On April 11, 2014, the United States Court of Appeals for the First Circuit rendered an important decision regarding the long-running bankruptcy case of SW Boston Hotel Venture LLC (“SW”), the developer of the W Boston Hotel. This Advisory focuses on two key rulings made by the First Circuit: (i) when an oversecured creditor’s claim for post-petition interest in a debtor’s chapter 11 case begins to accrue and (ii) how such post-petition interest should be calculated in the instances where it is due.

The OCC has issued guidance to clarify supervisory expectations for national banks and federal savings associations in situations where secured consumer debt is discharged under Chapter 7 bankruptcy proceedings. The guidance issued on February 14 in OCC Bulletin 2014-4 describes the analysis necessary to “clearly demonstrate and document that repayment is likely to occur” to avoid the charge-off that would otherwise be required by the OCC’s Uniform Retail Credit Classification and Account Management Policy.

Every lender sincerely hopes that, even when its borrower is flat on the floor and seems down for the proverbial count, the borrower will still find the wherewithal to repay it. A lender often starts counting the days after it is repaid until the 90-day preference period (11 U.S.C. §547) has passed. The lender generally breathes a sigh of relief on the 91st day, confident that if its borrower files for bankruptcy, the money paid to the lender is safe from being clawed back by the Bankruptcy Court.

The recently decided case of RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. ____ (2012), puts to rest a conflict among the Third, Fifth, and Seventh Circuits as to the right of secured creditors to credit bid at a proposed sale of their collateral under a plan of reorganization that the secured creditor opposes. The practice of credit bidding is codified in the Bankruptcy Code at 11 U.S.C. §363(k) and is the right of a secured creditor to bid the amount of its secured debt at a debtor’s sale of the creditor’s collateral in bankruptcy.

The U.S. Bankruptcy Court for the District of Massachusetts ruled that the Massachusetts Predatory Home Loan Practices Act, Chapter 183C of the General Laws of Massachusetts, is preempted by the high cost home loan provisions of the federal Truth in Lending Act (“TILA”) for federally chartered depository institutions. The July 27 ruling came in a case brought by Massachusetts residents who had jointly received a home mortgage loan from a national bank.

In an apparent case of first impression in Massachusetts, the US Bankruptcy Court for the District of Massachusetts recently held that an allonge must be physically affixed to the original promissory note to be effective.

Generally speaking, Massachusetts is a non-judicial foreclosure state – meaning that lenders can foreclose on mortgages of Massachusetts property without seeking judicial approval beforehand. In certain circumstances, however, a pre-foreclosure judicial proceeding is required solely to determine whether the borrower is in the active military service and entitled to the protections of the Servicemembers Civil Relief Act, 50 U.S.C. §532.

A Massachusetts trial court has denied a borrower’s request to stop a foreclosure proceeding despite the borrower’s claim that the loan was “unfair” under the Massachusetts consumer protection law, Chapter 93A of the General Laws. In its May 13 decision denying the borrower’s request for an injunction, the court examined a stated income (no documentation) loan and determined that the borrower was not likely to prevail on a claim that the loan featured a combination of four characteristics that qualify as “unfair” under Chapter 93A.