In difficult economic times, the strain is felt by everyone, including entrepreneurs involved in all aspects of creating and running businesses. Considering the fact that commercial property loans are usually the biggest liability of a company, it is no wonder that so many such loans are in default, which only makes the bigger economic picture worse. Bankruptcy is rarely the most beneficial option, even when it seems like the only option. Commercial loan restructuring could be an answer to prevent loan default and bankruptcy, providing a much-needed second chance at survival.Though it is definitely not an easy process, commercial loan restructuring is probably worth looking into at the very least. There is much that needs to be known about restructuring and it may be beneficial if not essential to hire a loss mitigation professional to work on behalf of a business to try to find a resolution. In what could be a highly complex process, experienced professionals are the best way for a failing business to find some type of relaxation on mortgages. Following are some important factors to consider.Commercial Mortgage-Backed Security (CMBS) – These loans can be exceptionally difficult to get restructured because of how they are financed. It is not only lending institutions backing them but private commercial property investors involved with multiple loans and investments. Therefore, one of the main problems in trying to obtain a commercial restructure involves tracking down all loan-backing names to be included in the process.
Special Servicers – There are often difficulties in dealing with ‘Special Servicers’ who are financial professionals that take over commercial accounts that are either into or going into default. The task is to get a debt out of default; with no real connection to either party, frequently whatever can be done to push a loan straight to foreclosure and liquidation is carried out. In some cases, such a direction could be the best thing; however, in many cases especially considering a lot of the CMBS investors will lose money, it is not the best move and investors fight the Special Servicers on foreclosure. Part of the issue with this scenario is that there is little regulation preventing this from happening. When all is over, a fee is paid and the case is considered closed; to the business and investors, it is in most cases a huge financial loss.
Outside Help – The biggest reason for hiring a professional on behalf of a business itself is to analyze things and fight for options other than foreclosure. When done successfully through restructures that might involve interest reductions, principal reductions, or even acquiring the financial support of an additional investor may be a wise move. It is true that this does involve much intensive work, which is the very reason that Special Servicers try to bypass this.
Best Option – With this in mind, it needs to be carefully determined whether restructuring is best for the loan or if it would be better to let Special Servicers handle it all. Change is happening today in regard to such arrangements and how these people are allowed to dictate what happens. Both the banking industries and government have realized that this sector of the loan industry is potentially making things worse for business owners and the economy, rather than better.For businesses unable to pay for commercial property loans, there are not many options to consider when trying to keep afloat in the sea of uncertainty. Many find themselves at the mercy of their particular lender and that group’s investors; it is true that there are definitely better ways to deal with such problems. Obtaining a commercial property loss mitigation specialist is going to be a key factor and may be the only way to avoid the Special Servicer’s chopping block until there is more regulation on commercial restructuring!