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

Structuring Modification Agreements While Avoiding Legal Pitfalls

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, March 5, 2024 (in 6 days)

1:00pm-2:30pm EST, 10:00am-11:30am PST

or call 1-800-926-7926

This CLE course will guide lenders' and borrowers' counsel 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:

  • When amending or modifying a commercial mortgage loan, what lien enforceability issues must lenders consider?
  • How has discontinuation of creditors' rights coverage in title insurance policies 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

Bitan, Oren
Oren Bitan

Shareholder; Co-Chair Fiduciaries, Receives & Trustees Group; Co-Chair Cannabis & Hemp Industry Group
Buchalter

Mr. Bitan is a trusted strategic advisor who frequently represents lenders, financial institutions, investors, and real...  |  Read More

Ormond, Richard
Richard P. Ormond

Shareholder; Co-Chair Fiduciaries, Receivers & Trustees Group
Buchalter

Mr. Ormond has over 23 years of experience that includes finance, special servicing, loan syndication and...  |  Read More

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