IRS Eases Restrictions on Commercial Loan Modifications

In this article

The IRS has issued a new rule IRS Revenue Procedure 2009-45 IRS Revenue Procedure 2009-45 that eases the restrictions on modifications of commercial mortgages that have been packaged into commercial mortgage backed securities.

This action allows borrowers to open discussions with the loan servicer prior to any default in an attempt to work out the loan. Prior to this new rule only a very small number or loans in a servicing pool could be modified and they must already have been in arrears.

What is the Commercial Loan Modification Process?

Do you or someone you know own an apartment building that is under performing? Are you behind on your commercial loan payments? Is the bank threatening a commercial loan foreclosure?

When you hire a commercial loan modification professional, it is important to know what to expect. The first step is to go through a consultation and analysis. The commercial loan workout professional will look over your loan papers. They assess your business’ financial situation, and they will explain what they can do for you. In order to get a commercial loan modification, you must qualify with the lender for the new loan agreement. Your commercial loan workout professional will pre-qualify you based on the information you provide them.

Once your commercial loan modification professional pre-qualifies you for the commercial loan modification, they will go to the bank or commercial lender to make sure you are officially qualified. Simply put, they will make sure the lender is willing to discuss options pertaining to your current commercial loan agreement. After you are qualified the negotiations begin.

During the negotiation process, your commercial loan modification professional will represent you and work to get you the best possible commercial loan workout. The commercial loan modification professional may be able to negotiate a better interest rate, an extension on the life of your loan, or possibly lowering the principal amount still owed on the commercial loan. Finally, the negotiations will result in the final modification or restructuring of the loan. A new loan agreement will be written up, and you will sign it agreeing to the new loan. Once the papers are signed and processed the new terms of the loan go into affect.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.