Lenders are very interested in helping borrowers in the modification of their commercial loans. Commercial real-estate borrowers used to get help easily before than they do these days. As commercial mortgage modification comes into existence, borrowers, who qualify, are able to negotiate in terms of reducing the interest rate, extending the term of their loan, deferring past due balances and extending interest-only payments for unchanging period.
Lenders are quite willing to modify commercial mortgages. The reason behind commercial loan modification is that most of the commercial mortgages in the U. S will have balloon payments, which borrowers are not able to satisfy. Hence, it is obvious that the borrowers need to refinance when balloon payment becomes due. As financial institutions do not want to lend money, borrowers have got trapped in a situation that they make huge payments or go onto default as they are not capable of refinancing. Nowadays, it becomes commonplace to do commercial mortgage modifications, due to unwillingness of lenders to foreclose on properties.
Previous limitations about modifications have been relaxed by the Internal Revenue Service for fixed kinds of loans that is particularly held by REMIC’s. It means that borrowers got a chance to escape defaulting for getting a modification. Such a novel and beneficial change even advances a low-risk and smooth transition for all of those involved in it.
This means a modification can occur even if a hardship is foresighted in the future, such as a balloon payment coming due a year from the date, the borrower applies for a modification. This is a boon to borrowers: no longer do they have to go into default, ruin their credit and risk foreclosure, just to get a modification. Now, let us see how to apply for a commercial mortgage modification. Before lenders get informed by borrowers about the modification, loan documents of borrower should get reviewed.
Documents that are supplied by borrowers, to lenders, for modification are same as the ones the borrowers submit with the original loan application. Essential documents include profit and loss schedules, tax returns and proof of accounts. Lenders also need to provide borrowers information of present leases, payment histories of tenants, if the borrower is a landlord.
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