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A growing number of lenders are starting to clamp down on commercial property owners who are behind on their mortgage payments.

For the past two years, many lenders were inclined to “amend and extend,” an industry tactic used to prolong the maturity of the loan in exchange for better terms. The idea was that lenders would have a better chance of receiving full value of the loan if the borrower were given more time.

But in the past six months, lenders have begun to draw a harder line between loans they are willing to renegotiate and properties they are going to foreclose upon.

That may mean good news for people with cash in hand looking for deals in the real estate market. But while the shift by lenders is likely to increase the number of foreclosures in the future, prices on those buildings won’t necessarily drop because lenders have better positioned themselves to get the most value out of foreclosed properties.

Tim Parks, a partner with Ball Janik LLP, has seen the shift occurring in Portland.

“At first banks were doing one-year extensions on these underperforming loans because they weren’t sure how to deal with the onslaught of properties they would receive through foreclosures,” he said during the Building Owners and Managers Association monthly networking event. “That just pushed the problem back a year.”

Now, though, banks are adopting new rules for dealing with properties with late mortgage payments. For example, if there is a reasonable chance to get full performance on a loan, a lender might be inclined to give a three-year extension. But if there’s no chance, the bank might decide to take back the property, Parks said.

Part of the growing willingness to foreclose also has to do with the fact that lenders are finding new ways to resell those properties.

One method gaining popularity is bundling properties and selling them at a discounted rate. For example, even though hotels are notoriously hard to sell in this economy, buyers have been more inclined to agree to deals for multiple hotels rather than only one.

Parks said banks also are often taking a landlord’s approach to properties. If they feel a property failed because of bad management or marketing, they will hire out those services to improve performance. Once the properties become profitable, banks will put them on the market, he said.

Robert McKean, CEO of Albina Community Bank, said workouts tend to take more time than foreclosures and often are less certain. When deciding whether to extend a loan or foreclose on a property, a bank will consider: the current appraised value, the building’s performance and a prediction of market conditions, he said.

“In commercial terms it all comes down to cash flow and cap rate,” he said. “If the cash flow isn’t there, lenders are going to push to take that property over sooner rather than later.”

The problem with banks taking over properties in the present economic environment is that there is still a large gap between what buyers are willing to pay and what banks need to at least break even. This has led banks to resist selling properties, further tying up their capital.

When the former owners of the KOIN Center, California Public Employees Retirement System, defaulted on its $70 million loan with New York Life Insurance, the lender sued the owner spurring a deed in lieu of foreclosure. The building, which was sold to CalPERS in 2007 for $109 million, sold for $57 million last year when it was deeded back to the lender. The sale didn’t even make up the value of the debt.

“Banks are pricing these foreclosed properties below market to entice buyers, and buyers are coming in and trying to lowball them because there isn’t much competition,” said Phillip Higgins, principal broker with Bluestone & Hockley. “But we are starting to see a shift from that as banks hold off and more buyers enter the market.”

Another reason banks don’t want to take on underperforming properties is the regulatory stress that comes with such assets. If 5 percent of a bank’s assets don’t perform, the bank will be pushed by government regulators to unload those properties, even if prices don’t pencil out, McKean said.

While banks are finding ways to handle foreclosed properties, all three commercial real estate professionals think the problems are far from over.

“It’s hard to know the loan-to-value on these properties if the appraisals drop 10 to 15 percent each time we update them,” McKean said. “Combine that with the fact that we’ve got a ton of loans coming due and no money to support them (and) we are still a ways out from a full recovery.”