BOMA International Supports Nonrecourse Mortgage Loan Act in Michigan
Ensuring CMBS Loans Remain Nonrecourse Will Benefit Development and Jobs
(firmenpresse) - WASHINGTON, DC -- (Marketwire) -- 04/18/12 -- The Building Owners and Managers Association (BOMA) International applauds the Michigan Legislature for passing the Nonrecourse Mortgage Loan Act, which prevents lenders from seeking damages against a borrower or guarantor due to the borrower's inability to remain solvent.
Over the past decade, lenders have made more than $1 trillion in commercial mortgage backed security (CMBS) loans to the owners of commercial real estate nationwide. These loans were underwritten, marketed, sold and documented on the explicit basis that they were nonrecourse, meaning the borrowers had no personal liability for the debt. Instead, the CMBS lender's sole remedy was to take back the property in the event the borrower became insolvent, and the lender was prohibited from obtaining a monetary judgment for any deficiency. This nonrecourse feature made them attractive to borrowers.
"CMBS loans are an effective tool in attracting investment grade development to the nation's cities thus creating needed jobs and economic benefits," commented BOMA International Chair Boyd R. Zoccola, executive vice president, Hokanson Companies Inc. "If borrowers are required to put their personal assets at risk, these projects will never see the light of day."
The legislation comes on the heels of an ongoing court case, Wells Fargo Bank, NA v. Cherryland Mall, which exposed wording in some commercial real estate loans that allowed lenders to pursue the personal assets of real estate investors; the judge ruled insolvency by the borrower triggered the full recourse and thus the borrower's personal liability for the loan deficiency. This was despite the undisputed intent of the contracting parties - the lender, loan buyer, and the borrower and guarantor. BOMA International and BOMA/Metro Detroit have filed an Amicus Brief in the Michigan Supreme Court to reverse a Michigan Court of Appeals' decision involving the interpretation of these loan agreements funded with assistance from BOMA International's Industry Defense Fund. This case could severely impact nearly $700 billion in CMBS loans that are currently outstanding, and threaten the country's already fragile commercial real estate market.
About BOMA International
The Building Owners and Managers Association (BOMA) International is an international federation of more than 100 local associations and affiliated organizations. Founded in 1907, its 16,500-plus members own or manage more than nine billion square feet of commercial properties. BOMA International's mission is to enhance the human, intellectual and physical assets of the commercial real estate industry through advocacy, education, research, standards and information. On the Web at .
Laura Horsley
Director of Communications
BOMA International
Phone: (202) 326-6315
E-Mail:
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Datum: 18.04.2012 - 08:39 Uhr
Sprache: Deutsch
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