DO YOU EVEN LIFT BRO WHEN AND HOW

DO YOU EVEN LIFT, BRO? WHEN AND HOW TO DO LOAN WORKOUTS DICKINSON LAW BANKING LAW SEMINAR SEPTEMBER 6 T H , 2018 BANKING LAW SEMINAR | KEEP CALM AND BANK ON: BEST PRACTICES 1

Do You Even Lift, Bro? When and How to do Loan Workouts. I. Preparing for Your Workout From the Beginning- Jeff Baxter II. Don’t be Afraid to Modify - Ben Bruner III. Alternatives to Workouts - Brad Kruse IV. Protecting your Gains – Post Workout Issues - Mollie Pawlosky 2018 BANKING LAW SEMINAR | KEEP CALM AND BANK ON: BEST PRACTICES 2

I. Preparing for Your Workout From the Beginning- Jeff Baxter Don’t Overlook the Basics Confirm the information on the documents is accurate - • • • Proper Parties Signatures Notarization Legal Description/Collateral Description Agreement of Documents 2018 BANKING LAW SEMINAR | KEEP CALM AND BANK ON: BEST PRACTICES

Notice of Homestead Exemption Waiver • Homestead protection can be waived. • Iowa Code § 561. 22 - In a contract affecting agricultural land (greater than 40 acres), waiver must: • Be in boldface type; • 10 point font or larger; • Be signed and dated by person waiving exemption (at the time of the execution); • Must include required language. 2018 BANKING LAW SEMINAR | KEEP CALM AND BANK ON: BEST PRACTICES

Homestead & Spouses • An encumbrance against the homestead , if the owner is married, is not valid, unless and until the spouse of the owner executes the same or like instrument. • Except – Spousal interest terminated by divorce; encumbrance is purchase money; a curt sitting in equity determines that invalidating the conveyance would unjustly enrich the non-signing spouse. • Tip: Attempt to documents marital status of borrower; obtain representation of marital status. 2018 BANKING LAW SEMINAR | KEEP CALM AND BANK ON: BEST PRACTICES

1. Purchase Money Priority 2. Security Agreement 3. Right to Financial Information; Inspect Books 4. Right to Inspect Collateral 5. Right to Appoint Receiver 2018 BANKING LAW SEMINAR | KEEP CALM AND BANK ON: BEST PRACTICES

II. Don’t be Afraid to Modify - Ben Bruner Analyzing the Loan File To Identify Issues • • Proper Parties Proper Signatures and Notarizations Legal Description Errors Inadequate Default Notice Inconsistencies Between Loan Documentation Loan History Potential Lender Liability Claims Collateral Valuation 2018 BANKING LAW SEMINAR | KEEP CALM AND BANK ON: BEST PRACTICES 7

Loan & Mortgage Modifications • Formal Modification of Mortgage Required: • Extension of Maturity Date • Increase in Secured Obligation • Potential Priority Issues: • Lenders may lose priority if amendments to note and mortgage “materially prejudice” the interest of junior lienholders. Examples: • Rate Increases • Increase in indebtedness • Reduced repayment period • Guarantor Consent To Amendment Recommended 2018 BANKING LAW SEMINAR | KEEP CALM AND BANK ON: BEST PRACTICES 8

Forbearance Agreements An accommodation agreement between the lender and a delinquent borrower whereby the lender agrees not to exercise its collection and enforcement remedies as long as the borrower agrees to a plan that will, over a certain time period, bring the borrower current on his payments or otherwise cure its defaults. 2018 BANKING LAW SEMINAR | KEEP CALM AND BANK ON: BEST PRACTICES 9

Forbearance Agreements (con’t) Key Provisions to Be Included • Acknowledgement of Validity of Loan Documents • Acknowledgment of Default • Acknowledgment of Outstanding Indebtedness Amount • Release of Claims from Borrower • Period of Forbearance Other Provisions to Be Included • Forbearance Fee • Bankruptcy Provision • Additional Covenants of Borrower • Remedies 2018 BANKING LAW SEMINAR | KEEP CALM AND BANK ON: BEST PRACTICES 10

III. Alternatives to Workouts - Brad Kruse Major due diligence items and topics include the following: v Review loan documents – has everything been properly executed by all parties? v Are the legal descriptions and collateral descriptions correct? v Review UCC filings – is everything up to date? – was everything properly filed in the first place? v Are all financial covenants and ratios in compliance? v Obtain new tax, lien, and judgment searches on the Borrower and Guarantors.

Options v Deed in Lieu of Foreclosure v v Bank obtains title to the Real Estate immediately Junior Liens on the Real Estate are not removed by the process No requirements of mediation or for notices of right to cure If Borrower agrees, Bank may retain and pursue a deficiency against the Borrower (most Borrowers will require Bank to waive any deficiency v Voluntary Nonjudicial Foreclosure v Iowa Code Section 654. 18 v Extinguishes Junior Liens v Bank is required to waive deficiency against Borrower

IV. Protecting your Gains – Post Workout Issues - Mollie Pawlosky 1. Lender must give the Borrower a notice to cure default 2. Lender must attempt mediation 3. The Borrower receives a preference in receivership 4. The Borrower is allowed to seek a continuance 5. The Lender is barred from seeking foreclosure without redemption 6. The Borrower receives a right of first refusal, following the recording of the Sheriff's deed 2018 BANKING LAW SEMINAR | KEEP CALM AND BANK ON: BEST PRACTICES 13