Is the Bank Fair and Reasonable In a Loan Workout?

"Fair" and "Reasonable" in a Workout?

I am frequently asked whether a particular Offer in Compromise (OIC) for a defaulted loan is reasonable. I am aware of the pain many borrowers feel when they determine the bank is not being "fair". Along this path is also the anger that defaulted borrowers experience when they believe the bank is out to get them, liquidating assets rather than "working with" the borrower to help them recover, of course with the promise to pay them back more than if they were foreclosed upon now.

Let me explain what you already know but are not satisfied with: The bank is not your friend.

They are a business and they follow whatever path they deem most beneficial to themselves. They are uninterested in protecting or supporting your well-being, your assets, or your business and it has nothing to do with being fair. It has everything to do with how they do business and what their goals and objectives are. In short, they are doing what they believe is either in their best interest or what they believe they are required to do, whether or not it makes sense to you. Fairness is not an issue, not a consideration, not even a distant thought. Nor are they acting mean-spirited or "out to get" you. Get it out of your mind. You signed a note, posted collateral, guaranteed payment and in default you are asked---actually demanded---to perform as you promised.

The bank is not your friend---nor your adviser or your mentor---and is only interested in its own needs, not yours. Stop pretending the bank is giving you any advice that may be in your best interest. That is pure folly. They are only interested in their own self-interest.

Maybe you have to get real and appreciate the high stakes game you entered into when you borrowed far more than you could ever possibly repay if demanded. Once you are in default that is exactly what is expected of you---repay the debt or suffer the liquidation of your assets.

We at Second Wind understand this disconnect and have devised strategies to level the playing field and put the defaulted borrower in a much better position to successfully reduce the debt and payback requirements without sacrificing assets or your business. This, too, has nothing to do with fairness or being reasonable, it's just a matter of smart business strategy and logic on our end, just as the bank is doing for itself.

"Fairness" is for the playground, not the real world. Unfortunate, but true.