Conditions for a Commercial Loan Modification or workout

1. The loan or mortgage must be secured by a commercial property, which is basically a property which does not consist of 1-4 residential units.

2. There should be a default or the potential for an imminent default.  The default could arise from two sets of circumstances, either a debt service default or a balloon payment default.

In a debt service default the borrower no longer has the cash flow to continue to service the debt during the life of the loan.  Commercial loans are usually for a period of 7 years or less.

A ballon payment default occurs at the end the loan when a large lump sum payment is due. The ballon payment.

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