“When a borrower defaults on its loan, its lender is faced with a major decision — will it exercise its remedies under the loan documents, including foreclosing on the collateral? Or will it work with the borrower to possibly waive the default, enter into a forbearance agreement or otherwise modify the loan and loan documents? Before getting to this crucial decision, however, there are other preliminary issues to consider. Among these issues is the following question: how should it respond to the borrower’s communications regarding the default and requests to discuss possible loan modifications? Should it send a reservation of rights letter? And should any other step be taken before entering into workout discussions with the borrower? The purpose of this article is to advise lenders on these key preliminary issues.”
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