When it Comes To Non-recourse Debt
Amidst skyrocketing rates of interest and the recent swell in commercial realty loan workouts, debtors and lenders alike are significantly considering an option to the traditional and often long and cumbersome foreclosure process: a deed in lieu of foreclosure (frequently described as simply a deed in lieu). A deed in lieu is a voluntary conveyance by the customer to the lender, frequently in exchange for launching the borrower and guarantor from all or a few of their liability under the loan. Before engaging in a deed-in-lieu deal, borrowers and lenders need to consider the costs and benefits relative to a standard foreclosure.
Borrower Advantages:
Time, Expenses, and Publicity Avoided: A deed in lieu might be appealing in circumstances in which the borrower no longer has equity in the residential or commercial property, does not anticipate a recovery within a sensible quantity of time, and/or is not thinking about investing more equity in the residential or commercial property in consideration for a loan modification and extension. A faster transfer of title may even more benefit the debtor by easing it of its obligation to continue moneying the residential or commercial property's cash shortfalls to prevent triggering recourse liability (e.g., for waste or nonpayment of taxes and insurance). A deed in lieu can likewise be helpful due to the fact that the borrower can prevent incurring legal expenses and the negative publicity of a public foreclosure sale. A deed in lieu is relatively personal (until the deed is tape-recorded) and may appear to the general public to be more like a voluntary conveyance of the residential or commercial property. A consensual resolution may also enable the borrower or its principal to protect its relationship with the loan provider and its capability to raise capital in the future.
Amidst skyrocketing rates of interest and the recent swell in commercial realty loan workouts, debtors and lenders alike are significantly considering an option to the traditional and often long and cumbersome foreclosure process: a deed in lieu of foreclosure (frequently described as simply a deed in lieu). A deed in lieu is a voluntary conveyance by the customer to the lender, frequently in exchange for launching the borrower and guarantor from all or a few of their liability under the loan. Before engaging in a deed-in-lieu deal, borrowers and lenders need to consider the costs and benefits relative to a standard foreclosure.
Borrower Advantages:
Time, Expenses, and Publicity Avoided: A deed in lieu might be appealing in circumstances in which the borrower no longer has equity in the residential or commercial property, does not anticipate a recovery within a sensible quantity of time, and/or is not thinking about investing more equity in the residential or commercial property in consideration for a loan modification and extension. A faster transfer of title may even more benefit the debtor by easing it of its obligation to continue moneying the residential or commercial property's cash shortfalls to prevent triggering recourse liability (e.g., for waste or nonpayment of taxes and insurance). A deed in lieu can likewise be helpful due to the fact that the borrower can prevent incurring legal expenses and the negative publicity of a public foreclosure sale. A deed in lieu is relatively personal (until the deed is tape-recorded) and may appear to the general public to be more like a voluntary conveyance of the residential or commercial property. A consensual resolution may also enable the borrower or its principal to protect its relationship with the loan provider and its capability to raise capital in the future.