COLLECTION ISSUES Jeff Novel M. Edward Burdzinski TABC Webinar Series—Banking 101 COLLECTION ISSUES Jeff Novel M. Edward Burdzinski jnovel@krcl.com 214.777.4223 Blog: LawofBanking.com Ed.Burdzinski@Leclairryan.com 713.752.8329

Initial Considerations—5 key questions What is the lender’s goal? What type of default? What is the borrower’s situation? How many loans and what amounts? Does the borrower have a feasible plan?

The Pre-negotiation Letter Fix issues that you have identified in the loan documents. Confirm the defaults under the loan documents. Set out all conditions of the potential workout. Confirm all amounts due under the borrower’s loan(s). Consider getting borrower to acknowledge fair market value of collateral. Obtain a waiver and release.

Assignment of Rents & Leases, Forbearance Agreements, Modifications Chapter 64 Tex. Prop. Code Collection Letters Directly To Tenant or Landlord Forbearance Agreements When To Use Common Terms & Conditions Modifications

Notices Common Law Notices - Demand For Payment Intent to Accelerate Acceleration Common Law Notices Can Be Waived by Clear & Unequivocal Language – Shumway v. Horizon Credit Corp., 801 S.W. 2d 890, 893-894 (Tex.1991)

Servicemembers Civil Relief Act – 50 USC §§501-597b. Notices Servicemembers Civil Relief Act – 50 USC §§501-597b. Protects Active Duty Servicemembers and Their Dependents From Foreclosure While On Active Duty These Rights Can Be Waived in a Separate Instrument Signed by Servicemember §517 Tex. Prop Code §51.002 (i) – Required Statutory Language In Notice of Default & Notice of Sale Warning Active Duty Servicemembers To Notify Sender of Their Status Immediately

Non-Waivable Notices - Notice of Default (personal residence) 20 Days Prior To Notice of Sale (Tex.Prop. Code §51.002(d); BUT Fair Debt Collections Practices Act – (15 USC§§1692-1692p) Must Give Consumer Debtors 30 Days to Dispute Validity of All or Part of the Debt Notice of Sale To IRS (Federal Tax Liens) 25 Days Prior To Sale (26 CFR §301.7502-1) Notice of Sale 21 Days Prior To Sale (Tex. Prop. Code §51.002(b) – Mail, Post & File

Read DoT, Appoint Substitute Trustee Foreclosure Read DoT, Appoint Substitute Trustee Determine the Appropriate Bid Value and Deficiency Amount Check Active Duty Military Status at https://scra.dmdc.osdmil/scra/#/home Conducting the Sale Record Foreclosure Deed ASAP

Special Rules for Home Equity Loans Foreclosure Statutory Rescission Provisions (Residential Real Property) (Tex. Prop. Code §51.016) Special Rules for Home Equity Loans Tex. Rules of Civil Procedure§§735 and 736 Promulgated Forms at http://www.txcourts.gov/media/847145/expedited-foreclosure-forms-for-website.pdf.

The Deficiency Lawsuit If the preliminary steps are done correctly, the deficiency lawsuit should be fairly simple. Where a counterclaim arises, determine whether there is an arbitration clause or jury waiver. Principal issues in litigation. Misrepresentation and fraud claims Texas Property Code Section 51.003 The calculation of the deficiency amount. Bankruptcy

Post Judgment Collection What happens after you get a judgment? Locate the debtors’ assets Abstract of Judgment Execution Discovery Garnishment Charging Orders

Bankruptcy of Debtor, Guarantor or Pledgor Other Issues Bankruptcy of Debtor, Guarantor or Pledgor Death of an Obligor (Hire/Consult with, Probate Counsel) Death an Event of Default? Estate Solvent? Collateral Valuable? Creditor Has a Right To Apply For Administration Complex Claims Process and Priority of Claims

THANKS! Jeff Novel 1601 Elm Street Suite 3700 Dallas, Texas 75201 (214) 777-4223 jnovel@krcl.com Blog: lawofbanking.com

Thank you M. Edward Burdzinski Ed.Burdzinski@Leclairryan.com 713.752.8329 CALIFORNIA \  CONNECTICUT \ DELAWARE \ FLORIDA \ ILLINOIS \ MARYLAND \  MASSACHUSETTS \  MICHIGAN NEW JERSEY \   NEW YORK \  PENNSYLVANIA \  RHODE ISLAND \ TEXAS \ VIRGINIA \  WASHINGTON, D.C. WWW.LECLAIRRYAN.COM With approximately 300 attorneys in a full range of practices, LeClairRyan is an entrepreneurial firm providing business counsel and client representation in matters of corporate law and litigation.