In these tough economic times, it appears that even players in the “sport of kings” are tightening their waistbands to the dismay of golf course owners and their financial backers. Many posh private courses have had to delay improvements, lower their membership fees, and allow public play for daily greens fees. While this has been a pleasant proposition for the public golfer, it hasn’t made the members who paid hefty membership fees during healthy economic times very happy. The combination of decreased income, increased expenses, and unhappy members has put the golf course portion of the real estate market “in the rough”.

In Arizona alone, 15 golf courses have gone into foreclosure or bankruptcy since the middle of 2008. To date, all golf courses remain open, but many have changed ownership, often at fire-sale prices. Some prestigious courses have sold for as low as ten cents on the dollar. The multi-million dollar Club West Golf Course in Phoenix was recently sold for only $500,000, less than the original price for many homes in the area. Residential properties that border golf courses are also experiencing price drops and foreclosure increases.

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For those who are considering a new commercial real estate loan, it is important to know that commercial-backed securities (CMBS) are experiencing historically high delinquency rates. Not only will this affect future interest rates, it may mean that banks and other financial institutions will be tightening their belt and approving fewer loans regardless of the borrower’s past history or ability to repay the loan.

The overall delinquency rate has climbed from a relatively normal 2.77% last year to the historical high of 8.42% in May, 2010. For, seriously delinquent loans (this figure eliminates anything under 60 days past due) the current figure is 7.55% while last year’s rate was 2.18%. Fitch Ratings forecasts that this trend will continue through the end of 2010 and will exceed 11% by the end of December.

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An increasingly popular tactic that’s being used by banks to avoid writing off bad loans – and, in turn, taking huge hits on their capital – could be setting the stage for even more dramatic economic woes. The tactic is popularly referred to as “extending and pretending,” and it takes many different forms. Stretching out maturities and extending below-market interest rates are two of the most popular techniques. These strategies allow banks to prevent the default of billions of dollars of loans that were made during the real estate boom; however, they may be drawing out a process that could ultimately trigger their demise.

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It’s one thing to know that there is an elephant in the room, but it’s a totally different situation when no one is willing to vocalize that there is an elephant in the room or talk about the problem that it is causing. This may well be the situation with many banking institutions at present. In spite of the government’s attempts to buy time for the recovery process by promoting their supposed re-gained health and vitality, the stark truth is that business at your local bank may get much worse before it gets better.

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While you may understand some aspects of the loan workout process, you may not know all of your rights. We feel it is better to at least be educated before deciding to go through with the process on your own. Although you may want to have complete control of your situation or not want to pay more out of pocket to find help, realistically you could be costing yourself more distress by taking the reins. You’ll experience much less pressure if you can remain out of direct communication with your lender – let us tell you why.

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