Be Aware of the Commercial Mortgage Loan Terms

Term Predatory Lending
Home mortgage defaults and increasing real estate forclosures have caused economy down fall since the beginning of the summer this year. Now, many businesses are laying off workers. Report shows that many other companies are planning to lay off more people. There is no doubt that we are entering into depression.

I recently figured out the reason why there are many foreclosures and default in real estate. Because banks and mortgage companies think diffrently, not for the better. Their lending practices seems backward. If the banks and mortgage companies worked with home owners before their loan default started, they could have saved a lot of home owners and we wouldn't have had as many as foreclosures.

Now, I have seen the same in the commercial mortage industry.

The other day I received a following letter from a bloger who owns a mobile home park. The recent eonomic condition has catched up on her business and she has been looking into refinancing her commercial mortgage. However, she ran into an unexpected term penalties that had not disclosed to her in written form before signing the mortgage. Before seeking the refinancing option, she contacted her bank and ask for readjustment or loan modification. However, the bank's response is astonishing.

Here is the letter:

We have a commercial loan from M&T Bank. It's originated by Silver Hill under its subsidiary Bayview Loan Company on Sept. 2007 and Bayview sold to M&T Bank after 7 or 8 months later. The loan is for a small MHP.

Recently, our tenants are having problems with their jobs. Consequently, a few can not make their rent payments on time. Therefore, we are having a tough time making a mortgage however, we tried to make the payment on time because we are hoping to keep our credit in tack for refinancing the mortgage with low interests and low monthly payment in order to self sufficient.

We called M&T Bank to consider the readjustment or loan modification possibility but M&T told us that we have to be on default status in order to be considered. So, we looked for another bank to refinance the mortgage.

However, we found out that our payoff information from M&T Bank for refinancing our mortgage was very disturbing. Terms and early payment penalties were so severe that we do not have the chance. It turned out to be our early payment penalties were over $160,000 (57%) on the loan amount of about $279,000 and terms were 7 years early payment penalty plus 10 years payment penalty thereafter, which it was not disclosed before the contract.

I discussed with many business people and loan brokers but they never heard such terms. So, I hired a predatory lending mortgage lawyer and he tried to resolve the problem with M&T Bank directly; however, M&T Bank told him that commercial loan is norm in that terms. Basically, M&T Bank wants $160,000 penalty if we want to refinance it or rather see the default or foreclosure on the loan.

The lawyer told me that he is not expert in commercial loan and he told me that we should consult with other commercial mortgage lawyer.

Please investigate the term predatory lending practice. Are these terms are norm in commercial loans? There should be some kind of restriction for commercial loans.

I don't believe our forclosure would help M&T nor our situtation. The city our MHP is in, currently the highest unemployment in the state. We are doing everything to work with tenants financial situation. We're asking M&T Bank to give us the opportunity to refinance in order to lower our interest rate and monthly payment.

I'm trying to find an answer to send my letter to anyone who listens. This will help others to be aware on getting the commercial loan in the future.
Thank you for reading.

Examine Your Loan Terms
AS the letter indicated, be aware of terms and any hidden clause on your business mortgage before you sign.

As usual however, some successful business people look at the current condition as an opportunity and use their creativity to figure out how to make money while many people are complaining and waiting on the side walk for things get better. However, it is difficult to jump on new businesses if you lost money in real estate, stock, 401K, and other form of investments in recent months.

There are many opportunities whether we are in a prosper time or in depression. If you're thinking of going into a business and seeking a loan, this will be a great lesson.