Commercial Mortgage Modifications: Lien Priority, Title Insurance and Bankruptcy Issues

Structuring Modification Agreements While Avoiding Legal Pitfalls

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

Conducted on Thursday, February 7, 2019

Recorded event now available

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Program Materials

This CLE webinar will guide counsel for lenders and borrowers on negotiating and documenting commercial mortgage modifications while protecting their clients' interests against potential lien priority challenges, title pitfalls, and bankruptcy issues.

Description

Mortgage modifications allow borrowers and lenders to extend loan maturity, prevent defaults and foreclosure, and otherwise restructure loan terms. They provide an opportunity for lenders to "clean up" documentation ambiguities and potentially contentious issues, as well as obtain waivers and releases as part of the consideration for granting the term changes.

Modifications that significantly revise the loan terms increase the risk that subordinate lenders and bankruptcy trustees may challenge the priority of liens encumbering the mortgaged property. This is particularly true when a modification relates to an incomplete construction project that is being re-started.

Title insurance policies have discontinued creditors' rights coverage and do not protect against a loss of lien position. They have also significantly reduced or altered the scope of mechanics' lien coverage. Counsel involved with loan modifications must know how to obtain the optimal title insurance coverage.

Listen as our authoritative panel of attorneys discusses current trends in commercial mortgage modifications and strategies for lenders' and borrowers' counsel to ensure that modifications protect their clients' interests against potential lien issues, title pitfalls, and bankruptcy concerns.

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Outline

  1. Popular objectives and current trends for loan modifications
    1. Modifying loans for construction that stalled then re-started
    2. Extending maturity date; changing or removing extension options
    3. Adjusting loan amount; obligatory vs. optional advances
    4. Changing interest rate; bifurcating the rate
    5. Modifying payment provisions
    6. Changing, adding or releasing collateral securing the loan
    7. Modifying disbursement provisions to re-start a dormant construction project
  2. Key legal considerations to address with a loan modification
    1. Priority issues, including the effect of intercreditor agreements
    2. Title insurance--creditors' rights exclusions and available endorsements
    3. Title insurance--changes in mechanics' lien protections for lenders and related issues impacting borrowers and guarantors
    4. The threat of bankruptcy and documenting the possibility
  3. Documentation strategies
    1. Role of third parties
    2. Recordable and non-recordable documents
    3. Loan cleanup and clarification

Benefits

The panel will review these and other noteworthy questions:

  • What lien enforceability issues must lenders consider when amending or modifying a commercial mortgage loan?
  • How has the national title insurance companies' decision to discontinue creditors' rights coverage impacted mortgage modification transactions?
  • What is the optimal title insurance coverage in a modification transaction?
  • What bankruptcy issues should lenders and borrowers anticipate and proactively protect against in the mortgage modification documents?

Faculty

Contreras-Camua, Aimee
Aimee Contreras-Camua
Partner
Pircher Nichols & Meeks

Ms. Contreras-Camua's practice focuses on sophisticated real estate transactions, including mortgage and mezzanine...  |  Read More

Natter, Erin
Erin F. Natter
Partner
Pircher Nichols & Meeks

Ms. Natter’s practice focuses on sophisticated real estate finance, purchase and sales, sale-leaseback, and lease...  |  Read More

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