Construction Finance Modifications and Workouts: Key Considerations for Lenders and Distressed Borrowers

Responding to Project Shutdowns and Delays

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, October 11, 2022

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

or call 1-800-926-7926

This CLE course will examine issues presented for construction lenders and borrowers in the current economic environment. The panel will discuss critical concerns for lenders when dealing with financially distressed borrowers and projects that have been delayed or disrupted. The panel will also discuss essential provisions for construction loan modifications and steps to take if the loan goes into default.

Description

Supply chain disruption and worker shortages can cause construction delays and, in some instances, the shutdown of ongoing projects. The result may increase carrying costs for developers, extend timelines for completion, and require changes in building plans or design. All of these factors have ramifications for the construction loan and the borrower's financial health. Construction lenders must be able to respond to a default scenario or with a loan modification that facilitates the completion of the project and eventual repayment of the loan.

Threshold questions include whether a project has lost value and the ability of contractors, subcontractors, architects, and suppliers to perform under the construction contract. Parties must identify whether insurance coverage is available to cover losses associated with disruptions, the disbursement obligations of the lender under the loan agreement, and the financial condition of the borrower and guarantors.

Construction loan modifications present particular problems for lenders. All interested loan parties, including loan servicers and participants, must consent to changes. Determining the status of the title and any competing liens may be problematic, as title offices may have a backlog due to government-mandated closures. State law may require the lender to file a notice of modification to protect its lien priority. Further issues may arise on the site if the pandemic continues to impact contractors and suppliers.

Listen as our authoritative panel discusses construction loan issues resulting from COVID-19 economic disruptions and best practices for working out and modifying distressed loans.

READ MORE

Outline

  1. Impact of supply chain issues and shortage of workers on construction loans and the construction industry
  2. Communicating with parties to construction projects and construction loans
  3. Pre-workout agreement
  4. Assessing the value of the project post-pandemic
  5. Optional vs. obligatory advances
  6. Insurance coverage: property insurance, business interruption, business income
  7. Lender alternatives in the event of default
  8. Key provisions to include in the loan modification agreement
  9. Specific issues related to construction loans during the pandemic

Benefits

The panel will review these and other issues:

  • How has COVID-19 impacted ongoing construction project plans and timelines?
  • What are the ramifications for borrowers, lenders, and project valuations?
  • What are the lender's and borrower's primary concerns in entering into a construction loan modification?
  • How should the lender proceed if a construction loan goes into default?

Faculty

Goldstein, Jason
Jason E. Goldstein

Shareholder, Co-Chair Mortgage Banking Group
Buchalter

Mr. Goldstein specializes in resolving complex business disputes for a diverse cross-section of clients, ranging from...  |  Read More

Hosack, John
John L. Hosack

Shareholder
Buchalter

Mr. Hosack focuses his transactional practice on commercial real property loan documentation, loan workouts, REO sales...  |  Read More

Rodriguez, Enrique
Enrique (Rick) Rodriguez, Jr.

Founder and Principal
Rodriguez & Associates

Mr. Rodriguez is a qualified expert in banking and real estate matters and for the past 17 years has provided a wide...  |  Read More

Attend on October 11

Cannot Attend October 11?

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.

To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

Download