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.

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