Pub. 9 2019-2020 Issue 6

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S May • June 2020 7 • Promissory Note (Do you have the original? Is it signed by the borrower?) • Deed of Trust/Mortgage (Was it signed by the borrower and recorded in the appropriate county?) • Guaranty Agreement (Do you have the original? Was it signed? Is there an expiration on the guaranty obligations?) • Security Agreement (Is it signed? Does it accurately list the collateral?) • UCC-1 Filing (Has it been filed with the appropriate office? Do you have the correct borrower name listed on the UCC-1 filing? Does the UCC-1 filing accurately list your collateral?) • Title (Do you have the physical title to vehicles and trucks serving as collateral?) • Title Policy (Did you retrieve the final title policy from the title commitment after the loan closed?) SBA Loans. For you lenders who make Small Business Administration (SBA) loans: if you encounter a borrower having trouble making loan payments, it is paramount that you review the loan file and ensure that all of the loan documents are signed and the necessary collateral pledged to secure the loan has been perfected. If you have not completely complied with the SBA loan instructions that accompany each SBA loan, you risk losing the guaranty of the United States Government — and let’s be honest, that was a pretty important reason why you agreed to make that loan in the first place. As with all loans, the sooner you can discover a deficiency with your loan documents, the more leverage you have to cure that deficiency and ensure that your loan is adequately secured. Forbearance Agreements. You’re likely going to encounter these pretty soon if you haven’t already. Working off the previous section, if you know that your loan file lacks a perfected security instrument or has an unsigned guaranty, now is the time to get that document signed or perfected. Your borrower wants some leeway with repaying the loan. You have all the power right now. Make sure that you have Tom Dolphin is an attorney at Spencer Fane LLP in the Firm’s Denver office. Tom is an associate practicing in the Banking and Financial Services Group and the Real Estate Group. Tom has 12 years of experience working as inside legal counsel for a financial institution and clearly has an affinity for the Rolling Stones’ tune, “Sympathy for the Devil.” adequately reviewed the loan file and have everything in order before executing a forbearance agreement. You’ll have far less leverage with your borrower to remedy any deficiency in the loan file once you and your borrower execute the forbearance agreement. Legal Counsel. A lot of lenders hate to involve outside legal counsel and waste that money unless they absolutely have to. With that mindset, it’s often too late for the lawyers to be as effective as they could have been had they been involved early in the process. Your outside legal counsel is going to be your best ally when things get tough. Make sure that you have a process in place for involving outside legal counsel (including getting approval from your board of directors) and that you have the necessary approvals already in place. Approach your loan file review as if you are going to involve an attorney at some point. You’ll need to send the attorney an electronic form of the loan file along with all correspondences you’ve had with the borrower, guarantor, and, in some cases, other lenders with whom you may have competing security interests. If you need to involve an attorney, you’ll be prepared and can act fast to engage the attorney and let them hit the ground running to protect you. If you have collateral that is susceptible to waste or deterioration (properties with renters and high cash flows, unfinished buildings not properly finished to prevent damage from the weather, livestock that relies on food, shelter and care, etc.), you’ll likely want to hire an attorney quickly to arrange for receivership to protect your collateral. In a time with so many uncertainties, take the time to create as many certainties in your lending practice as possible. Everything takes time. Organize your employees. Talk to your borrowers. Sometimes you aren’t going to have the luxury of time and need to act quickly to protect your interests. Put yourself in a position to succeed — or at least stop the bleeding as soon as possible. n Forbearance Agreements. You’re likely going to encounter these pretty soon if you haven’t already. Working off the pre - vious section, if you know that your loan file lacks a per- fected security instrument or has an unsigned guaranty, now is the time to get that document signed or perfected.