Real estate loans in default: strategy for lenders

Article Abstract:

A loan that has turned bad changes the relationship between a borrower and a lender. Since the attainment of profits has become questionable, both sides would like to minimize risks and retain the value of the assets which secure the loan. The loan will have to be restructured and this presents to lender a with chance to improve his negotiating position. The alternatives which a lender may consider are, to change the loan from nonrecourse to recourse, to control the income earned by the property, to request for a relief from the automatic stay and to transform the terms of the loan agreement.

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The myth of the yield maintenance formula

Article Abstract:

The so-called 'yield maintenance' premium is a pre-payment premium commonly used in commercial mortgages. The term 'yield maintenance' is a misnomer, however, as the premium most frequently furnishes lenders a considerably higher yield in the event of a pre-payment than they would otherwise have received had the loan payments been remitted until loan maturity. Furthermore, there is a considerably greater risk of unenforceability of the yield maintenance premium than that perceived by the lending community, especially if the borrower is in a bankruptcy proceeding.

Secured transactions, Debt prepayment

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Commercial real estate loan underwriting revisited

Article Abstract:

Real estate loan underwriting is a procedure wherein lenders assess both the quantitative and qualitative factors involved in a loan. The main elements of a loan are the property, the people and the deal. Properties are evaluated on their underwriting value as determined by appraisal reports. The people, or the borrowers, are evaluated on their credit standing, reputation and capacity to maintain the property to be built. The deal is assessed on repayment sources and risks involved.

Methods, Valuation

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