January 2017 was another bad month for CMBS delinquencies. The percentage of loans financed with commercial mortgage backed securities that are now considered delinquent once again creeped over 3.00%. According to the trade publication Mortgage Daily, the long term outlook is even bleaker.
Many of the CMBS financed projects were underwritten in 2006 and 2007. Most of the loans have a 10 year term meaning the loans written in 2007 are just now coming due. Everyone in the real estate profession realizes, of course, that properties reached their peak value in 2007.
In 2008, the proverbial bubble burst.
Many of these projects today have sufficient cash flow to meet all servicing obligations although there isn’t enough equity to get banks to refinance. The CMBS community isn’t stepping up to the plate either.
That gives borrowers several options. They can default and lose all equity. (Sometimes that may also trigger personal guaranties and even “hidden” guaranties which are also called “springing guaranties.”
Option two is to pony up cash. Often that means a lot of cash.
Option three, of course, is to find a willing lender to simply refinance the loan. Unfortunately, for many borrowers that has been near impossible.
The final option is to find a white knight to come in and use their capital to get the property refinanced. White knights come with a price, however. They often want a big piece of the pie.
What should you do if your loan is coming due and you can’t find financing? What should you do if you are already delinquent? Read on.
If you are already in default, find legal help fast. We have counseled many borrowers who simply thought the trust holding their note would renew. Even though they never missed a payment they suddenly find themselves in default. These nonpayment defaults are often called maturity defaults. Once the loan matures, the entire principal balance comes due.
We can work with the special servicer assigned to your note and insure that you are treated fairly. Some of the big special servicers try to take the property for themselves. That means driving down the price and stripping all your equity.
We have successfully helped borrowers with CMBS financed loans refinance. Often then means rolling up the original borrowers and changing the structure of the loan. Sometimes it means working with white knights. If necessary, we can even help you locate a white knight. Although that should not be your first option, unfortunately it is often the only viable option.
Whatever situation confronts you, don’t be the proverbial deer staring at the headlights. There are options but doing nothing surely means losing your equity and sometimes worse.
MahanyLaw and Judge, Lang & Katers – America’s Lender Liability Lawyers
The law firms of MahanyLaw and Judge, Lang & Katers are two independent national boutique law firms that join forces to represent property owners and borrowers. We don’t represent lenders or banks.
Based in Milwaukee, our lawyers have handled cases throughout the United States including Hawaii and Alaska. Using your local attorney, we can also help provide the muscle and experience necessary to bring lenders, CMBS trusts and special servicers to the table. And we have the reputation of taking these same people to court when they won’t play fairly.
Our services are provided on an hourly basis. Since we are headquartered in the Midwest, you get the benefit of Midwest rates. Because we frequently handle these types of cases, we understand the needs of borrowers and can usually handle cases for fewer hours than other larger and more expensive firms.
How is that possible? We don’t need to learn CMBS law on your dime.
For more information, contact attorney Chris Katers at [hidden email] or by phone at (414) 777-0778. The author of this post, attorney Brian Mahany, can be reached at [hidden email].