Attorneys Dealing With Loan Problems Following Failure of a Bank or Other Insured Lenders in Fort Lauderdale
When the recession of 2007 morphed into the near-collapse of the world financial system in September 2008, Florida lenders were especially hard hit. Many banks overexposed in the real estate lending markets went under, and the decline of mortgage collateral values from the peaks of just a few years before endangered the soundness of even the healthiest financial institutions.
The FDIC stepped in to close many of the weakest banks, and others were sold in supervised asset transfers to stronger institutions. Borrowers were quick to find that the transfer of secured lending portfolios into the hands of successor financial institutions had immediate and often drastic consequences.
Contact the Florida financial services litigation attorneys of Grumer & Macaluso, P.A., to learn about your options for dealing with a bank that succeeded to the interests of the institution with whom you closed a loan. There are two common scenarios that borrowers find especially problematic:
1. Rejection of side agreements that do not appear in the loan documents at or after closing. Small businesses, real estate developers and entrepreneurs run into this problem all the time: they think they have worked out the details of principal amount, interest, collateral, guaranty and non monetary covenants, only to find at closing that one or more of these terms have significantly changed in the bank's favor.
If the bank agrees to perform on the original form of the transaction despite contradictory terms in the final loan documentation, all is well for the borrower — until the bank closes by order of the FDIC. Under the D'Oench Duhme doctrine, named for the U.S. Supreme Court decision that announced it, neither the FDIC nor any successor financial institution will be bound by contract terms that do not appear in the original documentation. This can have disastrous consequences for a borrower that finds itself suddenly in default and subject to collection and foreclosure.
2. Rejection of loan modification terms after default or a decline in collateral values. During the depths of Florida's commercial and residential real estate crisis, many borrowers and lenders were faced with the need to renegotiate loan terms to account for lost equity and severely deteriorated collateral protection. High vacancy rates, declining rents and rising property tax pressure further contributed to the problems experienced on both sides of commercial real estate loans and for business lending in general.
While workouts and loan modifications helped many borrowers avoid bankruptcy and retain access to credit facilities while keeping loan portfolios in performing status, the insolvency of the lending institution can make the workout terms a dead letter. Once again, the D'Oench Duhme doctrine makes workout and modification terms unenforceable against the successor bank except under very narrow circumstances.
Protecting Borrowers From Successor Banks' Draconian Collection Tactics
At Grumer & Macaluso, our objective is to make sure that the losses imposed by the economic dislocations of recent years are shared fairly, and to protect borrowers from the harsh enforcement and collection practices that characterize the loss mitigation strategies of many successor banks.
To work with lawyers who know how to respond to collections strategies initiated by successor banks interested primarily in liquidating loan portfolios acquired at a deep discount after the insolvency of the original lender, contact Grumer & Macaluso in Fort Lauderdale.
