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Real Estate Financing with Forms on Disk

by Brook Boyd

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Real Estate Financing features a CD-ROM containing over 40 deal-specific forms and checklists, covering everything from complex loan workouts to simple residential closings. The forms on CD-ROM include information about each term and how it can be modified, with separate variations for lenders, borrowers or other parties. A “Data Input Sheet” lets you use the forms with widely available software and can serve as a “term sheet” for the transaction. The accompanying volume provides explanations of the issues along with the guidance you need to draft working documents quickly.

Real Estate Financing includes: checklists for loan modifications; wraparound mortgage loans; subordinations; loans secured by condos, co-ops and time shares; sale-leasebacks; contingent interests; securitizations; deeds in lieu and consensual foreclosures; participations; installment sales; sales of mortgage loans; and much more. The checklists highlight “deal” terms, flag risks and hot issues, and direct users, through cross-references, to alternative approaches and analysis. Standards issued by ratings agencies for securitized loans are discussed in detail, as are the EPA and ASTM standards for Phase I environmental reports and the best Web sites for forms and drafting requirements.

Book #00639; looseleaf, one volume, 1,550 pages and one CD-ROM; published in 1997, updated as needed; no additional charge for updates during your subscription. Looseleaf print subscribers receive supplements. The online edition is updated automatically. ISBN: 978-1-58852-076-0.

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  • Availability: Available
  • Brand: Law Journal Press
  • Product Type: Books
  • Edition: 0
  • Page Count: 1550
  • ISBN: 978-1-58852-076-0
  • Pub#/SKU#: 639
  • Volume(s): 1
  • CDs: 1

Author Image
  • Brook Boyd
Brook Boyd has been a practicing attorney for over 30 years, representing major money center banks and institutions, and is Special Counsel with the firm of Meister Seelig & Fein LLP, in New York City.

Mr. Boyd has published widely in legal and professional journals, including the New York Law Journal, the New Jersey Law Journal, The Real Estate Law Journal, Real Estate Finance Journal, Real Estate Review and The Practical Real Estate Lawyer, and has been quoted and cited extensively in periodicals such as The Wall Street Journal, The New York Times, Le Monde, Business Week, and the Mortgage and Real Estate Executives Report. He has also lectured for the ABA, ALI-ABA, the Association of the Bar of the City of New York, New York University, and the University of Miami and has contributed portions of a number of legal treatises, including Real Estate Transactions and Warrens Weed New York Real Property. He is listed in Marquis Whos Who in American Law and similar publications.


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’sTax 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’sObligation 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’sDeath
[8]Structuring a Transaction as an Equity Investment or Loan
[9]Tax Concerns of REIT Lenders
§2.06 Borrower’sTax 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’sLiability for Unpaid Withholding Taxes on Payments to Foreign Lender
[14]Adverse Tax Impact of Transferee’sAssumption of Mortgage Loan
[15]Adverse Impact of Pledge of IRA
[16]Tax Concerns of Tax-Exempt Borrowers and Investors
[17]Tax Concerns of REIT Borrowers and Investors
§2.07 Lender’sUnique Legal, Organizational and Contractual Requirements
[1]Governmental Licensing and Regulatory Requirements
[2]Offering Materials; Organization Requirements
[3]Contractual Requirements
§2.08 Lender’sAvoidance of Borrower’sDisabilities and Defenses
[1]Grounds for Borrower to Avoid Its Obligations; Illegality
[2]Obstacles to Recovery from Collateral
§2.09 Lender’sRequirements for Loan Commitments
[1]Combined Form of Application and Commitment
[2]Conditional Obligation to Lend
[3]Clarifying Implied Limits on Lender’sSatisfaction
[4]Requiring Strict Compliance by Borrower
[5]Borrower’sObligation 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’sRemedies
[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’sRequirements for Loan Commitments
[1]Specify Borrower’sTerms
[2]Lender Should Be Obligated to Fund, Subject Only to Reasonable Conditions
[3]Reasonable and Objective Limits on Lender’sDiscretion
[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’sFees
[8]Limit Borrower’sUltimate Liability
[9]Reconciling Loan Documents with Borrower’sOther Agreements
[10]Negotiations Among Members of the “Borrower Group”
[11]Other Changes
[12]Specific Performance of Commitment
§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
[3]Ways of Protecting Lender Representatives
§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
[5]Ways of Protecting Borrower Representatives
§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’sRequirements 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’sLimitations on Nonrecourse Provisions
[9]Choice of Law
§3.03 Lender’sDrafting 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’sAdvance as a Loan Rather Than Equity or Payment
§3.04 Lender’sRequirements 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’sExpenses
[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’sConcerns
[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’sCompliance 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’sRequirements
[2]Borrower’sRequirements
§4.03 Interest Based on Gross Income
[1]Lender’sRequirements
[2]Borrower’sRequirements
§4.04 Interest Based on Appreciation or Capital Events
[1]Lender’sRequirements
[2]Borrower’sRequirements
§4.05 Lender’sConcerns 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 Principle Amount
[7]Need for Agreement with Borrower as to Projected Payment Schedule
[8]Contingent Interest Over Long Period, or Requirement for Lender’sConsent, 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’sConcerns and Additional Provisions
[1]Limits on Lender’sRemedies
[2]Determine Income on Cash Basis

CHAPTER 5
Mezzanine Loans, Convertible Mortgages, and Other Lender Rights to Equity Interests

§5.01 General
[1]Definitions
[2]Chapter Scope
§5.02 Lender’sRequirements 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’sDrafting Concerns
§5.02 ABorrower’sRequirements for Security Interest in Ownership Interests
[1]Nonrecourse Financing
[2]Guaranty of Exceptions to Nonrecourse Limitation
§5.03 Lender’sRequirements 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’sDrafting Concerns for Convertible Mortgages
[1]Income Tax Consequences of Convertible Mortgages
[2]Regulatory Requirements
[3]Risk That Option May Be Deemed to Impair Borrower’sRight of Redemption
§5.05 Borrower’sConcerns for Convertible Mortgages
§5.06 Lender’sOwnership of Stock or Equity Interests
[1]Lender’sRequirements
[2]Lender’sDrafting Concerns
[3]Borrower’sRequirements
§5.07 Lender’sRequirements 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’sRequirements 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’sRight to Cure Defaults
[33]Payment of Lender’sExpenses
[34]Financial Statements
[35]Covenants by Borrower to Maintain Its Credit Standing
[36]Borrower as Guarantor
[37]Miscellaneous Provisions
§6.03 Lender’sRequirements 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’sRights 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’sAffidavit
[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’sAlternative 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’sRequirements 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]Blanket Release of all Lender Rights
[8]Avoid Oral Changes
[9]Borrower’sMilitary 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’sSetoff Against Cash Collateral
[15]Need to File Claim Promptly Against Estate
[16]Inspections
[17]Filing of Proof of Claim
[18]Notice of Transfer of Proof of Claim
[19]Acceptance of Loan Payments After Maturity
[20]Negotiations for a Loan Modification
§6.06 Borrower’sConcerns
[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’sAgreements
[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’sRequirements 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’sAssets
[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’sRequirements for Guarantees
[1]Income Tax Effect
[2]Adverse Effect of Guarantee by Foreigners or Exempt Organizations
[3]Disclosure by Public Company
§8.03 Guarantor’sRequirements 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’sPayments Deductible
[8]Guarantor’sAccounting Requirements
[9]Contribution Agreement Among All Guarantors
[10]Regulatory Requirements
[11]Asset Protection Planning
[12]Effect of Guarantor’sDeath
§8.04 Lender’sRequirements 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]Safe Procedure for Drawing on a Letter of Credit
[9]Special Rules of Interpretation
[10]Disclaimers in Favor of Issuers
§8.05 Lender’sRequirements for Letter of Credit Issued by It
§8.06 Mortgage Insurance
[1]Types of Mortgage Insurance
[2]Lenders Requirements
[3]Borrower's Requirements
§8.07 Lender’sRequirements for Set-Aside Letters

CHAPTER 9
Legal Opinions and Reports

§9.01 Lender’sRequirements 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’sLicenses, 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

§9.02 Requirements for Reports and Other Statements by Lawyers
[1]Requirements of Lawyers Issuing Reports and Statements
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’sPrior Approval of Lease
[5]Parties Entitled to Rights of Leasehold Mortgage Lender
[6]Tenant’sRight to Mortgage Its Rights Under Lease
[7]Tenant’sRight to Assign or Sublet
[8]Tenant’sRight to Use the Lease Property
[9]Landlord’sRight to Mortgage Landlord’sInterest
[10]Right to Cure Mortgage and Tax Defaults
[11]Right to Cure Lease Defaults
[12]Lender’sLiability Under Lease
[13]No Costly Future Obligations of Tenant Except Rent
[14]No Modification or Termination of Lease Without Lender’sConsent
[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’sRequirements 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’sRights 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’sPerformance 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’sObligations
[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’sInterest 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’sMortgage Loan
[3]Specification of Tenant’sEquity
[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’sMortgage Loan
[16]Subordination of Owner’sRight to Rents
[17]Owner’sSubordinate 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’sEquity
[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’sRight 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’sRequirements: Construction Loan Commitment/Application
§12.03 Construction Lender’sClosing Requirements
[1]Need to Understand Lender’sPractices, 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’sRights 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’sRequirements 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’sControl
[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’sRequirements 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’sAlternative 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’sRequirements 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’sConcerns 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’sDepreciation
[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’sRequirements 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
[7]Underwriting Best Practices
[8]Licensing and Registration Requirements
§14.03 Lender’sRequirements 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’sRequirements for Commitments and Related Disclosures
§14.05 Lender’sRequirements for Closing Documents
[1]Note
[2]Mortgage
[3]Other Security Instruments
[4]Notice to Co-Signer
[5]RESPA Settlement Statement
[6]Escrow Account Statement
[7]1099-S
[8]Appraisal and Credit Report
[9]MERS
[10]Insurance Policies
[11]Single-Premium Credit Insurance
[12]Debt Cancellation Agreements
[13]Additional Restrictions on “High-Cost” Loans
[14]Borrower’sAcknowledgment of No T-in-L Rescission
[15]Inspection Report
[16]Contract of Sale
[17]Loan Reserves
[18]Internet Sites Providing Property Information
§14.06 Lender’sConcerns
[1]Plain Language Laws
[2]Unconscionability; Unsophisticated Parties
[3]Yield Spread Premiums
[4]“Predatory Lending” and Subprime Lending Restrictions
[5]Lenders Are Subject to Privacy Limits
[6]Risk of Loss of Priority to Secured Party Whose Lien Is Noted on a Certificate of Title for a Manufactured Home
[7]Preemption of Conflicting State Laws
[8]Lender’sDocument Preparation Fees
[9]Regulatory Requirements
[10]Senior Housing
[11]Consumer Fraud
§14.07 Lender’sPost-Closing Requirements
[1]Notice of Change in Payments or Balloon
[2]Escrow Accounts
[3]Records
[4]Homeownership Counseling Notice
[5]Escrow Accounts for Purchaser Downpayments
[6]Periodic Statements for Open-End Loan
[7]Compliance with Billing Error Procedures
[8]Assumptions
[9]PMI Notification
[10]Transfer of Servicing or Other Rights
[11]Loan Modifications
[12]Giving Information to Credit Reporting Agencies
§14.08 Borrower’sRequirements 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
[7]Credit for First-Time Home Buyers


CHAPTER 15
Loans Secured by Condominium, Homeowners Association and Time Share Units

§15.01 General
[1]Definitions
[2]Chapter Scope
§15.02 Lender’sRequirements for Loan Secured by Condominium Unit
[1]Condominium Declaration and Bylaws
[2]Mortgage
[3]Property and Liability Insurance
[4]Title Insurance
[5]Offering Plan
[6]End Loan Commitment
[7]Purchase Agreement
[8]FNMA/FHLMC Approval
[9]Assignment of Sponsor’sRights
[10]Engineer’sReport and Pre-Conversion Rents
[11]Notice to Condominium Association
[12]Other Requirements
[13]Post-Closing Requirements
§15.03 Lender’sConcerns Regarding Condominium Loans
§15.04 Borrower’sRequirements 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’sRequirements for Loans Secured by Units in Homeowners Associations or Planned Unit Developments
§15.06 Lender’sRequirements for Time Share Loans
§15.07 Lender’sRequirements 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’sRequirements for Cooperative Loans
[1]Security Agreement
[2]Possession of Stock Certificate and Proprietary Lease
[3]UCC-1 Financing Statements
[4]Leasehold Mortgage or Assignment
[5]Recognition Agreement
[6]Stock Power in Blank
[7]Assignment of Proprietary Lease in Blank
[8]UCC, Judgment and Tax Lien Search
[9]Title Insurance
§16.03 Lender’sConcerns 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
[1]Property-Specific v. Pool Requirements
[2]Special Purpose Entities and Other Bankruptcy-Remote Entities
[3]Bankruptcy Waivers by Creditors
[4]Ownership of Issuer
[5]Criteria for “True Sale”
[6]Security Instruments Perfecting Trustee’sSecurity Interest in the Collateral
[7]Appraisals
[8]Financial Statements
[9]Tenancies
[10]Credit Leases
[11]Property and Liability Insurance
[12]Servicing Agreements
[13]Management Agreements
[14]Engineering Reports
[15]Environmental Reports and Insurance
[16]Special Hazard Reports
[17]Subordinate Debt
[18]Bankruptcy Bond
[19]Reserves, Guarantees, and Other Credit Enhancement
[20]Legal and Other Opinions
[21]Mortgage Warehousing
[22]Post-Closing Actions
[23]Other Property-Specific Requirements
[24]Other Pool Requirements
§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
§17.09 Alternative Forms of Securitization
[1]Covered Bonds


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
[1]Security Agreement and Other Requirements for a Security Interest
[2]Warranties by Debtor/Pledgor
[3]Assumption of Liability on Note as a Result of Endorsement by Transferor
[4]Estoppel or Endorsement by Maker
[5]Delivery of Possession of Original Note and Related Collateral
[6]Negotiation of Mortgage Note
[7]Assignment of Note and Mortgage
[8]Appointment of Substitute Trustee
[9]Assignment of Deeds to Secure Debt
[10]UCC Assignments
[11]UCC-1 Filings by Secured Party
[12]Notice of Pledge
[13]Due Diligence as to Pledged Loans and Collateral; Perfection of Security Interest in Collateral
[14]Additional Due Diligence if Debtor Is Not Originator of Pledged Loans
[15]Securities Law Opinion
[16]Precautions to Prevent Fraud
§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
§19.06 Drafting Issues and Alternative Provisions
[1]Repurchase Agreement May Be Better for the Lender

CHAPTER 20
Participations and Syndications

§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
[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 and Future Advances
[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
[4]Federal Programs
§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 Regarding Existing Loan Documentation
§21.03 Issues Commonly Negotiated in Sale of Funded Loan
[1]Legal Compliance of Documents and Holder
[2]Genuineness and Enforceability
[3]Recourse Against Seller
[4]Ownership of Loans; Title and UCC Insurance
[5]Seller’sEstoppel Regarding Unpaid Balance
[6]Escrows and Adjustments
[7]Purchaser Authorization Regarding Due Diligence
[8]No Modifications by Seller
[9]Defaults and Litigation
[10]Physical Condition and Legal Compliance of Collateral
[11]Waiver and Consent to Legal Representation
§21.04 Basic Requirements for Sale of Mortgage Loans
[1]Advantages of “Holder in Due Course” Status
[2]Requirements for “Holder in Due Course” Status
[3]Estoppel or Endorsement by Maker
[4]Possession of Notes and Other Collateral
[5]Negotiation of Note
[6]Assignment of Note and Mortgage
[7]Assignment of Deed of Trust
[8]Assignment of Deeds to Secure Debt
[9]Appointment of Substitute Trustee of Deed of Trust
[10]UCC Assignments
[11]Notice of Assignment
[12]UCC Financing Statement Filing
[13]Due Diligence as to Loans and Collateral
[14]Additional Due Diligence if Seller Is Not Original Lender
[15]Securities Law Considerations
[16]Income Tax Considerations
[17]Risk of Champertry Defense if Purchaser Sues to Enforce “Bad” Loan after Borrower’sCreditors Agree to Settlement
[18]Purchase of Electronic Note
[19]Risk When Purchaser of Loan Is Also Buying Assets
[20]Risk of Avoidance of Sale as Fraudulent Transfer
[21]Risk of Equitable Subordination
[22]Risk of Impairment of Cross-Default and Setoff Provisions
[23]Risk of Bankruptcy of Party to Contract of Sale
[24]Sales of Distressed 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

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’sRequirements 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
[8]Enforcement of Borrower Remedies
§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’sRequirements
[3]Limits on Modification of Home Mortgages
[4]Borrower’sRequirements

CHAPTER 23
Deeds in Lieu of Foreclosure

§23.01 General
[1]Definition
[2]Lender’sReasons for Deed in Lieu
[3]Lender’sReasons Against Deed in Lieu
[4]Borrower’sReasons for Deed in Lieu
§23.02 Requirements of Lender
[1]Settlement Agreement Between Lender and Borrower
[2]Borrower’sEstoppel Affidavit
[3]Deed in Lieu of Foreclosure
[4]Assignments of Other Property Interests
[5]Bulk Transfer Notices
[6]Sales Tax Returns
[7]Environmental Report
[8]Engineering Report
[9]Release of Borrower and Guarantors
[10]No Assumption or Indemnity of Borrower on Debt
[11]Refusal of Grant Deed
[12]Title Insurance Policies
[13]Legal Opinion
[14]Property Insurance Policy
[15]Appraisal
[16]Financial Statements
[17]Management Agreement
[18]Brokerage Agreement
[19]Construction or Renovation Agreement
[20]Compliance with Regulatory Requirements
[21]Compliance with Accounting Requirements
[22]IRS Reporting Requirements
[23]Requirements Relating to Unsold Condominium, Cooperative or HOA Units: Offering Plans
[24]Avoiding “Successor Liability”
[25]Other Requirements
§23.03 Requirements of Borrower
[1]Minimizing Income Taxes
[2]Guarantee to Avoid Income Tax Liability
[3]Obtaining “Abandonment” Loss
§23.04 Alternatives and Variations
[1]Transfer of Stock or Equity Interests in Borrower
[2]Partnership or Joint Venture with Developer
[3]Loan Refinancing
[4]Agreement with Developer-Contractor
[5]Sale of Property in Lieu of Foreclosure
[6]Sale of Loan in Lieu of Foreclosure

APPENDIX
TABLE OF ABBREVIATIONS
INDEX