May 2017
Deeds in Escrow

Deeds in escrow, or “pocket deeds,” have increased in popularity in recent years. But are they the right option in connection with a workout of your distressed loan?

A deed in escrow is a deed to real estate placed in escrow (sometimes with a third party) for future recording if and when specific conditions are met. Such a deed can be a useful tool for a lender in a workout situation – allowing a borrower to retain possession and ownership of its property pursuant to certain agreed terms, and, upon default of those agreed terms, allowing a lender to record a deed transferring ownership of the property to the lender without incurring the cost of foreclosure. However, such deeds can be subject to legal challenge. They may also meet with resistance from title companies reluctant to insure the title received by the lender via the pocket deed. Thus, before accepting one, the lender should (a) assess its enforceability, (b) work with a title company to ensure its insurability, and (c) structure it carefully to ensure that the lender can still foreclose, if necessary, any interests junior to the lender’s lien on the property.

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Payoff Statements

During the recent financial crisis, foreclosures increased dramatically. This fact, coupled with borrowers’ exploitations of defects, often technical in nature, in a lender’s process or documentation, caused significant delays to foreclosures in a number of instances. To avoid such problems, compliance with state and federal requirements is vital. Lenders and servicers who fail to comply with applicable federal and state specific regulations expose themselves to unforeseen litigation and statutory penalties, in addition to wasting time and resources. 

Read the full article here.

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