Defaulted Commercial Mortgage Debt
Defaulted Mortgage debt can be favorably worked out under certain circumstances, as follows:
If the liquidated value of the real estate is LESS than the current mortgage, the mortgage can be bought out for this lower liquidated value by finding a third party to purchase the building for its current value and then leased back to the business.
This requires acquiring a new mortgage to replace the existing one with a much lower value, thus experiencing a real benefit. This must be done by a party other than the defaulting borrower.
When unable to find someone to qualify to purchase the real estate as described above, there can be the option of working with the lending bank to keep possession of the space. The bank will take possession of the property through a deed in lieu of foreclosure or through traditional foreclosure methods and then agrees to lease the space to the business currently operating in it. Banks explore this options because buildings producing rent are more valuable – Better to have an occupied building than an empty one.
Many options exist and choosing the best strategy will be crucial to the operating business. Being proactive and coming to the lender with a comprehensive plan is the only way to assure success.
Contact us for a free consultation to discuss a strategy that best addresses your business and real estate.