Renegotiating Commercial Hotel Loans: Getting a Discounted Payoff is Possible But Complicated
In times of crisis, some hotel owners find themselves overwhelmed by debt and face a difficult dilemma – either keep putting more of their money into their troubled assets or stop paying their mortgages and lose their hotels to foreclosure.
This is an undesirable outcome for both borrowers and lenders. Borrowers lose their investments in the foreclosed property as well as their reputation.
On the other hand, lenders recover substantially less than the property’s market value due to various costs and expenses associated with foreclosure.
DPO. Fortunately, there is a third way to handle this awkward situation, known as a discounted payoff (DPO). With a DPO, the lender agrees to repayment of an obligation for less than the principal balance and the owner keeps the property (rather than face foreclosure). This could be a win-win outcome for both the property owner, who keeps the property and minimizes the damage to their reputation, and the lender, who avoids financial loss, legal fees, taxes, and other expenses of foreclosure.
Click here to download the complete article.
Categories: Development