It’s always good to have the “big picture” in one hand as you deal with the troubled loan with your other hand.

Previously, we’ve touched on preliminary tips and steps, and even some tips on the “art” of dealing with a mucked up deal and with “less than friendly” people – and don’t overlook the glossary of terms.

In addition to the “decision tree” laying out a typical “time line” or process of a distressed commercial real estate loan, here is a short check list of topics that a lender or servicer might consider as elements of a successful modification to the loan:

  • add lender rights or remedies (including addressing new laws or court decisions) (look at the “market trends” topic on the right side of the page)
  • waivers of claims and defenses (including disclaimer of any interest in reserves or escrow accounts)
  • new reporting requirements (“flash” reporting on a monthly basis)
  • changes to lease approval rights, location of tenant security deposits and tenant letters of credit
  • new or additional collateral, including direct deposit of rent by tenants into a lock box account controlled by the lender (or servicer), and new reserves or escrows (for tenant finish and leasing commissions on future leases, for capital repairs, and for debt service)
  • new recourse events and even new guarantors – and eventually, making the loan full recourse and with a full payment and performance guaranty
  • direct reporting by the property manager and leasing agent to the lender (or servicer), with tougher approval standards on the part of the lender (and servicer) (including the ability of the lender to require the replacement of the manager or agent)

If you have other items to add to this list, please comment below.