Our economic times are forcing many homeowners and business owners to face foreclosure, but business owners are perhaps in the most peculiar spot of all. In most circumstances, a person who is struggling to make their commercial loan payments will also struggle to make their residential loan payments. When a business property faces foreclosure, the business owner is often faced with the choice of where to send payments; toward the residential loan or the commercial loan. Luckily, there is nothing that says a person is only allowed to modify one of their struggling loans.
A loan modification is nothing more than an agreement between lender and borrower to modify the terms of an original mortgage contract in an effort to lower monthly mortgage payments and, hopefully, ease the financial hardship of the borrower. Since the modification is just an agreement, the borrower is free to enter into as many agreements to modify loans as they see fit. Lenders do not report any negative information to credit bureaus when a borrower requests a residential or commercial loan modification, so if the borrower is struggling with more than one loan, it is recommended that they seek a modification on each loan, even if each loan is held by the same lender.
Business owners should keep in mind that pursuing one loan modification can be stressful enough without another being thrown in the mix, but it may be necessary to pursue more than one modification simultaneously if one’s finances require it. If this is the case, borrowers attempting to modify more than one loan at the same time are urged to retain the services of an experienced attorney who will be able to represent the borrower through every step of the modification process.
Each request to modify a loan, even if the loans are held through the same lender, will require separate applications, financial documents, hardship letters, etc. An attorney will help the lender keep all of the necessary paperwork in order and will ensure that each document is filled out completely and accurately. An incomplete or inaccurate application can slow down the approval process when a delay is the last thing the business owner needs.
Should the business owner need assistance with their home loan and commercial loan, they could even apply for help through different programs. For example, the business owner could apply for federal aid through President Obama’s Making Home Affordable Plan for the residential loan (if they qualify) and through any in house modification programs offered through the lender for their commercial loan. An attorney will be able to better guide the borrower through which plan would be best for their particular situation.
If a borrower is successful in having their residential and commercial loan modification requests approved, they may be able to save their home and their business. If, on the other hand, the financial problem has become too great for a commercial loan modification to repair, the business may have to be sold to save the home. If this is the case, an attorney will be able to advise the borrower on the process of a short sale, assuming the value of the building is lower than the amount remaining on the loan.