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Acquisition of Distressed Real Estate Debt: Due Diligence, Key Contract Provisions, Mortgage and Mezzanine Issues

Recording of a 90-minute premium CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Tuesday, September 20, 2022

Recorded event now available

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This CLE course will examine the due diligence and transactional issues involved in acquiring distressed mortgage and mezzanine debt. The panel will outline strategies to identify and mitigate risks and liabilities for both the buyer and seller.


The current real estate loan market allows investors to acquire distressed debt at a discount and for holders to offload defaulted loans from their balance sheets. Still, buyers and sellers must clearly understand the due diligence and documentation issues to consider in a loan sale.

Due diligence of the loan and underlying collateral are critical to a successful transaction. As a successor to the lender, the investor can pursue remedies such as foreclosure and claims against the guarantor. The investor must examine the title, zoning, building code, environmental, and other property-level issues and identify expenses and impediments (receiverships, ongoing lawsuits) to exercise any loan remedies.

Mortgage transfer documents should include the loan purchase and sale agreement (LPA), any attachments, recordable assignments of recorded documents, and the original loan documents. Representations and warranties are a crucial part of the LPA. The buyer and the seller will typically indemnify one another for losses for actions or events caused by the indemnifying party during its ownership of the loan.

Mezzanine loans present unique concerns. In addition to the LPA and its attachments, the purchaser must obtain an assignment of the pledge of the ownership interest in the borrower and the associated UCC, as well as the intercreditor agreement. Counsel must thoroughly understand the entity structure and any consents required from the mortgage lender to transfer the mezzanine loan.

Listen as our authoritative panel discusses the nuances of buying and selling distressed real estate debt.



  1. Purchasing distressed as opposed to performing debt
  2. Due diligence
    1. Review of existing loan documents: locating originals and understanding key terms
    2. Property-level issues: title, survey, environmental, property condition, and other property-specific considerations
    3. The borrower and guarantor (and restrictions on actions by borrower under its organizational documents)
    4. Outstanding claims, litigation, bankruptcy
    5. Notices of Default and pending foreclosure filings, if any
    6. Knowing your Loan seller
    7. Intercreditor Agreement, if there is a Mezzanine Loan
  3. Due Diligence if the Loan Being Purchased is a Mezzanine Loan
  4. Documentation
    1. Loan purchase agreement
  5. Post-Acquisition
    1. Mortgage Foreclosure and guaranty enforcement
    2. Mezzanine Foreclosure
  6. Bankruptcy issues


The panel will review these and other notable matters:

  • What types of due diligence must be conducted on the underlying property before proceeding with a loan purchase?
  • How should a loan-to-own lender consider foreclosure and other enforcement in pricing and due diligence of the acquisition of a distressed real estate loan?


Fitzmaurice, Patrick
Patrick E. Fitzmaurice

Pillsbury Winthrop Shaw Pittman

Mr. Fitzmaurice's practice focuses on representing lenders and other creditors in workouts, restructurings,...  |  Read More

Harcourt, Caroline
Caroline A. Harcourt

Pillsbury Winthrop Shaw Pittman

Ms. Harcourt represents lenders, owners, investors, developers and tenants in all aspects of commercial real estate....  |  Read More

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