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IN THE SPOTLIGHT
| Jeffrey S. Feldman, Esq. |
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Jeff concentrates his practice on the litigation, arbitration and trial of commercial disputes in the state and federal courts. Over the course of his more than 15 years of litigation experience, he has represented organizational and individual clients in lawsuits involving a broad range of substantive areas, including: contract law, the Uniform Commercial Code, the transfer and enforcement of judgments, creditors' rights matters, partnership law, disputes among shareholders in closely held companies, disputes among members of limited liability companies, injunction proceedings, covenants not to compete, breach of fiduciary duty claims, business tort claims, unfair competition claims, civil fraud claims, class actions, civil conspiracy and RICO claims, commercial disparagement and defamation claims, abuse of process claims and vicarious liability claims.
ADMISSIONS:
- Pennsylvania
- New Jersey
- United States District Court for the Eastern District of Pennsylvania
- United States District Court for the District of New Jersey
- United States Court of Appeals for the Third Circuit
To read more about Jeff, click here.
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FEATURED ARTICLE
Best Practices: Mitigating Risks of Intervening UCC Filings with Payoff Letters
By: Kristen G. Dickey, Esquire
| Kristen G. Dickey, Esquire |
SBA reports that the most frequent reason for a repair of the SBA guaranty is the lender's failure to obtain the correct lien position on collateral as set forth in the SBA Loan Authorization. While the priority of a lender's lien applies to both real and personal property, the recommendations set forth herein pertain to a borrower's business assets only. Title insurance coverage is usually the starting place for protecting lien priority on real property.
SBA Loan Authorizations frequently require that security interests be taken on all of a borrower's business assets or "personal property," the perfection of which are governed by the filing requirements of the Uniform Commercial Code (UCC). The payoff letter is an often overlooked piece of due diligence that is vital to properly document and close some SBA loans in accordance with the SOP and the requirements of the SBA Loan Authorization. Many times, the payoff letter becomes a last minute item obtained in a rush prior to closing. Unfortunately, an insufficient payoff letter can give rise to a repair or denial of the SBA guaranty when a lender fails to obtain a commitment from a creditor to release its lien(s) upon payoff.
A carefully crafted payoff letter details the specifics of the loan to be paid off and provides the total payoff amount through a specific date along with a per diem rate with which to calculate interest if the payoff arrives after the specified date. Additionally, the payoff letter should include a request for the creditor to confirm that it will release its lien on and security interest in borrower's assets and file a termination of any and all associated UCC filings within a designated time frame upon creditor's receipt of the payoff. The creditor should specifically identify the UCC filing(s) by filing number. By comparing the creditor's list of UCC filings to be terminated upon payoff with the results obtained from a proper UCC search, a lender can identify any intervening liens that may require resolution prior to closing.
Sometimes a UCC filing may appear on a lender's UCC search that does not relate to a loan payoff, and this may indicate that a creditor that was previously paid in full failed to terminate its UCC filing. If the debt was paid in full, borrower will need to contact the creditor and obtain a UCC-3 termination filing prior to closing. In other situations, a creditor may refuse to terminate the UCC filing associated with a loan payoff because the same collateral secures a different loan by the same creditor. In this instance, if the debt is currently outstanding, lender may ask borrower whether it is possible to pay off such loan before closing and obtain a UCC-3 termination filing, or borrower must contact the creditor to request a subordination agreement or intercreditor agreement. Otherwise, lender's underwriting department must confirm whether taking a position junior to the creditor will be acceptable in terms of both lender and SBA rules.
The UCC does not give a lender who has paid off a borrower's debt owing to an existing creditor the authority to terminate that existing creditor's UCC filing. While debtors do possess such a right under limited circumstances, the best practice is for lenders to either: (i) require a written confirmation from each creditor of record that it has no lien against the borrower; (ii) require each creditor of record, through use of a payoff letter, to provide written authorization for the lender to file a UCC-3 termination filing upon payoff; or (iii) have each creditor of record provide a copy of its properly filed UCC-3 termination prior to closing.
For more information regarding mitigating risks of intervening UCC filings with payoff letters, please contact Kristen at [email protected] or at 407.618.0698.
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Date: August 18 - 20, 2014 Location: Westin Riverwalk, San Antonio, Texas For more information about this event and/or to register, click here.
Date: September 17 - 19, 2014
Location: Rosen Shingle Creek Resort, Orlando, FL
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Date: October 28 - 30, 2014
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Bob Cota / President / PCFS Solutions
It is a pleasure working with a law firm that can provide us with legal advice that also addresses the business aspects of the issues that we deal with. Your counsel, combined with your unique knowledge of the SBA industry, has been a great help to us.
We look forward to a long relationship with your firm.
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