Identify All Defaults For Your Foreclosure Counsel

As a mortgage lender, once you decide to foreclose on your borrower’s commercial real estate loan collateral, you need to provide certain information and documentation to counsel so he or she can file suit (or perhaps negotiate a workout).  On January 16, 2007, I discussed what the lender’s “care package” for its counsel should contain, and why.

ID the breaches.  One of the items I mentioned was the identification of all defaults.  While the most common defaults are for non-payment, there may be other breaches of the loan documents.  All such defaults should be identified in the Complaint.  You can assist your lawyer, who is new to the loan, with his or her default analysis if you’re able to convey a listing of any and all contract breaches, with operative dates and perhaps even citations to loan documents.  Or, a mere recitation of the key facts/loan history will help your lawyer determine your potential rights and remedies as provided under the documents.

Notice/cure.  The nature of the breach may also bear upon whether, or to what extent, the borrower has rights to notice and an opportunity to cure.   

Breach statute.  For a handy legal citation when dealing with defaults, remember Indiana Code 32-30-10-3(a) , which states:

Subject to IC 32-30-10.5 with respect to mortgage transactions described in IC 32-30-10.5-5, if a mortgagor defaults in the performance of any condition contained in a mortgage, the mortgagee or the mortgagee’s assigns may proceed in the circuit court of the county where the real estate is located to foreclose the equity of redemption contained in the mortgage.

(I.C. 32-30-10.5 deals only with residential mortgages.)

Not every commercial foreclosure case involves a matured loan or a payment default.  The more quickly your foreclosure counsel can obtain the information relative to the underlying defaults, the more efficient your counsel will be in getting the result you’re seeking.