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The Problem Loan Action Plan, A Uniform System for Managing Problem Assets.

The Problem Loan Action Plan, A Uniform System for Managing Problem Assets

Anyone active in commercial mortgage origination for the past six to seven years has undoubtedly been involved in some form of loan restructuring or workout planning. Today, all major markets throughout the country are overbuilt as well as many of the secondary markets. This has contributed to a significantly higher delinquency rate than ever experienced before. This condition is putting commercial loan servicing to the test as lenders attempt to work through problem loans and grapple with the complexities of exercising assignments of rents, filing foreclosures, securing bankruptcy claims and the like.

The Problem Loan Action Plan provides a system for dealing with the problems that are presently shaking the real estate finance industry. The book is divided into three sections. Section one is a general introduction that includes definitions and background information. Section two provides detailed checklists for construction loans, permanent loans, foreclosures and other commercial activities. And section three is a detailed analysis of a problem loan by way of example, which demonstrates the use of the checklists presented in section two.

If you have ever been through a workout, you will appreciate the importance of organization. The checklists provided in The Problem Loan Action Plan provide the basis for such organization by ensuring that each property moves smoothly though the workout process and that important details are not left out. The checklists can be used in their entirety or tailored to specific needs. Our company has found that when the checklists are laid out on a time-line, they can be helpful in planning personnel usage. When multiple workouts occur simultaneously, the allocation of human resources by management becomes increasingly important.

Some specific checklists in the book include construction and permanent loans - to facilitate the early diagnosis of problem loan situations; borrower evaluation - to ascertain whether the lender should take possession of the property or attempt to negotiate a troubled debt restructuring; lender liability - to provide a framework for the consideration of lender liability that can arise in the workout or foreclosure context; and loan modification - to evaluate loan modification alternatives. The book also provides analytical checklists to perform market analyses, quantitative analyses and project monitoring. Use of these checklists in combination can facilitate decision making as regards the best workout alternatives.

Lenders today are insisting upon quality servicing; a quality that goes beyond routine property inspections to include the workout of existing problems and anticipation of future problems. To maintain a quality commercial servicing portfolio, the checklists and procedures outlined in The Problem Loan Action Plan will prove to be extremely helpful.
COPYRIGHT 1991 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Juergens, Dick
Publication:Mortgage Banking
Article Type:Book Review
Date:Oct 1, 1991
Words:437
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