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SpotlightAttorney Spotlight 
Kim Web Photo
Kimberly A. Rayer
 
 
Kim concentrates her practice in the areas of financial services, commercial contracts, real estate and corporate law. Kim has extensive experience representing banks, financial institutions, as well as companies in connection with commercial financing transactions, including acquisition financing, asset-based financing, healthcare receivable financing and other secured transactions. She has experience with intercreditor relationships, as well as creditor's rights in bankruptcy. Kim also advises small businesses on corporate governance and transactional matters.

Kim is admitted to practice before the Supreme Courts of Pennsylvania and New Jersey and the Federal District Court for the Eastern District of Pennsylvania. She is a member of the Philadelphia Bar Association and the National Association of Government Guaranteed Lenders (NAGGL).

Kim is a graduate of Drexel University where she received a Bachelor of Science Degree, cum laude, and the James E. Beasley School of Law, Temple University, where she earned a Juris Doctor degree.
  
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FeaturedArticleBEST PRACTICES:
TITLE INSURANCE - HOW MUCH IS ENOUGH?
By Ethan W. Smith

Ethan Smith

When closing SBA loans, lenders often wonder how much title insurance to obtain on real estate collateral.  This is especially true in 7a lending, where loan amounts routinely exceed the value of the collateral being insured.  How should lenders strike the balance between obtaining title insurance in an amount high enough to sufficiently protect their interests, while not overinsuring and causing their borrowers to incur unnecessary closing costs?  In performing this analysis, it is helpful to keep a few basic principles in mind:

 

First, it is important to understand the limits of title insurance coverage.  All American Land Title Association ("ALTA") policies limit the title underwriter's liability to the lesser of: (i) the face amount of the policy; (ii) the fair market value of the property insured; or (iii) the actual loss sustained by the insured claimant. 

 

Second, SBA regulations generally require lenders to file all liens in the full loan amount.  The only exception to this rule is for liens on secondary collateral in states where there are adverse tax consequences associated with the recording of lender's lien; in such cases the lien may be limited to 150% of the equity in the property.  SOP 50-10 5 (B), p.181.

 

Third, SBA regulations only require lenders to take liens on personal residences to meet the requirement of "fully secured" when the property has equity that is equal to or greater than 25% of the fair market value of the property.

 

The SOP does not contain specific requirements regarding the amount of title insurance that lenders must require.  Although the Loan Authorization Boilerplate contains optional language for the amount of title insurance coverage that may be required, there is no express guidance from the SBA as to when to require title insurance, and how much coverage is enough.  In the absence of express direction from SBA, lenders must look to the catchall "prudent lending" standard that governs all SBA loans.

 

Therefore, when the loan amount exceeds the value of the property, it does not add significant value to the lender or the SBA to require title insurance in the amount of the loan.  Instead, it is more appropriate to require insurance in an amount equal to the value of the real property being insured.  An even more conservative approach would be to take title insurance in an amount equal to 150% of the equity in the property.  This will provide protection to the lender in the event the borrower's equity in the property increases or if the property appreciates in value post-closing.  Regardless of the decision lenders make as to the amount of title insurance to obtain, the decision should be well documented in the lender's file and the interests of providing adequate protection to the lender and avoiding unnecessary costs to the borrower must be balanced.

 

For more information on title insurance and other closing issues, contact Ethan Smith at [email protected] or 215-542-7070.

 


DYKDid you know...
 
Compass

...that Starfield & Smith, P.C. can provide title insurance in Pennsylvania and New Jersey and can assist its lender clients to place title insurance nation-wide through its national title underwriting network?

 For more information about this and other services Starfield & Smith, P.C. provides its clients, please call Ethan Smith at 215-542-7070 or by email at [email protected].

 
SeminarSeminars and Events
  
Fundamentals of SBA Lending: Documenting, Closing and Funding the SBA Loan

Presented by: Lorman
Date: March 4, 2010 from 1:00 pm EST - 2:30 pm EST
Location: Webinar
 
SBA lending affords banks and other lending institutions with the opportunity to finance commercial loans to small businesses and, at the same time, secure a 50 to 90 percent loan guarantee from the federal government. While the program can be quite profitable, it's not without its risks. Compliance with SBA regulations is mandatory to ensure success and profitability. With seismic changes occurring to the program over the last several months, it is critical to understand the new regulations and the way to make the SBA loan programs work for you.

Register online by clicking here or call 866-352-9539
Discount code: Z7745121
Priority code: 15000
 
Closing and Funding the SBA Loan

Presented by: NAGGL
Instructor: David W. Starfield
Date: March 8 - 9, 2010
Location: Huntington Beach, CA

On March 8 and 9, 2010 at the NAGGL SBA Lender Training Event in Huntingdon Beach, CA, David Starfield will present the 2-day course, "Closing and Funding the SBA Loan." This program is of special interest for all those who prepare loan closing documentation and who coordinate key people and events in the loan closing meeting. Topics will include, SBA standardized loan authorization; SBA closing forms; SBA closing regulations; lender documentation; securing the lender; and much more.
 
To register online, click here.

Advanced SBA Loan Documentation and Closing

Presented by: NAGGL
Instructor: David W. Starfield
Date: March 10, 2010
Location: Huntington Beach, CA

On March 10, 2010, at the NAGGL SBA Lender Training Event in Huntingdon Beach, CA, David Starfield will present the "Advanced SBA Loan Documentation and Closing" course. This session is designed to help lenders ensure that the documents they asemble comply with the SOPs, the loan authorization and sound lending practices. Topics will include key loan closing issues; tax, lien and judgment searches; third parties; loan modification issues; and more.
 
To register online, click here.
 
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ContactInfo Starfield & Smith, P.C.
Pennsylvania Office
501 Office Center Drive,
Suite 350 | Ft. Washington, PA 19034
phone: (215) 542-7070 | fax: (215) 542-0723
 
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1516 West Lake Street, Suite 303 | Minneapolis, MN 55408
phone: (612) 208-0877 | fax: (215) 542-0723

http://www.starfieldsmith.com
 
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