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WHEN THE BORROWER DEFAULTS . . .

WHEN THE BORROWER DEFAULTS. September 5, 2008 Sponsored by Law Seminars International. A. MICHELLE (SHELLI) WILLIS shellli.willis@troutmansanders.com Troutman Sanders LLP Bank of America Plaza 600 Peachtree Street NE, Suite 5200 Atlanta, Georgia 30308 (404) 885-3000

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WHEN THE BORROWER DEFAULTS . . .

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  1. WHEN THE BORROWER DEFAULTS . . . September 5, 2008 Sponsored by Law Seminars International A. MICHELLE (SHELLI) WILLIS shellli.willis@troutmansanders.com Troutman Sanders LLP Bank of America Plaza 600 Peachtree Street NE, Suite 5200 Atlanta, Georgia 30308 (404) 885-3000 www.troutmansanders.com

  2. I. Assess the Situation A. Review loan documents and file B. Assess agreements with third parties C. Bankruptcy analysis • Receivership analysis • Confirm proper payment of intangible taxes F. Evaluate Access to Insurance G. Evaluate Third Party Agreements H. Title and Lien Searches and Analysis

  3. II. Next Steps A. Forbearance or loan modification 1. “Wait and see” 2. Proceed to documentation now • Foreclosure • Alternatives to foreclosure 1. Deed in lieu of foreclosure agreements 2. Suit on note and/or guaranty

  4. III. Forbearance or Loan Modification • Business Reasons for “Wait and See” or Modification of Loan Documents • General Legal Considerations: 1. Conditions Precedent; Timing 2. Documentation 3. Title and Priority Matters 4. Other Parties to Transaction C. Bankruptcy Issues; Relief from Stay

  5. IV. Foreclosure A. Acceleration letter; Attorneys’ 10-Day letter B. Federal Tax Liens C. Update title and Bankruptcy records checked • Appraisal (as of the date of foreclosure) • Physical Inspection or updated survey • Environmental Issues

  6. IV. Foreclosure (Cont.) G. Foreclosure Notice H. Deed Under Power of Sale and Other Documents I. Foreclosure Sale and Beyond

  7. V. Deed-in-Lieu • Pre-workout agreement and deadline • Consider commencing foreclosure as leverage • Confirm borrower has authority • Identify and evaluate any subordinate liens • Avoid common law merger • Transaction voluntary at transfer G. Consider likelihood Bankruptcy Court might view deed-in-lieu as a preference or fraudulent transfer H. Ensure adequate title insurance protection

  8. VI. Suit on Note or Guaranty • Decide where to sue- state v. federal court, which jurisdiction • Timing Considerations on Guarantor Suit • Impact of arbitration clauses

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