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

Structuring Modification Agreements While Avoiding Legal Pitfalls

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


Conducted on Tuesday, March 9, 2021

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 restarted.

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 changes 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 restarted
    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 restart a dormant construction project
  2. Key legal considerations to address with a loan modification
    1. Priority issues, including the impact of intercreditor agreements and lien bifurcation
    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
    5. Pre-negotiation agreements
    6. Governing law in multi-property transactions
  3. Documentation strategies
    1. Role of third parties and estoppels
    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

Natter, Erin
Erin F. Natter

Member
Mintz Levin Cohn Ferris Glovsky and Popeo

Ms. Natter has significant experience representing institutional lenders, real estate funds, opportunity funds, and...  |  Read More

Schnitzler, Gabriel
Gabriel Schnitzler

Member
Mintz Levin Cohn Ferris Glovsky and Popeo

Mr. Schnitzler works with commercial real estate, health care, technology, and energy clients in the acquisition,...  |  Read More

Swalwell, Chauncey
Chauncey M. Swalwell

Partner
Goodwin Procter

Mr. Swalwell focuses his practice on commercial real estate and represents private and institutional investors and...  |  Read More

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