Pub. 13 2016 Issue 3

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S 16 The Advisors’ Trust Company ® Zia Trust, Inc. www.ziatrust.com 800.996.9000  No in-house asset management - we use your bank’s advisor  13 trust officers, including J.Ds., CFP ® and CTFA ® practitioners  Offices in Albuquerque, Las Cruces, Santa Fe, and Phoenix  Complex trusts over $100,000,000 – to trusts under $1,000,000, and everything in between  Old fashioned “face to face” service. We’re accessible!  Closely held business trusts/ specialty assets Offering Caring and Competent Trust Administration Throughout New Mexico and Arizona the bank’s good faith conduct. This hopefully avoids (or wins) a fight over whether there was a problem, how the problem was to be fixed, and whether the bank improperly “controlled” or “man - aged” the borrower’s business. 8. Keep The Guarantor At The Table Every banker who has had to enforce a guaranty to repay a loan has experienced in real life the “character” factor of credit. Guar- antor “remorse” seems to occur far more often these days than in prior decades – presumably a reflection of social change (I will leave to someone else to explain.) Few guarantors intend to have to actually pay the loan at the time a loan is made. Even fewer willingly write checks to pay off a problem loan. Keep the guar - antor “involved” during renewals, restructuring and any workout prevents arguments about “release” of the guarantor. Having a guarantor confirm the existing guaranty as part of the borrower’s loan modification prevents an argument about “release” or that the bank was “no longer relying on the guaranty”. Red flag any “revocation” notice from a guarantor and consult your attorney if any “I don’t want to be liable any more” notice is received from a guarantor. Any renewal or restructure after such a notice may in fact release the guarantor unless an affirmation is obtained. 9. Understand And Follow Requirements For Remedies If the time comes for the bank to discuss or take actions or rem- edies allowed under the loan documents – first understand, then follow those requirements. The bank’s loan documents should contain specifics for how and when the bank is entitled to take ac - tions. Going back to #3 above, review the documents to confirm what is required and follow the loan documents. Remember that there are also overriding state and federal law requirements which must be followed (for example; UCCArticle 9 requirements for the notice, sale and accounting for the sale of personal property col- lateral, and the automatic stay under the U.S. Bankruptcy Code). Banks with dedicated loan workout staff are likely to have a better working knowledge than a line lender of how to follow all these requirements. You can be sure that any uncooperative borrower, bankruptcy trustee and unsecured creditors in a bankruptcy will scrutinize, and take issue any misstep. 10. Get A Legal Review/Consultation (While You Still Can) At the risk of being accused of self-servicing advice, if in doubt consult early and often with legal counsel as to any of the steps. For complex/unusual loan consider having counsel prepare loan documents, or review the bank prepared documents. Consulting with and having existing loan document review by experienced counsel in the event of serious credit weakness can provide real value. First, consider the benefit of being able to say “we consult - ed with our attorney and acted on the attorney’s advice. Assum- ing the advice is good, this may limit complaints about the bank’s motives for taking adverse action against the borrower. A discus- sion the credit problems and a review of documents may identify new or corrective measures or documents needed as part of a loan modification or restructure. The time to get corrective or addi - tional documents is while the borrower is still cooperative. It is no surprise that borrowers seldom agree to fix problems after receiv - ing a demand letter or being sued. n n Ten Things Your Attorney Would Like Commercial Lenders to Remember  continued from page 15