Publications

Top 10 Securitizable Loan Negotiations—Part 1 of 2

Winter 2005
Real Estate Developments - Winter 2005

From a borrower's point of view, what drives many loan negotiations is a tension between, on the one hand, the attractive pricing that the liquidity of the capital markets enables securitizing lenders to offer (when compared with their portfolio lender competition), versus, on the other hand, added up-front structuring requirements and increased ongoing "policing" of and constraints on the borrower's property operations, compounded by the arguably less-responsive servicing that borrowers occasionally view as the price of doing REMIC-destined deals. This first part of the series highlights key issues regarding (1) matters that set the tone for subsequent negotiations by influencing the parties' relative negotiating leverage from early stages of the deal; (2) the extent of and limits on pre-funding due diligence and (similarly) life-of-loan monitoring; (3) the nonrecourse carveouts; (4) transfer restrictions; and (5) bankruptcy remoteness.