Special Assets Lawyer Blog

Don't Create A Liability When You Sell A Loan

Mon, 09 Jan 2012 18:30:19 -0800

These days, many institutional lenders are selling non-performing loans to financial and strategic buyers. The concept is usually sound because the selling institution can recover at least the amount at which the loan is carried on its books, often together with out-of-pocket fees and costs. The idea is simple: Get the loan off the books of the Bank and move on to other matters that are profitable.

Why It Is Important For A Lender To File A Proof Of Claim

Fri, 30 Dec 2011 18:18:34 -0800

Unless you are a specialized lender who makes loans to debtors-in-possession, you do not make a loan with the expectation that your borrower is going to file bankruptcy. Although the number of bankruptcy filings in California and nationally is trending slightly lower, filings remain at higher than normal levels. Nearly every lender has received the notice of a bankruptcy filing that was unexpected and then faced decisions as to what to do next.

SAMA Comes to Northern California

Wed, 23 Nov 2011 12:17:29 -0800

A few years ago, the Special Assets Management Association (SAMA) was born in Southern California. SAMA is a member-driven non-profit organization dedicated exclusively to fostering the best practice in the workout arena through continuing education, mentoring, skill sharing and peer support. I hear from my partners and clients in Southern California that SAMA has been quite successful in providing continuing education for workout professionals as well as a platform for workout professionals to network with one another.

SAMA is now coming to Northern California, and I am privileged to be a member of the Event Planning Committee that will be working to get SAMA North off the ground.

Our first event will be a breakfast program in San Francisco on December 8 on "Current State of the Workout" featuring Greg Bloyd of Bank of the West and Seth Moldoff of Wells Fargo Bank. The meeting will be held at Silk's Restaurant in the Mandarin Oriental Hotel at 7:30 a.m. I hope that you can join us that morning to inaugurate SAMA in Northern California.

California Court Decision Threatens to End Receiver's Sales of Real Property

Wed, 02 Nov 2011 17:05:38 -0800

In these times of declining property values, lenders are often faced with the prospect of taking back property that will prove to be difficult to manage as ORE. One time-honored means of administering these properties is to move for the appointment of a receiver and ask the Court to authorize the receiver to sell the property and disburse the proceeds in the appropriate priority.

Receiver's sales are useful in any number of circumstances. One of the best examples was in the liquidation of a failed farm implement dealership. The bank held a deed of trust on the real property, but property was chock full of equipment, tools, old engine blocks and decades of what looked a lot like junk. The bank received very high bids from salvage companies to haul it all away. Instead, the receiver held an auction and sold off all of the personal property. Result: instead of paying $100 to haul off an old engine block, a buyer at the auction paid $100 for the privilege of hauling it off! When the dust settled at the end of the auction, the yard was reasonably clean, most of the personal property had been removed by auction buyers, there was sufficient cash available to cover the cost of the auction and the receivership, as well as some left over for other expenses.

Meanwhile, the receiver had listed the property for sale. Once the property was cleaned up, buyers appeared and the property was soon liquidated for enough to repay the secured lender with some left over.

We've also used receiver's sales to sell property where there were documentation issues, such as where one lender held a deed of trust on the real property and another held a personal property security interest in the essential personal property. (Yes, a real lesson in underwriting!!) The receiver, as the neutral representative of the Court, was able to sort out which lender was entitled to what sums and get the property sold as a package to a buyer.

Now comes a decision that threatens to end receiver's sales. My partner, Joe Demko, who has handled countless receivership matters over the years, files this comment on a very troubling decision.

When Your Borrower Files Bankruptcy - A 10-Point Checklist

Mon, 10 Oct 2011 09:44:07 -0800

This past quarter end once again reminded us that the economy remains weak and borrowers who have managed to hang on for the past three or four years are running out of staying power. The topic again arose - what to do when a borrower files bankruptcy? Faced with the prospect of throwing good money after bad, some lenders bury their head in the sand and simply wait it out, often with terrible results. Others charge ahead aggressively and run up large legal bills that are not justified by the amount of the obligation or the difficulty of recovery.

Over the years, I have encouraged clients facing a bankruptcy filing by a customer to stop and carefully consider the available options. Here is a simple checklist to run through while reaching a decision that will preserves the Bank's rights in a manner that is cost-effective.

Bank Lawyer: It's Important to Record the Trustee's Deed Promptly After Foreclosure

Tue, 13 Sep 2011 18:51:56 -0800

While we always recommend that our lender clients make sure the trustee's deed is signed and recorded as soon as possible after a trustee sale, my partner, Joe Demko alerted us to new reason why this is a good idea.

The United States Bankruptcy Court for the Central District of California recently held that the filing of a bankruptcy petition by a borrower can void a trustee sale even where the petition is filed after the trustee sale, so long as the borrower files the petition before the execution of the trustee's deed upon sale.

Joe knows his way around Bankruptcy Court and he follows all the decisions that affect our lender clients. This one is a real eye-opener. As Joe notes, whether or not the decision is correct, foreclosing lenders need to take heed.

Learn about Legal Issues Affecting California Banks - Attend California Bankers Association's Annual Bank Counsel Seminar from May 4-6

Thu, 28 Apr 2011 05:11:52 -0800

Another noteworthy conference happening next week is the California Bankers Association's 44th Annual Bank Counsel Seminar from May 4-6 in Huntington Beach. Influential lenders, bank counsel, outside counsel, attorneys from bank regulatory agencies, and compliance officers will be in attendance for this three-day educational event, with seminars customized for each type of audience. I have attended and spoken at the Bank Counsel Seminar in past years. It is the premier meeting for legal issues affecting California banks.

This year, JMBM's very own Marty Orlick will be speaking on Americans with Disabilities Act compliance for financial institutions at 3pm on Thursday, May 5. Marty is a past contributor to SpecialAssetsLawyer.com and provides sensible advice to pass along to bank clients about the ADA. I suggest you take a look at his insightful presentation, which he will speak about in depth during the conference. By the way, Jeffer Mangels Butler & Mitchell LLP is also a featured sponsor of the seminar. Register for this conference at http://www.calbankers.com/bankcounsel2011/.

Special Assets Lawyer Update: Lenders, make the most out of 2011 at Meet The Money® next week

Wed, 27 Apr 2011 05:00:49 -0800

Lenders, an important conference is coming up next week. Meet the Money® is a forum for lenders in the hospitality industry to meet the experts and get your questions answered about how to get the most from the current market. Meet the Money® runs from May 2-4 at the Sheraton LAX. If you haven't registered yet, do it now at www.MeetTheMoney.com. Read below for what you can expect at this year's Meet the Money.

Hospitality experts predict that 2011 will be the first year of significant growth in hotel transactions since 2007 -- will you be ready? Meet the Money® 2011 is your chance to find out how some of the most knowledgeable and successful people in the industry are preparing for the improved economic environment.

You'll get answers to your questions about the anticipated market at Meet the Money®, including:

What are the real players doing?
How can lenders, receivers and investors create value in this market?

Who's doing transactions and how?

Where are the biggest investment opportunities?

What's the best way to work with the media?

Follow and join the conversation on Twitter using #MTM2011.

Successor Liability Law - Avoiding the Surprises of Successor Liability

Wed, 13 Apr 2011 05:00:00 -0800

When a bank makes a loan, it underwrites the deal to determine whether the risk of repayment is reasonable. Banks don't consider the risk of acquiring the business that is being financed. All too often, of course, when a loan goes bad, the Bank ends up with its collateral, and occasionally, must essentially operate that collateral, which could be the business that was the Bank's customer.

There are numerous risks involved in succeeding to a failed business. Bankers are very good at their own business, but in my experience, most bankers are not very good at running hotels, apartments, packing sheds or -- perish the thought -- construction companies. When foreclosure is the only way out, the Bank must carefully consider the consequences of its enforcement actions or find that it has unwittingly assumed a sea of liabilities. My partner, Joe Demko, wrote about the surprises of successor liability and how to avoid them in the article below which was published in the Daily Journal's California Lawyer. Although he penned the article in 2007 after a trial he had won on the topic, the issues he wrote then still ring true today.

Short Sale Legislation Progress Report: Legislation To Correct Misguided Statute Enacted to Govern Short Sales

Tue, 15 Mar 2011 05:11:27 -0800

Last year, the California Legislature enacted a statute that prohibits a deficiency judgment under a note secured by a first deed of trust against a dwelling of not more than four units that is sold at a short sale with a written consent of the lender. The existing statute, codified as Code of Civil Procedure Section 580e, also provides that once the secured lender consents to the short sale, the lender agrees to accept the sale proceeds as full payment and that the short sale fully discharges the remaining amount of the indebtedness on the note. In my capacity as Secretary to the Financial Institutions Committee of the Business Law Section of the State Bar of California, I became active in conjunction with a working group from the California Bankers Association Legal Affairs Committee who was attempting to address the many shortcomings of the statute as enacted. In addition to careless draftsmanship, the statute has serious negative unattended consequences. Apparently, the authors were thinking only of a typical residential loan secured by one single family residence. Unfortunately, the language of a statute was not so limiting.

"How to Get to the Top and Stay There: Becoming a Leader In Your Legal Department" Corporate Counsel Roundtable on March 8

Wed, 23 Feb 2011 08:24:53 -0800

It seems that Spring is the time for wonderful events for I have yet another timely educational seminar to share with our general counsel readers. "How to Get to the Top and Stay There: Becoming a Leader in Your Legal Department" is part of the monthly Corporate Counsel Roundtable series which my partner, Bill Capps, hosts each month. This month, Bill, who is the chair of JMBM's Corporate Department, teams up with Beverly Weise, special guest and founder of Leadership Talent Solutions, to identify skills that are valued by senior management in General Counsel. Note also that this event is a fully accredited MCLE seminar.

The live event will take place in JMBM's Los Angeles office on March 8 at 7:30am, and we will be videoconferencing the program to our San Francisco office at Two Embarcadero Center, 5th Floor and our Orange County office, located at Three Park Plaza, 11th Floor, in Irvine. Don't hesitate to join us in the office that is most convenient to you. Of course, the seminar is complimentary and parking will be validated! To RSVP, email jh7@jmbm.com.

For Creditors with Clients Filing Chapter 11- Commercial Finance Roundtable: A Creditor's Plan - A Way Out of the Morass of a Single Asset Real Estate Bankruptcy Case

Thu, 17 Feb 2011 08:00:10 -0800

Many lenders are not very familiar with creditors' plans, which can be a useful tool to break through a logjam in a Chapter 11 bankruptcy case. JMBM Special Assets Team members and expert creditors' rights attorneys, Bob Kaplan and Nick De Lancie, are veterans at crafting and confirming creditor's plans in tough cases. Bob and Nick have created a seminar entitled, "Commercial Finance Roundtable: A Creditors Plan - A Way Out of the Morass of A Single Asset Real Estate Bankruptcy Case." The complimentary program is based on their 30 years of experience of representing creditors and includes recent bankruptcy court trial experience where they obtained a very successful result.

The program will take place on March 10, 2011, in our San Francisco office at Two Embarcadero Center, 5th Floor, with registration beginning at 5:00 PM and wine, cheese, and networking after the one-hour program. The seminar will also be MCLE accredited. RSVP your attendance to aluk@jmbm.com.

For more information, see the brochure by clicking the link below.

The Americans with Disabilities Act and your retail properties and services

Tue, 15 Feb 2011 09:00:38 -0800

In addition to compliance with financial and securities regulations, financial institutions must also be mindful of laws and regulations affecting a financial institution's responsibilities to disabled Americans.

As a member of the State Bar of California's Financial Institutions Committee, I have the opportunity to hear interesting speakers on timely issues directed toward general counsel, regulatory specialists and outside counsel for major financial institutions. JMBM Special Assets Team member and real estate attorney, Marty Orlick, recently gave an excellent presentation on the accessibility rules of the Americans with Disabilities Act (ADA). Marty is an expert at ADA defense and counseling having defended more than 400 ADA claims with many clients from financial institutions like Bank of America, Union Bank, and City National Bank. See his presentation and message by clicking the link below.

Happy New Year to Our Valued Readers

Tue, 28 Dec 2010 06:32:52 -0800

To our valued readers,

2010 proved to be a difficult and challenging year for workout professionals, and of course, for the JMBM Special Assets Team. Because our good clients are busier than ever this holiday season, so are we. I regret that I haven't been writing as frequently as I would like, but I hope that next year I will be able to share more interesting "SAD but True" stories and articles to help our banker and lender audience work through their problem loans. There is no shortage of topics and information -- just not enough hours in the day to put in a form that is useful for all of you.

From all of us at the JMBM Special Assets Team, please accept our best wishes for happy holidays and a prosperous new year, and a special wish to all of our borrowers and guarantors -- may they find buyers for their properties at prices that are high enough to pay back their loans in full!!

Happy New Year!!

Dick Rogan and the JMBM Special Assets Team

Dick Rogan Appointed to Secretary of State Bar of California's Financial Institutions Committee

Tue, 02 Nov 2010 11:18:27 -0800

It's been a dizzying but remarkable past few months with dozens of complicated loan workouts and bankruptcies and growing activity from co-managing JMBM's San Francisco Office. On top of this good news, it is with great pride that I inform you of my recent appointment to Secretary of the State Bar of California's Financial Institutions Committee (FIC). FIC members are lawyers who represent bank and financial institutions and include general counsel, regulatory specialists and outside counsel for major financial institutions in California. I have found FIC meetings to be a terrific opportunity to exchange ideas with other lawyers who represent banks and to stay abreast of current developments that affect our clients. This year's FIC chair is Joe Sanchez of Bank of the West. Joe will continue the FIC tradition of bringing interesting speakers and timely presentations to the committee.