Loan and Loan Portfolio Acquisitions and Dispositions

What are loan and loan portfolio acquisitions and dispositions?

Loan and loan portfolio acquisitions and dispositions involve buying and selling individual or group loans. These transactions can include the transfer of mortgage loans, commercial loans, or other loan types related to real estate. For instance, a financial institution might sell a group of loans to another institution, allowing the buyer to collect the borrowers’ outstanding principal and interest payments.

A prime example is when a bank acquires a distressed loan portfolio from another lender. This acquisition may involve purchasing individual loans or an entire portfolio at a discounted price, intending to either restructure the loans, collect on the debt, or sell the assets to recover the investment.

Need help with creating, structuring, or enforcing real estate transactions? Schedule your consultation today with a top real estate transactional attorney.

Which Florida laws, rules, and regulations apply to loan and loan portfolio acquisitions and dispositions?

Several Florida and federal laws, rules, and regulations govern loan and loan portfolio acquisitions and dispositions, particularly concerning real estate transactions. Key Florida regulations include the Florida Consumer Finance Act and the Florida Mortgage Brokerage and Lending Act. These laws establish licensing requirements, disclosure obligations, and other rules for institutions involved in real estate finance.

The Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) are significant at the federal level. TILA requires lenders to disclose essential loan terms and costs to borrowers, while RESPA addresses the settlement process for real estate transactions, including loan servicing and escrow accounts. In addition, federal banking regulations, such as those enforced by the Office of the Comptroller of the Currency (OCC), also apply to loan and loan portfolio acquisitions and dispositions.

What are common issues associated with loan and loan portfolio acquisitions and dispositions that lead to litigation?

The following issues tend to escalate transactional disputes to litigation:

• Breach of contract: Parties may disagree about the terms and conditions of the loan sale agreement, leading to allegations of contract breaches.
• Misrepresentation or fraud: One party may claim that the other misrepresented material facts about the loans or the underlying assets, potentially giving rise to fraud claims.
• Lender liability: Borrowers might assert lender liability claims against the acquiring institution, arguing that the new lender has engaged in unfair or deceptive practices.
• Violation of federal and state laws: The parties involved in the transaction may face allegations of violating applicable federal and state laws, such as the Truth in Lending Act (TILA) and the Florida Consumer Finance Act.
• Disputes over loan modifications: Disagreements may arise over the terms of loan modifications, primarily if the acquiring institution seeks to change the loan terms after the transaction.

When a set of facts is appropriate for legal advocacy or intervention, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation or another form of specialized advocacy, please contact our office to set up your initial consultation.

What are effective measures to resolve issues and avoid litigation over loan and loan portfolio acquisitions and dispositions?

• Conduct thorough due diligence: Counsel should carefully review all relevant documentation and financial records to identify potential risks, ensure compliance with applicable laws, and confirm the accuracy of representations made by both parties.
• Draft clear and comprehensive agreements: Loan sale agreements should carefully and clearly outline the parties’ rights, obligations, and expectations, minimizing the potential for misunderstandings and disputes.
• Negotiate in good faith: Parties should negotiate the terms of the transaction in good faith and work to address any concerns raised by the other party during negotiations.
• Seek legal counsel: Both parties should consult with experienced legal counsel throughout the transaction process to ensure compliance with applicable laws and regulations and to help avoid potential disputes.
• Consider alternative dispute resolution (ADR): Incorporating ADR provisions, such as mediation or arbitration, into the loan sale agreement can help parties resolve disputes more efficiently and cost-effectively, potentially avoiding litigation.
• Communicate effectively: Open and clear communication between the parties and their counsel is essential to address any issues that arise during the transaction process and to minimize the risk of disputes escalating into litigation.

Please contact our office to set up your initial consultation to see what forms of legal advocacy or intervention may be available for your unique situation.

Frequently Asked Questions

1. What is the difference between a loan acquisition and a loan disposition?

A loan acquisition refers to the process of a financial institution or investor purchasing a loan or loan portfolio from another entity. In contrast, a loan disposition refers to an institution or investor’s sale of a loan or loan portfolio.

2. What are some due diligence steps to consider during a loan acquisition or disposition?

During a loan acquisition or disposition, parties should conduct thorough due diligence to ensure compliance with applicable laws, confirm the accuracy of representations, and identify potential risks. This process may include reviewing loan documents, financial records, and real estate-related documentation and verifying the borrower’s creditworthiness.

3. How do loan modifications affect loan acquisitions and dispositions?

Loan modifications can impact loan acquisitions and dispositions by altering the loan terms, such as interest rates, repayment schedules, or loan balances. Accordingly, acquiring institutions should carefully review existing or proposed modifications to understand their potential impact on the transaction and the acquired loan portfolio.

4. How do federal and state laws impact loan acquisitions and dispositions in Florida?

Federal and state laws, such as the Truth in Lending Act (TILA) and the Florida Consumer Finance Act, govern various aspects of loan acquisitions and dispositions in Florida. Compliance with these laws is essential for a successful transaction and to avoid potential litigation.

5. Can parties to a loan acquisition or disposition negotiate the terms of the transaction?

Yes, parties can negotiate the loan acquisition or disposition terms, including the purchase price, representations and warranties, and indemnification provisions. Effective negotiation and clear communication between the parties can help minimize the risk of disputes and potential litigation.

Have more questions about real estate transactions and disputes?

Crucially, this overview of loan and loan portfolio acquisitions and dispositions does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain tireless advocates at every step. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.