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Category Archives: Workout Issues

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OCC Lending Handbook Needs Parenting on Important Legal Topics

Posted in Articles, Training, Workout Issues

In an earlier posting, I reviewed the OCC’s new Commercial Real Estate Lending handbook .  The purpose of the handbook is to give parenting – I mean guidance – on risks inherent in commercial real estate lending.  On legal topics, the handbook takes a mind-boggling approach: it swings from legal light, to “I know it when I… Continue Reading

Grading the Examiners: OCC’s Commercial Real Estate Lending Handbook gets a “C”

Posted in Good Times for Lenders, Guaranty Issues, Insurance & Environmental Risks, Remedies, Training, Workout Issues

Last month, the Office of the Comptroller of the Currency published the Commercial Real Estate Lending handbook (August 2013).  The 128 page handbook gives guidance to bank examiners and bankers on risks inherent in commercial real estate (“CRE”) lending.  It replaces a 95 page version published in 1995 (and revised in 1998). For this new school year… Continue Reading

What Law to “Choose” in Commercial Mortgage Loan Docs? Simple.

Posted in 1 Guest Writers, Good Times for Lenders, Training, Workout Issues

Provisions in commercial mortgage loan documents,  where a particular state law is “selected” as the governing law, can drive a deal into a ditch, and take a good (or growing) lending relationship into the emergency room.  In many situations, this topic is a good example of over-thinking, and perhaps over-lawyering. Simply stated, which of these two… Continue Reading

Hide and Seek: Service of Process as a New Loan Provision

Posted in Good Times for Lenders, Remedies, Training, Workout Issues

Lenders are refreshing their mortgage loan documents with provisions based on the “lessons learned” during the recent (continuing?) economic experience.  One change is to add a service of process provision. The change is based on this basic lesson learned: when the tough times hit, borrowers and guarantors sometimes are hard to find. A few simply… 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 the Co-lender Train Wreck? Lenders Used Wrong Agreement

Posted in Good Times for Lenders, Tough Times for Lenders, Training, Workout Issues

Train wrecks draw a crowd.  Look at this old film from the 1913 California State Fair (click the text).       1913 Train Wreck                             Unfortunately, many co-lender structures (secured by distressed commercial real estate) look exactly like this train wreck…. Continue Reading

Need to “Reposition” the Distressed Project or REO? Consider a Condominium

Posted in Tough Times for Lenders, Workout Issues

So much of dealing with distressed commercial real estate is an “out of the box” experience. But my use of the phrase “out of the box” is extremely nuanced: change your thinking; and change the box (the property), too. Here’s an approach that goes out of box and then reverses field to “remake” the box… Continue Reading

Lessons Learned: More Tips on Topics to be Included in Loan Documents (& Modifications)

Posted in Market Trends, Training, Workout Issues

Periodically I touch on topics that could be, or should be, covered in loan documents – either when the loan is initially closed and funded, or when the terms of the loan are revisited during an extension or a restructure (collection of blog posts on "lessons learned" [it is a long list]).    Here are… Continue Reading

More Trouble: Will Record Online Sale Numbers Transform Sticks & Bricks Retailing in 2012? I say “yes”

Posted in Market Trends, Technology (including Green Buildings), Training, Workout Issues

2012 should be the year when online sales broadly impacts "how" retailers view and use their "physical" stores.  This will impact both the owners AND the lenders. Record online sales point to the need (RIGHT NOW) to take a different approach in reviewing and approving retail leases – which for lenders with shopping center and… Continue Reading

Special Purpose Vehicle (SPE): Comment in Recent US Supreme Court Case Encourages Bankruptcy Risk

Posted in Good Times for Lenders, Market Trends, Single Purpose Entity, Workout Issues

Recently, Professor Joshua P. Fershee posted a very interesting observation on the Business Law Prof Blog.   Professor Fershee comments on a legal concept called the "single enterprise" theory, and on references to this concept by the US Supreme Court in a decision published by it this past summer (Goodyear Dunlop Tires Operations, S.A. v…. Continue Reading

Defaulted Hotel (California) Loans: Nice Story in Bloomberg; Here are some practical tips

Posted in Market Trends, Remedies, Tough Times for Lenders, Workout Issues

Nadja Brandt and Kara Wetzel with Bloomberg have a nice piece on the scope of and challenges in dealing with defaulted hotel loans in CMBS pools.  It is a good read.  And it has been picked up or syndicated in other news media. As I’ve noted before, with a hotel or motel securing the loan,… Continue Reading

The Collection Plate: Don’t Overlook the Marital Status of the Loan Guarantor or Indmenitor

Posted in Workout Issues

Collecting on a judgment against a commercial loan guarantor or indemnitor brings into focus one bedrock question for a commercial loan guaranty or an indemnity: in collecting on the judgment, does the marital status of the guarantor or the indemnitor come into play? does this status take some assets beyond the reach of the judgment?… Continue Reading

Navigating Distressed Co-Lender Loans: Just Another (Dysfunctional) Modern (Finance) Family?

Posted in Market Trends, Tough Times for Lenders, Workout Issues

Earlier, I offered up some advice that in a workout, you really can’t take it personally. If that didn’t work for you, then here’s another approach that should resonate (I can’t get it out of my head):  if you’re in a loan with other lenders, the co-lender structure probably has some real, real, real dysfunctional aspects to it … Continue Reading

Leases, Lenders & Letters of Credit: Lenders Taking New Approaches With Tenant Letters of Credit (lessons learned)

Posted in Good Times for Lenders, Tough Times for Lenders, Training, Workout Issues

We know commercial real estate is all about the rents – and the credit of the tenant, which some times is enhanced by the tenant giving the landlord a letter of credit. David Staas and Michael Thomas recently clued me in on several lessons learned by commercial mortgage lenders, on the topic of letters of… Continue Reading

Golf Course Loans in Default: Tough Topics When Playing in the Rough

Posted in Tough Times for Lenders, Training, Workout Issues

Loans secured by a golf course present some very unique problems when the loan is in distress.   At the annual meeting of the American College of Mortgage Attorneys, Nancy Little, Bessie Giannopulos and Robyn Nordin Stowell gave an excellent presentation on this topic. I’ve added some of their topics to my list of hazards… Continue Reading

A/B Note Structure Is Tough: More Points For Your Due Diligence List

Posted in Market Trends, Tough Times for Lenders, Training, Workout Issues

More on my focus on A/B Note structures (earlier posting), covering key structural points that surface during a workout involving both an A note and a B note: What is the credit support impact of the B note holders rights? Huge.  If the intercreditor agreement (covering the relative rights of the A note holder and the… Continue Reading

A/B Note Structure Is Tough: Put These Questions On Your Due Diligence List

Posted in Market Trends, Tough Times for Lenders, Training, Workout Issues

The A/B note structure grabbed considerable attention in 2009 when the Federal Financial Institutions Examination Council (FFIEC) issued it’s "Guidance on Prudent Commercial Real Estate Loan Workouts."  Recently, the A/B note structure is making a come back in new loan origination. Here are a few basic questions that will help you understand some of the… Continue Reading

Purchase of Defaulted CMBS Loans & Discounted CMBS Loan Pay Offs: Step #1 – Understand the PSA

Posted in Tough Times for Lenders, Workout Issues

CMBS loans have some very, very unique qualities that come into play when a buyer wants to purchase a defaulted CMBS loan.  (These blog posts and this paper [down loaded 300+ times to date] are good resources on understanding distressed CMBS loans; and how they differ from bank loans or life company loans.) The result… Continue Reading

CMBS Defaults & Delinquencies on the Rise? Yes. Distressed or Defaulted CMBS Loans Still Misunderstood? Yes.

Posted in Tough Times for Lenders, Workout Issues

Two things jumped out at me this morning:  I was surprised to read about Fitch’s announcement that CMBS defaults rose to 12.9% at the end of June, and that CMBS delinquencies were at a record high in July (at 9.88%). This means that work on distressed CMBS loans will not taper off in the near… Continue Reading

Want to Improve Rents & Occupancy at Apartments & Student Housing? One word: Technology

Posted in Technology (including Green Buildings), Workout Issues

In the movie The Graduate (1967), Ben learns that one word  (“plastics”) is the pathway for a successful career. Today, for distressed investments or for quality apartments (including apartments pointed to students as tenants), the pathway to higher rents, occupancy and value is this one word – Technology. The technology attributes of a community can… Continue Reading