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This article was featured in the March/April 2014 edition of Virginia Banking.

Each issue of Virginia Banking is devoted to legal, legislative and informational articles related to the state banking industry, technology issues, bank profiles and personnel updates. 

Click here to view the March/April 2014 edition. 

The UCC frequently requires financing statements to perfect the security interests of lenders in collateral granted by the borrower. Financing statements provide notice to third parties and bankruptcy trustees of the existence of the security interest. One of the key requirements of a financing statement is that it contains an adequate description of the collateral.

Recently, the United States Court of Appeals for the Sixth Circuit ruled that a lender's security interest in accounts was not perfected and thus not entitled to priority, because the lender's financing statement did not include the word "accounts" in its description of the collateral. See 1st Source Bank v. Wilson Bank & Trust et al., 735 F.3d 500 (6th Cir. 2013). The lender's security agreement described the collateral as equipment, accounts, and the proceeds from the collateral. The financing statement identified the collateral as equipment and "all proceeds thereof, including rental and/or lease receipts." The financing statement failed to mention accounts. Applying Tennessee law, the Court stated that "revenues earned through the use of collateral are not proceeds" and the proceeds from the accounts receivable were not subject to the lender's collateral for purposes of priority since accounts were not identified. Thus, the junior lenders who, with respect to the borrower's accounts and related proceeds, had listed "accounts" or "accounts receivable" in their financing statements held priority over the lender who filed its financing statement earlier in time.

The Court's holding has bankruptcy implications as well. Since the Bankruptcy Code does not ... continue reading... 

Title insurance companies have protected the American dream of homeownership for more than a century and the behind-the-scenes work of title insurance agents ensures the quick and secure transfer of land, giving consumers and lenders confidence in their investment. On closing day, a homebuyer not only attains ownership of a property, the buyer also walks away with the assurance that his interest in the property is protected. This is all achieved through the professionals working in the land title insurance industry.

When someone purchases a home, how can they be sure that there are no problems with the home's title and that the seller really owns the property? Problems with the title can limit a homeowner's use and enjoyment of their property, as well as bring financial loss. This is how a title search and title insurance provide benefits.

After a buyer's sales contract has been accepted, a title professional will search the public records to look for any problems with the home's title. This search typically involves a review of land records going back many years. Nearly 40 percent of all title searches reveal a title problem that title professionals fix before going to closing. For instance, a previous owner may have had minor construction done on the property, but never fully paid the contractor. Or the previous owner may have failed to pay local or state taxes. Title professionals seek to resolve problems like these before you go to closing.

What happens if a problem arises after a homebuyer moves in? This is an additional benefit provided by the title insurance industry. An Owner's Policy of Title Insurance remains in effect for as long as the policyholder (or their heirs) owns the property that is insured. A claim could actually be filed 50 or 100 years after the policy was issued. And, an Owner's Policy covers legal expenses involved in defending the title on behalf of the homeowner.

Let's face it - a homebuyer certainly has more than enough to think about during the closing process when purchasing a new home. An Owner's Policy provides peace of mind that comes from knowing their investment is protected.

The American Land Title Association helps educate consumers about title insurance so that they can better understand their choices and make informed decisions. Homebuyers, regulators and legislators are encouraged to check out the website, www.homeclosing101.org, to learn more about title insurance and the closing process.

VTC is frequently asked by our customers why they need owner's title insurance coverage. This is just one summary of the benefits of this nominal investment.

For more information on how obtaining an Owner's Policy can prevent potential nightmares, contact Bobby Fothergill at 1-800-468-5811. Additional benefits of Title Insurance are available here. 

7 Bold Commercial Real Estate Predictions

Conjuring the future of commercial real estate begins by conjuring our future. How will we work, live, shop or do business? Perhaps no other investment sector is so closely tied to people's most fundamental needs and behaviors; its evolution, to a large extent, follows ours.

Take it from Peter Linneman of Linneman Associates and the Albert Sussman Emeritus Professor at The Wharton School of Business, who pioneered the academic study of real estate and was named by the National Association of Realtors as one of the 25 most influential people in the business. Commercial real estate, he said, "exists to service the economy and society. That's all we do."

Over the next 25 years, say Linneman and other key players in the industry, commercial real estate will be buffeted by changes in demographics, technology, globalization, economic and environmental realities and a host of other trends. Some pieces of the trillion-dollar global industry will adapt; others will fall away. It will still be a cyclical business, but no matter how it changes, commercial real estate is expected to be thriving in 2039.

Here are seven bold predictions about U.S. commercial real estate in 2039.

Continue reading to learn about the 7 predictions.... 

Addressing the twin challenges of persistent consolidation in the banking industry and regulations that are disproportionately burdensome on the smallest financial institutions is essential to ensuring a future for the nation's community banking system, Independent Community Bankers of America (ICBA) President and CEO Camden R. Fine said. Speaking in Boston, Fine said that policymakers must ensure their regulations nurture the unique strengths of the community bank model instead of squeezing these institutions into a one-size-fits-all regime.

"Community banks have evolved and remade themselves countless times in their more than 200 years of history, and they will continue to do so in this rapidly changing environment," ... "But we cannot let excessive and ill-fitting regulation take away their ability to adapt, and survive."

... Fine noted that the continued concentration of banking assets in the hands of the largest banks risks the loss of availability of banking services in small and rural communities.

..."How our nation's community banks fare in the future will have a significant impact on not just our banking system, but also on our culture, our economy, consumers and the vitality of thousands of smaller communities and rural areas across the country," Fine said.

Click here for the entire article.

While a mechanism for financing a portion of the cost of eligible hotel and tourism projects in Virginia commonly referred to as the "Tourism Development Financing Program" (the "Program") began slowly, the use of this Program is now on the rise. Several developers and municipalities across the Commonwealth, including notably the iconic oceanfront Cavalier Hotel in Virginia Beach, plan on using the Program for development or redevelopment of their hotel projects. In essence, the Program provides a source of "tax rebate" financing to pay down the debt associated with not greater than 20 percent of a qualifying project's cost. Accordingly, the Program is designed to promote the development of hotels, motels and related tourism projects that might not be financially feasible without the cash flow enhancement available through the Program. The Program is codified at VA § 58.1-3851.1 in 2011 and is administered by the Virginia Tourism Corporation in conjunction with the Virginia Resource Authority.

The Program acts very much like a tax increment financing district for conventional real estate. Provided the proposed hotel or other tourism project satisfies the qualifying criteria, a portion of the state sales and use tax applied to "transactions taking place on the premises" (e.g., the hotel "room" tax) and an equal portion of local tax revenues (note the local matching portion is not limited to the sales and use or "room" tax) can be "rebated" to the project developer to allow the project developer to finance 20 percent or less of the qualified development cost of the project. By this mechanism ....continue reading 

Question: What is a "Pre-existing Business Relationship" and its effect on affiliate marketing?

Answer: At its core, the pre-existing business relationship is a relationship between a "person" or "persons" (i.e.,residential mortgage lender and originators) and consumers, based on these three rudimentary criteria:

1. A financial contract between the person and the consumer that is in force on the date a solicitation covered by the affiliate marketing provisions is sent to the consumer;
2. The consumer's purchase, sale, or lease of the person's goods or services, or a financial transaction (including holding an active account or a policy in force or having another continuing relationship) between the person and the consumer during the eighteen-month period immediately preceding the date a solicitation covered by the affiliate marketing provisions is sent to the consumer; or
3. An inquiry or application by the consumer regarding a product or service offered by the person during the three-month period immediately preceding the date a solicitation covered by the affiliate marketing provisions is sent to the consumer.

There are essentially two scenarios that come under scrutiny: (1) where there is a pre-existing business relationship, and (2) where there is no pre-existing business relationship. [16 CFR § 680.3(j)(i)-(iii); 16 CFR § 680.3(j)(2)-(3)]

A pre-existing business relationship is where a consumer:

►Has an existing loan account with a creditor-the creditor has a pre-existing business relationship with the consumer and can use eligibility information it receives from its affiliates... continue reading 

by Kenneth R. Harney, Los Angeles Times, Real Estate

Can you be charged interest on your mortgage even after you've fully paid it off? Can the meter keep running when you owe the bank nothing - your principal balance is zero?