Getting a business loan solution can be a very labor intensive process. Having all your “ducks in a row” is key to a successful workout. For homeowners who are unable to refinance, have an upcoming balloon payment, defaulted on their mortgage, or are facing foreclosure, a commercial loan solution can accomplish one or more of the following:
1. Reduce the interest and/or principal amount
2. Extend the reset period or due date to delay the balloon payment
3. Defer payments
4. Temporary interest-only payments
5. Avoid foreclosure
Please review the following five steps:
1) Required paperwork
The required documentation is obtained from the owners. Necessary documents: List of rents, copies of the expenses of the last year, rental contracts, copies of the mortgage note, etc. Not having all the required documents could delay the entire process.
2) Research analysis
Before a business loan solution is submitted to the lender, a financial snapshot of your situation is needed. The lender is primarily concerned with your ability to pay each month if your loan has been restructured to more favorable terms. Determining current market value, rental rates, and recent comparable sales are also important factors to consider. Once the note review is complete, an exercise pack is generated.
3) Presentation of loan
Once a delivery confirmation is received from the lender, the filing package is sent to a restructuring specialist. Failing to confirm receipt of the restructuring package by the lender could mean your file gets stuck somewhere in the mailroom for weeks or “lost in never-never land.”
4) Negotiation process
The restructuring specialist reviews the package and submits a loan modification offer. Sometimes the property owner or third party negotiation firm will counter offers until an agreement with favorable loan terms is excepted. The entire process from start to finish can take 2-3 months to complete. Stay in regular contact with the lender’s exercise specialist until a proposal is received.
5) Final approval
Once the lender approves the newly restructured home loan, a proposal is submitted to the property owner for review. The owner can expect the following options: deferred payment, lower interest rate, extended due date, increased cash flow, or principal reduction. The lender may offer any combination of options. Finally, the modified loan documents are signed by both parties to make the changes official.
With so many commercial property owners unable to meet their mortgage obligations, commercial lenders are now willing to modify their existing mortgage loans to avoid foreclosure. The key to preventing a default is to be proactive and contact your lender or seek the help of a professional third-party commercial loan restructuring firm.
Commercial mortgage loans are much more complex than residential mortgage loans. Hiring a professional commercial loan servicing company can help you navigate through the negotiation process with your lender.
