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It is no secret that many commercial real estate (CRE) properties are struggling. The dramatic increase in interest rates over the past few years and employers’ evolving mindsets regarding the use of office space are creating strains on property owners’ ability to service CRE debt. As a result, many CRE loans are either in default or teetering on the brink of default. While many lenders are actively working with their customers to restructure the loan and avoid a default, lenders should be mindful that their actions (and inactions) while servicing loans may have serious unintended consequences. The following is a brief look at some common behaviors that lenders should avoid in order to preserve their ability to enforce remedies following loan defaults.

Many lenders pride themselves on their flexibility, customer service and ability to work with their borrower customers during difficult times. While this is commendable and likely the preferred approach for bank regulators, borrowers and the CRE market in general, lenders should be careful not to unwittingly impair their ability to call a defaulted loan or expose themselves to potential lender liability claims.

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