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

A live 90-minute premium CLE video webinar with interactive 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.

Tuesday, September 20, 2022

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

Early Registration Discount Deadline, Friday, August 26, 2022

or call 1-800-926-7926

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.

Description

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.

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Outline

  1. Purchasing and selling distressed as opposed to performing debt
  2. Due diligence
    1. Review of existing loan documents: locating originals
    2. Property-level issues: title, survey, environmental, property condition
    3. Borrowing entity
    4. The financial condition of the borrower and guarantor
    5. Outstanding claims, litigation, bankruptcy
  3. Documentation
    1. Loan purchase agreement
    2. Mortgage
    3. Mezzanine

Benefits

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?
  • What are the key provisions of an LPA, and how might the LPA for a mortgage loan vary from a mezzanine loan?
  • How do the borrower's and guarantor's entity structure and financial condition figure into a loan purchase?
  • How should ongoing litigation, or a pending receivership, be addressed in the LPA?

Faculty

Fitzmaurice, Patrick
Patrick E. Fitzmaurice

Partner
Pillsbury Winthrop Shaw Pittman

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

Additional faculty
to be announced.
Attend on September 20

Early Discount (through 08/26/22)

Cannot Attend September 20?

Early Discount (through 08/26/22)

You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

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