Five Ways Lenders Make Their Collection Actions More Difficult (and Pay More Attorney Fees): #3

This is the third installment of the five ways lenders make their collection actions more difficult.

RULE #3:       MAKE SHORT-CUTS IN LOAN DOCUMENTATION TO ACCOMMODATE  YOUR BEST OR MOST SOUGHT-AFTER CUSTOMERS

            Although the temptation is great when times are good for a lender to accommodate its best customers by not insisting on quite the same level of detail and formality when documenting their loans, lenders should never forget that large credits are in many cases no more immune from a bad economy than are the smaller ones.  In the event of bankruptcy by the borrower, the lender with a duly perfected lien in collateral is always in far better shape than the holder of an unsecured claim, regardless of how good the borrower’s balance sheet looked at one time.  If an appraisal, a formal title opinion and lawyer-reviewed or prepared documentation are desirable in the case of a routine loan, the same is no less true in the case of a loan to a favored customer of the bank.  In that regard, a “title report” or “lien search” is no substitute for a final title opinion or title policy.  A “preliminary” title opinion is what the name implies – only a final title opinion can confirm the perfection and priority of the mortgage lien.