Commercial mortgage modifications a challenge

In spite of increased traffic and interest in our commercial mortgage modification portal (see International Business Times) actual loan workouts have been scarce. Says Dempsey Mork of Whiehall Montegue and Associates, "the servicers of commercial mortgages which have been securitized (CMBS) are subject to strict servicing agreements and do not have the authority to modify the loans in many cases, as they do in the residential market." Whitehall consults owners of commercial property that hope to get their loans modified. He goes on to say that these loan servicers tend to be the same people that would underwrite the loan to begin with and are typically very knowledgable about the projects and their challenges.

A consultant can propose a modification plan that makes sense for all parties. Portfolio lenders are more likely to accept an offer since they actually are the owners of the notes. More often a forbearance agreement is negotiated which delays a foreclosure and gives the owner time to raise cash to bring the note current, file bankruptcy or sell the property.

As the commercial refinancing crisis looms, modifications of existing loans will be difficult and under current market conditions refinancing is almost impossible.

Ted Schmidt
President
Leadsnet, Inc