McDonnell Property Analytics (“MPA”) is
often engaged by real estate investors who purchase, hold and manage residential properties,
mixed-use properties, gyms, warehouses, office buildings, apartment complexes, and other types
of commercial properties held for long-term investment, business use, or lease. MPA analyzes
commercial mortgage transactions, examines commercial mortgage servicers’ transaction histories,
performs financial forensic examinations, and provides litigation support.
In most instances, investors will need to secure mortgage financing to purchase, remodel, or
refinance the underlying debt to maximize the cash flow potential of the investment. Disruptions
can occur when, for example, there is an economic downturn such as in the 2008 Financial Crisis;
an anchor tenant fails to pay the rent; the property is damaged by fire, flooding, natural
disaster, etc.; or a national emergency has been declared such as in the recent COVID-19
lockdown.
Dealing with disruptions that cause delinquency or default in mortgage payments can be
challenging depending on whether the lender holds the loan in its portfolio or sells the debt to
an investment bank for securitization purposes.
Since commercial consumers’ rights and remedies are strictly contract-based, MPA begins by
conducting a review of the terms sheet, note, loan agreement, mortgage, assignment of leases and
rents, personal guarantees, etc., that constitute the legal obligation between the parties.
We then translate the note or loan agreement into
its mathematical form and effect, which requires a close reading of the interest calculation
methodology, default triggers, default interest rates, and the rights of the parties in the
event of default.
Using Microsoft Excel, we create a dynamic three-dimensional mathematical model based upon the
terms of the loan agreement at issue and compare that to the static two-dimensional monthly
mortgage statements and transaction histories provided by the lender or its servicer. This
comparative analysis allows us to determine whether the servicer’s mortgage servicing platform
is precisely accurate; whether interest rate and payment changes have been calculated correctly;
whether escrow deposits and disbursements comply with the terms of the mortgage contract; and
whether the servicer has applied the borrower’s monthly payments to the appropriate accounts.
Once we have completed our Financial Forensics Examination, we identify errors, overcharges,
omissions, and malfeasance in the servicing of a mortgage loan account which give rise to claims
such as breach of contract, negligence, breach of the duty of good and fair dealing; and
potentially, for recognized exposures under traditional tort theories of fraud, duress,
unconscionability, and tortious interference.
Lender liability theories are asserted under contract theories, tort theories, equitable
theories, and statutory grounds. In a lawsuit brought by the lender for recovery under the loan
documents, courts have held that most lender liability claims are compulsory counterclaims in
the lenders’ suit on a note or to recover a deficiency judgment after foreclosure. Therefore,
regardless of whether a commercial consumer brings an affirmative action or defends against the
lender’s lawsuit, they are expected to proactively identify their claims and properly assert
them in their responsive pleadings.