Real Estate Financing

Commercial acquisition and refinance loans, construction loans, and the mezzanine or preferred-equity layer behind a senior mortgage, along with the purchase or refinance of a home. The documents differ more than the economics do. A home loan runs on federal consumer disclosure deadlines, a construction loan on title date-downs and contractors' sworn statements at each draw, and a mezzanine loan on a pledge of the borrower's equity that can be foreclosed under Article 9 in weeks rather than through a judicial foreclosure in months.

Because the lender's form is drafted for the lender's bad day, and the borrower's bad day is the only time it will be read. Three places repay the reading. The recourse carve-outs decide whether a nonrecourse loan reaches the guarantor's other assets. The transfer clause may treat a change in the borrower's ownership, a lease to a major tenant, or a second mortgage as a default. The cure periods are shorter for payment defaults than for covenant defaults, and there is none at all for a bankruptcy filing.

Residential lending is regulated; commercial lending is negotiated. A home loan arrives with federal disclosure deadlines, ability-to-repay underwriting, and a three-day rescission right on most refinances, and almost none of it can be waived. A commercial loan has no consumer protections and is governed by its own text: the financial covenants, the cash-management provisions, and the carve-out guaranty are all set by negotiation. Illinois also gives a commercial mortgagor a shorter redemption period in foreclosure than a homeowner receives.

Yes, and the first document we read is the old loan, not the new one. Its prepayment clause decides whether the payoff is par, yield maintenance, or defeasance, and the payoff letter carries an expiration date and a per-diem that have to match the closing. On the new loan, the title company will require a release of the old mortgage and any assignment of rents, and the new lender's policy will except any lien recorded in the gap. On a principal residence, the three-day rescission period means the funds move on the fourth business day, not at the table.

The ones that fire without a missed payment. A cross-default clause lets a default on another loan, sometimes with another lender, accelerate this one. A transfer restriction can reach a change of control in the borrower's parent. A financial covenant tested quarterly can trigger a cash sweep while every payment is current. A deposit-account control agreement can let the lender freeze operating cash the day a covenant breaks. Each is negotiable before the commitment letter is signed, and none is negotiable after.

The loan documents sit on top of everything else and override whatever they touch. The purchase contract's closing date has to survive the lender's conditions, so the financing contingency and the rate-lock expiration are calendared together. The operating agreement is amended to lender form, usually to add single-purpose covenants and a consent right over transfers. Leases are conformed with estoppels and subordination agreements, and any management agreement is subordinated too. We run one closing checklist across all of it, so a change in one document reaches the others the same day.