How Do Mortgage Brokers Deal

By Author: stevenherter
Total Articles: 11
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Industry analysts expect delinquency rates to continue to increase through this year and to peak in 2011. Further, Deutsche Bank estimates that around $2 trillion in commercial mortgages is expected to come due within the next four years.

How do mortgage brokers deal with this potential new business via distressed borrowers? Partnering with a loan-modification company may help.

Short of a loan modification, commercial property-owners may suffer the consequences of losing their income-producing asset, which subsequently will produce unwanted repercussions on the economy. Lending institutions will feel the effects severely if they have non-producing assets in a market flooded with foreclosed properties.

The logical solution is for banks and commercial borrowers to agree on a beneficial modification. There are various modification methods a bank can take. One way is for banks to decrease their rates permanently or temporarily, which can help borrowers avoid foreclosure. A fractional drop in interest rate may eliminate tens of thousands of dollars from a property-owner's annual debt burden.

The point ...
... is to give borrowers time to turn their property back into a positive-cash-flow business. Alternately, banks might extend the maturity dates on loans. This would push back untenable balloon payments and keep the borrower in business.

Because of the technical and legal aspects involved with restructuring a commercial loan, many property-owners may ignore their position and accept foreclosure rather than save their investment. Commercial loan modification companies exist, however, and at times can help stressed property-owners navigate the complex procedures, negotiations and nuances associated with a successful loan modification.

These full-service loan-restructuring companies often have experienced and educated business executives who know their way around a business plan, as well as lawyers, accountants and real estate professionals on staff. They could provide comprehensive and individualized restructuring programs.

By leveraging these professionals' combined experience, knowledge and industry relationships, these companies often can guide commercial property-owners through a loan modification. With a successful loan modification, property-owners can avoid foreclosure, increase their cash flow, weather market changes and be in a stronger position when the economy recovers fully.

A commercial loan-restructuring company will advise borrowers and negotiate on their behalf during the process. The best loan-restructuring companies typically do all the work and negotiation while communicating what is happening to the property-owner at each step of the process.

Mortgage brokers looking to help and develop long-term ties with their commercial property-owner clients should consider establishing a relationship with a reputable commercial loan-modification company. Clients who face foreclosure likely will not forget the broker who helped them find help in a time of financial crisis. In addition, some commercial loan-restructuring companies have referral programs for established brokers.

When facing a potential foreclosure, a property-owner may find a loan modification to be the best solution. The process is rigorous and labor-intensive and requires people with the tenacity, skill and experience to deal with banks, lawyers and real estate professionals. As such, mortgage brokers with commercial property-owner clients in the pre-foreclosure stage or clients heading into turbulent times may find a worthy option in a professional loan-restructuring company that focuses on commercial loans.

Commercial real estate analysts have predicted that approximately 1.5 trillion dollars of commercial loans will be maturing between now and 2013. Most of these loans were initiated during the peak times of real estate valuation, between 2005 and 2007. Since 2007, however, commercial real estate owners have watched as their investments have dropped in value by an average of 40%. Commercial real estate investors who have a loan that is now coming due are facing a dire situation. Most commercial properties purchased with financing during the past five years simply will not qualify for financing of any kind as underwriting guidelines and liquidity have changed dramatically. Below are the steps that a commercial property owner should take when they are evaluating their position for extending the terms of their existing commercial loan, attempting a loan modification or seeking a new loan.