Title Index:
CHAPTER 1
How to Use This Book
1.01 How to Use This Book to Save Time, Lower Stress and Increase Efficiency
[1] Improvements to Traditional Document Preparation and Negotiation
[2] Key Features of This Book
[3] Document Assembly Software Compatibility
1.02 Scope of the Book
CHAPTER 2
Overview of Standard Mortgage Financing; Pre-Closing Matters
2.01 Chapter Scope
2.02 Mortgage Loan Stages
[1] Advertisements, Solicitations and Brokers
[2] Application
[3] Underwriting Review
[4] Commitment
[5] Appraisals
[6] Due Diligence
[7] Closing
[8] Administration
2.03 Sources of Financing Available to Borrowers
[1] Institutional Lenders
[2] Government-Assisted Loans
[3] Tax-Exempt Financing
[4] Purchase Money Financing
[5] Component Financing
[6] Sale-Leaseback
[7] Equity Financing
[8] Tenant Financing or Equity Participation
[9] Loans by IRAs
[10] Loans by Pension Plans
2.04 Requirements for Lenders Regarding Out-of-State Loans
[1] Qualification to Do Business
[2] Licensing and Regulatory Requirements
[3] Franchise and Other Taxes
[4] Filing Requirements
2.05 Lender's Tax Planning for Lending Transactions
[1] Interest Rate Less Than "Applicable Federal Rate"
[2] Avoiding "Original Issue Discount" Rules
[3] Recharacterization of Nonrecourse Loan as Payment if Borrower's Obligation Is Conditional
[4] How Foreign Lenders Can Reduce United States Income Tax
[5] Risks of "Conduit" Financings
[6] Shift Organization Expenses to Borrower Since Lender Might Have to Amortize Them
[7] Cancellation of Note on Lender's Death
[8] Structuring a Transaction as an Equity Investment or Loan
2.06 Borrower's Tax Planning for Lending Transactions
[1] Incentives to Maximize Financing
[2] Ownership of Mortgaged Property
[3] Minimizing Impact of "At Risk" Rules
[4] Qualified Nonrecourse Financing
[5] Acceleration of Interest Deductions by Refinancing
[6] Reducing Loan Fees and Increasing Deductible Interest
[7] Payment of Interest by Borrower from Its Own Funds
[8] Only Borrower Can Deduct Payment of Interest
[9] Related Party Loans
[10] Insuring Deductibility of Interest by Proper Use of Loan Proceeds
[11] Insuring Deductibility of Interest on "Bona Fide" Debt
[12] Nonrecourse "Loan" Proceeds Are Income to Borrower if It Controls Repayment
[13] Minimization of Risk of Borrower's Liability for Unpaid Withholding Taxes on Payments to Foreign Lender
[14] Adverse Tax Impact of Transferee's Assumption of Mortgage
[15] Adverse Impact of Pledge of IRA
2.07 Lender's Unique Requirements
[1] Governmental Licensing and Regulatory Requirements
[2] Offering Materials; Organization Requirements
[3] Contractual Requirements
2.08 Lender's Avoidance of Borrower's Disabilities and Defenses
[1] Grounds for Borrower to Avoid Its Obligations; Illegality
[2] Obstacles to Recovery from Collateral
2.09 Lender's Requirements for Loan Commitments
[1] Combined Form of Application and Commitment
[2] Conditional Obligation to Lend
[3] Clarifying Implied Limits on Lender's Satisfaction
[4] Requiring Strict Compliance by Borrower
[5] Borrower's Obligation to Borrow
[6] Commitment Fee
[7] Appraisal
[8] Financial Statements
[9] Compliance with Regulatory Requirements
[10] Specifying All Material Terms and Avoiding Vagueness
[11] Enforceability Against Entities to Be Formed
[12] Limitations on Borrower's Remedies
[13] Right of Cancellation Upon Any Material Change
[14] Notification of Adverse Action
[15] Brokerage Agreement
[16] Consent to Pre-Closing UCC-1 Filings
[17] Restrictions on Requiring Spouse to Be Guarantor or Co-Borrower
2.10 Borrower's Requirements for Loan Commitments
[1] Specify Borrower's Terms
[2] Lender Should Be Obligated to Fund, Subject Only to Reasonable Conditions
[3] Reasonable and Objective Limits on Lender's Discretion
[4] Limit Right to Cancel Based on Material Changes
[5] Limit Maximum Amount of Fees
[6] Interest on Refundable Commitment Fee
[7] Limit Forfeiture of Borrower's Fees
[8] Limit Borrower's Ultimate Liability
[9] Reconciling Loan Documents with Borrower's Other Agreements
[10] Negotiations Among Members of the "Borrower Group"
[11] Other Changes
2.11 Electronic Loan Documents (from the Perspective of Lenders and Borrowers)
[1] Electronic Loan Documents Are Technically Enforceable, But Are Too Risky at Present
[2] Take Special Precautions in Electronic Transactions
[3] Impact of Federal Electronic Signatures Act on State Law
2.12 Methods of Avoiding Lender Liability
[1] Types of Liability
[2] Ways of Avoiding Lender Liability
2.13 Methods for Borrower and Its Principals to Limit Personal Liability to Lender
[1] Maintain Separate Identity of Borrower to Avoid Personal Liability of Members, Partners, and Shareholders
[2] Comply with Fiduciary Duties to Creditors
[3] Avoid Waste to Mortgaged Property
[4] Asset Protection Planning
2.14 Ethical Requirements Applicable to Attorneys
[1] Ethical Requirements for Counsel to Lender
CHAPTER 3
Promissory Notes and Payment Terms Generally
3.01 Chapter Scope
3.02 Lender's Requirements for Promissory Note
[1] Negotiability Provisions
[2] Interest
[3] Usury Savings Clause
[4] Methods of Payment
[5] Limits on Prepayment or Early Termination
[6] Late Charges
[7] Increased Interest Rate After Default
[8] Lender's Limitations on Nonrecourse Provisions
[9] Choice of Law
3.03 Lender's Drafting Concerns and Alternative Provisions
[1] Assumption of Note
[2] Mandatory Forum Selection Clause
[3] Extension Option
[4] Option to Reduce Interest Rate
[5] Enforceability
[6] Interest Rate Swaps, Caps and Collars
[6A] Structured, Synthetic and Volatile Notes
[6B] Inflation Adjustment to Principal
[7] Payments in Foreign Currency
[8] Electronic Notes
[9] Structuring Lender's Advance as a Loan Rather Than Equity or Payment
3.04 Lender's Requirements for Other Documents and Payments
[1] Usury and Unconscionability Opinion
[2] Usury Calculation Memorandum
[3] Advancing Loan Directly to Borrower/Owner
[4] Payment of Lender's Expenses
[5] Suspicious Activity Report
[6] Documents Under USA Patriot Act for Accounts
[7] Risk of Advancing Loan Proceeds to Borrower Who Applies for Purchase Money Loan and Then Cashes Out
[8] Documents Verifying Identification of Borrower and Other Parties
[9] Authentication of Internet and Other Electronic Transactions
[10] Disbursing Proceeds by Joint Check to Lender and Borrower
[11] Proof That Payments to Lender Are Not Subject to Third-Party Rights
3.05 Borrower's Concerns
[1] Whether to Refinance and at What Interest Rate
[2] Nonrecourse Provision
[3] Right to Prepay at the Lowest Cost
[4] No Interest on Undisbursed Funds
[5] Late Charge Should Not Apply to Entire Unpaid Balance
[6] Eliminate Late Charges
[7] Revolving Credit
[8] No Representation as to Lender's Compliance with Law
[9] Securities Law Liability
[10] Reducing Interest Rate Risk
[11] Reducing Exchange Rate Risk
[12] Below Market Interest Rate May Be Fraudulent Transfer
[13] Risks of Electronic Notes
[14] Other Changes
CHAPTER 4
Contingent Interest
4.01 General
[1] Definitions
[2] Chapter Scope
4.02 Interest Based on Net Income
[1] Lender's Requirements
[2] Borrower's Requirements
4.03 Interest Based on Gross Income
[1] Lender's Requirements
[2] Borrower's Requirements
4.04 Interest Based on Appreciation or Capital Events
[1] Lender's Requirements
[2] Borrower's Requirements
4.05 Lender's Concerns and Additional Provisions
[1] Usury
[2] Recharacterization of Loan as Partnership Interest
[3] Portfolio Interest Exclusion Does Not Apply to Contingent Interest
[4] Contingent Interest May Be U.S. Real Property Interest
[5] Contingent Interest Might Not Be Prior to Other Liens
[6] Title Insurance Should Cover More Than Principal Amount
[7] Need for Agreement with Borrower as to Projected Payment Schedule
[8] Contingent Interest Over Long Period, or Requirement for Lender's Consent, May Be Void
[9] Risk That Contingent Interest After Maturity Date May Be Unenforceable
[10] Tax-Exempt Lenders May Be Able to Escape UBTI by Making Loan with Contingent Interest Rather than Equity Investment
[11] Risk of Adding Interest to Principal
[12] Contingent Interest May Impair Negotiability
[13] Increased Risk of Lender Liability
4.06 Borrower's Concerns and Additional Provisions
[1] Limits on Lender's Remedies
[2] Determine Income on Cash Basis
CHAPTER 5
Lender Interests in Ownership Rights
5.01 General
[1] Definitions
[2] Chapter Scope
5.02 Lender's Requirements for Security Interest in Ownership Interests
[1] Security Agreement
[2] Control or Possession of Security
[3] Organizational Documents of Entity
[4] Agreement with Stockholders or Members
[5] Stock Power
[6] Notice of Grant of Security Interest
[7] Proof of Registration of Security Interest
[8] Recognition Agreement
[9] UCC-1 Financing Statements
[10] UCC, Judgment, Tax Lien and Other Searches
[11] Title and Security Interest Insurance
[12] Due Diligence as to Entity and Its Assets and Liabilities
[13] Securities Law Opinion
[14] Other Documents
[15] Lender's Drafting Concerns
5.02A Borrower's Requirements for Security Interest in Ownership Interests
5.03 Lender's Requirements for Convertible Mortgage Loans
[1] Separate Option Agreement
[2] Title Insurance Endorsement
[3] Recognition Agreement
[4] Agreement Among Holders of Equity Interests
[5] Affidavit by Borrower
[6] Appraisal
5.04 Lender's Drafting Concerns for Convertible Mortgages
[1] Income Tax Consequences of Convertible Mortgages
[2] Regulatory Requirements
[3] Risk That Option May Be Deemed to Impair Borrower's Right of Redemption
5.05 Borrower's Concerns for Convertible Mortgages
5.06 Lender's Ownership of Stock or Equity Interests
[1] Lender's Requirements
[2] Lender's Drafting Concerns
[3] Borrower's Requirements
5.07 Lender's Requirements for Direct Ownership of Property
5.08 Recharacterization of Loan as Equity or Income
[1] Each Party Shares Profits
[2] Each Party Shares Losses
[3] Mutual Control
[4] No Right to "Pay-Off" Party
[5] Perceptions of Third Parties
[6] High Nonrecourse Financing
[7] Insider Loans
[8] Other Terms
[9] Accounting Requirements
[10] Documentary Requirements to Reduce Risk of Recharacterization
[11] Structuring Deals as Equity or Loans
CHAPTER 6
Mortgages, Deeds of Trust and Other Loan Documents Generally
6.01 General
[1] Definitions
[2] Chapter Scope
[3] Closing Documents and Requirements
6.02 Lender's Requirements for Mortgages, Deeds of Trust, Security Agreements, and Control Agreements
[1] Broad Description of Collateral
[2] Description of Debt
[3] Covenant to Pay Debt
[4] Mortgage to Secure Nonmonetary Obligation
[5] Maturity Date
[6] Identification of Parties
[7] Assignment of Rents and Leases
[8] Occupancy Leases
[9] Receiver to Collect Rents
[10] Future Advances
[11] Negative Amortization
[12] "Dragnet" Clauses Including Other Debts
[13] After-Acquired Property
[14] Reserves for Taxes and Insurance Premiums
[15] Covenant to Make Repairs
[16] Reserves for Repairs
[17] Property Insurance
[18] Liability Insurance
[19] Condemnation
[20] Warranty of Title
[21] Restrictions on Releases
[22] Due on Sale Clauses
[23] Due on Encumbrance Clauses; Negative Pledges
[24] Default Clauses
[25] Remedies
[26] Waiver of Limits on Deficiencies
[27] Bankruptcy Waivers
[28] Waiver of Right of Redemption
[29] Waiver of Constitutional Law Defenses
[30] Security Agreement and Control Agreement
[31] Purchase Options Granted to Borrower
[31A] Options Granted by Borrower
[32] Lender's Right to Cure Defaults
[33] Payment of Lender's Expenses
[34] Financial Statements
[35] Covenants by Borrower to Maintain Its Credit Standing
[36] Borrower as Guarantor
[37] Miscellaneous Provisions
6.03 Lender's Requirements for Other Related Documents
[1] Assignment of Rents
[2] Lock-Box Agreement
[3] Independent Management Agreement
[4] Notices to Tenants and Account Debtors
[5] Occupancy Leases
[6] Subordination, Attornment and Nondisturbance Agreements with Tenants
[7] Lease Estoppel Certificates and Rent Roll
[8] Security Deposits Held by Borrower
[9] Loan Agreement
[10] Security Agreement and Control Agreement
[11] Assignments of Permits and Intangibles
[12] Assignment of Borrower's Rights Under Agreements
[13] UCC-1 Financing Statements
[14] Pre-Closing Filing of UCC-1 Financing Statements
[15] UCC, Judgment, Tax Lien and Other Searches
[16] Security Interest Insurance
[17] Confession of Judgment
[18] Guarantees, Accounts, L/Cs, Insurance, and Other Credit Enhancements
[19] Environmental Indemnity
[20] Legal Opinions
[21] Property Insurance Policies
[22] Copy of Application for Property Insurance
[23] Liability Insurance
[24] Notice to Borrower Regarding Flood Insurance
[25] Notice to Government Authority Regarding Real Estate Taxes
[26] Title Insurance Policy
[27] Escrow Agreement with Title Company
[28] Proof of Payment of Recording and Filing Taxes and Fees
[29] Certified Survey
[30] Appraisal
[31] Financial Disclosures
[32] Tax Returns
[33] Engineering Report
[34] Environmental Report
[35] Interest Reserve
[36] Certificate of Occupancy; Proof of Subdivision; Tax Map
[37] Letter from Utility
[38] Proof of Recording of, and No Defaults Under, Easements and Related Documents
[39] Proof of Dedication of Roads
[40] Organizational Documents of Entities Obligated to Lender
[41] Entity Certificates
[42] Borrower's Affidavit
[43] Requirements of "Permanent" Lender
[44] Memorandum of Counsel with Material Terms
[45] Disclosure of Other Material Information
[46] Modification and Consolidation Agreements
[47] Other Documents
6.04 Lender's Alternative Provisions and Drafting Concerns
[1] Control of Borrower
[2] Avoiding Equitable Subordination
[3] Agreement to Transfer Collateral to Lender
[4] Advances for Improvements
[5] Compliance with Anti-Tying Requirements
[6] Financing of Multiple Properties
[7] Electronic UCC-1s, Mortgages, and Other Filings
[8] Payoff of Existing Mortgage
[9] Preventing Fraudulent Transfers and Preferences
6.05 Lender's Requirements for Post-Closing Loan Administration
[1] Recorded Instruments
[2] Title Insurance Policy
[3] UCC-1 Financing Statements
[4] Insurance Policies and Renewals and Payment of Premiums
[5] Payment of Real Estate Taxes
[6] Transfers of the Mortgaged Property
[7] Avoid Releasing Collateral When Lender Still Obligated
[8] Avoid Oral Changes
[9] Borrower's Military Service
[10] Renewals of Letters of Credit, Permits, and Agreements; Substitution of Issuer/Guarantor; Additional Deposits
[11] Timely Challenges to "Takings"
[12] Confirm New Loan Is Covered by Existing Dragnet Clause
[13] Loan Payoffs
[14] Lender's Setoff Against Cash Collateral
[15] Need to File Claim Promptly Against Estate of Guarantor
[16] Inspections
6.06 Borrower's Concerns
[1] Nonrecourse Provision
[2] Notice of Default and Opportunity to Cure
[3] Releases
[4] Permitted Transfers
[5] Permitted Subordinate Mortgages
[6] Financing Land Separately
[7] Interest on Escrows and Reserves
[8] Minimizing Escrows and Reserves
[9] Use of Insurance Proceeds and Condemnation Awards for Restoration
[10] Coordination of Insurance Coverages
[11] No Side Letter
[12] Proof of Authority of Lender
[13] Protecting Confidential and Privileged Data
[14] Avoiding Conflicts with Borrower's Agreements
[15] Financings of Multiple Properties
[16] Other Changes by Borrowers to Closing Documents
[17] Post-Closing Concerns of Borrowers
CHAPTER 7
Title Insurance
7.01 General
[1] Definitions
[2] Chapter Scope
7.02 Criteria for Selecting Title Insurer
7.03 Title Insurance Commitment
7.04 Standard Endorsements
[1] Variable Rate
[2] Contingent Interest
[3] Revolving Credit and Future Advances; Letters of Credit and Surety Bonds; Reverse Mortgages
[4] Environmental Protection
[5] Restrictions, Encroachments and Minerals
[6] Survey
[7] Zoning
[8] Truth in Lending
[9] "Last Dollar" Endorsement
[10] "First Loss" Endorsement
[11] "Tie-In" Endorsement
[12] Mobile Homes and Other Manufactured Housing
[13] Street Assessments
[14] Other Endorsements
7.05 Affirmative Insurance
[1] Access
[2] Contiguity
[3] No Fraudulent Transfer
7.06 Coinsurance and Reinsurance
7.07 Escrow Agreements
7.08 Insured Closing Letters
CHAPTER 8
Guarantees and Other Credit Enhancements
8.01 Lender's Requirements for Guarantees
[1] Types of Guarantees
[2] Description of Guaranteed Obligations: Waiver of Defenses
[3] Disclaimer of Reliance
[4] Waiver of Right of Subrogation
[5] Protections Relating to Guarantees by Insiders or Tenants
[6] Guarantor's Assets
[7] Indemnity Against Bankruptcy Filing
[8] Protections Against Avoidance as Fraudulent Transfer
[9] Guarantee of Nonrecourse Debt
[10] Forbearance, Extension and Modification
[11] Restrictions on Spousal Guarantees
[12] Limits on Enforceability in "One Action" States
[13] Effect of Limits on Deficiency Claim
[14] Payment of Taxes
[15] Consideration to Guarantor
[16] Other Guarantee Provisions
8.02 Borrower's Requirements for Guarantees
[1] Income Tax Effect
[2] Adverse Effect of Guarantee by Foreigners or Exempt Organizations
[3] Disclosure by Public Company
8.03 Guarantor's Requirements for Guarantees
[1] Guarantee of Collection
[2] Notice and Grace Periods
[3] No Waiver of Right of Subrogation
[4] Fixed Limit on Liability
[5] Risk of Recharacterization of Guaranteed Loan as Equity
[6] Pledging Collateral to "Support" FASIT Interest
[7] Make Guarantor's Payments Deductible
[8] Guarantor's Accounting Requirements
[9] Contribution Agreement Among All Guarantors
[10] Regulatory Requirements
[11] Asset Protection Planning
[12] Effect of Guarantor's Death
8.04 Lender's Requirements for Letters of Credit Issued to It
[1] Limiting Risk of Injunction of Payment
[2] Limiting Risk of Avoidance as Preference
[3] Application of Security Does Not Cure Default
[4] Possession of Letter of Credit
[5] Obtain Control or Become Transferee Beneficiary of Letter of Credit
[6] Regulatory Requirements
[7] Legal Opinion as to Enforceability of Letter of Credit
8.05 Lender's Requirements for Letter of Credit Issued by It
8.06 Mortgage Insurance
[1] Types of Mortgage Insurance
[2] Borrower's Requirements
8.07 Lender's Requirements for Set-Aside Letters
CHAPTER 9
Legal Opinions
9.01 Lender's Requirements for Legal Opinions
[1] Specification of Loan Terms
[2] Usury and Unconscionability
[3] Zoning and Environmental
[4] Title, Perfection, and Priority
[5] Errors and Omissions Insurance
[6] Overcoming "Privity" Defense of Opinion Giver
[7] Overcoming "Reliance" Defense of Opinion Giver
[8] "Securitization" and Other Opinions
[9] Compliance with Legal Requirements
9.02 Requirements of Opinion Giver
[1] Due Diligence
[2] Need to Modify Accord and Other Standard Forms
[3] Caveats to Enforceability Section of Opinion
[4] Disclosure and Waiver of Conflict of Interest
[5] Qualification for Knowledge of Opinion Giver; Litigation
[6] Exclusion of Real Property Matters
[7] Exclusion of Personal Property Matters.
[8] Qualification of Borrower to Do Business
[9] Qualification of Lender to Do Business
[10] Borrower's Licenses, Permits, and Compliance with Laws and Contracts
[11] Land Use and Environmental Opinions
[12] When the Opinion Giver Practices in a Jurisdiction Other Than the Jurisdiction of the Applicable Law
[13] Assumption of Genuineness of Signatures
[14] Special Qualifications for Opinions Regarding LLCs
CHAPTER 10
Leasehold Mortgage Loans
10.01 General
[1] Definition
[2] Purpose
[3] Component or "Split" Financing
[4] Chapter Scope
[5] Closing Documents and Requirements
[6] Reasons for Lease Rather Than Sale
[7] Reasons for Loan in Addition to Lease
10.02 Requirements for "Mortgageable" Lease
[1] Essential Features
[2] Mortgage Against Lease and Fee
[3] Leases Not Perfectly "Mortgageable" May Still Be Valuable Collateral
[4] Leasehold Mortgage Lender's Prior Approval of Lease
[5] Parties Entitled to Rights of Leasehold Mortgage Lender
[6] Tenant's Right to Mortgage Its Rights Under Lease
[7] Tenant's Right to Assign or Sublet
[8] Tenant's Right to Use the Lease Property
[9] Landlord's Right to Mortgage Landlord's Interest
[10] Right to Cure Mortgage and Tax Defaults
[11] Right to Cure Lease Defaults
[12] Lender's Liability Under Lease
[13] No Costly Future Obligations of Tenant Except Rent
[14] No Modification or Termination of Lease Without Lender's Consent
[15] Right to a New Lease
[16] Necessity of Option to Purchase
[17] Lease Expiration Date Must Follow Loan Maturity Date; No Termination Rights
[18] Term Must Not Exceed Legal Limits
[19] Exercise of Extensions and Renewals
[20] Limit on Rent Acceleration
[21] Limits on Rent Adjustments
[22] Property Insurance
[23] Condemnation
[24] No Merger of Lease into Fee
[25] Duty to Give Estoppel Certificate
[26] General Requirements
10.03 Lender's Requirements for Leasehold Mortgage
[1] Requirements for Lease
[2] Cross-Default Clause
[3] Right to Cure Defaults
[4] Protections Against Termination of Lease in Bankruptcy
[5] Options to Renew or Purchase
[6] Tenant's Rights in Leased Property and Proceeds
[7] Subleases
[8] Restrictions on Junior Mortgages
[9] Waiver of Subrogation to Prior Liens
[10] Waiver of Marshalling
[11] Property Insurance
[12] Security for Tenant's Performance Under Lease
[13] Assignment
[14] Trust Mortgage
[15] Other Requirements
10.04 Other Closing Documents and Requirements of Leasehold Mortgage Lender
[1] Recordation of Lease
[2] Title Insurance
[3] Security Agreement and UCC-1 Financing Statements
[4] Nondisturbance Agreement from Prior Mortgage Holder
[5] Subordination Agreement from Prior Mortgage Holder
[6] Nondisturbance Agreement from Fee Owner or Other Prior Party
[7] Estoppel Certificate
[8] Reserves for Tenant's Obligations
[9] Power of Attorney
[10] Enforceability Opinion Regarding Lease
[11] Appraisal
10.05 Liens Against Fee or Other Prior Interests: Requirements of Leasehold Mortgage Lender
[1] In General
[2] Fee Mortgage
[3] "Subordination" of Fee
[4] Subordination of Lease
[5] Assignment of Landlord's Interest in Lease and Subleases
[6] Attornment by Subtenants
[7] Other Requirements
10.06 Subordinating to Lease: Requirements of Fee Mortgage Lender
[1] No Modification or Cancellation of Lease
[2] No Prepayments
[3] Fixed Minimum Rent Paid Directly to Lender
10.07 Subjecting Ownership Rights to Leasehold Mortgage: Requirements of the Owner
[1] Specification of Mortgage Lender
[2] Specification of Tenant's Mortgage Loan
[3] Specification of Tenant's Equity
[4] Specification of Use of Proceeds
[5] Notice of Default and Opportunity to Cure
[6] "Cross-Default" Clause in Lease
[7] Reimbursement of Owner
[8] Assignment of Rents and Other Payments
[9] Attornment by Subtenants
[10] Insurance and Condemnation
[11] Assignment of Construction, Development and Other Rights
[12] Additional Safeguards for Construction
[13] No Personal Liability of Owner
[14] Limits on Refinancings, Extensions and Modifications
[15] Subordination of Owner's Mortgage Loan
[16] Subordination of Owner's Right to Rents
[17] Owner's Subordinate Leasehold Mortgage
10.08 Accounting for Leases by Tenant
[1] Operating Lease or Capital Lease
[2] Land Leases
[3] Lease of Land and Buildings
10.09 Recharacterization of Lease as Installment Sale and Loan
[1] In General
[2] Factors Leading to Recharacterization
[3] Factors Preventing Recharacterization of Lease
[4] Recharacterization of Sale-Leasebacks
10.10 Landlord Loans
[1] Customary Costs Included in Loan
[2] Advantages of Making Loan Instead of Including Landlord Costs in Rent
[3] Disadvantages of Making Loan to Tenant
CHAPTER 11
Subordinate Mortgage Financing
11.01 General
[1] Definitions
[2] Chapter Scope
[3] Closing Documents and Requirements
[4] Reasons for Subordinate Financing
[5] Reasons for Priority
[6] Alternatives to Subordinate Mortgage Financing
11.02 Requirements of Prior Lender for Subordinate Mortgage
[1] Negotiation Considerations
[2] Types of Subordination
[3] Consent of Third Parties
[4] Subordination Agreement
[5] Resolutions and Consents
[6] Releases, Nondisturbance Agreements and Consents
[7] Delivery of Original Subordinate Note and Mortgage
[8] Legending of Original Subordinate Note
[9] Security Agreement Pledging Subordinate Note and Mortgage
[10] UCC-1 Financing Statement
[11] UCC-3 Amendment Statement
[12] Financial Disclosures by Subordinate Lender
[13] Financial Disclosures of Borrower
[14] Title Insurance Endorsement
[15] Confirmation of Subordination
[16] Documents Complying with Laws Protecting Subordinate Lenders
[17] Prudent Post-Closing Loan Administration
11.03 Requirements of Prior Lender for Subordination of Other Interests
[1] Tenants
[2] Purchasers
11.04 Requirements of Subordinate Lender for Subordination Agreement
[1] Negotiating Considerations
[2] Specification of Terms of Prior Mortgage Loan
[3] Specification of Owner's Equity
[4] Notice of Default and Opportunity to Cure
[5] Waivers by Prior Lender for Subordinate Lender
[6] Limits on Refinancings, Extensions and Modifications of Prior Liens
[7] Right of Subordinate Lender to Commence Enforcement
[8] Application of Insurance Proceeds and Condemnation Awards to Restoration
[9] Limits on Consents by Subordinate Lender
[10] Agreement to Subordinate Not Effective Unless No Defaults
[11] Subordination Effective Only if Prior Lien Retains Its Priority
[12] Representation by Prior Lender of No Basis for Subordination or Avoidance
[13] Assignment to the Prior Lender Without Recourse
[14] Waiver of Defenses by Borrower and Guarantors
[15] Option to Buy Senior Loan
[16] Compliance with Laws Protecting Borrowers
[17] Exceptions to Subordination
[18] Documentary Preconditions to Subordination
[19] Accounting Disclosures for Interests in Variable Interest Entities
[20] Requirements of Multiple Subordinate Lenders
11.05 Requirements of Subordinate Lender for Subordinate Mortgage
[1] Collection of Payments on Prior Mortgages, Taxes and Insurance
[2] Subordinate Lender's Right of Subrogation Based on Payment of Prior Liens
[3] "Cross-Default" Clause in Subordinate Mortgage
[4] Reimbursement of Subordinate Lender
[5] Assignment to Subordinate Lender of Rents and Other Payments
[6] Construction Loan Requirements
[7] Covenants by Borrower Affecting Its Credit Rating
[8] Insurance Requirements of Subordinate Mortgage
11.06 Requirements of Borrower
[1] Enhancing Liquidity by Compliance with Lenders' Requirements
[2] Tax Option
[3] Other Requirements
11.07 Wraparound Mortgages
[1] Requirements of Wraparound Lender for Mortgage
[2] Requirements of Wraparound Lender for Other Closing Documents
[3] Requirements of Borrower
CHAPTER 12
Construction Loans
12.01 General
[1] Traditional Stages of Construction Financing
[2] Alternative Types of Construction Financing
[3] Chapter Scope
[4] Closing Documents and Requirements
12.02 Construction Lender's Requirements: Construction Loan Commitment/Application
12.03 Construction Lender's Closing Requirements
[1] Need to Understand Lender's Practices, Local Laws and the Particular Transaction
[2] Construction Loan Agreement
[3] Proof of Recordation of Construction Loan Agreement
[4] Notice of Lending
[5] Construction Note
[6] Interest Reserve Agreement
[7] Construction Mortgage
[8] Property Insurance
[9] Liability Insurance
[10] Title Insurance Policy
[11] Guarantee
[12] Payment and Performance Bonds and Alternatives
[13] Construction Contracts
[14] Proof of Recordation of Construction Contract
[15] Assignment of Owner's Rights in Construction Contract
[16] Waiver by Subcontractors
[17] Assignment of Rights to Licenses, Permits and Agreements
[18] Undertaking of General Contractor
[19] Undertaking and Consent of Architect or Engineer
[20] "Permanent" Loan Commitment
[21] Assignment of "Permanent" Loan Commitment
[22] Buy-Sell Agreement
[23] Inspection of Mortgaged Property
[24] Affidavits Regarding Commencement of Construction
[25] Engineering and Environmental Reports
[26] Proof of Utility Connections
[27] Certificates of Compliance with Zoning and Building Laws
[28] Approval of Plans and Specifications
[29] Building Permits and Other Construction Approvals
[30] Prudent Loan Administration After Initial Closing
[31] Requirements for Final Construction Loan Advance
[32] Sale of Construction Loan
[33] Other Requirements
12.04 Borrower's Requirements for Construction Financing
[1] Guarantee of Payment
[2] Minimizing Construction Period
[3] Election to Capitalize Development Expenses
[4] Revolving Credit
[5] Minimizing Retainage
[6] Advances for Stored Materials
[7] Advances for Soft Costs
[8] Deficiency in Costs During Construction
[9] Option to Obtain Gap Financing After Construction
[10] Right to Reallocate Construction Budget
[11] Consistency of Loan Documents with Other Documents
[12] Bonds
[13] Short Deadlines for Lender Decision
[14] Delays Beyond the Borrower's Control
[15] Development by Different Owner/Borrowers (as Members of an LLC) of a Single Project to Be Used as a Condominium on Completion
[16] Miscellaneous Requirements
[17] Other Requirements
12.05 Requirements of "Permanent" Lender
CHAPTER 13
Purchase Money Financing
13.01 General
[1] Definitions
[2] Chapter Scope
13.02 Seller's Requirements for Installment Land Contract
[1] Right to Accelerate Balance Due
[2] Waiver of Defenses
[3] Installment Contract Must Be in Recordable Form, and Should Be Recorded in Some States
13.03 Seller/Lender's Alternative Provisions and Drafting Concerns
[1] Possible Ineffectiveness of Deed in Escrow
[2] Qualifying for Installment Sales Reporting
[3] Current Payments of Interest at No Less Than Applicable Federal Rate
[4] Structuring Loan as "Bona Fide"
[5] Preconditions to Subordination
[6] Include "Mortgage" Provisions in Installment Contracts
[7] Option to Repurchase May Be Recharacterized as Mortgage
13.04 Purchaser's Requirements for Installment Land Contract
[1] Title Insurance
[2] Recordation of Installment Land Contract
[3] Trust to Hold Unit Until Title Closing
[4] Conditions to Payment of Purchase Price
[5] Purchaser Takes Possession of Property
13.05 Purchaser's Concerns and Alternative Provisions
[1] At Risk Rules
[2] Below-Market Financing
[3] Payment of Interest on Existing Mortgages
[4] "Rolling" Standards
[5] Options
[6] Contingent Interest May Delay Buyer's Depreciation
[7] Tax-Motivated Resale by Purchaser
CHAPTER 14
Loans Secured by Single-Family Homes
14.01 General
[1] Definitions
[2] Chapter Scope
14.02 Lender's Requirements Prior to Loan Application
[1] Advertising Guidelines
[2] Pre-Application Disclosures
[3] Form of Application and Other Requests for Information
[4] Fair Housing Act "Log-In" Sheet
[5] Real Estate Settlement Procedures Act ("RESPA") Servicing Notice
[6] E-Consents
14.03 Lender's Requirements for Post-Application Disclosures
[1] RESPA Disclosures
[2] Truth-in-Lending Disclosures
[3] Notice of Adverse Action or Incomplete Application
[4] Notice of Right to Appraisal
[5] Initial Disclosure of Right to Cancellation or Termination of PMI
[6] Disclosure of Credit Scores
14.04 Lender's Requirements for Commitments and Related Disclosures
14.05 Lender's Requirements for Closing Documents
14.06 Lender's Concerns
14.07 Lender's Post-Closing Requirements
14.08 Borrower's Requirements and Concerns
[1] Maximizing Acquisition Financing
[2] Documenting Deductibility of "Points"
[3] Eliminate PMI When L-T-V Drops Below 80%: PMI Deduction
[4] Transfer of Residence to Trust; Other Transfers
[5] Insurability of Home; Adequacy of Policy Amount
[6] Co-Ownership by Unmarried Persons
CHAPTER 15
Loans Secured by Condominium, Homeowners Association and Time Share Units
15.01 General
[1] Definitions
[2] Chapter Scope
15.02 Lender's Requirements for Loan Secured by Condominium Unit
15.03 Lender's Concerns Regarding Condominium Loans
15.04 Borrower's Requirements for Condominium Loans
[1] Minimize Presale Requirements
[2] Separate Mortgages on Each Condominium Unit
[3] Phasing Development
[4] Pay Less Than Pro Rata Common Charges on Unsold Units
15.05 Lender's Requirements for Loans Secured by Units in Homeowners Associations or Planned Unit Developments
15.06 Lender's Requirements for Time Share Loans
15.07 Lender's Requirements for Loans to Condominium and Homeowners Associations
CHAPTER 16
Loans Secured by Cooperative Units
16.01 Definitions
[1] Cooperative Unit
[2] "Condop"
16.02 Lender's Requirements for Cooperative Loans
16.03 Lender's Concerns Relating to Cooperatives
[1] Regulatory Requirements
[2] Compliance With "80/20" Rule
[3] High Percentage of Unsold Units
[4] Rights of Tenants After "Deconversion"
[5] Unenforceability of Special Sponsor Rights
CHAPTER 17
Structured Finance ("Securitizations")
17.01 General
[1] Definitions
[2] Advantages for Borrower
[3] Chapter Scope
17.02 Securitization Requirements for Loan Documents
17.03 Concerns of Holders of REMIC Residual Interests
[1] Regular Interest in REMIC
[2] Residual Interest in REMIC
17.04 Securities Law Issues in Securitizations
17.05 Recommendations of Industry Groups
17.06 Accounting Requirements for Securitizations
17.07 Regulatory Requirements for Securitizations
17.08 Borrower Concerns for Securitizations
[1] Limits on Additional Securitization Costs
[2] Nonconsolidation Opinion
[3] Substitution of Collateral
[4] Defeasance
[5] Other Requests for Rating Confirmations
CHAPTER 18
Sale-Leasebacks; Synthetic Leasing
18.01 Sale-Leasebacks Generally
[1] Definitions and Types of Transactions
[2] Chapter Scope
[3] Closing Documents and Requirements
[4] Reasons for Sale-Leasebacks
18.02 Closing Requirements for Sale-Leasebacks
[1] Sale to Purchaser/Landlord
[2] Leaseback to Seller/Tenant
18.03 Compliance with Accounting and Regulatory Requirements for Sale-Leasebacks
[1] Active Use by Seller/Tenant
[2] Initial Investment and Continuing Investment
[3] Risks and Rewards Transferred to Purchaser; Seller Has No Continuing Involvement
[4] Regulatory Requirements
18.04 Recharacterization of Sale-Leasebacks
[1] In General
[2] Factors Leading to Recharacterization as a Loan
[3] Factors Supporting Original Form as a Sale-Leaseback
18.05 Financing of "Synthetic" Leases
CHAPTER 19
Pledges of Real Estate Mortgages and Notes
19.01 General
[1] Definition of "Pledge"
[2] Closing Documents and Requirements
[3] Vulnerability of Pledges to Fraud
[4] Risk of Loss of Pledged Notes
[5] Claims by Third Parties to Pledged Notes
[6] Necessity of Perfected Pledge in Securitizations or Other Sales of Loans
[7] Chapter Scope
19.02 Mortgage Warehousing
19.03 Basic Requirements for Pledge of a Loan
19.04 Liability of Law Firms and Other Possessory Parties for Lost Notes, Third Party Claims and Other Risks
[1] In General
[2] "Lost Note" Affidavit and Indemnity
[3] Waivers by the Debtor
[4] Liability Insurance
[5] Risk of Liability to Third Party Claiming an Interest in Pledged Notes
19.05 Accounting Treatment of Borrowing Secured by Mortgage Loans
CHAPTER 20
Loan Participations
20.01 General
[1] Definitions
[2] Chapter Scope
[3] Closing Documents and Requirements
[4] Reasons for Participations
20.02 Types of Participations
[1] Regular Participation
[2] Assignment of Record
[3] Noteholder Agreements
[4] Loan Syndication or Consortium
[5] Joint Venture or Partnership; SPE
[6] Credit Derivatives
20.03 Drafting the Participation Agreement
[1] Presumption Against Implied Obligations and for Implied Powers
[2] Management and Control
[3] Ownership Rights of Participants
[4] Lead Lender as Fiduciary for Participants
[5] Representations by Seller
[6] Representations and Waivers by Participants and Disclaimers by Lead Lender
[7] Acquisition of Collateral for Loan
[8] Sharing of Expenses
[9] Relations Between Senior and Junior Parties
[10] Waiver and Consent by Participant in Favor of Counsel to Lead Lender
20.04 Characterization of Participation as Loan Rather Than Sale
[1] Adverse Consequences of Recharacterization as Loan
[2] Checklist of Characteristics of Participation Interests Deemed to Be Unsecured Loans
[3] Lead Lender as a Fiduciary for Participants Indicates Sale of Participation Interest
[4] Accounting Treatment of Participation
20.05 Characterization of Participation as Security
[1] Redefinition of Which Notes Are Securities
[2] Cases Determining Whether Participation Interests Are Securities
[3] Checklist of Characteristics of Participations Deemed Securities
[4] State Securities Laws
20.06 Naming Participant as Insured in Title Insurance Policy
20.07 Compliance by Banks with Regulatory Requirements
[1] Comptroller of the Currency Circular Regarding Participations
[2] Lending Limits
[3] Other Regulatory Requirements
CHAPTER 21
Sales of Mortgage Loans
21.01 General
[1] Chapter Scope
[2] Growth of Secondary Market
[3] Closing Documents and Requirements
21.02 Structure of Sale Depends on Which Party Is Dominant
[1] Secondary Market Purchasers
[2] Investment Banks and Rating Agencies
[3] Funded Loans Allow Less Flexibility Reading Existing Loan Documentation
21.03 Issues Commonly Negotiated in Sale of Funded Loan
21.04 Basic Requirements for Sale of Mortgage Loans
21.05 Criteria for "True Sale"
21.06 Precautions to Prevent Fraud
21.07 Liability of Possessory Parties for Lost Notes, Third Party Claims and Other Risks
[1] In General
[2] "Lost Note" Affidavit and Indemnity
[3] Waivers in Favor of Seller-Servicer
[4] Liability Insurance
[5] Risk of Liability to Third Party Claiming Interest in Notes
21.08 Accounting Treatment of Sale
[1] Applicability of FASB 140
[2] Criteria for Recognition of Sale for Accounting Purposes
[3] Avoidance of Consolidation of Transferor and Transferee
[4] Accounting for "Below Market Value" Transaction with Variable Interest Entity
CHAPTER 22
Loan Modifications
22.01 General
[1] Definitions
[2] Chapter Scope
[3] Closing Documents and Requirements
[4] Why Modify the Loan?
22.02 Lender Requirements for Loan Modification Agreements
[1] Waivers, Estoppels and Representations by Borrower and Obligors
[2] Consideration to Borrower
[3] Other Loan Modification Documents
[4] Drafting Issues and Alternative Provisions
22.03 Borrower's Requirements for Loan Modification Agreements
[1] Waiver by Lender of Existing and Probable Defaults
[2] Limit Reaffirmation of Representations
[3] Limit Release of Lender
[4] Consideration to Lender
[5] Consent by Lender to Future Reorganization on Same Terms
[6] Other Loan Modification Documents
[7] Drafting Issues and Alternative Provisions
22.04 Loan Consolidations
[1] Why Consolidate the Loans?
[2] Lender Requirements for Consolidations
[3] Lender Requirements for Unconsolidated Mortgages
[4] Contractual Flexibility
[5] Consolidation of Lien or Loan
22.05 Loan Extensions (and Forbearances)
[1] Why Enter Into a Loan Extension?
[2] Lender Requirements for Loan Extensions
[3] Drafting issues
22.06 Pooling Defaulted Debt and Securitizing Senior Tier
22.07 Deferral of Loan Payments Pending Orderly Liquidation
[1] Advantages for Borrower
[2] Immediate Interim Lien
[3] Intercreditor Agreement
[4] Priority for Fully Secured Creditors
22.08 Forbearance Agreement Coupled with Stipulated Foreclosure Judgment
[1] Lender Requirements for Foreclosure Documents
[2] Drafting Issues for Lender
[3] Borrower Requirements for Foreclosure Documents
[4] Drafting Issues for Borrower
22.09 Consensual Bankruptcy Reorganization Plan
[1] Advantages to Lender
[2] Lender's Requirements
[3] Limits on Modification of Home Mortgages
[4] Borrower's Requirements
CHAPTER 23
Deeds in Lieu of Foreclosure
23.01 General
[1] Definition
[2] Lender's Reasons for Deed in Lieu
[3] Lender's Reasons Against Deed in Lieu
[4] Borrower's Reasons for Deed in Lieu
23.02 Requirements of Lender
23.03 Requirements of Borrower
23.04 Alternatives and Variations
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Mark
A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate
Thinking of Selling? Best Mortgage Rates Current Home Prices Search MLS
RE/MAX Realty Specialists Inc.
Providing Full-Time Professional Real Estate Services since 1987
( BUS 905-828-3434
›mark@mississauga4sale.com
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