The loan modification may be needed because commercial property owners, especially those who collect rent, are feeling the effects of the financial crisis. Vacancy rates have reached record heights and tenants are now able to negotiate lower rents by threatening to leave. Thus, owners of hotels, warehouses, strip malls, shopping centers, apartment buildings, multi-tenant buildings and office buildings, are discovering that the mortgage payments have become too high for their cash flows. Experts have been predicting that about two-thirds of commercial real estate loans are in danger of going into default and into foreclosure.

Fortunately, a loan modification may be the solution to the problem for both lender and borrower. With the help of a forensic loan audit and the pressure for the lender to seek other alternatives other than foreclosure, a loan modification is likely to be approved. Meanwhile, because commercial loans are complex, the borrower may require the help of a commercial loan modification expert. This professional will make the initial contacts with the lender to pre-qualify the borrower. If everything goes well, he will start the negotiation process, which may take a few months, depending on the willingness of the lender and borrower to reach a compromise.

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If the foreclosure process has already been started, the lender will be ordered to put it on hold while the litigation on the questionable provisions of the loan is still unresolved. In addition, the borrower does not need to pay the mortgage installments during the litigation process, although it is often suggested that the borrower should be ready with these payments by depositing them into a separate bank account.

To determine if such violations are present in a commercial real estate loan, the property owner usually hires a forensic loan audit expert who will go through the various loan documents with a fine tooth comb. After the audit is completed, a report of the violations is presented to the borrower, if there are any. This report will specify the laws and regulations that have been violated.

These findings could be used by the borrower when requesting for a loan modification. A loan modification may be the solution to preventing a foreclosure if the borrower is no longer capable of coming up with the mortgage installments. With the violations that carry stiff penalties for the lender, the borrower can present a strong case for the approval of the application of a loan modification.

It should be noted that another factor in favor of the borrower is the impending crisis in commercial real estate loans. With sales in commercial real estate virtually non-existent, lenders would find it very difficult to find a buyer for the properties that they will repossess. Thus, they would also be averse to the prospect of a foreclosure.

Because the various transactions for the loan modification are complex, the borrower may then obtain the services of a loss mitigation expert, who will be responsible for making the necessary negotiations with the lender. This professional will make the preliminary contact with the lender to determine if there is a possibility for a negotiation. If the lender agrees, then the expert proceeds with the negotiations until both parties reach an agreement.

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