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During the course of representing both lenders and guarantors in real estate loan work-outs, I routinely see accusatory correspondence that often goes nowhere.  Usually detailed and lengthy, the typical letter attempts either to argue that the lender is being wholly illogical or it asserts with great vitriol that the lender is acting in such bad faith that it will pay heavy monetary penalties.  However meritorious, neither of these strategies work very often, and for very practical reasons they usually lead to even greater frustration when the correspondence is simply ignored.

Experience teaches that most of the time these frustrations are produced when guarantors ignore three basis considerations.  First, the special assets addressees of the correspondence are usually consumed with other, more pressing crises in one or more loans in their ever-increasing case loads.  They either don’t have time or won’t make time to compose a response, let alone a careful and constructive one.  Second, most of the time lenders are not being irrational, they are simply operating out of what they perceive to be their own self-interest and pursuant to a plan which they and their committees genuinely believe is both cogent and logical.  Third, lenders receive these kinds of letters on most of their troubled files and so the automatic reaction is simply “Here we go again.”

Here are some practical tips to avoid these frustrations.  For one thing, it is imperative for the guarantor to focus upon aspects of their particular situation which have short fuses—that is, something very bad can be avoided or something very good can happen if quick and close attention is given to their matter.  The pendency of a foreclosure sale date and the consequent need for a lender to carefully study what its credit bid is going to be is often such an occasion because lenders prefer not to own the property.  Another example might be a development opportunity which needs to be seized by the parties in order to minimize exposure for all involved.  Perhaps a window for entitlement may be closing, or the interest of a potential third party development partner could be waning, or certain tax deadlines could be looming.

Armed with that information, perhaps first communicated in an email but in all events followed with a phone call, the goal ought to be to set up a personal meeting with the lender.  Progress is frequently made at meetings where truly authorized representatives from both sides are present, while the back-and-forth process of letter exchanges just drags on and it becomes too easy for a lender to ignore correspondence.  And here the guarantor should make the logistics easy for the lender—volunteering to go to the lender’s town or office, perhaps putting a time limit on the length of the meeting, and maybe a promise could be made, once there is firm commitment to meet, to circulate a very short, bullet point outline beforehand.

In all of this, the prudent guarantor will certainly need to be guided closely by legal counsel with a full range of rather specific skill sets.  Table-pounders are usually ineffective but, at the same time, the attorney must be fully versed in the many weapons available in a guarantor’s toolbox.  See, for example, the articles on this website entitled:

Another key quality is the ability to couch proposals in terms of the lender’s needs.  Further, not every lawyer is proficient in the arts of reading people, politely forcing them to be specific, and building credibility.  Finally, the all-important skill of following through is critical to achieve any meaningful progress.


Mr. Norman is Chair of Cooper White & Cooper LLP’s Real Estate Solutions Group.  For further information, please email or call at 415-765-6236.

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