Mature Commercial Loan, Balloon Due, Way Under Water. Help Please

[Stephen Williams]

Hello there, I'll try and make this brief. I am a bit out of my depth here but my father has asked me for help so I'm doing my best. Basically to dumb it down in 2005 my father bought four properties right around the boom before the bust. These mortgages were packaged in one commercial loan in the amount of around 200,000. These aren't great properties and he uses them to pocket the difference of the mortgage payment versus the amount he gets in section 8 for the property every month. He's approaching 70 and pretty much bought his properties in hopes of never really paying them off and refinancing whenever possible to lower the payment and increase income. It's small potatoes but the man's just trying to work less. He also owns 9 other properties with a similar strategy.

So now the trouble. He gets a call today from his lender telling him he had been reviewing the loan and found that he was realistically under water a total of about $40,000 value wise from what the actual loan was. The loan has matured and the only possibility of keeping it is a $20,000 balloon payment that he could never come up with. He asked the man, "So can I just give you the houses?", the man said well we're not really at that point yet, this is more of a notification that it is a bad loan. The houses were mercilessly over-appraised. The bank never reviewed the appraisals and signed off on them. Thus he finds himself in a bad loan, with houses nobody really wants, and a loan that no other bank would want to touch.

The only nest-egg my dad has from all this is about $50,000 in equity from all properties combined. None are purchased under an LLC, they're all personal loans. The man has immaculate credit and has never missed a payment on anything in his life. So all that being said, I hope it makes sense what's going on. My questions are these.

1. Is there any way for him to get out of this predicament without them seizing everything he owns and potentially all of his accrued equity with it (including his own house which is paid off) ?

2. What would be the best starting point and course of action for him to take?

3. Have you or someone you know gone through something like this and what did you/they do?

4. What's going to happen to him from a bank action stand point?

I would really appreciate any advice you have. I'm not a real estate guy; my dad is just my best friend and I'd do anything to help him. Thank you so much for reading.