Banking White Papers

The loan documents set forth the rights, obligations and remedies of the Borrower and Lender with regard to the loan. While the contents of the loan documents will vary depending upon the type of loan, the basic loan documents are as follows:

1. Loan Agreement
2. Promissory Note
3. Security Agreement
4. Deed of Trust/Mortgage
5. Ancillary Loan Documents

The concept of relief from one’s debts has existed since antiquity. In Western civilization, it dates back at least to the Jubilee Year of biblical times. The drafters of the United States Constitution included bankruptcy relief among the powers delegated to the Congress. The modern Bankruptcy Code was enacted in 1978 and has been amended several times, most recently with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). Bankruptcy provides for two competing and sometimes conflicting goals: first, to provide a fresh start for a borrower and, second, to provide for the orderly liquidation of assets and repayment of debts.

Commercial Real Estate financing is essential for individuals, developers, and large retail and hotel institutions. It is likely that any one or more of these entities will venture into commercial real estate financing at many different points in the existence of the entity, and commercial lenders will see the same faces emerge again and again over the lifetime of the enterprise, whether they request a term loan for the financing of an already existing property with improvements which have already been built, a construction loan to finance the construction of the improvements on raw land, or a bridge loan as a means of securing temporary financing until a later date not too distant in the future. Amendments to any or all of these loans can take place at any time during the existence of the Loan term, depending upon the credit situation and needs of the borrowers, and these amendments can run the gamut of an extremely simple extension of a maturity date in a note to give the borrower more time to pay off a loan to a complete restructuring of the Loan terms, whether it be a substitution of borrowers, a substitution in the structures of repayment of the Loan, or a combination of any or all of the above. As a commercial real estate lender, borrower, or counsel for either the lender or borrower, it is crucial to know the steps in the process from documenting the loan to the final closing process.