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Category Archives: Tough Times for Lenders

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The Lender Holds the Bag When the Appraisal is Wrong

Posted in Tough Times for Lenders, Workout Issues

The Bankruptcy Code permits a bankruptcy trustee to “surcharge” a lender’s collateral when the cost will benefit the lender and there is also benefit to the bankruptcy estate.  The friction arises when the collateral is worth less than the lender’s secured claim plus the surcharged expenses.  In short, who is left holding the bag when… Continue Reading

THE GOVERNMENT HAS WAYS TO FIND OUT WHO LENDERS HAVE DISCRIMINATED AGAINST EVEN IF THE LENDERS DON’T KNOW

Posted in Lender Liability, Tough Times for Lenders

Sometimes government regulators do funny things.  Sometimes their actions reflect that they are non-economic actors, sometimes its political, sometimes its bureaucracy and sometimes there is just no reason at all because no one knows who made the original decision. The recent Ally Bank borrower discrimination settlement in which no one knows who was actually discriminated… Continue Reading

The Long Arm of the FDIC is Even Longer After Recent 5th Circuit Opinion Extends the Extender Statute

Posted in Remedies, Tough Times for Lenders

One of the many tools of the FDIC in resolving failed banks is the Extender Statute which, by its terms, replaces existing statutes of limitation under state law by a period of years.  In simple terms, the Extender Statute creates a longer statute of limitations for bringing a lawsuit on behalf of the now defunct… Continue Reading

The Only Thing Worse Than a Claim in Bankruptcy is Claim Subordination

Posted in Collection, Guaranty Issues, Remedies, Tough Times for Lenders, Workout Issues

Claim subordination is the opposite of alchemy.  In most bankruptcy cases, creditors might look for ways to improve their treatment.  Claim subordination in the bankruptcy code provides a mechanism to force a creditor to receive worse treatment (relative to other non-subordinated claims which is, admittedly, not that great of treatment). In bankruptcy, there are a… Continue Reading

PWC Escapes MF Global, Inc. Class Action Suit Claiming In Pari Delicto

Posted in Collection, Remedies, Tough Times for Lenders, Workout Issues

I have been told that in a traffic jam ambulance drivers are taught to move to the first opening available in traffic and figure out where to go after that.  Sometimes legal strategy takes that same philosophy.  In a recent 2nd Circuit Case, PriceWaterhouseCoopers, LLP (“PwC”) asserted in pari delicto to avoid immediate liability in… Continue Reading

Make Whole Provisions: the Need to Aggressively Walk Back Aggressive Collection Provisions

Posted in Collection, Tough Times for Lenders, Workout Issues

Unexpected things happen in bankruptcy.   Some debts can be restructured, some debts can be reduced and some debts the debtor is just stuck with.  In contrast, outside of the bankruptcy ecosystem, economic interests are treated normally.  Because of the difference, a creditor’s activities for recovery in bankruptcy will, at times, seem at odds with their… Continue Reading

7th Circuit Holds Construction Lender “Caused” M&M Liens when it Cut Off Funding, Can’t Seek Coverage Under Title Policy

Posted in Insurance & Environmental Risks, Tough Times for Lenders, Workout Issues

Knowing when to cut your losses and walk a deal is a difficult skill to master.  In the construction loan context it is particularly difficult because a half completed building lacks the intended value anticipated on the loan.  On the other hand, cutting off disbursements causes a whole other set of risks including mechanic and… Continue Reading

The Plaintiffs Suing the Lender May Not Exist At the Time the Loan Documents Are Signed

Posted in Lender Liability, Tough Times for Lenders, Workout Issues

It is often surprising to me how often people are unaware of the fairly high risk of being sued in connection with a chapter 11 bankruptcy case when there is money in the case.  Many times, non-debtor parties’ falsely comfort themselves with the belief they will not be sued because existing management wouldn’t want to… Continue Reading

JPMorgan Requests Rehearing Following Loss of Secured Status of $1.5 Billion Loan following “Clerical Error”

Posted in Lender Liability, Tough Times for Lenders

It’s an old saying that lessons are expensive and good lessons are really expensive.  A recent 2nd Circuit Case provides a good lesson on attention to detail and, unfortunately, it is also a really expensive lesson to JPMorgan and their attorneys.  In the 2nd Circuit’s recent opinion, the Court determined that a UCC3 (termination statement)… Continue Reading

Bankrupt Individuals Can’t Strip Down Senior Lenders in Ch. 7, but the SCOTUS will decide if they Can Strip Off – Leaving Junior Mortgage Lenders Unsecured

Posted in Tough Times for Lenders, Uncategorized, Workout Issues

The SCOTUS has recently decided to hear an appeal to consider whether junior mortgage liens, which are out of the money, on chapter 7 debtor’s homes may be voided simply because there is no equity in the home to attach to the junior lien at the time of the bankruptcy filing.  The effect of a… Continue Reading

Confidential Information May Not be so Confidential in Bankruptcy. Just Ask Apple.

Posted in Tough Times for Lenders, Trade Secrets, Workout Issues

It is said that when the debtor files bankruptcy the debtor is in a fish bowl.  The reason is simple:  the debtor in bankruptcy is required to make honest and sworn disclosure of all manner of financial and operational information on request and at regular intervals per the bankruptcy code.  Often, new and exciting liabilities… Continue Reading

No Good Deed Goes Unpunished When Accepting Payment from a Non-Borrower on Behalf of a Borrower

Posted in Guaranty Issues, Lender Liability, Tough Times for Lenders

I have found this to be true over and over again.  Maybe it’s just my line of work. Part of my regular practice is being called in by the transactional lawyers (paper pushers) as they paper up a new loan or re-fi.  My job in those situations is to give my thoughts on what will… Continue Reading

Sticks and Stones May Break Your Bones, but Reliance Waivers Can Still Hurt You

Posted in Lender Liability, Reps & Warranties, Tough Times for Lenders, Uncategorized

Last week Regions Bank sued Comerica Bank seeking a declaration that Regions is not liable to Comerica in connection with their $53MM syndicate loan to a plant nursery that went very wrong.  Regions Bank v. Comerica Bank, civil action 3:14-cv-3607, pending in the United States District Court for the Northern District of Texas. In short:… Continue Reading

Risks of Over-Sharing or: How I Learned to Stop Worrying and Love the Attorney-Client Privilege

Posted in Discovery, Remedies, Tough Times for Lenders

Believe it or not, when you (the good guy) accidently produce in discovery an internal memo which is subject to attorney-client privilege to the bad guys (the guys suing you), the bad guys might not give back all the copies.  And, if you are really unlucky, the bad guys will distribute it to other bad… Continue Reading

Sell the Company as the “Exit” Strategy? Tips on the Forbearance Agreement

Posted in Tough Times for Lenders

The “forbearance” agreement between a lender and a borrower is an important piece of an orderly sale of a company (as it sells all of its assets and pays creditors).  Whether you’re the creditor or the company, a thoughtful forbearance agreement (balanced with key interests of both sides) must be in place to begin the… Continue Reading

List & Links to “HOTTEST” Topics on L360 Point To: new lending, bad loans & iPad tips

Posted in Articles, Good Times for Lenders, Technology Notes, Tough Times for Lenders

My latest resolution is to be better at giving lists of the “hottest” or top topics on L360 – as selected by you. It gives me a rough sense of the direction we’re heading. The summer 2012 list now has several topics on “positive” lending issues, which reflects the general up-tick that I’m seeing in… Continue Reading

Early Pay-off of a Commercial Mortgage Loan? Shhhh – here’s “why” it makes sense

Posted in Tough Times for Lenders, Workout Issues

Acceptance by commercial real estate lenders of a partial payment in full satisfaction of the loan (as a “discounted payoff” – a “DPO”), prior to the maturity of the loan, is a topic that receives little “public” attention. Here are a few reasons why we hear so little about this topic, and the challenges in… Continue Reading

Why Do Lenders Disdain Bankruptcy Court? 2 Cases Show “Why” and Offer Lessons

Posted in Good Times for Lenders, Market Trends, Remedies, Tough Times for Lenders

Two recent cases are good examples of “why” secured lenders, who hold liens on real property, correctly view bankruptcy court as a very, very, very bad place.  One case has received a lot of attention, including an appeal of the decision and state legislation; and the second bankruptcy ruling was overturned on appeal. The lessons… Continue Reading