The Current Economic Climate, Financing Decisions, and Personal Factors from Michael Burton

The current economic climate, financing decisions, and personal factors from Michael Burton himself have all led to this loan being in default. During the commercial property boom of 2005-2006, property owners borrowed huge sums of money directly from commercial banks, and indirectly from investors through the sale of commercial mortgage backed securities. When the economy began to weaken in late 2007, rents went down as vacancies went up. Because of this, property owners were not able to meet their loan obligations made during the boom, and the amount of delinquent loans rose.

Poor underwriting on the loan is another reason for its default. The property had been overvalued at $1,350,000 by Colonial Bank. Colonial lent $1,250,000 to Burton, meaning the loan had a 92.6 loan-to-value ratio. The fact that Colonial Bank approved this high LTV is worrying, and it is no surprise that the bank was taken over by the FDIC in 2009. Despite this, Burton remains responsible for making the payments.

The sales of each of the businesses depend largely on the local community, which is primarily Hispanic. With the recent tightening of immigration laws in Georgia, along with the downturn of the construction industry, the Hispanic community was negatively affected, leading to a decline in sales. Despite the bad economy, Northwinds Community Crossing is fully occupied. All tenants have triple net