The company operating a warehouse that is leased to other companies may find that income from rents have declined because of companies trying to shrink their operations in the effort to become viable again. As a result, the companies using the warehouse may have reduced the amount of space that they require or may even have shut down their operations. Existing tenants may even petition for a decrease in the rent or they will find another warehouse. The final result of all these could be the inability of the warehouse owner to come up with the mortgage payments, thereby causing the property to be in danger of foreclosure.
A possible remedy is through a loan modification for a warehouse that will permit changes to the terms of the loan either permanently or temporarily. For example, the lender may agree that the borrower will only pay the interest for a certain period of time. Ordinarily, lenders are hesitant to agree to a loan modification. This is understandable because the result is the reduction of their monthly cash flow, albeit temporarily.
However, if the lender discovers that the owner is really having problems with the mortgage payments and he observes that the business will become viable if the loan restructuring is allowed, he may agree to the proposal. What the lender wants to ascertain is that the borrower is not just delaying an inevitable foreclosure.
There is also the possibility that the loan is nearing its term, which means that the borrower will soon be required to pay a substantial amount of money to the lender as final payment for the loan. This is known as the balloon payment and what the owner usually does is to refinance the loan or sell the property. However, the financial crisis makes it difficult to find another source of funding. Thus, a loan modification may provide the owner with more time to look for refinancing.
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