When borrowers stop making payments on the loan for their commercial real estate property, lenders will pursue any chance to bring the borrower out of delinquency. However, when all resources have been exhausted, the final action is to enact a commercial foreclosure. For lenders, it is not uncommon to delay beginning the foreclosure process for months or years — far past the point that it becomes useful to do so. Lenders can consult a foreclosure service, like Total Lender Solutions, for help evaluating their case and determining the best time to begin the commercial foreclosure process.
Reasons Why Lenders Delay Beginning the Commercial Foreclosure Process
There are several common reasons lenders may delay beginning the foreclosure process. However, avoiding delays is the best chance lenders have at protecting their assets.
Alternative Resolution
Most lenders will exhaust alternative resolution options before beginning to enact a foreclosure. Alternative options include forbearance, loan modification, enacting a short sale on the property, refinancing, or deeding the collateral of the property to the lender. Lenders tend to pursue alternatives before enacting foreclosures because they are ultimately better options, financially and conveniently, for both the borrower and the lender.
Financial Considerations
Foreclosures are expensive to enact. Additionally, in many nonjudicial foreclosures, there is no way for lenders to recover any deficiencies due to the deed of trust they signed. Lenders may delay the process to avoid costly fees.
Time
Many lending firms, especially small-to-medium-sized lenders, may not have the manpower to enact a foreclosure in-house. Enacting a foreclosure can take time and resources away from lending teams who need to focus on their current customers, which may delay the foreclosure until it is more convenient.
Expertise
For many small-to-medium lenders, foreclosures may be an uncommon occurrence, and thus, teams may not have the expertise to enact foreclosures. Many states have strict compliance requirements and lenders can accrue penalties for failing to meet these requirements.
When is the Best Time to State a Commercial Foreclosure?
The best time to begin the commercial foreclosure process is after the required waiting period according to state law and after lenders have exhausted their alternative resolution options. In many U.S. jurisdictions, lenders must wait around 120 days after the borrower has stopped making payments before they may begin the foreclosure process.
To begin a nonjudicial foreclosure, many states require lenders to issue a notice of missed payments, typically called a Notice of Default. After a waiting period as required by state law, lenders may issue a Notice of Sale. This notice outlines the day, place, and time of the foreclosure sale, which can be halted if the borrower settles their payments.
Because different nonjudicial states have different requirements, it is imperative that lenders seek out a trusted expert to enact commercial foreclosures on their behalf. A service like Total Lender Solutions works with small-to-medium-sized lenders to enact foreclosures to completion, meaning that you can recover your assets even if your team does not have the time or manpower to do it. Let us work hand-in-hand with your lending business.
Keep Your Team Educated About Foreclosure Law
At Total Lender Solutions, we advocate for lenders looking to maximize recoveries on defaulted loans. For over 15 years, our team of highly experienced real estate professionals and legal experts has transformed complicated processes into clear resolutions for institutional and private lenders. We work as a vigorous extension of your team to provide comprehensive solutions and seamless communication, from pre-foreclosure and notice of default to the final sale phase. Our dedication and persistence when it comes to the foreclosure process ensures that our clients feel confident in reaching a successful outcome. Contact us today.
