In a highly publicized article today, Reuters followed up on yesterday’s speculation regarding federal guidelines for commercial loan modifications.  It now appears that this guidance for the workout of commercial mortgages will be unveiled in the very near future.  I am closely following these developments as the impact that this will have on my clients may be dramatic.  My take on this is that any guidance can only help.  Although the banks are currently making an effort to modify these loans, stringent accounting rules and lack of government support have limited their capabilities. 

The government must act in a manner that allows these banks to rework these loans to reflect the current market.  Another wave of foreclosures is not the answer.  Although many economists may say that foreclosures are needed in order to bring the market back into equilibrium, that theory may be too drastic when our economy is in such turmoil.  A better solution may be to set forth guidelines that will allow these loans to be worked out and give the overall economy time to recover.  A commercial loan modification will also be less costly for banks than going through the foreclosure process while providing them the opportunity to recoup their entire debt.