Commercial Loan Modification Guidelines

There are definite rules concerning what properties are and are not eligible for commercial loan modification. The following property types are generally considered acceptable for loan modification:

Health and Care Related Facilities:

• Hospitals
• Medical clinics
• Dentist offices
• Health spas
• Daycares
• Assisted living centers
• Nursing homes
• Hospices
• Funeral homes

Income Producing Residential Properties:

• Single tenant properties
• Multi-family units (including 5 or more units - some restrictions apply)
• Mobile home parks
• Mixed use properties (residential/commercial)

Industrial Properties:

• Light, medium or heavy industrial facilities
• Warehouses
• Manufacturing
• Industrial condos
• Multi-use properties

Retail Properties:

• Groceries and markets
• Anchored and unanchored retail centers
• Gas station (including those with convenience stores)
• Bowling alleys
• Car washes
• Auto service/repair stations
• Mini-storages
• Nursery/greenhouses

Office, Hospitality and Food Service:

• Office space or buildings
• Flagged and un-flagged hospitality
• Restaurants
• Cafeterias
• Bars/saloons
• Catering

Religious, Educational and Charitable:

• Churches
• Mosques
• Synagogues
• Temples
• Schools
• Educational facilities
• 501(c)3 not-for-profit owned properties

Other types of property are generally not eligible for commercial loan modification. These include but are not limited to:

ALL Property Outside the USA

Dealerships

• Auto
• Boat
• RV
• Motorcycle

Properties Financed under Certain Programs:

• SBA financed properties (includes 504 and 7(a)
• USDA financed properties (specifically B&I programs)
• Non real estate secured loans (again SBA, 7(a) and FFE)

Undeveloped Properties:

• Raw land
• Entitled land
• Tracts
• Lot loans
• Construction sites
• Projects under development
• Rehabilitation projects

Shared Properties:

• Timeshares
• Condo-tels

Some properties fall in the middle of the two categories above, and are approved on a case by case basis. These include:

Entertainment Venues:

• Amusement parks
• Theme parks
• Sporting arenas/facilities
• Adult entertainment (specifically structures with interior non-structural poles)

Recreational Areas:

• RV parks
• Campgrounds
• Marinas
• Golf courses
• Retreats

Miscellaneous:

• Vacant properties
• Properties owned by real estate, mortgage, finance, title or escrow companies
• Agricultural properties

Exceptions and restrictions vary from state to state, and include but are not limited to the following:

Florida

Commercial properties held in the name of entities (Corp., LLP, LLC, etc) only are eligible; properties held as a sole proprietor, by in joint tenancy, community property or tenants in common are not eligible for commercial loan modification.

New Jersey

Multi family properties consisting of 6 units or less are not eligible for commercial loan modification regardless of ownership title.

Bankruptcy

Businesses which have filed for bankruptcy are not eligible; also, individuals who have filed bankruptcy and included business holdings in the bankruptcy are ineligible. Bankruptcy places an automatic ‘stay’ on all aspects of the business.

There are several possible solutions to choose from when loan modification is indicated. These avenues of resolution include one or more of the following:

Removal or Deferment of Penalties:

• Prepayment
• Lock-out
• Defeasance
• Yield maintenance
• Late fees

Reductions and Forgiveness:

• Interest rate
• Convert to interest only payments for short time periods (up to 2-3 yrs)
• Principal balance

Extensions/Refinancing/Advances of additional funds:

• Term extensions (maximum 5 year balloon)
• Cash advances for tenant improvements or completion of rehabilitation of property
• Conversion from adjustable rate to fixed long term amortization
• Short term refinance authorization followed by new financing

Relinquishment of Property:

• Short sale authorization
• Deed in lieu of
• Cash for keys

Commercial loan modification generally takes 45-90+ days to complete (from date of submission), and is handled professionally through ‘special servicing’, ‘master servicing’ or ‘special asset’ units. Such units have extended authority, enabling them to streamline and expedite loan modification requests.

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