Current Real Estate Climate Make Commercial Mortgage Loans Hard to Obtain

Gone are the boom days of commercial real estate serveral years ago. Since 2007, commercial property values have declined over 40%, according a report by Moody's. Along with increasing default rates, obtaining a commercial mortgage is tougher indeed. Note what an artice written by Emily Maltby in the Online Wall Street Journal had to say regarding getting approved for a commercial mortgage: "Many banks taking extra precaution before issuing commercial mortgages are reeling from those kinds of losses and are wary of putting more of those loans on their books. According to a Real Capital Analytics' study of Federal Deposit Insurance Corp. and bank data, the default rate for commercial real-estate mortgages rose to 4.2%, amounting to $45.5 billion, for the first quarter of 2010. That's the highest default rate since 1992."

Banks don't want additional "toxic" commercial mortgage loans on their books. A good portion of commercial mortgages issused within the past few years are held by local and regional banks. Many of those loans are due to reset, from now until 2014. Without obtaining needed financing, a flood of commercial mortgages will go into default.

Commercial loan workouts can prevent distressed commercial properties from going into foreclosure by offeriing forbearance agreements, reducing the interest rate, extending the loan term, resetting the balloon payment and reducing late fees. For property owners, there are no credit or background checks to qualify for a commercial loan workout. Banks will weigh their options carefully: Foreclosure vs loan workout. Foreclosures can be very expensive to banks.

In constrast, if the borrower has enough cash flow to make mortgage payments, then a commercial loan workout to make payment arrangements or restructure their existing mortgage loan may prove to be beneficial, both to bank and borrower.

For information on obtaining a commercial loan workout, please visit:

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