(Wayne) Charles Blumenkehl, managing partner for Blue Asset Management LLC, predicts a higher rate of commercial backed mortgage foreclosures in 2011.
According to Blumenkehl, many of the Commercial Mortgage Backed Securities that were popular toward the end of the real estate boom years ending in 2006 will be maturing through their foreclosure cycle as the negotiations that lenders lt will inevitably and their commercial borrowers undertook to keep the loans from defaulting have failed, and the result will inevitably be the foreclosure of these properties. Alternatives already being seen in the market on many of these loans have resulted in the lenders assuming rights to the property through receivership clauses in the mortgage documents specific to the properties with motions made by the lenders to be allowed to sell the properties in receivership. Another strategy which has become popular is lenders accepting a ‘deed in lieu of foreclosure’ which is where the borrower or owner if the properties signs the deed and ownership rights back to the bank prior to the foreclosure action being completed in return for a release of any future obligations to the lender if the property ultimately sells for less than the amount owed by the borrower.
Blumenkehl said, “the need for these commercial loans to be monetized is a key component of the mortgage recovery. Lenders and borrowers both have accepted that this is not a short-term recovery that will cure itself imminently.” Blumenkehl continued, “Borrowers continue to default on their renegotiated mortgage terms for the same reasons that put them there in the first place, lower sales, tighter margins, and overall a contraction of the local economies which makes it impossible for them to keep their doors open long enough to reach recovery.”
Blumenkehl considers this a necessary component of the mortgage recovery, and says the sooner these commercial backed mortgages are monetized, the quicker the country will be back on its feet. “We are substantially overleveraged as a country, and as the ratios normalize, we will be able to leverage the underlying economic recovery more meaningfully, translating to higher employment opportunities and more actual productive cash dollars being returned to the economy to further enable our economic recovery as a whole.”
For more information about Charles Blumenkehl or Blue Asset Management LLC, log onto the company website at www.blueassetmanagementllc.com or call the company directly at 973 835-1400.