Does a qualified lender have to provide borrower rights when some or all of the collateral is “at risk”?
Normally, yes. Borrower rights do not prevent a qualified lender from taking necessary actions to protect collateral when there is a reasonable basis to believe the collateral will be destroyed, consumed, concealed, converted or permanently removed from the State in which the collateral is located. Qualified lenders may protect at-risk collateral regardless of any remaining time on an outstanding distressed loan servicing notice or the status of a restructuring application. The protection of at-risk collateral is an exception to borrower rights for extreme circumstances and should not be used to avoid offering restructuring rights. Borrower rights still have to be provided on the loan, unless the entire debt had to be foreclosed upon in order to protect the at-risk collateral.
Related Questions
- May a qualified lender modify a distressed loan notice when it is being sent to a borrower(s) who has filed bankruptcy?
- Which distressed loan notice is sent before a qualified lender may act to protect collateral it fears is at risk?
- May a qualified lender consider a borrower’s treatment of collateral when reviewing a restructuring application?
