Co-Lender Mortgage Loan Structures: Understanding the Lender Structure is Critical (Second of Two-Part Series)
This is the second of a two-part series (PART ONE) covering initial due diligence topics for workouts involving co-lender structures, with a focus solely on the participated or syndicated co-lender structure. The series is not a comprehensive listing of possible issues on this topic, but merely a basis template to assist you as you review the co-lender and other relevant loan documents.
Typical Servicing issues:
- how are on all decisions made within the co-lender group on these subjects?
- waivers and consents
- default\enforcement (special servicing issues)
- after enforcement (expenses to protect\preserve, to sell, to complete; title of the property [name of servicer; tenant in common; nominee entity jointly owned]
- advances, expenses and losses
- excess recovery
- is there a buy\sell provision if co-lenders are not able to resolve disagreement?
- what decisions may servicer make without input from co-lenders
- duties of servicer: what must it do (reporting, inspections, etc.)?
- standard of care of servicer
- what if servicer has an equity position?
- rights of co-lenders to examine and copy
- notification rights (when must servicer notify a co-lender)
- fees (primary servicing; special servicing; asset management and disposition)
- future property inspections and reporting (review reports only; or more active role, such as accompany servicer during on-site inspections)
Does the loan seller or originator have any liability?
- contractual duties and warranties
- fiduciary duties
Transfers
- buy\sell for disagreements
- transfers to affiliates
- transfers to third parties (right of first offer?)
- is sub participations\syndication prohibited?
Sharing of payments: on sums paid by the borrower, are payments applied -
- proportionately to all co-lender?
- non-proportionately to co-lenders?
If you have any comments, suggestions or additions to the foregoing, please post a comment.
