Bank on it

Now is the time to revisit your bank loan. Yes, lending restrictions have tightened, but banks don’t want your real estate—and altering the terms of your loan can significantly lower the cost of doing business.

Ed Mermelstein, New York City real estate attorney and founder of Edward A. Mermelstein & Associates, advises his retail clients to get their ducks in a row and set up a meeting with their banker.

“Gather the financials on your property and make sure you can document the status of your position now and what to expect six months from now,” said Mermelstein. “The bank doesn’t want to renegotiate or modify a loan if in just a few months you’ll be right back in front of the bank requiring further discussions. “

It is important to show a realistic picture of where you are now in terms of your financial status and where you expect to be in the near future. And, if you haven’t already established a positive working relationship with your lender, get moving. It’s imperative that you not only know your loan officer personally, but that you have a good relationship with him or her.

“It’s very difficult to deal with an anonymous bureaucrat,” noted Mermelstein.

Once you have initiated the conversation with your lender and you can clearly present your position, it will become apparent to the lender whether or not you can continue on the loan terms you have. The lender may have no choice but to open the discussion, Mermelstein explained, because the last thing the bank wants is to take hold of your real estate. That’s not the business the bank is in.

If, however, the bank does not respond positively to your renegotiating posture, then there are still ways to maneuver the situation to your favor.

“If you can’t pay your loan and you have no choice but to go into technical default, most situations these days will wind up going in front of a judge who, quite frankly, tends to be borrower-friendly rather than lender-friendly,” said Mermelstein.

“At the end of the day, the judge will likely nudge the lender to rethink the terms at a more reasonable level, urging the lender against taking ownership of property that is now worth far less than was originally loaned.”