2. Lack of Coordination Regarding Due Diligence and the Closing Checklist: In the current environment, it seems like lenders and borrowers need to move from the commitment stage to loan closing quicker than ever before. The first step to a successful closing should always be a detailed closing checklist, setting forth all items that will be required conditions precedent to closing and the party’s responsibility for each such item. The lender should walk through the checklist with counsel and the borrower to ensure everyone is on the same page. The party managing the checklist, whether counsel or the lender, should send checklist updates on a weekly basis to reflect items received. It is a simple concept, but I have seen a number of situations where the parties are waiting on a thirdparty item, such as a survey, Phase I or landlord waiver, simply because there was a miscommunication and the item was requested late. 3. Limited Borrower Engagement: This relates to (2) above and, in my view, is critically important. Simply put, the borrower needs to be engaged throughout the closing process, whether through internal counsel, external counsel or a financial officer. Questions invariably come up during diligence and preparation of loan documentation, and it is important these questions be addressed promptly from the borrower side, particularly when the parties are working under an aggressive closing timeline. Where disclosure schedules are included within the loan documents, the borrower should be the party preparing. I have seen a number of situations where the borrower provides documentation that may be responsive to a disclosure request (such as providing copies of leases or material contracts) but leaves it to the lender or its counsel to actually compile and populate the schedule. This is not only inefficient, from a time and cost standpoint, but can lead to errors in the documents. 4. Misunderstanding of Lender’s Internal Requirements: This ties in with (2) and (3) and is another issue I see often. At my firm, there are a number of financial institutions we work with routinely and with whom we have developed customary processes and procedures and/or developed form loan documents and checklists. However, there are others who we work with only periodically or engage us only for a specified matter due to certain unique circumstances associated with a particular loan. In these situations, counsel may be unaware of certain lender requirements. For instance, a lender may have specific title endorsement, survey, KYC and beneficial ownership requirements, require specific SOFR or related index rate language or require, as a matter of course, delivery of review memoranda or borrower legal opinions. Lenders should not assume these requirements have been previously communicated to outside counsel or that the requirements are “standard.” Similarly, as counsel, we do not want to assume that what was “good” for a prior transaction is “good” for the present one. Communication on the front end regarding lender-required items and the inclusion of the same in the closing checklist will avoid issues later. As outside counsel, you never want to get a call from your bank client six months after a loan closing with a list of open audit exception items from the closing. 5. Use of Hybrid Loan Documents: When I refer to “hybrid” loan documents, I mean a situation where some of the documents evidencing or securing loans to a particular affiliated borrowing group have been prepared 14 Nebraska Banker
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