Lender Liability - Research Proposal Example

Lender Liability Thesis ment The assignment is based on competing an annotated bibliography on the topic lender liability. Lender liability has gained significant recognition in the area of law. In brief, lender liability signifies that lenders should treat the debtors impartially and lenders are subjected to lawsuit the borrowers under several legal claims. Before initiation of lender liability, lenders were the ones who usually sued debtors from infringement of loan agreement. However, with the appearance of lender liability, debtors are also likely to sue lenders for the infringement of those loan contracts. Thus, it is vital to understand briefly regarding the concept of lender liability. Based on this aspect, the objective of the assignment is to summarize the works of various authors on the area of lender liability. About ten credible sources have been used in order to evaluate the quality of information and relevance on the research subject i.e. lender liability. Schott, S. P. (1992). Lender liability under CERCLA--past, present and future. UCLA Journal of Environmental Law and Policy, 11(1), 78-97. The author used various secondary sources in order to evaluate lender liability under Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Throughout the research, the author found that possible liability for lenders under CERCLA has lurked in every commercial loan transactions. Schott (1992) also found that due to reluctance of lenders towards foreclosure on mortgages deeds, the very purpose of CERCLA has been disenchanted. Schott (1992) has provided significant information on CERCLA, an Act, which enacted by Congress in order to regulate hazardous waste issues that stemmed from inappropriate, inattentive and irresponsible waste disposal activities. It is worth mentioning that Schott (1992) described various legal cases in order to assess the liability of lender of any property. The author observed that CERCLA has generated uncertainty for lenders with respect to their liability on waste reduction. Hence, the author pointed out the amendment of CERCLA as a way to improve law in the context of lender liability (Schott, 1992). Jensen, K., & Leonhardt, S. (2013). Students, loan servicers and the Servicemembers Civil Relief Act. Westlaw Journal, 19(10), 1-6. The authors have evaluated Servicemembers Civil Relief Act (SCRA) for addressing the problem of loan services of the students. The article portrayed that the mortgage lenders are not complying with the process of SCRA while providing loans. Jensen & Leonhardt (2013) recognized the threat of increased loan debt, which highlighted the importance of lenders liability while providing loans to the students. Various secondary sources have been utilized in the article in order to address the challenges of mortgage loans and most vitally litigation risks. In this research, the authors observed that SCRA provides protection to service members (military personnel) concerning debts. SCRA applies to every debt comprising student loans and therefore limit certain debt collection activities. However, loan servicers who underestimate SCRA can face ample challenges. The article thus provides information regarding the importance of SCRA for student loan servicers in order to acquire a better idea about their liability (Jensen & Leonhardt, 2013). Segerson, K. (1993). Liability transfers: an economic assessment of buyer and lender liability. Journal of Environmental Economics and Management, 25, 46-63. In this article, Segerson (1993) studied the circumstances under which it is effective to handover liability for contamination of a given area of property from the seller to the purchaser during sale. The author has identified two possible sources of ineffectiveness, one is associated with the level to which liability shifting between parties occurs and the other is linked with the level to which sellers can influence the possible liability through sale of property. The article also defines about CERCLA, which defines that a party buying a property fundamentally receives possible liability for cleanup and waste management for the same. The findings derived from the research also suggest that efficiency effect of liability transfer is subjected to relative magnitudes of the above discussed two sources of ineffectiveness. The author also described an economic model and condition for efficiency with respect to property. However, the explanation of whether liability transfer can encourage real world complexity was missing in the article. Furthermore, in the article, it was not clear that liability of purchasers is acceptable on the ground of efficiency (Segerson, 1993). Mintz, B. (2005). Revisiting lender liability claims under new theory. The National law Journal, 1-2. Mintz (2005) has re-examined the liability of lenders under new theories that have been developed from various liability claims. The author has certainly observed various liability claims that were the focal points of several litigation activities. Mintz (2005) has analyzed two cases where novel claims against lenders are rejected. The article is relevant in the field of lender liability as it helps to understand liability claims. Such claims have opened opportunities for borrowers in trailing liability rights against the lenders. The findings of the article suggest that there exist disputes regarding contractual provisions that frequently resolve on lenders’ breach of liability of good faith. However, information regarding good faith has not been mentioned in the article. Mintz (2005) evaluated deepening-insolvency theory in order to address liability claims. Deepening-insolvency is a principle through which bankruptcy organizations can recuperate the compensations from lender on the ground that the lenders distorted the organizations’ financial condition to the impairment of creditors and other third parties. The findings of the article suggest that courts’ repercussion against extensive lender liability claims has made borrowers’ claim against lenders relatively narrow (Mintz, 2005). Fischel, D. R. (1989). The economics of lender liability. The Yale Law Journal, 99, 131-154. Fischel (1989) depicted economic viewpoints regarding lender liability in this particular article. Specially mentioning, quality resources have been used in order to define the lender-borrower relationship. The article is quite relevant for the subject as it described lender liability through various cases. It demonstrated various misbehavior attitudes demonstrated by debtors once a loan is made in the form of asset extraction, risky investment, claim dilution and underinvestment. Fischel (1989) has also defined the concept of ‘duty of good faith’ and ‘fiduciary duties’ perform by lender. The findings of the research suggest that lender liability has intensely augmented the exposure confronted by the lenders. Each lender when determining whether to make loan and on what terms and conditions a loan should be provided, must evaluate the possibility that a specific borrower is default. Furthermore, the principle of liability and damages that have grown in the field of lender liability are frequently based on misinterpretation of basic economic ideologies. Better understanding of economic ideologies can drastically minimize the exposure faced by lenders (Fischel, 1989). Fajt, M. M., & Litke, G. S. (2002). Leasing decisions: liability awaits the unwary lender. The Real Estate Finance Journal, 49-51. Fajt & Litke (2002) made valuable contributions in terms of providing valuable information regarding claim of lender liability. The authors described various leasing issues as well as lender liability. The article states that lender liability claims are typically based on assertions that a lender has misrepresented the ultimate characteristics of loan. Furthermore, most of the claims made against lenders are subjected to legal models that direct other areas of law. The findings of the research are based on the experience of authors while practicing law. Fajt & Litke (2002) stated that with cautious planning and practical measures, lenders can effectively protect themselves from claims of lender liability in the situation of leasing. For instance, evading direct cooperation with proposed leaseholder and clear explanation in the verified mortgage documentation among others. The article seems to be quite significant as it provides measures for effectively dealing with claims made against lender liability. It has defined various issues regarding existing and new leases. However, no specific information regarding lender liability has been provided in the article. Still it is a great specimen to understand the carefulness to be maintained by lenders while entering into a lease agreement (Fajt & Litke, 2002). Strickland, J. B., Campbell, W., & Pearson, S. M. (2009). A return to the 1980s? lenders beware. The Banking Law Journal, 36-43. Strickland & et al. (2009) in this article discussed about the theories asserting that commercial borrowers positively use such theories against lenders in order to evade loan compulsions. The article has provided brief overview regarding lender liability. According to Strickland & et al. (2009), lenders in this present day context face serious problems with respect to negligent and under-collateralized commercial loans. The authors stated that lenders liability claims are made by borrowers to recover the damages from the lenders due to predetermined rights. From the findings, it can be apparently observed that lender liability can appear when an individual become remarkably involved with mortgagors’ business. Furthermore, lenders are often exposed towards bad faith with respect to loan acceleration. The article is quite relevant as it defines various theories that entail ‘breach of contract’, ‘fraud’ and ‘fair dealing’ among others. The authors have also provided practical recommendations for lenders who seek to reduce litigation risks in today’s challenging times (Strickland et al., 2009). Brugueras, J. A. D. (2011). Lender liability in construction and real estate financing. U.P.R. Business Law Journal, 2(1), 165-186. Brugueras (2011) in the article explained lender liability in relation to construction and real estate industry. The article is quite relevant, as it applied contract theories, non-contract theories and tort theories in order to define lender liability. The main point, which appeared from the article, is that most of the cases associated with lender liability generated from either contract or tort theories. According to Brugueras (2011), in present days, lenders face similar possibility of liability that sellers of varied products and/or services face. Various cases have been used in order to describe lenders liability in construction segment that made the quality of the article highly credible. Besides, remedies have also been defined in order to deal with the problem of loan liability claim. The findings of the article depict that lender liability is a complex law, which integrates several agreements and misdemeanor theories for safeguarding borrowers from unfair treatment associated with their counterparts (Brugueras, 2011). Ward, E. S. (2014). Tips for negotiating a commercial loan application. Westlaw Journal, 19(22), 1-8. Ward (2014) in this article described various tips for better negotiation of commercial loan application. The article is quite useful on the area of lender liability because it briefly reviewed the key provisions for standard loan structure, business specific provisions and lenders due attentiveness along with closing requirements. Ward (2014) stated that these factors are vital for better concentration of the key activities that are necessary in order to close a loan. Furthermore, the findings of the article suggest that an inclusive, well-drafted and negotiated loan claim can greatly abridge lenders due diligence and minimize the exposure of lender liability by a certain degree (Ward, 2014). Saft, S. M. (2013). Protecting lenders providing condominium construction financing. The Real Estate Finance Journal, 5-14. Saft (2013) studied the procedure of funding the construction and renovation of residential areas. The author also highlighted the fields that must be taken into concern by a lender while providing finance. The article is quite relevant as it provided information regarding lender safety. It also evaluated mixed usage of condominiums with respect to construction projects. According to Saft (2013), owing to unusual characteristics of condominium construction finance, the review must comprise evaluation of condominium’s affirmation, state condominium act, federal securities and purchase or sales of other agreements among others. Furthermore, the findings also suggest that a construction lender require studying purchase agreement as a vital document, as it is the basic pursuant based on which a specific loan amount will be reimbursed. In accordance with the findings of the article, there are various issues that require to be considered by a lender while authorizing a big loan amount. Except in infrequent conditions, lenders require to proceed prudently due to complexities persisting in lending procedure and the existence of diverse interests of various parties (Saft, 2013). References Brugueras, J. A. D. (2011). Lender liability in construction and real estate financing. U.P.R. Business Law Journal, 2(1), 165-186. Fischel, D. R. (1989). The economics of lender liability. The Yale Law Journal, 99, 131-154. Fajt, M. M., & Litke, G. S. (2002). Leasing decisions: liability awaits the unwary lender. The Real Estate Finance Journal, 49-51. Jensen, K., & Leonhardt, S. (2013). Students, loan servicers and the Servicemembers Civil Relief Act. Westlaw Journal, 19(10), 1-6. Mintz, B. (2005). Revisiting lender liability claims under new theory. The National law Journal, 1-2. Saft, S. M. (2013). Protecting lenders providing condominium construction financing. The Real Estate Finance Journal, 5-14. Schott, S. P. (1992). Lender liability under CERCLA--past, present and future. UCLA Journal of Environmental Law and Policy, 11(1), 78-97. Segerson, K. (1993). Liability transfers: an economic assessment of buyer and lender liability. Journal of Environmental Economics and Management, 25, 46-63. Strickland, J. B., Campbell, W., & Pearson, S. M. (2009). A return to the 1980s? lenders beware. The Banking Law Journal, 36-43. Ward, E. S. (2014). Tips for negotiating a commercial loan application. Westlaw Journal, 19(22), 1-8. Read More