Lender Willingness to Modify Commercial Loans Increases

Commercial lenders throughout the country are becoming increasingly aware of their need to enter into modification agreements with their borrowers, says Kevin Levine, executive vice president of Strategic Asset Services of Woodland Hills, Calif. Levine explained that commercial loan values are falling in most markets, and that the office buildings, retail centers and multifamily residences are losing tenants at an increasing pace due to the economic recession. As a result, borrowers are experiencing compressed cash flow, and are unable to meet their loan payments. "Unless the loan is modified to reduce the payments, the lender inevitably will be forced to commence foreclosure proceedings," he says. "But balance sheets of banks and other lenders are only able to absorb a limited number of foreclosed properties, and that limit is being approached or exceeded by many lenders." When his company first began offering commercial loan modification services in early 2009, many lenders were reluctant to recognize the seriousness of their commercial loan problems and modify the loans, he added. Levine said in the past several months that recognition has increased dramatically. "Commercial lenders are now being compelled to negotiate with their borrowers. It is preferable for them to have a paying asset, even at a reduced return, than to go through the expense of foreclosure and incur property management expenses during a two-three year holding period while attempting to sell the property."