One of the major themes I brought back from the recent mortgage bankers conference in San Diego is maintaining communications between borrowers and lenders, particularly when a problem is perceived or a maturity is upcoming. Most of the lenders and servicers speaking at the conference said they expected negative issues to come up, but that their options for working with customers were limited if the customers would not communicate with the lenders or provide updated information.
This lack of communication is not a new issue. On the residential side of things I hear that more than one-third of homes going into foreclosure do so without a single conversation between lender and borrower. So it is only natural that we would see something similar on the commercial side.
The bottom line from the various panelists speaking about permanent loans was that they were simply servicing the loans for a third party (typically a trust) and that their marching orders were clear: Collect the loans with as little loss as possible. To the extent that borrowers can assist in maximizing collections when a loan turns sour, the servicer will work with the borrower. But if the borrower works against the servicer or attempts to “walk away” by “throwing the keys” to the lender, the gloves come off and things get ugly very quickly.
So if you have a problem or think that a problem with your loan is eminent, make contact with the servicer. Involve them in your situation and try to make them a part of the solution. With all of the problems coming down the road in other parts of the country, you might be surprised with the servicer’s willingness to work with you if you are proactive with your communication.
(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at firstname.lastname@example.org.)