Essential Points to Follow When Entering Into or Renewing Your Lease

In spite of the uncertainties caused by the pandemic, your lease remains critical to your business. Commercial leases are complex transactions and should be undertaken with great care.

Following these basic points will make the lease renewal or new lease go smoothly. Continue reading »

Mergers and Acquisition Activity: A Post Pandemic Surge?

Many post-pandemic signals indicate that Merger and Acquisition (M&A) activity has increased and is expected to continue to increase. Listings for sales of existing businesses surged in 2021, according to Rob Schmitt, a business broker at the St. Louis Group. Reasons for this increase include:  (1) post-pandemic stability; (2) low interest rates; (3) low capital gain rates; (4) access to government benefits like the PPP program; (4), retiring baby boomers; (5) robust stock values; and (6) the presence of capital on the sidelines waiting to be put to use.

Conditions are favorable for willing sellers and buyers in the M&A arena. Some businesses, including retail and hospitality, have not yet recovered from the pandemic. While some may not consider these to be good subjects for M&A activity, their valuations are low and may present attractive opportunities. There are also sellers who have experienced both the 2008-2009 financial crisis and COVID-19 and have decided that they will not wait any longer to exit. On the other hand, many companies look to expand operations in this favorable environment.

The process typically begins by contacting a M&A specialist, investment banker, business broker or similar advisor to determine how to position your business for sale, or, if you are a buyer, what acquisition candidates exist. After the initial match, Continue reading »

CARES Act Offers Forbearance Options Including Residential Foreclosure and Eviction Moratoriums

Most of us are well aware of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the help it provides to small businesses, individuals, and the health care industry affected by the COVID-19 pandemic. But three changes in the CARES Act are of particular importance to residential property owners, lenders and loan servicers. These changes involve forbearance, foreclosure, and eviction from property financed with federally-insured residential loans.  (For questions regarding steps Missouri or Illinois have taken on this front or possible commercial loan implications, please see COVID-19-related Forbearance Options Including Foreclosure and Eviction Moratoriums)

1.  Single Family Federal Foreclosure Moratorium and Consumer Right to Request Forbearance

Covered Loans:

The federal foreclosure moratorium, created under Section 4022 of the CARES Act, includes a borrower’s right to request a forbearance. The CARES Act moratorium and forbearance provisions are only available for federally backed residential mortgage loans. Relevant loans are secured by a lien on residential real estate designed primarily for the occupancy of 1 – 4 families (including individual units in condominiums and cooperatives). For those unsure if their mortgage loan is federally backed, such loans are typically:

1. Insured by the FHA under Title II of the National Housing Act;
2. Insured under the National Housing Act, Section 25;
3. Guaranteed under the Housing and Community Development Act of 1992, Section 184 or 184A ;
4. Guaranteed or insured by the Department of Veterans Affairs;
5. Guaranteed or insured by the Department of Agriculture;
6. Made by the Department of Agriculture; or
7. Purchased or securitized by Federal Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae).

Foreclosure and Eviction Moratorium Basics: Continue reading »

COVID-19-related Forbearance Options Including Foreclosure and Eviction Moratoriums

As we each come to grips with the immediate changes to our daily lives brought on by COVID-19, the question of what happens if/when people can no longer pay their rent or mortgage is on the minds of tenants, landlords, lenders, and borrowers alike.

As unemployment numbers continue to spike across the country, many states (including Missouri and Illinois), individual lending companies, and banks have announced forbearance, foreclosure, and eviction changes in response to COVID-19. Banks and lenders are taking it upon themselves to aid customers struggling due to COVID-19 in addition to the assistance provided by local, state, and federal governments. If you, your business, or your property fall within this category you should contact your individual lender or bank to determine if such resources are available to you.

The federal government and some state and local authorities have put temporary emergency restrictions on foreclosures and evictions in place. Some directives do not make a distinction between commercial and residential foreclosure proceedings.

National Directives:

• HUD and FHA: The U.S. Department of Housing and Urban Development issued a foreclosure and eviction moratorium on FHA-insured single-family mortgages and home equity conversion (reverse) mortgages. The 60-day period runs from March 8 to mid-May 2020.
  • Foreclosures: All new foreclosures and the completion of any foreclosures already in process are halted.
  • Evictions: All evictions from FHA-insured single-family properties cease.
• FHFA (Fannie Mae and Freddie Mac):
  • The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac and backs the mortgages of 28 million homeowners, ordered a suspension of all foreclosures and foreclosure-related evictions for at least 60 days beginning on March 18, 2020.
  • The FHFA announced earlier in March that Fannie Mae and Freddie Mac would provide payment forbearance to borrowers for a mortgage payment to be suspended for up to 12 months due to hardship caused by COVID-19.Additionally, Freddie Mac has implemented a program offering relief to multi-family landlords with  Freddie Mac Multi-family Fully Performing Loans.
    • Landlords can defer loan payments for 90 days by showing hardship due to COVID-19.
    • Landlords are not allowed to evict any tenant based on nonpayment of rent during the forbearance period.
  • HUD and Public Housing: HUD may take steps soon to protect low income individuals in public housing.
  • Federal District Courts: Many federal district courts (and some state courts) have suspended nonessential hearings which would presumably bar foreclosure hearings. This decision has been made by each individual district.

Missouri Foreclosures and Evictions Directives:

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New AML Rules for Investment Advisors?

The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, is proposing new anti-money laundering rules for investment advisors. Continue reading »

Missouri Changes Its No-Oral-Credit Agreement Disclaimer Language Requirements for Lenders

Missouri has once again amended its credit agreement statute of frauds to limit the ability of borrowers and guarantors to assert claims against lenders and the parties’ written credit agreement based upon oral promises or commitments.  Specifically, Senate Bill 100, effective late 2013, extends Missouri’s prohibitions to reach not only oral, but now also unexecuted agreements or commitments to loan money, extend credit, or to forebear from enforcing repayment of a debt if the parties’ credit agreement contains certain disclaimer language as provided in the statute.

Extending the prohibition specifically to unexecuted agreements between the parties became necessary after Mo. Rev. Stat. 432.047 was limited by the Missouri Court of Appeals in its Bailey v. Hawthorne Bank decision.  In that case the Court of Appeals broadly construed several different bank documents, including a bank loan summary which was never delivered to the borrower, to find a “credit agreement” as that term is used in the statute. Continue reading »

Missouri Supreme Court Upholds Foreclosure Laws

On April 12th, Missouri’s highest court granted lenders across the state a victory by ruling that banks only need to give defaulted borrowers, in foreclosure, credit for the amount of the foreclosure bid, as opposed to the fair market value of the property. The ruling is consistent with existing Missouri precedent, which, for decades, has maintained that the sale price of a foreclosed property is determinative with respect to the deficiency owed by the borrower to the bank, which is the remaining balance on the loan for which the lender can sue.

In the case, First Bank v. Fischer & Frichtel, the borrower, Fischer & Frichtel, a Missouri real estate developer, defaulted on loans to First Bank, which then foreclosed on properties securing the loan. First Bank purchased the property at the foreclosure sale. The lender proceeded to sue the borrower for the deficiency balance remaining on the loan. The borrower defended the case by alleging that the proper method of determining the deficiency was not the sale price at the foreclosure sale, but rather, the fair market value of the property. In so doing, the borrower essentially sought a modification of existing Missouri law with respect to calculations for suing on deficiency against a defaulted borrower. Fischer & Frichtel maintained that Missouri should align itself with other states which require a lender to determine the fair market value of the foreclosed property and apply that amount, which is generally higher than the foreclosure price, to the loan balance before suing a borrower.

The borrower argued that the current law often grants lenders a windfall after a foreclosure. Foreclosure sales require cash buyers on the day of the sale, except that the foreclosing lender can simply bid as a credit against the amount of the indebtedness owed by the borrower. This allows lenders to often easily outbid potential purchasers who may not have cash readily available. If the lenders obtain the properties at a depressed sale price at the foreclosure, they can then resell the property to a third party, in an arms-length transaction, and are entitled to keep any profits from the resale of the foreclosed property, without applying those profits to the borrower’s loan balance.

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Is This by Consent? Changes to Missouri Supreme Court Rule Affect Use of Non-party Subpoenas

Part of a series on issues related to Manufacturers, Distributors and International Trade

A major change involving subpoenas to non-parties has hit the business world in the state of Missouri.

A new amendment to the Missouri Supreme Court Rules now requires non-party record custodians to physically appear at deposition to produce subpoenaed items, unless all parties to the litigation have agreed that the subpoenaed party may produce the items without appearing.

The amendment changes the prevailing practice where parties send out subpoenas to third parties with a letter explaining that they will be excused from appearing at deposition if they produce the requested items along with what is known as a business records affidavit.

Rule 57.09, as amended, now requires parties to first obtain consent from all other parties to the litigation before a subpoenaed witness may produce documents without attending the deposition. This agreement must be communicated to the witness in writing. Absent this agreement, a witness must appear to produce subpoenaed items at deposition.

What does this mean to you? If you receive a subpoena, you may only produce the documents to the party serving the subpoena without appearing at deposition if that party represents to you in writing (e.g., in a letter) that all other parties have consented to production of the docume

nts without need for you to appear at the deposition. Such a letter should protect you from allegations that you improperly produced records by mail, instead of bringing the documents to the deposition. You do not need to see the actual agreement. If you have any questions as to whether you can simply mail the documents, instead of appearing at deposition, you should either call your attorney for advice or simply wait and bring the documents at the time and place designated in the subpoena.

Continue reading »

Bank Transfer Day and its Prospects for “Main Street” Banking

November 5, 2011 marked “Bank Transfer Day” around the United States, as initiated by 27-year old Los Angeles art dealer Kristen Christian, via this facebook page in early October. The movement, purposefully or not, coincided with the Occupy Wall Street movement and spread throughout the United States, denouncing big banks and the Wall Street financial industry. Perhaps the greatest alleged perpetrator, and possibly the greatest victim, of the Occupy and Bank Transfer Day movements was Bank of America, who announced earlier this year it intended to implement $5.00 monthly service fees for certain deposit accounts. Bank of America’s plan imploded when other big banks failed to follow suit with their own fees, and Bank of America became the sole target of criticism for its planned fee policy.

The result, in part, was the concept of Bank Transfer Day, where consumers were urged to withdraw their deposits from big banks and move their money to smaller and locally run credit unions. The result, according to the Credit Union National Association (CUNA), was that more than 40,000 people signed up for accounts at credit unions on November 5th, corresponding to about $80 million in deposits.  CUNA represents most of the chartered credit unions in the United States, and reports that its members saw increases in new account activity during the month of October and early November, prior to Bank Transfer Day.

While Bank Transfer Day created headlines and long lines at credit unions on a Saturday morning, did it really have the desired impact on Bank of America and other big banks?  The answer is probably not, given the size of the market share that Bank of America and other top banks in the United States hold, a loss of even tens of thousands of customers in a given week probably does not represent much of a blip on the banks’ radars. In fact, most large banks are flush with deposits right now, given the unstable market and the desire for many people and investors to remain liquid. Additionally, banks are benefitting from the low interest rates on deposit accounts, which means that many consumers are not even shopping rates to find the best return on their deposits, as has historically been the case.

Continue reading »

Consumer Financial Protection Bureau releases Supervision and Examination Manual

Established in 2010 by Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau (“CFPB”) has released its first edition of the Supervision and Examination Manual. The Manual is a guide to how the CFPB will supervise and examine consumer financial service providers under its jurisdiction for compliance with Federal consumer financial law.

As stated on the CFPB’s website, the Manual is divided into three parts:

• Part One describes the supervision and examination process.
• Part Two contains examination procedures, including both general instructions and procedures for determining compliance with specific regulations.
• Part Three presents templates for documenting information about supervised entities and the examination process, including examination reports.

While the Manual is designed in large part to supervise the nation’s largest mortgage servicers, it will impact all lenders who deal with consumer loans.