Expert: Christine Janklow - 5/13/2010

Question
Hello there,

My current situation is that I have just started escrow with a short sale that I am doing on my two buildings. I have a first and second loan and the second is backed by the SBA. After selling the buildings, I will have about a $600,000 deficiency that I will owe the SBA. I am not looking to walk away from the debt but looking to offer a lower amount.
As I am doing my research, I have found 2 companies that are SBA consultants that deal with loan workouts or offer in compromise but I am still not sure whether they would be best or a lawyer would be best.
Is it likely that a lawyer can workout a good settlement? These consultants are saying that they can reduce the deficiency amount up to 95%. Too good to be true? What are the SBA trends today?

I appreciate your time in reading this. If this is not your area of expertise, would you be able to refer me to one that is? I am looking for someone that is familiar with SBA practices and processes.

Answer
Dear Susie:
Thank you for your question. If you default on payment due to short sale, the second lender will likely be reimbursed up to 75% by the SBA. They can however pursue you for payment on the deficient amount. If you were to offer them, lets say for argument sake 50% of that amount(or whatever amount you have to offer up immediately), they might just take it and forgive the debt. If you are uncomfortable with handling negotiations on your own, that would definitely be the time to engage a third party whom you feel qualified to negotiate your accounts. As for discounts, anyone can suggest "best case" savings, do your homework, maybe get a couple of references. As for attorney's, my experience is their negotiations tactics can be too heavy handed for this type of situation, if you are not involved in a lawsuit. Furthermore you will likely pay an attorney by the hour whether or not they actually effect a discount. Lastly, you did not mention what state your business is in, but it may be helpful to ask your commercial realtor to refer you to someone in your area who can consult with you about your second loan. You want to make sure you have no personal liability or collateral attached to that loan before you begin. If you can not locate anyone you feel confident can help, my company SettleSource offers loan negotiations/restructuring also. Feel free to contact me directly through settlesource.com if you have additional questions. I wish you the best.

Respectfully,

Christine Janklow