Commercial Real Estate Louisville

Commercial Real Estate Louisville

I read an article this morning that was very interesting and something everyone should know about Commercial Real Estate in Louisville and around the country.?

Our legal system permits every type of property owner a way to decrease their mortgages, with one exception; home owners.? They are given no way to reduce excess mortgages.

Consequently, four years after the crash of real estate, homeowners are still buried in debt. This really is why consumer demand has not recovered and a big cause of why the recovery has been so weak. We have had many prior cycles, in which real estate prices soared, tempting property owners to take on high mortgages, and then prices crashed, leaving owners ?underwater? with real estate worth much less than the debt held against it.? When this happens to commercial property owners, our law gives them an escape route. They are able to file a Chapter 11 reorganization. While Chapter 11 filings are costly,? Chapter 11 provides commercial property owners the power of strip down: They are able to decrease the principal of their mortgages to the present fair market value.

The rest of the mortgage, the quantity by which the mortgage exceeds the value of the property, can be stripped down under Bankruptcy Code Section 506, or transformed into unsecured debt, which can be wiped away. Attorneys make money but the property owners remove the debt burden. Strip down gives underwater commercial property owners an affordable opportunity to decrease their debts, and to return to profitability. This is one reason there will most likely never be a commercial real estate crisis.

Since 2007, residential real estate prices have fallen nationally by over 30%. Tens of millions of property owners have homes worth much less than the mortgages against them. Strip down could solve the problems of those underwater property owners. I know this because I see homes for sale in Louisville every day that are under water.

Middle class people can file Chapter 13 or Chapter 11 reorganizations, not strip down. If they could strip down their mortgages, they could decrease their debts to a reasonable level. Consumer bankruptcies always involve substantial dangers; the worst, by far, is the long term credit damage.

If homeowners, in general, had the possibility of filing bankruptcy, and utilizing strip down, this would give banks an enormous incentive to negotiate voluntarily with homeowners to decrease their mortgages, even if they didn?t file bankruptcy. But homeowners cannot use strip down. Under bankruptcy law, the only mortgages that can?t be stripped down are those against the principal residences of people or households. Donald Trump can use strip down to decrease multi million-dollar mortgages against his casinos. A middle-class family, however, cannot use strip-down to save their home from foreclosure.

What the middle-class has been provided, instead, are shallow loan-modification programs. Beneath the hype, these programs are nothing but an organized way for the middle-class to beg for charity. Because banks aren?t charities, it should surprise nobody that lenders place applicants for loan modifications through the ringer and end up modifying VERY few loans. Testimonials by applicants attest to this. This law is very one -sided. Real Estate laws regarding bankruptcy should be exactly the same for everybody. It?s unfair and one of the factors of why the recovery has been so weak.

The recession technically ended in June 2009, almost three years ago. What?s slowing this recovery?

The principal driver of the economic climate is consumer demand. Much of the middle class has not begun spending simply because a lot of property owners have excessively high mortgages and no way to restructure them.

With a lot of the middle class buried in debt, consumer demand has remained weak. Discrimination (because of the power of banks) against homeowners

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