Owners of commercial properties, such as warehouses, apartment complexes, strip malls, shopping centers and retail shops, can take advantage of commercial loan modifications if they find that their cash flow is not sufficient for the monthly payments.  However, one of the prerequisites for such modifications is a commercial loan review.  The two parties have different purposes for a review so that a loan workout could be reached that would be a win-win situation for both lender and borrower.  First of all, this review is needed by the borrower to examine the details of the previous loan agreement to find out if the lender had failed to comply with any regulations.  Meanwhile, the lender will need a commercial loan review to evaluate the capacity of the borrower to repay the mortgage after the adjustments have been made.

The lender may allow negotiations for a loan workout only after a commercial loan review has been conducted to assess the ability of the business or individual to come up with the installments in the event that they are adjusted.  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 factors that the lender will consider when deciding whether to approve the loan workout or not.  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.  During the boom years when commercial loans were being approved in large quantities, many lenders had taken some shortcuts and had neglected to comply with laws that were established to protect borrowers from lender abuse.  If the contracts are found to contain such violations, it would be illegal for the banks to apply any of the provisions that are found in them, such as foreclosure.  Thus, this is a vital negotiating tool for the borrower that could facilitate the approval of the application.

A commercial loan review may also be helpful when foreclosure proceedings have already been started.  If any violation is found in the original agreement, the court may order that the foreclosure process be stopped until such time that a decision has been rendered on the allegations.  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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