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Some Sell Distressed Commercial Real Estate Properties Fast



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By : John Cutts    99 or more times read
While several lenders take time in reselling their distressed commercial real estate properties, a number of commercial property lenders have a policy of disposing of their repossessed properties quickly.

These lenders do not want to drag the foreclosure process for a long time as deferrals and delays could mean deterioration of properties or missed resale opportunities. They have also made their own calculations about the costs of carrying out other foreclosure prevention schemes such as loan restructurings and debt workouts.

Zions Bank is one of these lenders that do not want to hold their REOs for more than three months. The bank has reasons to foreclose on distressed properties and sell them off quickly, as real estate properties entail maintenance and payments of other fees related to property management.

Many community banks, however, have been doing creative loan restructurings to cut down their loan losses. Based on reports from bank analysts, community banks hold the largest percentage of commercial debt in the country.

Amalgamated Bank, one of the community banks exposed to about $1 billion in commercial real estate loans, said that community banks, unlike the large commercial banks, could not just write off large commercial property loans. They need to restructure troubled loans to cut down their losses.

On the other hand, lenders like Emigrant Realty Finance and Brank Banking Company have been engaging in swaps with other banks to contain their distressed commercial real estate properties. Brank, which has written about $300 million in commercial loans, reported that it has made credit swaps with other lenders.

Difficulties arise, however, when commercial loans involve a pool of lenders. When the loans become troubled, the lenders in the pool have different plans about remedying the distressed loans. While some would like to foreclose immediately, the others would like to do workouts.

Nevertheless, according to many lenders, whatever remedy banks use to cut their loan losses, they need to address their troubled loans in the earliest stage. Lenders must craft plans and institute policies on how to treat their distressed loans, according to the more savvy lenders, and not just sell troubled assets as they come.

They point out lessons that need to be learned from the banks that failed and were taken over last year and in the first months of this year. Most of these banks had heavy exposure to commercial real estate properties that became troubled and were subsequently foreclosed.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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