The Advantages of the Commercial Loan Review

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Posted by admin on 25 Feb 10 - 0 Comments

Commercial Loan Modification

Individuals or companies that own commercial properties, such as retail shops, shopping centers, strip malls, apartment complexes and warehouses, can benefit from commercial loan modifications if they are no longer capable of coming up with the installments.  However, one of the prerequisites for such modifications is a commercial loan review.  Both parties have their own agendas for a review so that a loan workout can be agreed upon that would be beneficial for all.  For the borrower, this review is required to analyze the various details of the original loan contract to discover any violations made by the lender against certain regulations.  On the other hand, the lender will require a commercial loan review to assess the capability of the borrower to repay the loan after a loan restructuring.

The lender usually conducts a commercial loan review first before permitting the negotiations for the restructuring of the debt to start because this will show if the individual or business can really afford the monthly payments after they have been reduced.  This particular review will examine various data with regards to the borrower, such as the payment history, the business cash flow, and whether there are any guarantors.  This review is one of the deciding factors for bank on whether to allow the restructuring of the loan.  Basically, what this means is that there is no sense in wasting time negotiating and then approving the adjustments if the borrower does not have the capacity to keep up with the payments.

Meanwhile, a commercial loan review has a vital and different purpose for the borrower.  The property owner often gets the services of loss mitigation experts and professionals to examine the details of the original loan contract to see if the lender had violated any laws and regulations on the protection of borrowers’ rights.  It has been the observation of many that during the years when commercial loans were being provided in large numbers, many lenders had cut corners and in the process had violated certain laws and regulations that are supposed to prevent lender abuse.  If such violations are found in the contracts, the banks would not be able to implement any of the provisions that are contained therein, including foreclosure.  Therefore, this is a very important negotiating tool for the borrower that could speed up the approval process.

And if foreclosure proceedings have already been filed by the bank, a commercial loan review can also provide assistance.  If the previous agreement contains such violations, the court may put the foreclosure process on hold until such time that a judgment has been rendered on the claims of the borrower.  The property owner may even halt mortgage payments although it is advisable to set aside these payments and let them accumulate in a separate account, just in case the court rules in favor of the lender.

Therefore, a commercial loan review is important for both borrower and lender although they have divergent purposes.  For the lender, it is a tool for evaluating the creditworthiness of the borrower but for the borrower, it is a negotiating tool in the event that violations are discovered in the original loan contract.

For further information visit http://www.commercial-modification.com

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