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.

Several 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

Credit 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

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

Recently, the Mortgage Bankers Association published its “National Delinquency Survey” for the fourth quarter of 2011.   The report covers the delinquency and foreclosures  rates on first-lien mortgage loans, and includes @ 88% of all single family homes in the US.  Although the survey does NOT cover commercial mortgages, the data gives us important

People 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 and

Recourse against individual owners or sponsors (andor their operating companies) is a significant leverage point for any lender in a distressed commercial real estate loan.

Both CMBS loans and portfolio loans (typically life company) technically are “non-recourse” in that the lender agrees to look to the collateral for the ultimate recovery of the loan. However, the

Thankfully, 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