More Arizona Commercial Properties Face Bank Foreclosure List

by Donald Hanz on Foreclosure Crisis

Since January of this year, over 2,000 commercial buildings in Maricopa County, Arizona received 3-month notices of foreclosure. The total number of commercial properties facing the bank foreclosure list represented $6.3 billion of delinquent real estate loans.

Industry analysts said that the crisis that has been devastating the residential real estate market in Arizona and which put the state in the top 10 states with highest foreclosure rates, has spilled over to the commercial real estate market.

Already, the number of foreclosure filings in Maricopa County is staggering when compared with commercial foreclosure rates in previous years. Analysts said that the foreclosure problem in the commercial market was due to drastic drops in property values and the lack of refinancing options.

And with the state’s growing unemployment rate, warehouse and industrial properties also suffered tremendously. For the second quarter, over 1-million-square foot warehouse and industrial space was vacated.

After the issuance of notices of foreclosures or trustee’s sale, actual foreclosure sale in Maricopa County can take months to happen. Since January, the number of notices of defaults and foreclosures has remained in the range of 300 to 400 per month. But the number of actual foreclosures cannot be established immediately as the repossession of properties in default or sale of foreclosure properties can take months or years to happen.

In Arizona, lenders have two ways to foreclose a distressed property. One is to file a foreclosure case against the borrower, or the lender can immediately call for trustee’s sale which is the preferred way of most lenders as this method is quick and less expensive. However, in order for lenders to place a property on a trustee’s sale, they have to waive some legal rights.

Industry analysts said that there is no indication that commercial foreclosures will wind down soon. They said that many commercial developers are having difficulty maintaining fix construction mortgage payments while reducing rents to attract tenants. Commercial developers have also to cope with the declining demand for rental commercial spaces.

Analysts noted that there are many federal and nonprofit programs that help homeowners avoid foreclosures but no such efforts were made to help commercial loan borrowers avoid foreclosures.

They pointed out that many commercial loan providers are not modifying commercial mortgages even if rental rates declined by almost 75 percent in some places.