The FDIC voted to extend the safe harbor provided under 12 C.F.R. § 360.6 until September 30, 2010, from the FDIC’s ability, as conservator or receiver, to recover assets securitized or participated out by an insured depository institution. When the safe harbor was initially adopted in 2000, the FDIC provided important protections for securitizations and participations by confirming that, in the event of a bank failure, the FDIC would not try to reclaim loans transferred into such transactions so long as an accounting sale had occurred.
In the jargon of the secondary bank loan market, loans beneficially owned by participation may be "elevated" to direct assignments once requisite administrative agent and/or borrower consent is obtained. Such "elevations" customarily have been viewed as straightforward transactions -- when completed, the participant simply stands in the shoes of the grantor and becomes the lender of record of the loan on the books of the administrative agent.
When defaults spiked for loans underwritten by commercial mortgage-backed securities (CMBS), many Texas attorneys sought state court-appointed receivers for commercial real estate assets.
Placing a struggling property in receivership has long been a remedy available for lenders, but Texas' relatively expedited and inexpensive nonjudicial foreclosure process limited the remedy's practical value for traditional lenders.
On December 29, 2010, the Honorable Mariana R. Pfaelzer denied a motion by Stichting Pensioenfonds ABP ("Plaintiff") to remand its claims against Countrywide and others to state court. Judge Pfaelzer concluded that the case was sufficiently related to a bankruptcy case to confer federal jurisdiction in light of contractual indemnification obligations of a bankrupt originator, American Home Mortgage Corp., to Countrywide. The Court also concluded that there were no equitable grounds meriting remand.
On February 28, Fitch addressed questions that have arisen related to the orderly liquidation authority under the Dodd-Frank Act and the securitization safe harbor. Fitch stated that clarifications from the FDIC provide comfort that the rights of investors can be determined at the outset of a securitization and that the ratings assigned to the transaction can be de-linked from those of the sponsoring entity.
In a recent decision, the United States Bankruptcy Court for the Southern District of New York ruled that a certificateholder of two CMBS securitization trusts (“CMBS Trusts”) had no standing to be heard in a chapter 11 case involving the borrowers under a securitized mortgage loan held by the CMBS Trusts.
A senior creditor can obtain significant leverage over a chapter 11 debtor if it is able to vote not only its claim but the claims of junior creditors in connection with the solicitation of a plan of reorganization. Obtaining such leverage, however, has proven problematic in the past. Among other things, courts have been reluctant to enforce pre-bankruptcy assignments or waivers of voting rights contained in intercreditor agreements, holding that such assignments or waivers may violate the Bankruptcy Code and rules. In Avondale Gateway Center Entitlement, LLC v.
In the fallout of recent commercial mortgage-backed securities defaults, mortgage servicers have increasingly used receivership sales for commercial real estate assets, including last month’s sale of the Davis Building in downtown Dallas.
Krol v. Key Bank National Association, et al. (In re MCK Millenium Centre Parking, LLC), Adv. No. 14-00392 (N.D. Ill. Apr. 24, 2015)
What happens when a debtor, whose loan is pooled and securitized, files for bankruptcy? Are payments made to investors recoverable as fraudulent transfers or preferences?