• 14
  • November
    2011

As readers of this blog are no doubt aware, banks in Georgia have been among the hardest hit by underperforming loans in the real estate sector. According to a recent report on the pace of bank failures, Georgia has the highest number of bank failures in the Southeast. Given the stubborn economic situation, it is more important than ever for banks to effectively protect their interests and address nonpayment of loans through litigation, loan workouts, and any other appropriate means.

Everyone understands that in this economy times are tough for almost everyone. But for some reason the general public and often policy-makers, seem to believe that the usual rules of economics do not apply to banks. That if the banks would simply allow everyone to forgo repaying money loaned from banks, or if banks would stop charging interest, everything would be fine. Of course, the relatively high rate of bank failures demonstrates that, like any other business when bank customers stop paying the amounts they owe for their services, business is no longer sustainable.

Many real estate loans were requested and granted in a time when real estate values were strong and the economy seemed vibrant. Businesses that secured loans seemed to be well positioned for growth and individuals had steady and seemingly reliable income. When that all changed, borrowers found themselves with properties that were suddenly worth less than they had been previously and income streams that quickly shrinking.

In order for banks to remain viable they must ensure that they are pursuing the most effective means possible for recovering loan payments. In some situations this may entail aggressive litigation. But some situations call for a more nuanced approach to seeking the best possible return on your investment.

Source: CoStar Group "Pace of Bank Failures Picks Up Again," Mark Heschmeyer, Nov. 9, 2011