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Real Estate Loan Workouts

Overview

Varnum’s restructuring group is experienced in counseling commercial banks, distressed debt purchasers and other debt holders regarding troubled and defaulted real estate secured loans. Our mission is to listen to our clients, answer their questions and assist them in the formulation and execution of their business decisions to maximize recoveries.

Frequent questions we field for our clients include:

Investor Real Estate

  • How do I exercise my assignment of rents?
  • Can I continue to collect rents after the foreclosure sale?
  • Do I have management obligations after foreclosure if I am collecting rents?
  • Do I need a receivership to enforce rent collections?

Residential Real Estate

  • How can I best take control of the project?
  • Should I seek appointment of a receiver?
  • How can I most cost efficiently utilize a receiver?

Construction Liens

  • Does my mortgage have priority over construction liens?
  • Do I have title insurance coverage for construction liens?
  • How do I pursue my rights under my title insurance policy?

Loan Document Review

  • How quickly can you prepare a report on the sufficiency of the loan documents?
  • Are the loans effectively cross-collateralized?
  • Are there mortgage priority issues?
  • Are the limited guarantys properly structured?
  • Are there problematic exceptions to title that may raise concerns on resale after foreclosure?

Forbearance Agreements

  • How long should I forbear?
  • What key issues should I consider in structuring the forbearance?
  • How can I maintain the greatest flexibility during forbearance in the event unforeseen developments occur?

Deed-in-Lieu Agreements

  • What should the consideration be for the deed-in-lieu?
  • How do I get the deed-in-lieu agreement prior to completion of environmental due diligence?
  • Do I have to pay transfer taxes on a deed-in-lieu?
  • Are there successor owner issues I need to address first?

Environmental

  • What level of environmental due diligence should I conduct?
  • What are my due care obligations after taking title?

Foreclosure

  • Should I foreclose judicially or by advertisement - what are the pros and cons of each method?
  • What title issues must be addressed prior to foreclosure?
  • Can I sue guarantors and simultaneously foreclose?
  • What minimum value must I bid at foreclosure?

Receiverships

  • Are there adequate grounds for a receivership?
  • What are the pros and cons of a receivership proceeding?
  • Can the real estate be sold by the receiver?
  • Should the receivership be filed in state or federal court?

Bankruptcy

  • How does a bankruptcy filing affect an existing receivership?
  • When should relief from stay be sought?
  • How long do relief from stay proceedings take?
  • Can I get a trustee appointed?
  • How long can the debtor continue in Chapter 11?

Overall Strategy

  • What can or should I do to legally position the loan asset for maximum recovery?
  • Should I seek a forbearance or deed-in-lieu or should I foreclose? What are the relative advantages and disadvantages of each strategy?
  • How can I minimize the loss due to construction liens?

The members of Varnum’s restructuring group are happy to answer these and any other questions about troubled and defaulted real estate secured loans to help our clients develop strategies best suited to the situation at hand.

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