What becomes of non-performing commercial loans?
This was selected as Best Answer I’d like to add to what the others have said, from my 10 years in corporate banking and also dealing with workouts on the client side since then. The line lender will work with a client only up to a point, discussed above. Then, most banks have a workout group (often called “Special Assets” or something like that) which will handle a deal as it moves more towards the legal boundaries of the loan documents. There are risk ratings that the bank assigns that detail all this out, but those are generally invisible or meaningless to the client so I won’t bore you with them unless you’re curious. Special Assets Groups (I”ll call it SAG, the Bank of America name) have a lot of latitude in working with clients – often the loans have been significantly written down by the time they get to SAG, and SAG’s job is to maximize the return. How SAG approaches a given client depends on the size of the loan, the opportunity to recover, and how hard that recovery is going
