How does a lender address such creditors rights issues without a title endorsement?
First, creditor’s rights issues should be managed through underwriting. A lender must know the borrower and its financial condition, and should continue to monitor the borrower’s financial condition throughout the term of a loan. Even in the case of a routine re-finance or purchase money loan, a lender should be thoroughly familiar with the borrower and the transaction. A court will consider what the lender “should have known” when evaluating whether or not a lender had knowledge that other creditors were being hindered or delayed at the time the lender’s transaction was completed. Second, the issues may be managed through the lender’s loan documents. When a loan is to be secured by the property of an affiliate or guarantor of the borrower, the loan documents should clearly and concisely set forth (i) the relationship between the borrower and the affiliate/guarantor; (ii) an acknowledgement by the affiliate/guarantor that it will receive a direct benefit from the loan to the borrower;
Related Questions
- What type of approval does a lender need to originate and/or underwrite and/or service Title II Single Family Loans, including HECMs (Reverse Mortgages) or 203k (Rehabilitation mortgages)?
- How does a Lender who is already Title I or Titel II approved obtain the other approval?
- What is the difference between Title I and Title II lender approvals?
