The Maryland Court of Appeals recently held that lenders can’t skirt foreclosure requirements by making borrowers sign a deed in lieu of foreclosure at the closing, before the borrower has even defaulted.  In that case the lender required the borrower to execute both a deed of trust and a deed in lieu of foreclosure as security for the loan at closing.  The deed in lieu of foreclosure stated that if the borrower defaulted, the lender could immediately take title without a foreclosure proceeding.  After the borrower defaulted, the lender recorded the deed in lieu of foreclosure to take title to the property without a foreclosure proceeding. The Court of Appeals called it a “‘heads I win, tails you lose’” arrangement, requiring the borrower to give up its right to a foreclosure proceeding at the outset, before the borrower had even defaulted.  The Court held that the deed in lieu of foreclosure did not convey the title to the lenders – rather, the Court treated it as a mere mortgage, which requires the lender...

Your small business wants to refinance a mortgage that is about to mature, but can’t refinance in the private market because the economic meltdown has left your business with real estate worth near the amount of your existing loan, or less.  If this sounds like you, the SBA’s new program may help your business stay afloat.

Effective October 1, 2010, the Maryland Legislature enacted the Maryland General and Limited Power of Attorney Act (Act).  The Act creates a statutory form power of attorney and provides that no one can require an additional or different form of power of attorney for any authority granted in the statutory form power of attorney (this includes anyone -- banks, insurance companies, title companies, and anybody else dealing with a power of attorney).  Failure to accept an appropriate acknowledged statutory form power of attorney may subject you to liability for attorneys’ fees and costs incurred in an action or proceeding to confirm the validity or mandate acceptance of the statutory form power of attorney.  To avoid liability for noncompliance with the Act, be familiar with and able to recognize the new statutory form power of attorney and be sure to accept it.

For more information on the Act, see Maryland’s Statutory Power of Attorney – Learn It, Accept It, or Get Ready for Liability. ...

 A recent case made it harder for an unsecured creditor to defend a preference avoidance action in a bankruptcy.  This ruling may be particularly troubling to unsecured creditors in the construction industry, because it involved the potential for payment from bond proceeds.

 If so, there may be changes in the way your loans are handled in bankruptcy court.  Although lenders never want to be creditors in bankruptcy proceedings, in the past they thought that if their collateral was sold, they could bid up to the full amount of their claim, without putting out any cash.  To the contrary, in 2010, a federal appeals court ruled that secured creditors do not have an absolute right to “credit” bid when their collateral is sold under a Chapter 11 plan of reorganization.

Credit bidding allows a secured creditor to bid up to the full amount of its debt claim at a sale of its collateral, without actually having to tender cash to acquire the collateral.  Traditionally, credit bidding protects secured creditors by ensuring proper valuation of the collateral at the sale and preventing other bidders from acquiring the collateral at bargain prices.

In this case, the debtor’s plan provided that almost all of its assets would be sold at auction, and the secured creditors would be given...

On September 27, 2010, President Obama signed the Small Business Jobs Act (the Act) into law.  The Act will benefit small businesses in several ways, including extensions of Small Business Administration (SBA) lending programs and tax breaks.

This is a time of joint ventures and partnerships.  With commercial financing still difficult to come by, business owners are entertaining loans and investments from private parties and joint ventures/partnerships with other businesses.  So, lots of Non-Disclosure Agreements ("NDAs") are being used.