This article discusses and analyzes the recent holding of a California appellate court, which refused to award a mortgage lender attorney's fees for prevailing in a bad-faith waste action against the borrower. Because the applicable California statutes did not provide for attorney's fees in a tort action for waste, the lender's entitlement to fees depended entirely on the contractual language. The court ruled that the "carveout" language in the mortgage did not extend to attorney's fees, either explicitly or implicitly, and therefore their recovery was barred by the nonrecourse provision of the mortgage. The article also contains drafting tips to preserve the lender's right to collect attorney's fees in a nonrecourse loan, and discusses steps to preserve these rights in connection with modification agreements.
This article discusses and analyzes an unreported decision by the Michigan Appellate Court, London v. Gregory. The court held in this case that where a third party had redeemed the property from foreclosure sale, in exchange for a lease of the property back to the mortgagor with an option to repurchase at a highly inflated price, the transaction constituted an equitable mortgage and the mortgagor could remain in possession of the property. This article also examines the law in general regarding equitable mortgages.
This article examines the issue of whether a mortgagee that takes a deed in lieu of foreclosure may subsequently foreclose a subordinate mortgage on the property. The article examines current case law in this area, and the issues of merger and the intention of the parties.
Updated
This article discusses, in outline form, the conditions under which mortgage lenders commonly accept deeds in lieu of foreclosure from delinquent borrowers. The article also analyzes the legal and bankruptcy issues that arise in these transactions, and contains exhibits with sample title endorsements, checklists and settlement agreement provisions.
For reasons advantageous both to the borrower and the lender, loan defaults are frequently resolved by a deed in lieu of foreclosure, the transfer to the lender of title to the real estate securing the debt. This article presents an encyclopedic discussion of the relevant concerns in a workout effectuated by a deed in lieu of foreclosure.
This article discusses and analyzes the tax implications to a mortgage lender of taking a deed in lieu of foreclosure.
This article discusses the structure of a like-kind exchange of property, under sec. 1031 of the Internal Revenue Code, within the framework of a deed in lieu of foreclosure.
A comprehensive compilation of practical legal forms (many of which are annotated) used in connection with the resolution of distressed commercial real estate, including a pre-negotiation agreement, loan modification agreement, cash collateral agreement, deed in lieu of foreclosure agreement, and purchase and sale agreement.
This article discusses and analyzes the federal district court's decision in Travelers Ins. Co. v. Corporex Properties, Inc. This is one of the few cases ever to rule on the enforceability of mortgage loan pre-workout agreements. The court in this case upheld the validity and enforceability of the lender's pre-workout agreement.
An analysis and discussion of recent Federal Court rulings in Illinois on receiverships, diversity jurisdiction and foreclosure sales that have encouraged commercial mortgage lenders to file foreclosure actions in federal instead of state court, as well as an examination of the risks involved in utilizing the Federal Court system for such actions.
This article discusses and analyzes the strategies that should be considered and implemented by a lender when dealing with a defaulted real estate loan.
This article discusses and analyzes the use and enforceability of pre-workout agreements between the lender and borrower, and the applicablity of credit agreement statutes with respect to lender liability claims by borrowers.
This article discusses a California Appellate court decision of first impression, Vallely Investments, L.P. v. Bancamerica Commercial Corp., which held that the assignee of a ground lessee's interest, who expressly assumed the lessee's obligations to the ground lessor in connection with a workout/foreclosure by the ground lessor of its leasehold mortgage with the lessee, remained liable to the ground lessor even after foreclosure of the ground lessee's position. The article also contains suggested alternatives that may have enabled the assignee to avoid this result.
A detailed discussion and analysis of the various theories of lender liability, especially as they relate to construction lending. The article contains suggestions for minimizing the lender's exposure to such claims.
This article examines recent case law that deals with lender liability issues in securitized loans. Because of the number of “players” in securitized loan transactions, there is more of a chance that such claims will occur. But as noted in the cases discussed in the article, the courts will still employ a traditional fact-based analysis and will not tolerate frivolous claims against the lender that are unsupported by the loan documentation or the special facts of the case.
This article discusses a Maryland appellate court decision of first impression, which held that a mortgagor's failure to secure off-site parking for a commercial office building did not constitute waste or a breach of the mortgagor's duty of reasonable care of the property. The court refused to permit a tort action for "permissive" waste where there was no allegation that the property was in disrepair, that taxes were unpaid, or that monies were wrongfully withheld.
This article discusses the legal and bankruptcy issues faced by mortgage lenders in connection with obtaining a deed in escrow as part of a mortgage loan workout, or as part of the original loan transaction. Existing case law in this area throughout the United States is analyzed, and suggestions are offered to enhance the enforceability of such agreements. A sample form of Deed in Escrow Agreement is attached as an exhibit.
This article discusses a recent California appellate court decision, Nippon Credit Bank, Ltd. v. 1333 North California Boulevard, which found a mortgagor liable to the mortgagee for the tort of bad-faith waste based on the mortgagor's failure to pay real estate taxes while the nonrecourse loan it obtained from the mortgagee was delinquent. The article also discusses the trend in recent case law to blur the distinction between "active" and "passive" waste, and to hold that "economic" waste, such as the failure of the mortgagor to pay taxes, may be actionable as a violation of the duty not to commit waste or impair the value of the property.
This article discusses and analyzes a recent U.S Ninth Circuit Court of Appeals ruling which upheld, under the facts of the case, the priority of a mortgage over a federal forfeiture claim and permitted the foreclosure sale purchasers to take title to the property free and clear of the government's interest. This decision brings some much needed guidance to mortgage lenders when dealing with forfeiture issues in the foreclosure context. The article also contains, as exhibits, sample forms of "anti-forfeiture" provisions for insertion in mortgage loan documents.
A summary, in outline form, of existing case law regarding the rights of subordinate lienholders with respect to substantive and non-substantive modifications to senior loan documents, including the requirement of notice to and the consent of such subordinate lienholders.
This article summarizes the steps that a mortgage lender should take when the loan becomes delinquent, in order to protect its rights and remedies in the event of foreclosure and/or the borrower's bankruptcy, and enable it to implement a strategy to maximize the likelihood of recovering the indebtedness.
What Do You Need to Know About Workout Strategies?
