one of the entities in the Peak Corporate Network headquartered in Woodland Hills, California. In addition to commercial loan modifications, the Peak Corporate Network entities offer mortgage lending, loan servicing, residential short sale, 1031 exchange, escrow services, trustee work, foreclosure services, and real estate brokerage services. For more information, visit http://www.peakcorp.com.
The Peak Corporate Network is a brand that represents a group of separate legal entities, each providing its unique set of real estate services.