For more than a week, papers have been covering the problems of Orange County, Calif., apartment investor The Bethany Group. The company has accused its lenders of "starving" a 16-property portfolio by forcing employees, contractors, and utility bills to go unpaid.

Looking at where the properties are?Arizona, California, Colorado, and Florida?it's no surprise. Between high leverage levels, excess supply, and rising job losses, there will be more foreclosures in all of these markets in the months to come.

But Bethany says operations aren't the problem. It says all three of its investment portfolios are cash-flow positive and are paying off the $400 million in debt. Unfortunately, its loan-to- value ratios fell below minimum thresholds, pushing the properties into noncash default. Evan Smiley, the Costa Mesa attorney handling the filings for the company, told the Orange County Register that lenders gained control of rent payments and refused to release any of that cash to meet payroll, pay utility bills, or pay contractors.

Now, those employees, contractors, and utlity providers need to be paid. Trigild, a San Diego-based distressed receivership, property, and loan recovery specialist, has been appointed receiver of the portfolio. But what becomes of Bethany? Surely, we'll see a slugfest in the courts.

And what becomes of the other apartment owners around the country paying their loans but staring down scenarios where declining asset values will push their loans into default? It's a scary scenario that a number of apartment owners say they're facing. In some cases, the banks may work with them to find common ground.

"The banks are open to discussing [loan modifications]," said Ryan Akins, Regional Director for The Bascom Group in Irvine, Calif. "Lenders aren't in the business of owning real estate. If there's a way to work something out that is mutually beneficial, everyone is open to doing that."

But in more difficult markets such as Florida, the situation could be tougher. "Banks do not want to extend any loan, even if it's performing," said one Florida builder bluntly, after requesting anonymity.

Another owner in Florida sees a major mess if banks don't revise their policies. "When you see banks posturing over details and holding back on giving you a loan extension when you're current, that's not good business," says the owner, who also requested anonymity. "If I'm put in the position where you're not willing to give me an extension, and there's not another bank that can give me a loan, all I can do is hand you back the keys. That's just really not intelligent business on behalf of a bank. The banks should do whatever they can to make sure their borrowers can still make debt service payments and stay whole on the loan. They need to keep that thing performing at all costs."

In Bethany's case, the bank didn't work with the owner. And, unfortunately, the same scenario could soon play out in other beleaguered markets around the country.