Special Assets Lawyer Blog

Welcome to SpecialAssetsLawyer.com, a place where problem loans and troubled debts are the topic of discussion. I am Dick Rogan, bank lawyer and chair of the JMBM Special Assets Team. Every day, problem loans of all types cross my desk and the desks of my colleagues here at JMBM. That's because we ask for them. Our clients are banks, special servicers, private lenders and others dealing with the fallout from the "Great Lending Bubble." Our clients challenge us to help them find value where all appears to have been lost. They rely on our collective years of experience to develop the right approach for each loan. Let's face it, our task is to work with our clients to make the most out of a bad situation.

Over the years, we've been asked by young people just joining a lender's workout team and by experienced lenders who have crossed over to the "dark side" of the bank to explain the tricks of the trade in dealing with special assets. In response, we created SpecialAssetsLawyer.com - a collection of some of our accumulated wisdom and a place for bank workout professionals to come find out what works when attempting to collect and deal with problem loans.

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Workout professionals often ask us whether they should accept a deed in lieu of foreclosure offered by a borrower whose property is now worth less than the debt. What is a deed in lieu of foreclosure? A deed in lieu of foreclosure is where a borrower deeds the real property that is collateral for the loan to the secured creditor instead of going through the foreclosure process. When it works, a deed in lieu of foreclosure has advantages for both the secured creditor and the borrower. The borrower avoids a foreclosure on its record, and gives up responsibility for maintaining the property, paying property taxes and insurance, and providing security. Where there are tenants, the borrower no longer has to assume the responsibilities of being a landlord.

For the secured lender, a deed in lieu of foreclosure terminates a troubled debt more quickly than traditional judicial or non-judicial foreclosure. Instead of waiting at least four months for a traditional non-judicial foreclosure sale to take place, during which time the property can deteriorate, the lender takes title to the property immediately. The secured lender also avoids the cost of foreclosure, the potential cost of a receivership, and the possibility that the borrower will get cold feet at the last minute and file bankruptcy.

So why wouldn't a secured lender take a deed in lieu of foreclosure anytime a borrower offers one up?

Continue reading "Deed In Lieu of Foreclosure: When to Look A Gift Horse in the Mouth" »

Every downturn creates an opportunity for the cash buyer to acquire valuable assets at a favorable price. The opportunity arises when the owner of an asset fails, and can no longer benefit from holding the asset. The failing company must either sell the asset to raise cash for operations or to pay its creditors. Assets can be everything from real estate to operating businesses to intellectual property.

Secured creditors are often the driving force behind asset sales. When a borrower gets into financial problems, most banks transfer the credit into the workout department, often known as Special Assets or Loan Adjustment. This allows the bank's workout professionals to take charge and to drive the process of either restructuring or collecting the loan. Often, this process requires sale of some or all of the collateral, which is the assets of the borrower.

Continue reading "Opportunity Buying--Purchasing Assets Before and After Bankruptcy" »

After a loan goes into default or matures and payment in full has not been made, some borrowers try to show their good faith by continuing to make payments to the Bank. Occasionally, these payments continue, even after a Notice of Default has been recorded and foreclosure proceedings have started. A question that we often get at the JMBM Special Assets Team is whether the lender can accept these partial payments without waiving the default.

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On September 30, 2009, I was a panelist on the Structured-Finance Asset Restructuring and Disposition webinar sponsored by the top-notch appraisal firm, Property Sciences. The webinar was attended by more than 100 special assets officers, credit officers, asset managers and loan officers. My portion of the panel presentation focused on strategic considerations that workout professionals need to understand in dealing with troubled commercial real estate loans and development projects, and the tools that are available to lenders to collect the loan, foreclose or sell the assets. If you'd like to see the PowerPoint slides that I presented during the webinar, please click the "continue reading..." link below.

Continue reading "Programs & Events: Structured-Finance Asset Restructuring and Disposition" »

A construction lender client of ours got a bit too casual in specifying release prices on one of its projects. Mindful that it is important to "front load" payments against the loan, the lender forgot that opportunistic developers can manipulate their pricing to the disadvantage of the lender - unless the release price language in the loan documents forbids it. In this deal, the lender provided only that the developer had to pay the lender "100% of all net proceeds from the sale of Units 1 through 4." Since the asking price for each Unit was $350,000, the lender felt that net proceeds would easily pay down the loan quickly.

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