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09. Colorado Mobile Home Community

SITUATION:

This LLLP owned and managed a profitable Mobile Home Community in central Colorado. The owners of the community were struggling with residual devaluation issues stemming from the economic downturn of 2008-2009.

Despite experiencing positive cash flows, the community's management team was unable to make its balloon payment as the loan matured. Property devaluation issues, similar to those seen in commercial properties across the U.S., had left the LLLP unable to secure adequate refinancing for the property. The owners could not meet the balloon payment obligation. As a result, the loan fell into maturity default. As a concurrent part of the process, the loan was moved into special servicing and the lender began moving aggressively within their legal rights to foreclose.

Within a matter of weeks, the lender had issued notices of default and initiated foreclosure proceedings. Although the clients did not possess a means for refinancing, they did have a third party interested in purchasing the property from them. The borrowers had the unique opportunity to execute a sale of the property, avoid default interest and penalties- all while netting a considerable gain from the sale of a property in danger of foreclosure.

The special servicer was not satisfied with the borrower's efforts to communicate and work toward a solution for the property. If the lender did not approve the purchase of the mobile home community by the borrower's third party, a foreclosure would be imminent and the borrower would not only experience a significant loss, but would be held liable for the collection of several fees and penalties imposed by the lender.

WHAT WAS DONE:

The Mitigation Team was retained by the owners of the Mobile Home Community to intervene and work toward a resolution as quickly as possible. The Team was able to analyze the pertinent data, determine the best position to take, and negotiate a direct, effective, credible solution with the lender.

The Team provided an objective evaluation which helped the clients to determine exactly what actions were necessary to communicate with the lender effectively. Given the precarious circumstances surrounding this property's valuation and the interest of the third party buyer, the Team was able to negotiate a payoff at par on the property while waiving the borrower's liability for large penalties and default interest.

This negotiated purchase and payoff ended the lender's track toward a foreclosure. The lender halted the actions and accepted the offer. The property owners were able to simultaneously sell and pay off their note at par; all while avoiding a considerable amount of penalties, fees and default interest.

The Team succeeded in facilitating a sale of the property from which the original owners paid off the principal balance of their loan and walked away with a profit. Had the Team not intervened and acted in a timely fashion, the owners of the community were likely to have lost the interest of the third party buyer and would have endured a tremendous amount of losses from the foreclosure that would have followed.

Within days, a titling company contacted the lender and remitted payment (held in escrow) from the third party buyer for the principal balance of the loan. The lender accepted the payoff and the client's funds held in escrow were refunded. The titling company transferred ownership of the property to the buyer. Within 60 days, the lender confirmed satisfaction of the mortgage as a result of this transaction. This acceptance essentially eradicated a debt that included tens of thousands of dollars in default interest and penalties.