Banks are playing with fire by delaying foreclosure on UK commercial property borrowers who are in breach of their loan terms.
Property finance professionals say hundreds of loans secured against many millions of pounds of commercial properties are in breach of terms called loan-to-value covenants the result of a 16 percent nosedive in values since last summer's market peak.
These covenants tie the loans to a percentage of the value of the asset they are secured against. Breaches triggered swift foreclosures and repossessions in previous downturns. This time many lenders are waiving those rights for fear of being saddled with assets they can't sell.
