Keeping Up on Following-On

The subject of opinions requested and given in loan modification transactions and other activity after closing of the loan as originated has been discussed often in gatherings of opinion practitioners, without much resolution or confidence in conclusions. The subject has been well-discussed in several articles in this Newsletter. In publishing these articles, we have hoped not merely to provide information but also to stimulate thought about good solutions for every participant in the opinion process facing the questions raised by various requests for assurance about the effect of an amendment or modification in relation to the existing loan.

The real estate centric opinion committee leadership has agreed to collaborate to identify supported solutions and recommendations, and prepare a statement on recognized and improved practice as they have in significant subjects previously. A joint drafting committee has been established by the opinions committees of ABA RPTE, ACMA, and ACREL (see below) with the goal of developing a recommendation for these opinions that may have uniformity as well as what variables might be required and when they may be needed.

The shape of this project is along these lines:

1. What is a follow-on opinion, and what is its goal?
2. What content is typically requested?
   1. Effect of amendatory document itself.
   2. Effect on original documents.
   3. Original documents as amended are enforceable.
   4. Does it matter if opinion giver gave an enforceability opinion on original loan?
3. What are reasons for it?
4. On what basis can the opinion preparer respond?
   1. Applicable law or governing law jurisdiction legislation
      1. Chosen law issues.
   2. What legislative solutions exist?
   3. What governing law exists?
   4. Are any of these models for broader consideration – e.g., a Uniform Law; other?
5. Is a third party legal opinion the right way to address the concern?
   1. What assumptions and exceptions are necessary?
   2. If the opinion excludes priority, should it address effect on priority?
   3. Does the opinion address novation?
   4. If based solely on a statute, . . . 
6. What alternatives to a third party opinion?
   1. ALTA policy endorsement
      1. What content and scope?
      2. What underwriting requirements?
      3. Where issued, where not; why?
      4. What cost?
   2. Others?
7. How have you managed this?

This project aims to be national in scope, and address differences in applicable law of U.S. jurisdictions and practice responsive to it.

The TriBar Opinion Committee has also undertaken a project on this subject. That project (purposefully) does not encompass real estate secured transactions, as the subject is outside the purview of TriBar. The work on that project continues and will likely integrate well with the Real Estate Opinion Committees’ work described here. It will be appropriate and important to coordinate the result of this work with the results of the TriBar work. Differences in result should be driven primarily by the effect of law governing real estate secured transactions.

The Joint Drafting Committee members are:

• Sterling Scott Willis – Editor (New Orleans, LA)
• Robert G. “Jerry” Converse (Austin, TX)
• William B. Dunn (Birmingham, MI)
• Catherine T. Goldberg (Albuquerque, NM)
• R. Marshall Grodner (Baton Rouge, LA)
• Kenneth M. Jacobson (Chicago, IL)
• Cheryl A. Kelly (St. Louis, MO)
• Charles L. Menges (Richmond, VA)
• David L. Miller (McLean, VA)
• Imran Naeemullah (Chicago, IL)
• Mark S. Sharpe (Charleston, SC)
• Charles J. Wilkes (Newark, NJ)

If you have any suggestions related to this project, please contact the editor: Sterling Scott Willis: [email protected]