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Report Outlines Optimism and Pessimism in Commercial Real Estate Market

June 17, 2010

Our Redlands commercial real estate loan modification attorneys have been writing a lot this year about the dire predictions for the commercial real estate market. On June 9, Fortune magazine ran an article outlining those predictions and contrasting them with the optimistic view taken by other observers. In fact, the article starts by posing a question: Where is the commercial real estate crash that was predicted? It gives a lot of potential answers to that question, depending on the observer's perspective as well as the segment of the market being examined. But in the end, the article notes that commercial real estate has a tough road ahead even if investors are optimistic.

The article starts with non-securitized CRE loans. In that area, some observers -- notably including Elizabeth Warren, TARP committee chair and financial watchdog for the Obama administration -- are predicting a market meltdown that will trigger failures of small to mid-sized banks with too many investments in bad assets. On the other side are people who believe the market will bottom out rather than collapse, thanks in part to government intervention. Investors are also helping themselves by finding creative ways to restructure their debts, and some investors are eager to get back into the market while prices are still low. Meanwhile, investors in commercial mortgage-backed securities have more to worry about, the article suggested, because a great many of them written during the boom years have low ratings. And speculative commercial loans not backed by assets, such as construction loans, are also risky and have already contributed to bank failures.

As Newport Beach commercial real estate loan modification lawyers, we hope the optimists are right. We and our clients would prefer an economic recovery to another real estate crash, especially one involving loans big enough to bring down banks. If you are looking for reasons to be hopeful, this article might give you some reasons, especially as to conventional, non-securitized CRE loans. However, a commercial real estate recovery relies on investors to make smart choices -- and on lenders to allow some out-of-the-ordinary financial moves. In our role as loan modification attorneys throughout the residential mortgage crisis, we saw repeatedly that lenders did not want to do anything they considered risky or a threat to their bottom lines, even if it made long-term sense for both parties.

Howard Law PC represents commercial real estate investors who need help convincing lenders to grant a loan modification or other changes to a loan. Commercial borrowers have been put into a tight spot by the realities of the recession, with rents falling so far that they can't make enough money to meet their debt obligations. At the same time, real estate prices have dropped so low that many borrowers are underwater, which means they don't have the flexibility to renew or refinance their debt. Under these circumstances, borrowers may have to default if the loan matures before the market rebounds. Our Los Angeles County commercial real estate loan modification attorneys help clients fight for another option: a loan workout that allows them to stick it out until the market improves. We negotiate aggressively to convince lenders that this is in their own best interests as well as our clients', and if appropriate, we can make the point clear with litigation.

If you're running out of time on a commercial loan and you'd like to explore your legal options, you should call Howard Law for help. To set up a free, confidential case evaluation, please contact us through the Internet or call 1-800-872-5925.