May a qualified lender foreclose on a distressed loan without a least-cost analysis?
Maybe. When a plan of restructure has been prepared, the qualified lender must prepare a least-cost analysis. The qualified lender will then use the least-cost analysis to identify whether or not the cost associated with restructuring the distressed loan(s) according to the plan is the same as or less than the cost of foreclosing on those loans. The law requires the lender to, in all cases, restructure loans when it costs the same as or less than foreclosing on the loans. Further, if there is more than one plan of restructure that will address the source of distress to the loan and if those alternative plans also cost less than the cost of foreclosure, the lender must use the plan that results in the lowest cost to the lender. However, if no plan of restructure was prepared—as in the case of a borrower who does not respond to the 45-day notice and the qualified lender that does not prepare a plan on its own—then the least-cost analysis does not have to be completed prior to foreclosing
Related Questions
- Does the least-cost analysis have to be completed if the qualified lender knows it will restructure the distressed loan(s)?
- 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?
