Structuring Mortgage Loan Participation Agreements: Strategies for Lead Lenders and Participants

Drafting Key Provisions, Conducting Lender Due Diligence, Managing Risk; "True Sale" and Perfection

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


Conducted on Thursday, July 6, 2017
Recorded event now available


This CLE webinar will prepare lender's counsel to draft and review key provisions of mortgage loan participation agreements and conduct effective due diligence for participating lenders. The panel will also analyze “true sale” and perfection, settlement conventions, and the FDIC advisory regarding risk management for banks.

Description

Banks and other lenders have historically purchased participations in commercial mortgage loans to achieve growth, employ funds, diversify credit risk, and deploy liquidity. Litigation between originating and participating lenders highlights the critical nature of the loan participation agreement in protecting the interest of all parties to the transaction.

Key provisions of the participation agreement include, among other things, voting and other rights and obligations of each party involved in the participation, seller representations and warranties, transfer provisions, and reclaiming or buying back the transferred fund.

For due diligence with respect to the borrower, the originating lender and the underlying real estate collateral is a necessity to mitigate risk for the loan participant. The FDIC, in its Financial Institution Letter 492015 (FIL492015), provides due diligence guidance for banks in managing risks associated with these transactions.

Listen as our authoritative panel of finance practitioners looks at the current state of the loan participation market and outlines best practices for drafting or reviewing key provisions of participation agreements and effective due diligence for lenders. The panel will also explain the FDIC’s FIL492015 regarding lender risk management for purchased loans and purchased loan participations, as well as discuss some recent case studies related to loan participations.

Outline

  1. Overview of loan participations
    1. What is a “participating interest?”
    2. What are the key characteristics?
  2. Key participation agreement provisions and how they differ from syndications
    1. Lender voting rights
    2. Defaulting lenders
    3. Borrower workouts, foreclosures
    4. Seller reps and warranties
    5. Reclaiming or buying back transferred funds
  3. Specific considerations
    1. Circumstances in which a loan participation can be regarded as a “true sale” of the underlying loan
    2. Circumstances in which a participated loan may be subject to another’s security interest.
    3. Automatic Perfection
    4. Settlement conventions/implications of delayed settlement; how loan sellers may obtain settlement liquidity coverage
  4. Lender due diligence
    1. Understanding and reducing the selling counterparty risks
    2. Considering the participation structure
    3. Additional concerns relating to underlying real estate collateral
    4. How much do you review of the deal and how much using representations
  5. FDIC Advisory on Effective Risk Management Practices for Purchased Loans and Purchased Loan Participations

Benefits

The panel will review these and other key issues:

  • What are the lessons from recent litigation regarding loan participation agreements?
  • What are the key provisions of a mortgage loan participation agreement?
  • When will a mortgage loan participation be regarded as a “true sale” of the underlying loan?
  • What specific information should participants obtain from the lead lender prior to entering into the transaction?

Faculty

Alison R. Manzer, Partner
Cassels Brock & Blackwell, Toronto

Ms. Manzer is a member of the Firm's Financial Services Group. Her practice encompasses a broad range of commercial practice in the financial services sector, including financial institution regulation, corporate and commercial lending, asset-based financing, securitization and structured finance, private equity, project finance, asset finance and leasing, business reorganization, syndicated lending and related areas. A significant part of her practice involves multi-jurisdiction transactions where she has expertise in the structuring requirements of financing, investment and securitization transactions to solve taxation, conflicts of laws, document structure, currency and rate issues, among others.

James C. Schulwolf, Partner
Shipman & Goodwin, Hartford, Conn.

Mr. Schulwolf represents senior and mezzanine lenders, venture capital investors (including SBIC’s), private equity funds, hedge funds, emerging growth companies and private companies in financing, investment, leasing, acquisition, corporate, licensing and restructuring transactions. He regularly advises these clients with respect to structuring, negotiating, and closing complex transactions.


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Customer Reviews

The speakers were very experienced.

Cal Johnson

BDP

The program covered a fair amount of material in a short time period.

Dawn Sharff

Bradley Arant Boult Cummings

I appreciated that there was a great deal of current case law on the subject and the speakers were concise and informative.

Thomas G. Mancuso

Haskell Slaughter

The speaker's practical discussions were particularly helpful.

Kenneth J. Clarkson

Sullivan, Ward, Asher & Patton

I appreciated the 'real world' examples on how a Seller or a Buyer would actually approach a particular rep or warranty issue in today's market.

Jon Yergler

Lowndes Drosdick

or call 1-800-926-7926

Real Estate Law Advisory Board

David A. Barksdale

Partner

Ballard Spahr

Jacob Bart

Partner

Stroock & Stroock & Lavan

Brian W. Blaesser

Partner

Robinson & Cole

Ronald B. Grais

Counsel

Sugar Felsenthal Grais & Hammer

Ren R. Hayhurst

Partner

Bryan Cave

Thomas C. Homburger

Of Counsel

K&L Gates

Susan C. Tarnower

Counsel

Kilpatrick Townsend & Stockton

Clark T. Thiel

Partner

Pillsbury Winthrop Shaw Pittman

or call 1-800-926-7926

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