You are a consultant hired by a financial intermediary that securitizes¹ commercial mortgages.In the midst of the coronavirus pandemic, shops and restaurants are closed, and occupants aren't paying rent.So landlords aren't paying mortgages.So the value of the securities your client issued have tanked and it is hard to raise money with new securitizations.

If only you can prevent bankruptcy of the parties involved.Consider making a recommendation to restructure the mortgages to maintain some cash flow during this crisis year - or perhaps these crisis five years.

If you can work out the first restructuring with a mall hard hit by the closings, you hope that it will provide a template for other restructuring in the future.

¹ Securitization is the process that occurs when a firm purchases many mortgages from the originating banks and offers securities to investors that pay returns based on the mortgage payments received.For example, a firm buys $1 million of mortgage receivable that have an average term of 20 years and an average interest rate of 5% for $900,000.Then the firm sells 1000 $1,000-securities that will pay to the investors their proportionate share of the interest revenue received each month on the mortgages.The highest expected payments are $4,167 (.05/12 * $10,000,000 * 1), so someone with a single $10,000 security could receive $4.167 each month for 240 months.Of course, the actual cash received will differ depending on the number of on-time payments and on any mortgage prepayments, etc.

Facts

Mortgage Principal at origination 1/1/2019:$10,000,000

Annual Interest Rate at origination:6%

Term of Mortgage from origination 1/1/2019:20 years

Purchase Price: $10,000,000 on 1/1/2019

The mall owner has stopped paying principal beginning April, 2020, and anticipates being unable to pay even the interest portion beginning September, 2020 unless the CDC allows less strict mask and social distancing requirements.

The mall had a fair market value of $20 million on 1/1/2019, and expects a current appraisal to be at about $16 million.

Ignore refinancing costs.

The securitizations do not qualify for sale accounting, and the creditor retains legal title to the mortgage as well as a 10% participation in the mortgage.

Today is August 31, 2020.

amortization table that allows for an input each period of the amount that the borrower actually pays.Using the facts of the case, use the amortization table structure to find the principal amount owed as of September 1, 2020.