Common Lender Litigation Issues

While a lender’s ultimate concern is obtaining its borrower’s performance of its payment obligations, lenders are also concerned about managing their risk both before and after default. Often this involves making sure that their collateral is preserved and protected, particularly when that collateral consists of rents and profits, accounts receivable or other easily liquidated assets. Lenders must also be mindful of the risks and complexities that can come into play in light of California’s one action and security first rules. Lenders also often find themselves defending against meritless lawsuits filed by borrowers in an effort to forestall foreclosure. Even after a lender successfully forecloses on its collateral, it may have to deal with “inherited” real property issues, such as undisclosed liens, encroachments, or tenants in possession.

How Our Experience Helps

We have represented national banks, federal credit unions, and private institutional lenders in connection with enforcement of their deeds of trust. On the enforcement side, we have substantial experience with both nonjudicial and judicial foreclosure proceedings (including obtaining deficiency judgments), as well as provisional remedies such as the appointment of rents and profit receivers. We also have experience in prosecuting actions for breach of guaranty, including obtaining prejudgment remedies such as writs of attachment and enforcing the judgments.

We have also defended numerous lenders in lawsuits involving priority disputes, lender liability issues (including alleged TILA and RESPA violations), quiet title actions, claims for cancellation of instruments based on allegations of fraud, and other claims adverse to our clients’ title. We have also developed a particular expertise in advising clients regarding the scope of their title insurance coverage and obtaining acceptance of claims for many of these issues, even after the insurer has initially denied the claim.

Representative Matters

• Represented federal credit union in successfully obtaining full recovery under defaulted commercial “TIC” loan secured by an assisted living facility, including prosecution of judicial foreclosure and receivership action and related breach of guaranty claims
• Successfully obtained defense judgments in favor of several national banks in connection with various lender liability claims asserted by their borrowers, including actions to stay or set aside foreclosure sales, actions alleging RESPA and TILA violations, and actions for damages for alleged unfair business practices
• Represented national bank in connection with tendering and prosecuting numerous title insurance claims involving a wide variety of coverage issues, including fraudulently obtained mortgage loans, legal description discrepancies,  boundary disputes, encroachments, and alleged senior liens
• Successfully prosecuted an action for breach of title insurance policy and bad faith denial and failure to defend against adverse claims of title, resulting in a favorable monetary settlement at mediation
• Represented a bank in connection with defaulted commercial acquisition and construction loans secured by residential development, including defense of state court lender liability claims, prosecution of cross-complaint for foreclosure, receivership, and breach of guaranty, and representation of lender in borrower’s chapter 11 bankruptcy

If you would like to discuss how our experience can assist you with your specific business dispute or legal issue, please contact us for a free telephone consultation.