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INFORMATION CENTER
- What are the differences between a Commercial Loan Workout and a Modification?
- What is a Commercial Loan Modification?
- What can Breakwater do for me in a Commercial Workout?
- What is Breakwaters Commercial Workout Process?
- How do commercial loan workouts succeed?
- What are the types of commercial properties you can modify?
- How Do I Qualify For A Commercial Loan Modification Plan?
- Is it more difficult to modify large commercial properties?
- What if I filed for bankruptcy?
- What is a Short Sale?
- What is a forensic audit?
- What do I do if my loan process was unlawful?
What are the differences between a Commercial Loan Workout and a Modification?
Breakwater specializes in Commercial Workouts, which may include a loan modification. Typically, a workout will focus on a release of personal guarantees, principal reductions, and other complex tactics allowing either the current owner or a ‘white knight investor’ to retain the property while addressing potential tax implications.
What is a Commercial Loan Modification?
A commercial loan modification (or loan restructuring) is a change in the terms of your commercial real estate loan negotiated between our team and your lender. In a successful modification, your loan may be restructured in a number of ways. The most common possibilities include a change in your loan payments such as a short-term interest only structure, a reduction in your interest rate, an extension of your maturity date or a reduction in your principal amount, or a combination of these.
What can Breakwater do for me in a Commercial Workout?
The solutions we offer our clients include but are not limited to:
- Release of the Personal Guarantee
- Principle Reduction
- Interest Rate Reduction
- Term Extension
- Minimize Tax Exposure
- Preserve Equity
- Clear out Non-Performing Assets
What is Breakwaters Commercial Workout Process?
We divide our services into 2 Phases:
Phase 1
- Analysis of the strengths and weaknesses of the clients financial situation including:
- Personal
- Assets
- Tax considerations
- Financial Institution
- Generate recommendations based on our findings
- Present potential strategies for Phase 2
- Take full responsibility and negotiate on the clients behalf
- Implement Phase 1 Generated Strategies
- Direct negotiations with lending institutions
- Written communication
- Verbal Communication
- Address Tax Implications
- Address capital considerations
- Bring about a successful resolution in the shortest timeframe possible
How do commercial loan workouts succeed?
The central aspect of the workout process is research and analysis. Once all the components of your financial situation are taken into account, the next step is to review your current loan, and consider all the options available for your particular situation. We have found that when our clients talk openly and honestly with us about their situation, we can best serve them in the workout process. We work with you during the modification process to get all documents and forms compiled. Once everything is in place and agreed upon, the proposal is presented to the bank for approval.
What are the types of commercial properties you can modify?
A loan workout can be performed on practically any commercial property.
- Land
- Development-Any product
- Office
- Industrial
How Do I Qualify For A Commercial Loan Modification Plan?
The main question a bank or lender will need to answer before renegotiating a loan is: Will the cost of foreclosure be greater than the cost of a loan modification? The lender's decision will be based on their best interests. Your ability to successfully negotiate a plan will depend on many factors. Some of these factors include:
- Amount Of Equity In The Property
- Past Payment Experience
- Costs Of Foreclosure
- Borrower's Financial Position
- Borrower's Willingness To Retain Property
- Local Market Conditions
In addition to these factors, many commercial loan modification plans will depend on the financial situation of the borrower's business. The lender must feel confident that the commercial property owner will produce enough profit to service the new payment successfully. Regardless of whether the property in question is a single family rental unit, multi-family apartment building, or retail property, your lender will request a business plan. The plan should include realistic numbers and a convincing explanation as to why the restructured plan will work. Be prepared to present a realistic proposal and back it with solid numbers. Consider seeking the services of an accountant, attorney, or experienced loan modification consultant. A negative result could mean the loss of a property and a business.
Many banks have created special legal departments to deal with the protection of their interests.
Is it more difficult to modify large commercial properties?
For larger commercial properties such as large retail, office complexes, and manufacturing facilities, the process of commercial loan modification becomes more complicated, but not overwhelming. Borrowers tend to be large corporations and lenders range from individual banks to large securitized real estate trusts. Often times the process is very similar to that of a smaller commercial property just on a larger scale. As with many things, the bigger the objective, the more professional help is needed.
What if I filed for bankruptcy?
If the LLC has filed a claim and it’s in the early stages then we can still do a workout.
What is a Short Sale?
As the name might imply, commercial short sales, as an alternative to foreclosure, can permit commercial borrowers with proven hardships to sell property to a third party for an amount less than the balance of the existing loan. Our staff of professionals have extensive experience and a high understanding of short sales and what they can mean for our clients. If a short sale appears to be the best alternative to foreclosure for a client, we will work hard to negotiate the best possible terms. In a short sale, the borrower must prove financial hardship to the lender. If this is done successfully, the lender will give the borrower permission to proceed with the short sale. The lender, in effect, agrees to accept less than the amount owed on the loan, and releases the borrower from the note rather than allowing the property to go into foreclosure. However, many times the commercial property owner is responsible for the difference of money that is discounted on the short sale and is forced to pick up the difference as additional income on their tax return. This could end up costing the property owner to show unwanted gains on his or her tax returns and may put that person in a higher tax bracket. Our Firm can advise you on how to avoid this costly mistake.
Foreclosures can be devastating to credit ratings and that can create major issues for years. Short sales are often the last-ditch effort to prevent foreclosure, and while they probably won't keep your credit rating at its previous level, they can be far less devastating than foreclosure. With proper mortgage mediation and professional guidance, a short sale can set you on the road to financial recovery. Many lenders prefer short sales, since their losses on loans will be far less than they could be in foreclosure proceedings. Most are willing to consider the most cost-effective way out of any financial crisis. Short sales are a less expensive and much faster way to relieve some of the consequences of unexpected financial hardships.
What is a forensic audit?
A forensic audit is an in-depth evaluation of your loan documents you signed at closing which will determine whether or not your bank or lender has violated any state or federal laws regarding the interest rate, pre-payment penalties, excessive fees, high cost loans, fraud, Truth in Lending Act, and the Real Estate Settlement & Procedures Act known as (RESPA). All promissory notes must comply with the fair lending laws. Any error or omission on the part of a lender or their agent constitutes a violation. If a note contains state or federal lending violations, the Loan is NOT enforceable.
What do I do if my loan process was unlawful?
Borrowers often have more leverage than they think. Building a defense often means accumulating lender issues one by one and documentation issues may present significant leverage to negotiate a settlement.
