From the September issue: With dwindling cash reserves, some commercial real estate borrowers in New York have resorted to aggressive tactics, like withholding payments or paying late, to get their lenders to agree to modify loans.
It’s a game of chicken borrowers sometimes play with lenders, sources say, because as long as borrowers stay current, lenders are reluctant to modify their loans.
In addition, unless the loan is in imminent risk of default, loan officers and servicers of securitized loan pools often cannot change the terms of a mortgage. “I see it happening in New York, and I see it happening nationally,” said Constantine Korologos, managing director at advisory firm Deloitte Financial Advisory Services. “A borrower says, ‘I have a train wreck approaching,’ and the [loan] servicer says, ‘Sorry, you are still current.’” The property owner is therefore “forced to become a bad borrower to get the attention” of the loan servicer, he said. more
