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

Responding to Project Shutdowns and Delays During the Pandemic

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


Conducted on Wednesday, July 22, 2020

Recorded event now available

or call 1-800-926-7926
Program Materials

This CLE webinar will examine issues presented for construction lenders and borrowers in the wake of COVID-19. 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

The COVID-19 pandemic has caused supply chain disruption, 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 financial health of the borrower. Construction lenders must be able to respond to a default scenario or with a loan modification that facilitates 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 caused by the pandemic, 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 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 COVID-19 pandemic on construction loans and the construction industry
  2. Effect of stay-at-home orders and other requirements--impact on government inspections
  3. Communicating with parties to construction project and construction loan
  4. Pre-workout agreement
  5. Assessing value of the project post-pandemic
  6. Optional vs. obligatory advances
  7. Insurance coverage--property insurance, business interruption, business income
  8. Lender alternatives in event of default
  9. Key provisions to include in loan modification agreement
  10. 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 primary concerns of the lender and borrower in entering into a construction loan modification?
  • How should the lender proceed if a construction loan goes into default?

Faculty

Flynn, Michael
Michael C. Flynn

Co-Chair Mortgage Banking Group
Buchalter

Mr. Flynn is a member of the Firm’s Commercial Finance Practice Group and Mortgage Banking Group, and Co-Chair of...  |  Read More

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

Other Formats
— Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

$347

Download

$347