Real Property Lending Defaults, Foreclosures and Recoveries

If and when real estate market values shift, the loan to value predicates of the original loan underwriting can be subjected to severe stress. Developing an action plan on the secured creditor side does not occur in a vacuum. Different types of lenders (regulated versus private) have different time and loan portfolio considerations. Almost all lender action plans come up against borrower action plans (chapter 11 filings, stripping of the rental cash flow, etc.)

Borrower defaults need to be vigilantly and decisively dealt with by real estate lenders. Triggering the enforcement of the assignments of rent so as to trap the income stream for the immediate benefit of the lender needs to be pursued.

Arizona recently adopted the Uniform Commercial Real Estate Receivership Act (hereafter “the Act”) which permits real estate lenders to have a receiver appointed to take possession of their real property collateral security and personal property collateral after default but before a foreclosure can be completed. The receiver displaces the borrower or the borrower’s designees (i.e. a management company) from having control over the rental income and the operation of the collateral security which enhances lender protection as required under the discrete facts of each lending situation. Waste, deterioration or other immediate harms to the collateral security can be averted.

The attorneys of the Rose Law Group have the experience to meaningfully oppose borrower action plans which have as their goal only delay without providing any material enhancement or benefit to the lender. This experience extends to representing lenders in borrower chapter 11 bankruptcy reorganizations in which the borrower is seeking to “cram down” its lender. This bankruptcy experience includes prosecuting motions to dismiss bankruptcy cases for lack of good faith, motions to lift the automatic stay for lack of equity or other cause, motions to appoint an examiner or trustee in the event of mismanagement or fraud, opposition to the confirmation of chapter 11 plans of reorganization, Section 1111 elections, protection of secured creditor credit bid rights in the context of Section 363 sales and prosecuting and defending a whole host of different types of adversary proceedings as well as conducting fact discovery as required pursuant to Bankruptcy Rule 2004.

Where the loans are with recourse and the foreclosure sale implicates a deficiency, post-foreclosure deficiency litigation will be brought on the lender’s behalf within the required statutory limitations period. In concert with its lender clients, expert appraisal data will be generated in support of the foreclosure bid price and the amount of the deficiency. Where there are guarantors, any and all permissible actions on the guaranties will be pursued on behalf of the lender.

Attorneys of the Rose Law Group team possess numerous credentials attesting to their expertise and specialization in sophisticated real property lending defaults, foreclosures and deficiency and guaranty recoveries.