In the past when workout solutions failed, lenders would simply foreclose on the
security for the loan and then sell the assets. During the foreclosure process,
however, the borrower may allow the property to deteriorate, significantly diminishing
the asset value.
There are myriad reasons why the lender may not want to foreclose, among them homeowner
association issues, health and safety concerns, possible future warranty issues,
environmental questions and other reasons to avoid coming into title. In these cases,
lenders should seriously consider using a receiver, who not only shields the lender
from liability exposure, but also from other creditors’ view of the lender as a
“deep pocket.” The receiver gives the lender impartial third-party control of the
asset, and also allows a quick start on assessing current status, determining operating
expenses, planning options for optimal recovery and preparing the property for sale
through appropriate strategies.
The receiver will apply for and maintain all necessary permits and licenses, verify
that documents are being properly recorded, secure approvals, select and monitor
vendors and contractors, and, importantly, assure that the project moves along carefully
and swiftly.