Mortgage Loan Repurchase Agreements: Responding to the Current Market Disruption

Temporary Agreements; Loan Defaults, Amendments and Waivers Under Repo Agreements

A live 90-minute premium CLE video webinar with interactive Q&A


Tuesday, January 12, 2021

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

Early Registration Discount Deadline, Friday, December 18, 2020

or call 1-800-926-7926

This CLE webinar will examine commercial mortgage loan repurchase facilities (repos) and their operation in the wake of COVID-19 and the real estate shutdown it has caused. The panel will discuss temporary agreements' complexities, modifying loans, and exercising (or forbearing from exercising) remedies within the repo framework.

Description

The disruption in the commercial real estate market caused by COVID-19 has led to defaults or anticipated defaults of various real estate loans sold under repo agreements. In response to borrower requests for waivers, modifications, and payment deferrals, repo sellers have made requests to repo buyers that they cede control over certain amendments and allow the seller to manage each loan in a way that may prevent that loan from going into default. Those amendments often help to avoid a large margin payment or a repurchase event under the repo.

In some instances, buyers and sellers have entered into agreements (temporary agreements) concerning repos that 1.) allow the seller to, among other things, (a) enter into modifications to the underlying loan documents, (b) defer interest payments for borrowers, and (c) use certain reserves to cover payment obligations; and 2.) allowed for margin and repurchase event holidays under the repo.

As the temporary agreements expire, there are several possible options that buyers and sellers may consider, including extending the temporary agreements based on several factors or modifying the repo to allow for different terms for distressed and defaulted loans in exchange for lower advance rates and/or higher spread.

If the seller and buyer cannot agree on terms to keep the loan on the repo facility, the seller may be forced to repurchase the loan and enter into negotiations with the borrower for a loan workout or foreclose on the mortgage. Alternatively, the seller may seek to refinance the loan with other buyers who are willing to finance more distressed loans or different types of financing structures.

Listen as our authoritative panel discusses the mechanics of repo facilities and how they have been altered by the market disruptions caused by COVID-19.

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Outline

  1. Mechanics of commercial mortgage loan repurchase agreements
    1. Seller sells and agrees to repurchase the loans from the buyer on a later date
    2. Use of SPV seller, bankruptcy code safe harbor protections
    3. Margin calls and repurchase events
  2. Impact of COVID-19 on real estate markets and loan performance
  3. Ramifications of continued market stress for repo agreements--options available to the buyer and seller
    1. Temporary agreements allowing the seller to mitigate margin and repurchase obligations
    2. Modification of the repo
    3. Repurchase of and workout of defaulted loans

Benefits

The panel will review these and other key issues:

  • How significant is the current repo market, and to what extent has the COVID-19 market disruption impacted repo loan portfolios?
  • What are the mechanisms for giving control of troubled repo loans to the seller, and how does the buyer benefit?
  • What issues should be addressed in a temporary agreement, and when should it terminate?
  • What options are available to repo sellers for dealing with troubled loans absent a temporary agreement?

Faculty

Arkins, Jonathan
Jonathan Arkins

Partner
King & Spalding

Mr. Arkins represents financial institutions in domestic and foreign asset-backed securitizations, supply chain...  |  Read More

Berger, Katy
Katy Berger

Attorney
King & Spalding

Ms. Berger is active in the firm’s securitization, specialty finance and leveraged finance practices. She...  |  Read More

Yudin, Mendel
Mendel Yudin

Counsel
King & Spalding

Mr. Yudin represents major financial institutions, private equity funds, and other institutional investors in warehouse...  |  Read More

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