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

In many 19th hole country club gatherings across the nation, there is a lot of discussion on whether CMBS loans really are enforceable.

Unfortunately, the answer to that question is multi-faceted.  (It has two parts to it.)

As part  of his focus on risk management issues for financial service companies, Brian Vanderwoude has this follow

In some (but not all) states, home owners (whose loans have been securitized) are successfully overturning or stopping judicial foreclosures (of their defaulted loan) by questioning the authority of the loan servicer (such as MERS) to foreclosure.  An example of this is the Ibanez case.  While the facts of these cases center around lost notes or missing documents, the legal concept centers around "standing" – which means "who" has the ability to assert certain rights or claims. 

The issue of "who" has standing to assert claims on behalf of a lender will be the focus of many courts over the next few months (or even years).

In a recent Texas appellate case handled by several lawyers at Winstead (including Talmage Boston and David Johnson, as co-counsel with in-house counsel and another Dallas law firm), this issue was addressed in the context of a securitized commercial real estate loan and the borrower’s failure to obtain terrorism insurance.  In the case, the loan servicer called a default and then sued the borrower due to this failure.  The borrower then argued that the loan servicer didn’t have the authority (or "standing") to bring the law suit.

After reviewing the pooling and servicing agreement (the "PSA"), the court held that the loan servicer had the authority to sue either in its own name or as loan servicer.  (More details on the case are below.)

Clearly, unless and until we get a federal solution to these questions involving securitized loans, this will be a 50 state slugfest on the basic question of "who" can assert the lender’s rights in a securitized loan.  And as this case illustrates, the answer could vary – depending upon the facts of each case.

If you see if differently, or have your own story, please post a comment below.

And "thanks" to Brian Vanderwoude for bringing this important Texas case to my attention, and in furnishing the summary below –


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Enough of MERS and technology – but, how about technology but from a different angle?

The amount of commercial real estate debt in distress is huge:

  • delinquent unpaid balances on CMBS loans exceeding $62 billion (October 2010), and heading toward $70-$80 billion by year end ’10 (per Realpoint)
  • delinquency ratio of 8.04% (September, 2010) (per

Guest Writer – Christopher T. Nixon, Winstead PC

In part 1I covered the relationship between the loan servicer and the B-note holder, and the role of the B-note holder in making decisions about the loan.  This posting addresses a situation where that the B-note holder no longer can participate in decisions, and the

Guest Writer – Christopher T. Nixon, Winstead PC

CMBS loan servicers have duties to a myriad of parties in the servicing of a CMBS loan, including the REMIC trust, the bondholders, and the borrower.  With respect to an A/B loan, a CMBS loan servicer also has certain duties to the B-note holder pursuant to