M2 EQUITYBITES-August 16, 2012-PREIT closes three non recourse loans
of USD402m(C)2012 M2 COMMUNICATIONS http://www.
NAA/NMHC and a coalition of trade groups have filed a "friend of the court" brief in an important case pending before the Michigan Supreme Court that could have a chilling effect on conduit borrowers, including apartment firms, by converting non-recourse loans
into recourse loans
(Wells Fargo Bank, N.
Given Treasury's intention of coupling the allocation of debt-financed deductions with the allocation of the liability that is financing the deductions among partners, it appears the deductions that are financed by member recourse loans generally should be allocated to the lending or guaranteeing member.
In the case of member recourse loans, the liability does not fall squarely within the definition of partner nonrecourse debt under Regs.
One suggested approach would be that by not subjecting the deduction attributable to a member recourse loan to the partner nonrecourse debt rules, the LLC is free to allocate these deductions pursuant to the general sharing ratio under the partnership agreement.
In non-recourse loans
, some "bad boy" provisions have the effect of converting the non-recourse loan
to a full recourse loan
such that the borrower becomes liable for the full amount of the loan.
Typical of commercial lending a couple of years ago were recourse loans
at a 50 percent loan-to-value (LTV).
In the case of a recourse loan, the borrower has given an agreement to the lender to repay the debt.
The default of a recourse loan is quite serious, because other assets of the property owner/borrower, whether an individual or a corporation, are liable for the remaining debt and might be seized by the lender.