Kevin Levine, Executive Vice President of Strategic Asset Services (SAS), a company that specializes in commercial workouts and short sales, stated that "in a workout scenario lenders may be willing to reduce the principal balance, in exchange for a full-recourse guarantee by a financially solid guarantor."
Woodland Hills, CA (PRWEB) August 11, 2010
“Commercial real estate lenders generally are motivated to secure a non-recourse loan by adding a strong guarantor,” stated Kevin Levine, Executive Vice President of Strategic Asset Services (SAS) of Woodland Hills, California a company that specializes in commercial workouts and short sales. “In a workout scenario they may even be willing to reduce the principal balance, in exchange for a full-recourse guarantee by a financially solid guarantor. However lenders never will reduce the principal obligation without obtaining something of significant value in return.”
Levine explained that SAS recently was able to negotiate a reduction of a commercial real estate loan with a principal balance of $4.7 million to $3 million. “The lender performed its own valuation analysis, and agreed with our conclusion that the property securing the loan was not worth more than $3 million and quite possibly considerably less,” Levine said. “The building had been unoccupied for some time, and the borrower had given notice to the lender that it would not continue to make the large monthly mortgage payments out of his own funds, plus pay the property taxes, insurance and ongoing maintenance expenses on the property. So the lender was faced with foreclosing on an empty building and holding it for an indefinite period of time, or accepting a new principal balance of $3 million but with a full-recourse guarantee assuring ultimate recovery of that amount.”
“Each lender has its own internal policies and procedures, and business culture,” Levine explained. Some lenders have policies in place that absolutely prohibit entering into a principal reduction with the existing borrowers. In those cases, we often can negotiate a short sale or note purchase to a third party. In other situations, the lender has no formal policy prohibiting a principal reduction; but the business culture is resistant to such a result, and we have to present a compelling case as to why this is the best course for the lender to follow in order to maximize its recovery in an already bad situation. Often there are multiple levels of authority to be convinced: loan officers, asset managers, problem loan committees, and board of directors.”
SAS (www.strategicworkouts.com) offers commercial loan modification and short sale services in California and throughout the country. The company is dealing with multi residential, retail, offices, industrial, land and its specialists bring extensive commercial real estate expertise to each assignment, including market analysis, valuation, legal, and negotiation experience. Each borrower’s unique lending situation is fully analyzed, and the borrower is assisted in preparing current operating reports and projections. Based on the detailed analysis, SAS submits to the lender a loan modification proposal. That proposal may include a principal reduction, interest rate reduction, and waiver of penalty charges. In those instances where a loan modification will not work to the mutual benefit of the borrower and lender, SAS will attempt to broker a short sale of the commercial real estate at a significant discount from the loan balance, or will seek to negotiate a sale of the note to a third-party.
SAS is a member of the Peak Corporate Network (www.peakcorp.net) headquartered in Woodland Hills, California. In addition to commercial loan modifications, PCN offers mortgage lending, loan servicing, residential short sale, 1031 exchange, trustee work, foreclosure services, Escrow and real estate sale brokerage services. These services are available primarily throughout the Western United States for both residential and commercial real estate properties and loans.
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