Solution to Commercial Mortgages with

Decreased Property Values

Over $300 billion in real estate loans were originated in 2006, and many of these loans are coming due this year and into 2012 with LTV’s over 80%.

The percentage of foreclosed commercial mortgages held by banks by the end of 2011 is estimated to be over 7% or nearly $15 billion.

MATURING DEBT:

* Office

* Warehouse

* Retail

Many of these loans are owner-occupied real estate that cannot be refinanced because of the lower valuations, but enter the SBA 504 refinance program.

You can now do the following:

• Refinance a high-LTV loan in your portfolio up to 90% LTV of current value with the SBA 504 refinance and reduce your exposure to 50% LTV.
• Refinance a standard-LTV loan in your portfolio up to 90% LTV of current value and take cash-out to pay the revolving credit line back down to zero.
• Sell any of your ‘broken’ investor OREO, i.e., investment property with large vacancy issues, to an owner-user on the SBA 504 program up to 90% LTV and get this loan off non-accrual status.  Maybe to someone within your own customer base?
• Do you have a great customer who is growing his business and needs a larger revolving credit line and/or cash to expand the business and/or needs to expand his building to accomodate growth?  Refinance the existing commercial real estate loan with an SBA 504 refinance and provide the expansion funds needed on both the building and/or capital equipment.

The SBA 504 refinance program has now become much more flexible than the SBA 7(a) refinance program.  

You may find that some of your competitors will ‘push’ their borrowers into a 7(a) loan, due to the high yields of the guaranteed loans in the secondary market.  You can steal business back by offering a 504 refinance instead at 20-year fixed rates on both the 1^st mortgage and 2^nd debenture at a weighted average below 5%!