US lenders are preparing for the economic downturn in 2023 that will affect businesses in all states. There are many reasons that businesses fail, from mismanagement of funds, poor management, insufficient capital, and economic downturn. As a result, unfortunately, many businesses do not survive the first five years.
A higher rate of business failures means that lenders are likely to see less use of commercial buildings and more business foreclosures, also known as business property foreclosures. Lenders, especially small-to-medium-sized lenders who may have never enacted a foreclosure, may suddenly find themselves needing to secure their assets.
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For fifteen years, the experts at Total Lender Solutions have advocated for lenders looking to maximize recoveries on their defaulted loans. We are intimately familiar with foreclosure law in seven states and we understand the concerns that lenders have when faced with one or multiple foreclosures on properties during times of economic decline. Lenders feel the most secure when they have a partner who understands the foreclosure process and can assist in creating an action plan.
What Do Lenders Need to Know About Business Foreclosures?
Lenders can prepare for the upcoming and ongoing crisis by having a foreclosure action plan. Having a plan in place for properties before they are in default is the best way to ensure you can maximize recoveries on your assets.
Gather Proper Documentation
A foreclosure action plan requires lenders to understand how their loans are secured and how those properties are managed by the borrowers. This means ensuring you have all the proper documentation. Many types of commercial properties, especially multi-unit properties like hotels and apartments, have complex ownership structures and junior liens that lenders must contend with before they can begin the foreclosure process.
Choose a Course of Action
Once lenders fully understand and have documentation for the nature of the property which secures their loan, they must decide the best course of action. In many states, lenders may only pursue foreclosures non-judicially. In states where lenders are given the choice to pursue judicial or nonjudicial foreclosures, many states have some form of a One-Action Rule, which requires lenders to pursue only one avenue toward foreclosure.
The non-judicial foreclosure process is complex and requires strict compliance from lenders. A foreclosure partner, like Total Lender Solutions, can manage the foreclosure process so that lending teams who may not have the time or resources to handle foreclosures in-house can secure their assets without losing focus on their customers.
Deficiencies
Many lenders wonder whether they can pursue a deficiency judgment in the case of a foreclosure. In most nonjudicial foreclosures, lenders are not allowed to pursue deficiency judgments except in extremely extenuating circumstances. Guarantors are additionally exempt from an obligation to pay a deficiency in the case of nonjudicial foreclosure.
Partner with Leading Foreclosure Experts and Protect Your Assets
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.
