New FDIC Guidelines for Commercial Real Estate Loans
Escaping Commercial Real Estate Foreclosure 
In our August 4, 2009 e-Newsletter, we alerted our clients of the pending “Next Mortgage Crisis”. To address the pending issue of the coming commercial real estate “crisis”, on October 30, 2009, the Federal Deposit Insurance Corporation (FDIC) implemented new policy guidelines to its examiners and financial institutions for commercial loan workouts on those Commercial Real Estate (CRE) loans made to credit worthy borrowers. The new guidelines allow the value of commercial properties, which may have fallen below the loan amount, to continue as “performing” properties, under certain conditions. Link to FDIC policy guidance.
In the current economic downturn when cash flows are diminishing and with delays in selling or renting, the FDIC’s new policy guidance is routine. The new FDIC policy for its’ examiners and financial institutions provides guidance on developing processes for restructuring loans and on determining the correct structure for each property for credit worthy borrowers.
As noted in the Wall Street Journal, this situation reminds me of the real estate crash in the early 1990’s when the Resolution Trust Corp (RTC) destroyed numerous viable financial institutions. It was a mindless government “check the box” war on banks, and savings and loans. If this current approach was in effect back then, a lot of pain could have been avoided.
So, if possible, keep your loan current. Under the new guidelines your lending institution won’t be as anxious.
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