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Lenders 360

Good Times for Lenders

Dead Debtor (tortoise) v. Living Lender (hare): Which One Correctly Values On-line Information?

By Keith Mullen on Posted in Good Times for Lenders, Technology (including Green Buildings), Tough Times for Lenders

The dead are beating their lenders in recognizing the value of, and then protecting, their on-line lives – I mean assets.

Does the tortoise beat the hare (again)? Even when the tortoise is dead?

This perspective rings out in this:

  • The Dead: on-line assets (accounts, sites and materials) are recognized as an important asset by executors, agents, guardians and beneficiaries; and trust and estate professionals are planning for the care of those assets
  • Their Lenders: on the other hand, lenders and their lawyers are not focusing on the ways technology is changing commercial real estate – such as the changes needed in their loan documents in order to appropriately include on-line assets (and access to them) as part of the loan collateral

In the March ’11 issue of Mortgage Tech Magazine, I wrote about a variance of this cognitive dissonance, where one group “gets it” (property owners) and the group financing it (lenders) seems to be blind on the ways that technology is changing commercial real estate.  And periodically here on L360, I offer up my thoughts under my “technology” category (over on the right side of this page).

It jumped out to me again in the January\February 2012 issue of the ABA’s Probate & Property magazine, which is published by the section of the American Bar Ass’n populated by trust and estate lawyers and by real property lawyers.

The magazine has in interesting article by Gerry Beyer and Naomi Cahn on estate planning for on-line accounts and other “digital assets.”  The article acknowledges that it is a sequel to a paper in 2011, and refers to an influential blog post in 2010.

Separately, earlier this month, Tom Mighell and Dennis Kennedy covered this topic in their Kennedy-Mighell Report podcast.  This is an “old” topic for Dennis – one of my favorite pieces on estate planning and digital assets is a 2010 piece by Dennis Kennedy in the ABA”s “Law Practice Today” monthly webzine.

In contrast:

  • where is all of the writing and information on “how” technology is changing legal issues in commercial real estate finance?

Clearly, the trust & estate lawyers (in their care for the dead) are way ahead of the real estate finance lawyers (in their care for the [living] lenders).

Long live the dead tortoise.

Please post your comments below.

 

Good Times for Lenders

As “Bad-Boy” Recourse Liability Spreads to Construction Lenders . . . Is the End Near for Non-Recourse Liability??

By Keith Mullen on Posted in Good Times for Lenders, Guaranty Issues, Market Trends

Once upon a time and in a very simple time,  construction lenders required full payment and performance guarantees, and only permanent lenders offered non-recourse financing (with “bad-boy” liability).  Now, even some construction lenders include a variation of non-recourse liability (with “bad-boy” events) in their structure.  And, the list of “triggers” or events that form the basis for liability is growing.  If this trend continues -

  • will the number or bundle of “bad-boy” events be substantial enough to constitute, in a practical sense, the “end” of the non-recourse loan structure?

The time-line seems to say “yes.”

Traditionally, permanent lenders (typically life insurance companies) were the only commercial real estate lenders who incorporated the concept of “non-recourse” liability into their lending product.  In the structure, neither the borrower nor the guarantor (or indemnitor) was liable for the repayment of the loan.  If the project or local market went bad, the lender could obtain title to the property, but could not sue them for recovery of the balance of the loan.

Importantly, the triggers or events for liability were few in number: maybe 6 or 8.

Back in the day, life and liability was simple:

  • construction loan (high risk period since tenants were not paying rent): 100% liability
  • permanent loan (once tenants paying rent, then risk much lower): short list of bad-boy events as the only basis for liability

However, securitization of commercial real estate loans (CMBS) and the recent “down turn” of the economy introduced a much larger set of bad-boy events (Courtney Bristow’s article on dealing with distressed CMBS loans gives a nice over view – it is the #1 download from L360 [and the former TT4L blog]).

I’m confident that the list of bad-boy liability events will continue to grow.  For example, technology issues alone will father more bad-boy events.  (Take a look at my other posts.)

The non-recourse (bad-boy) liability structure is becoming form over substance.

If you view this differently, or want to give me a course correction, please comment below.

 

 

Good Times for Lenders

Fed Policy on Renting Residential REO Points to . . . no near term recovery

By Keith Mullen on Posted in Good Times for Lenders, Tough Times for Lenders

A recent policy statement issued by the Federal Reserve “reminds” banks and their examiners that renting residential property, after the bank obtains title, can be part of the bank’s process of returning the property to the market place.  The statement acknowledges that although banks “should make good-faith efforts to dispose of OREO properties at the earliest practicable date,” banks do NOT have to demonstrate their continual efforts to sell the property “in light of the extraordinary market conditions that currently prevail.”

This is NOT a hopeful message.  In a sense this is “kick the OREO can down the road”

In other words, the Federal Reserve tells us that our stress is far from over.  The stress will continue . . . .

  • banks will NOT be “dumping” foreclosed residential property onto the market place; since “dumping” typically
    -  adversely impacts the value of the homes surrounding neighborhood (of course, however, the rental rate will impact the value of the homes surrounding the neighborhood – but probably not as significantly as the value of a house sold at a discounted or distressed asset)
    -  means selling the property at a discount (with bank receiving less than full recovery of the loan by the bank)
  • “short sales” might be coming to an end (with banks electing to foreclose & then rent the property)
  • banks still need to maximize the cash on their balance sheet (selling at a discount will undercut this)

Granted, this statement applies to residential property, and not to commercial real estate.

For now.

If you view this differently, please comment below.

Tough Times for Lenders

Collateral or REO include Residential Condo Units? New Fannie Mae rules impose burdens on loan servicers

By Keith Mullen on Posted in Tough Times for Lenders

Bob Burton at Common Interests 360 reports on some good news for develpers and resident controlled owners  associations if Fannie Mae is holding a loan on a residential condo unit - but it is BAD news for loan servicers.  Briefly, the rules impose a litinany of new “must do” items onto the servicer, with a focus on paying home owner assessment dues.

The business of servicing residential condominium loans simply is becoming more complicated . . . and more burdensome on the loan servicer.

And perhaps the financing of residential condominiums is becoming less attractive to investors, which is NOT a good thing.

My guess is that the cost to finance a residential condominium loan, and\or the interest rate on it, has just gone up.

If you have any comments or want to share an incite, please comment below.

 

Technology Notes

Nominal Tech $$s in Your Company Budget? 4 Easy Steps on “How” to Better Use Tech Tools in Your Work

By Keith Mullen on Posted in Technology (including Green Buildings)

If, like most financial services companies, your department or work team only receives nominal support from your technology group, then my piece in the April issue of Law Practice Today  should interest you: it lays out  a fourfold strategy for better utilizing tech tools.  With fewer people doing more (the new workplace mantra), access to tech tools become our life vest.

Clearly, in the struggle to win dollars for use in technology tools to support business platforms, most (all?) financial services companies pour money into the retail or consumer side of the platform.  And what is the level of technology spend available to the investment side of the platform?  Bare-bones.  Just enough to get by.  Or, perhaps more when the retail side is full (as it digests the latest and greatest up-grade).

Although my piece is directed at in-house counsel, the content is relevant to all of us on these topics:

  • embrace collaboration
  • increase face time
  • standardize documentation
  • collect important information

This is a high level overview, with a few practical tips.  I’ll burrow done into these topics in the future.

If you have advice or questions, please comment below.

Technology Notes

“My iPad Works!” Join Me at the Dallas Belo Mansion – we’ll review my top 10 apps and more

By Keith Mullen on Posted in Technology (including Green Buildings)

Please come join us on Weds, April 25 at the 7:45a meeting of the Dallas Area Real Estate Discussion Group, at the Belo Mansion in downtown Dallas.

I’ll “show” you  “how” I use an iPad in my work, with a focus on the top 10 apps used by me - and we’ll cover much more.  The focus is practical stuff.

Here is the presentation, which gives you a good jump start in using your iPad at work: iPad presentation (April 23 2012 v1) DAREDG final.

I look forward to meeting you.

Keith

Technology Notes

Using My iPad at Work: Apps that Work for Me (and a link to my iPad presentation)

By Keith Mullen on Posted in Technology (including Green Buildings)

Today I’ll share my 10+ favorite apps, and some tips and resources, on “how” I use my iPad as I work in commercial real estate finance.  The sessions will be a short hour “break” for the leadership of the American College of Mortgage Attorneys.  This group is sharp.  So the session will be quick witted, pointed and fast moving.

Attached is a iPad presentation (April 20 2012 v1) ACMA Regents final

Just to make the session a little more  . . . interesting, I’ll be doing it without the use of a projector or any other A\V device.  I have a handout for the group, just in case this approach flops:

  • I’ll use the “idea flight” iPad app, which will allow up to 30 people (or “passengers”) to view the presentation on their iPads, as I remotely “drive” it from my iPad (as the “pilot”).

I have two iPads with me, and it has worked great in my practice runs.  (And “thanks” to Tom Mighell for directing me to this app – and yes, I strongly encourage people to buy Tom’s two iPad & app books, and follow his iPad blog.)

Why simply “talk” about using an iPad at work, when idea flight gives us a collaborative experience?

Each of us holding, and then test driving apps, is a much, much, much better than the standard “sit there and listen” experience.  Indeed:

We won’t be “toying” around in this presentation.  Each of us will put our iPads to work.  (Do you know of any other real estate or finance industry group that has done this?)  (Yes . . . I’m nervous.)

Here’s my top 10 apps for use in commercial real estate finance:

  1. Flipboard – “personal” magazine-style news, blogs, twitter, Facebook, etc. (free)
  2. Documents to Go Premium – view and edit Microsoft Office documents ($16.99)
  3. CloudOn – Word, PPoint & Excel in the “cloud” (free)
  4. Note Master – note-taking app; syncs with Google docs ( $3.99)
  5. Noteshelf – handwrittng note-taking app ($4.99)
  6. “new” iPad Voice Dictation
  7. iAnnotate PDF – save files to PDF 8( annotate ($9.99)
  8. PDF Converter – save files to PDF format ($6.99)
  9. Fastcase – legal research (free, but full use requires Fastcase subscription)
  10. GeeTasksPro – task and deal lists; syncs with Google Tasks ($7.99)

I hope this is helpful.

Please post your favorite apps below, or your comments on the attached presentation.

Technology Notes

Work Flow and Volume Tough to Manage? Here are some tips

By Keith Mullen on Posted in Technology (including Green Buildings)

We’re all looking for realistic and meaningful tips on “how” technology will improve our work lives, and our work product.

If this is a challenge for you, or for others in your work group or department, then my article in the Law Practice Today webzine should help you.

The American work place is summed up in these phrases:

  • it’s all about fewer people doing more in less space
  • we know that better use of technology offers an answer
  • but right now technology itself is killing us (e-mail alone is a poison pill) (and don’t give me one more website and password)

One of my short-list goals this year is to improve in my use of technology.

Although my article is written with in-house counsel in mind, the problems and my tips apply to all of us – whether we lead a work team or a department, or simply struggle in our use of technology as we work.

One tech tool working more and more for me?  It is my iPad.  I’ll give you my top 10 apps  in a future posting.

If you have helpful tech tip, please share them below.

 

Good Times for Lenders

Lease Reviews & Surveillance: “Green” Lease Provisions in “Green” Buildings

By Keith Mullen on Posted in Good Times for Lenders, Technology (including Green Buildings)

Back in December of ’10, I gave you a list of lease provisions that are crafted to address topics unique to “green” buildings.

Here’s another version or update on the list:

  • insurance provisions
  • annual environmental performance report (access to space, access to the report, etc.)
  • carbon credits (they belong to Landlord!)
  • building operations (in compliance with applicable green building standards)
  • substitution of space (same standards as original space)
  • janitorial and cleaning services (and specifications)
  • utilities and compliance with applicable green building standards
  • bicycle storage
  • tenant finish requirements (for example, high-efficiency plumbing fixtures, appliances, light bulbs, etc.)
  • use of renewable energy suppliers

If you’re dealing with a green building, consider having both this list and the earlier list at your elbow as you review leases in the building.

Green buildings are different; so are the leases.

(For my other comments on “green” buildings, search the blog with the search term “green.”)

If you have additional provisions to add, please share them with us by commenting below.

Technology Notes

Using Your iPad at Work? Looking for Guidance? Try These 3 Books

By Keith Mullen on Posted in Articles, Technology (including Green Buildings)

In several weeks, I’ll be giving a presentation on using an iPad at work.  The audience will be leadership and most active members of the American College of Mortgage Attorneys.  (Yes, I’ll be buying Jake a dinner.)

I’ll give a brief overview of “how ” to use the iPad, accessories, initial steps and then jump into 10 examples of my use of my iPad during my day in commercial real estate finance – both in the good stuff (new loans, etc.) and the bad stuff (workouts and remedies).

The topic is huge and even overwhelming.  So, my focus will be small – which is good because for many of us, taking the iPad from personal uses to work is a huge leap.  Even mind boggling.

After all, the iPad is for our personal lives; for Facebook; for games; for books;  and reading e-mail; right?

Following law school, I worked for a Federal Appellate Judge. It was a wonderful experience, principally because he was (and is) a very thoughtful and wise  man.  Of the many lessons he taught me, this one is in the “top tier” list: “every case has a single question that resolves it; find it.”

So, during the clerkship with Judge, as I dug through the cart full of trial testimony and briefs (often thousands of pages) (yes, “hard” copy – back in the dark ages), my focus was -

  • “Don’t make it complicated.  Keep it simple.  Even single. Where’s the question?”

Most of us have the same thoughts in our longing to use the iPad at work.

  • what is the best resource or guidance on using an iPad at my work?
  • keeping it simple, where do I start? where do I go?
  • HELP!!!!

These three books are the best resources – and do NOT let the “lawyers” stuff stop you from using them (the “hard core” lawyer stuff is only a small portion of Tom Mighell’s books):

  • iPad at Work by David Sparks (lawyer; blogger) (available in hard copy and electronic) (Amazon link)
  • iPad in One Hour for Lawyers by Tom Mighell (linkedin) (available at the ABA book store and Amazon) (hard copy only [bummer . . .  but don't blame Tom])
  • iPad Apps in One Hour for Lawyers by Tom Mighell (available at the ABA book store) (hard copy only [bummer . . .  but don't blame Tom])

Yes, there are some great blogs on this topic (including David’s and Tom’s).  I’ll list my favorite blogs sometime.  But, if you’re looking for thoughtful guidance, focused on “using my iPad at work” – then the simple answer is these three books.

Please share your advice, or even other books, by commenting below.