Look to past deals to help lenders determine when they can restructure distressed loans
Charles E. Calhoun, director of client services, The Rockport Group LLC
As published in Scotsman Guide's Commercial Edition, April 2010.
In recent years, the standard practice for mortgage brokers closing commercial real estate loans was to negotiate, sign and file -- then move on to the next deal before the ink dried on the last. In today's market, though, the next deal may be a long time coming.
Don't be afraid to look back while you wait. As problems fromthe past creep into view, mortgage brokers can help lenders restructure troubled loans and get them back on track. Ultimately, it comes down to thorough, up-to-date and transparent information.
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This past Oct. 30, the Federal Deposit Insurance Corp. (FDIC) issued a policy statement on prudent commercial real estate loan workouts (see sidebar on next page). According to the FDIC statement, lenders should consider three key aspects for problem loans and loan-workout arrangements:
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The borrower's repayment capacity
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Guarantees
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Collateral values
To understand these, the lender must have good information at its disposal about many issues on each loan and property. Mortgage brokers likely collected the needed information when originating the loan and may still possess it. In fact, because you often are a mortgage borrower's principal contact, you likely can help lenders and borrowers communicate current situations, understand market changes, and give direction as workouts and restructurings develop.
The FDIC states that loan-holders must consider the facts and circumstances tempered by good judgment to reach a decision on how to treat problem-loan assets. This involves monitoring the property and debt-payment status constantly and tracking efforts and outcomes regarding the debt restructuring. When there is more than one loan on a property, they must understand each segment of a property's debt and analyze it individually, in addition to the specific segment or segments each lender owns.
Brokers can help lenders and borrowers alike with the following steps.
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