In addition to the events that create “full recourse” liability (for the entire loan), bad boy liability also includes losses or damages incurred by the Lender based upon another list of “bad” events or triggers. I’m sure that Jim Wallenstein will cover this at his presentation during the University of Texas Mortgage Lending Institute. Like… Continue Reading
Category Archives: Guaranty Issues
Subscribe to Guaranty Issues RSS FeedThe List of “Bad Boy” Recourse Liability Events Keeps Growing: My “Roll Up” Version
Posted in Good Times for Lenders, Guaranty Issues, RemediesSeveral months ago, I mused that, due to the conservative trending of commercial real estate lending, the list of “bad boy” exceptions (to a “no personal liability” deal) could be viewed as a full recourse deal. In other words, the exceptions to “no liability” could be so expansive or long, the practical reality equates to… Continue Reading
Construction Lending: Trend toward Guaranty “burn off” brings new list of hot conditions
Posted in Good Times for Lenders, Guaranty IssuesCredit enhancement of commercial construction lending has a new, important twist to the traditional (full) payment and performance guaranty: the burn-off events go beyond valuation and debt service thresholds to also include many of the check list items utilized by permanent lenders. The burn off has a new price. Finally, construction loans are bubbling… Continue Reading
As “Bad-Boy” Recourse Liability Spreads to Construction Lenders . . . Is the End Near for Non-Recourse Liability??
Posted in Good Times for Lenders, Guaranty Issues, Market TrendsOnce 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… Continue Reading
Minority Owner Exiting an Under Performing Deal? Don’t Need Lender Approval? Right . . . Wrong (or “oops”)
Posted in Guaranty Issues, Tough Times for Lenders, TrainingPeople don’t “connect” their ownership (even a minority ownership) with their liability under bad-boy or non-recourse carveout agreements (whether in the form of an indemnity, or as a guaranty). So, minority owners often transfer ownership without getting a release from bad boy liability . It could be a costly mistake. With deals under water… Continue Reading
Bad-Boy Liability: Courts Find Liability for Violating Solvency or Net Profit Retention Covenants
Posted in Guaranty Issues, Tough Times for LendersWe’re in that part of the cycle where many of us are focusing on guaranty agreements, which run the full spectrum from full payment and performance guaranties to “bad boy” indemnification agreements (my recent comment). One issue being litigated is the bad boy or recourse event tied to a breach of these types of covenants… Continue Reading
It’s “That Time”: What are the Most Important Terms of a Guaranty?
Posted in Guaranty Issues, TrainingThe holiday season is behind us, but one of my favorite songs still resonates: "It’s that time of year, when the . . . ." Holiday season. Fireplace. Home. But it’s back to work, where . . . after being back at the law firm for several weeks, clearly we’re at "that time" of… Continue Reading
Collection Plate: Litigation Against Guarantors or Indemnitors Points to Lessons Learned – Tips on Underwriting & Loan Document Terms
Posted in Guaranty Issues, Remedies, Tough Times for Lenders(More on the Collection Plate collection, which focuses on the recovery side of our work – the bottom line, nitty-gritty, work of getting "back" the money.) Our economic eddy is at the stage where law suits against guarantors or indemnitors, on full payment and performance agreements or on "bad-boy" agreements, are reaching final judgment –… Continue Reading
CMBS Hotel Delinquency at 14%+: Tips to Help You to Both Checkout and Leave (part two)
Posted in Guaranty Issues, Remedies, Tough Times for Lenders, Workout IssuesStandard & Poor’s summary of the CMBS delinquency rate for February is now out. S&P reports a delinquency rate for lodging at over 14%. Actually, the rate in February decreased from 14.36% in January to 14.06%. But still over 14%. Nothing magically in the "14" for me, except this: that’s a LARGE number. So, this… Continue Reading
Tips On Handling Defaulted Hotel Loans: You Can Checkout But Not Leave (part one)
Posted in Guaranty Issues, Remedies, Tough Times for Lenders, Training, Workout IssuesThankfully, the economy might no longer be trending downward. However, we’re still in a rough patch. One rough area is the lodging industry. As always, the “best” hotels (by location, flag, price point, etc.) are doing better than their competition. But stories like this – “61 Bay Area Hotels in Default” (4thQ 2010) – point to the need to… Continue Reading
Need a Decision Tree and Short List of Key Topics for Your Next Workout? Try these. (Blogging after ACMA)
Posted in Guaranty Issues, Insurance & Environmental Risks, Lender Liability, Remedies, Tax Issues, Tough Times for Lenders, Training, Workout IssuesThe second day of seminars, at the annual meeting of the American College of Mortgage Attorneys, had two key take-aways for me. The first nugget focuses on the Dodd-Frank financial law. The second nugget (below) is much more practical. Inspired by comments made by Jim Allen during a panel presentation (he’s with the Miller Canfield… Continue Reading
Diversion of Rent and Lender Liability: Bad Acts Pointing To Borrower and Lender Liability
Posted in FAQs, Guaranty Issues, Tough Times for LendersThis is a series of blog entries in which we provide some quick answers to lenders’ frequently asked questions (FAQ). Strangely enough, I associate diversion of rent with lender liability - because both are common liability claims based upon "bad acts" of either a borrower or a lender. FAQ #20 – What if I think… Continue Reading
Maximizing Recovery with Guaranties & Credit Enhancements–Seminar, November 5
Posted in Guaranty Issues, Tough Times for LendersI know, I know: This is a real tease if you’re NOT located in the Dallas/Fort Worth area. But, please be patient. Help is on the way (Sorry, bad memories there). If you are unable to attend this seminar, we’re planning a webinar series for 2010. If this topic is as "hot" as we think it… Continue Reading
What workout topics interest you? Any inside scoop?
Posted in Guaranty Issues, Lender Liability, Remedies, Tough Times for Lenders, Training, Workout IssuesOnce a month, our regular group of authors discuss topics that we view as being of interest (the "hot" topics) in the commercial loan workout arena. We then hash out a list of what we’ll write on for the next month. Identifying "hot" workout topics can be a dangerous thing for lawyers. Yes, we – are active in… Continue Reading
Recourse Carve-outs
Posted in Guaranty Issues, Tough Times for LendersReal estate financing in recent times has generally involved non-recourse loans. While this is virtually a given in a conduit loan situation – the regular portfolio lenders often found it necessary to offer non-recourse loans to compete. A corollary to this basic market term, is the recourse carve-out – circumstances which trigger an exception to… Continue Reading