On Tuesday June 7, 2011, at 2 p.m. ET, The TASA Group, Inc., in conjunction with commercial mortgage financing and appraisal expert Bruce Coin, presented a free, one-hour, interactive webinar, Commercial Mortgage Lender and Borrower Foreclosure Issues, for legal professionals.
Numerous commercial mortgage defaults and bankruptcies have occurred and will continue to occur during 2011 and into 2012. The five leading causes of commercial mortgage defaults and bankruptcies are:
* A dramatic increase in the property’s vacancy in combination with a decline in market rental rates that caused the property’s value and annual net operating income to diminish significantly and in some cases by 50% or more.
* The property‘s 1st lien, 2nd lien or mezzanine financing has come due and cannot be easily repaid because the purchaser grossly overpaid for and over financed the property.
* While the property continues to have enough income to pay its expenses and even debt service, appropriate reserves were never properly anticipated and created and, therefore, the property does not have sufficient cash available to pay the tenant finish and leasing broker commission costs necessary to retain and/or attract new tenants to minimize vacancy.
* The interest rate on the mortgage increased so much, due to an existing formula, that the property’s net income cannot pay its debt service.
* Bad management, often with interests that are in conflict with ownership.
Among other items the webinar addressed:
* Lender issues to be investigated and actions to be considered when a default occurs
* Borrower issues and actions to be addressed when the potential for default is imminent
* Some special problems to be confronted when dealing with a defaulted or defaulting loan that is in a Commercial Mortgage Back Securities pool.
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