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Loan Modifications Difficult Even for Owners of Commercial Real Estate

March 24, 2010

Residential loan modifications have been getting attention and sympathy in the media for more than a year. But as Rancho Cucamonga commercial real estate loan modification attorneys, we were interested to see an article suggesting that lenders are just as brutal about workouts for commercial loans. A March 21 article in the Las Vegas Review-Journal concerns the trend toward defaults in commercial real estate, which have risen sharply since 2008.

The owners of Flamingo Professional Courtyard in Las Vegas have had trouble finding tenants or getting them to pay agreed-on rent, which translates to not enough income. And like property owners of all kinds, they saw the value of their property sink with the economic downturn, which means they owe $1 million more on the property than its current appraised value. This spelled trouble when the loan came due in February. In a healthy economy, CRE owners can refinance, but that's not possible for underwater investors. Bank of America offered the investors an extension on the loan in exchange for payment of the $1 million difference, a year's worth of interest and agreement to an interest rate hike. The owners told the Review-Journal that they tried for a loan workout instead and emerged from the meeting with a notice of default. The building is in foreclosure proceedings.

The article quoted Nevada real estate attorney Phillip Aurbach, who said banks are not any more inclined to do modifications for commercial loans than they are for residential loans. This is despite several, including Bank of America, having taken TARP "bailout" money, which was ostensibly to keep credit available and prevent further damage to the economy. He suggested that the bank could protect its investment by allowing CRE companies an extra year or two to repay loans.

As Orange County commercial loan modification lawyers, we are concerned about predictions in this article that the CRE market is about to see the same suffering that residential owners have seen over the past year. The wave of residential foreclosures has not been good for the housing market. Thanks to the glut of discounted foreclosed properties, prices have been depressed for a year and are expected to stay that way for at least another year. This has kept prices so low that homeowners who've paid substantial parts of their original loans are still underwater and unable to refinance or sell. For residential owners, this problem can be solved by simply staying put and waiting out the market. For commercial owners, that's not an option because loans come due every few years, not in 15 to 30 years. That means commercial real estate could be the site of yet another economic crash.

Throughout the housing crisis, Howard Law PC has represented clients who are seeking to change a residential mortgage in a way that allows them to keep making payments and stay in the home. In response to the CRE market problems, we are proud to offer the same services to commercial investors. Our Irvine loan modification attorneys have a record of success that includes changes to loan repayment period; lowered interest rates; conversion of exotic or subprime loans to conventional loans; and sometimes principal write-downs. We negotiate aggressively for these and other solutions, using the raw numbers to show why it's better for the lender to consider changes than foreclose. If that won't work, we can and will file lawsuits whenever we find violations of our clients' legal rights.

If you know you need help renegotiating a commercial real estate loan that's due now or soon, you should call Howard Law right away. To set up a free, confidential evaluation of your case, call 1-800-872-5925 or contact us through the Internet today.