Ronn Steen, Author at Creditors’ Rights and Bankruptcy Attorney

Leaving La Vida LIBOR or SOFR so good? LIBOR will cease in 2021. Are you prepared?

By Ronn Steen, July 21 2020

0 Shares

As if the current economic markets were not already volatile and uncertain enough, a new problem is looming on the horizon. The end of 2021 will also mark the end of the London Interbank Offered Rate (“LIBOR”), which is the benchmark not only for banks’ short-term transactions but for banks, corporations, and other entities for determining interest rates in various financial transactions and contracts. LIBOR has been the standard for setting interest rates in commercial contracts for over fifty (50) years when it was used in 1969 by J.P. Morgan in an $80,000,000.00 transaction as the basis for the interest rate. There are varied reasons for LIBOR’s demise, but it largely stems from the 2008 market meltdown when LIBOR’s rates were manipulated. While banks and financial institutions are not required to use LIBOR, most do because of its history, the manner that it is calculated, and to ensure uniformity not […]

Remote Control Not So Remote: Bankruptcy Remote Entities and Fiduciary Duties

By Ronn Steen, February 13 2017

Share

Share7

7 Shares

Special purpose entities (“SPE” or “SPE’s”) are frequently utilized in financial transactions for any number of reasons including: tax issues, protection of assets, liability insulation (including environmental concerns), and for the benefit of creditors involved in the transaction. SPE’s involve the creation of a corporate entity usually taking the form of a limited liability company, corporation, or limited partnership designed solely to serve a special need between the parties in a transaction. They provide a layer of insulation between one or more of the parties owning the SPE and the outside world. One subset of SPE’s is the “bankruptcy remote entity” (“BRE” or “BRE’s”). A BRE is most often created a the behest of a creditor/lender, and is used to protect that creditor’s collateral from other creditors or in an attempt to prevent a voluntary filing for bankruptcy protection. Typically, the creditor or someone friendly to the creditor is appointed as a […]

CFPB Proposes New Servicing Rule Affecting Mortgages and Foreclosures: The New Myth of Sisyphus

By Ronn Steen, November 24 2014

Share

Share8

8 Shares

In Greek mythology, Sisyphus was punished by the gods as a result of his chronic deceitfulness. Sisyphus was required to push a humongous boulder up a slope every day only to have it roll back down once it reached the top and then repeat the process. The parallels between this myth and the mortgage service industry cannot be understated. As a result of the “mortgage meltdown” and “robo-signing” scandal, the Consumer Financial Protection Bureau (the “CFPB”) was created to give consumers an oversight agency to protect them from rogue mortgage servicers. The CFPB, has previously enacted several rules and regulations designed to end “deceitful” and damaging practices in the mortgage industry. Recently, the CFPB has proposed a new rule designed to provide greater protections to consumers in the default and foreclosure process. The newly proposed rule, which has just been released for review and comment, would alter the Real Estate […]

Anonymity of SWAP Traders In the Post-Meltdown Age

By Ronn Steen, November 14 2014

Share

0 Shares

Let’s face it. Swaps are complicated. Few outside the financial industry fully understand them but they are an integral part of the financial and investment industry. The basic definition of a swap is “the exchange of one set of cash flows for another.” It is a future commodity, in which one party seeks to derive a benefit from an existing interest rate in a loan deal based upon what the interest rate may be on a future date. If the party is correct, it is deemed to be “in the money” and obtains a cash benefit. If incorrect, then the party will not, and be deemed to be “out of the money.” Swaps are traded in the marketplace, though not on any well-known exchange, and oversight of the swaps marketplace falls to the Commodity Futures Trading Commission (“CFTC”). When the financial markets melted down, Congress passed several laws in an […]

Love and Marriage: The Two Shall Become One…Except When Applying for Credit.

By Ronn Steen, November 5 2014

Share

Share11

11 Shares

It is common practice for lenders to require personal guaranties as part of the credit and collateral package when making a loan. Oftentimes, more than one guarantor is needed to “shore up” the creditworthiness of the credit applicant. Usually, multiple guarantors are not an issue except when one of the guarantors is a spouse of the applicant. More than ever, lenders need to exercise caution when seeking the guaranty from the spouse of an applicant. In 1974, Congress enacted the Equal Credit Opportunity Act (“ECOA”) in an effort to “eradicate credit discrimination waged against women, especially married women whom creditors traditionally refused to consider for individual credit.” Mays v. Buckeye Rural Elec. Coop., 277 F.3d 873, 876 (6th Cir. 2002). The ECOA’s implementing regulation is known as “Regulation B,” and it aims “‘to promote the availability of credit to all creditworthy applicants without regard to … sex [or] marital status [and other […]