The Commercial Loan Modification Hardship Letter

A modification letter is a part of any loan modification process, residential or commercial.  The details of a commercial loan modification hardship letter will differ slightly form that of a residential letter, but the intent remains the same.  The purpose of the hardship letter is to express to a lender in one’s own words why a modification would be beneficial to both parties.  It is important to make sure that the hardship letter remains professional and does not turn into a complaint letter or a novel.  Don’t use profanity, don’t attack the lender, and don’t bore the lender with length.  The ideal length of a commercial loan modification hardship letter is a few paragraphs in length, two to three would be ideal.

The business owner, aside from explaining how they got to the point of facing a foreclosure, should explain in the letter their plan for getting out of debt with the help of a loan modification.  Including a plan for the lender to read lets the lender know that the business owner is serious about getting out of debt and making all future mortgage payments on time and in full.  One plan that would raise revenue and gain the favor of the lender would be a plan to increase lease rates as soon as current leases expire.  The owner can also express a desire to attract more prominent businesses that could afford higher rates.  These are only some examples of the kinds of things that commercial real estate owners can do to increase their chances of being approved for modification.  An experienced real estate and foreclosure attorney will be able to provide more guidance in terms of developing a sound plan for making future payments that can be shared with the lender.

In the body of the commercial loan modification hardship letter, the writer will discuss the events that led to them having to write the letter.  Business owners should be honest and to the point with their lenders.  They shouldn’t make any attempts to persuade the lender with a sob story.  The facts will be able to speak for themselves, and those facts should only relate to the financial trouble.  It will be challenging for many business owners to keep their emotions out of the hardship letter, but it is something that must be done.  Keep in mind that lenders have heard every story in the book, so appealing to their emotions will have little to no impact.

An attorney should look over the final commercial loan modification hardship letter for accuracy and readability.  If the attorney is able to spot formatting or language errors, they may be able to prevent their client from submitting a hardship letter that is not as persuasive as it could be.  When negotiating a loan modification, persuasiveness will be the real estate owner’s most useful tool.  Lender policies will dictate how low the lender will be able to make the monthly payments of the borrower, but those policies are never set in stone.

The commercial loan modification hardship letter will be included with the business owner’s application for loan modification.  If, after discussing their options with an attorney, the business owner decides that a loan modification will not be sufficient enough to fix their financial problems, the same hardship letter can be applied to other foreclosure avoidance tactics, like a short sale.