What's Now in Real Estate Finance (September 2026)

Topics from our July agenda included:

Basics of Title Insurance for Mezzanine Lenders 
Seth Taylor (Atlanta)

We discussed title insurance considerations for mezzanine lenders, including the distinction between a mezzanine financing endorsement to the owner’s title policy and a separate UCC insurance policy. Generally speaking, the mezzanine financing endorsement protects the lender’s right to title insurance proceeds if it succeeds to the owner’s interest, while the UCC policy insures the lender’s priority interest in the pledged equity collateral. The team also discussed practical steps for avoiding closing delays, including confirming that the borrower’s operating agreement opts into Article 8 of the UCC and carefully reviewing the original membership certificate with the UCC policy provider before execution. Other considerations include accounting for required financing endorsement signatures in signature packets and beginning the UCC insurance process early.

Deed-in-Lieu Transactions Following Loan Sales
Alyssa Rutherford (Downtown Los Angeles)

We discussed a transaction structure in which a buyer purchases a mortgage loan and immediately thereafter acquires the underlying property through a deed-in-lieu of foreclosure. This structure can oftentimes offer significant savings in certain jurisdictions with high transfer taxes. We also discussed conditioning the loan purchase closing on satisfaction of the conditions precedent to closing in the deed-in-lieu agreement, including delivery of the deed into escrow. Because the buyer ultimately acquires the property, the loan purchase agreement may also address property-level matters such as tax prorations. Buyers may consider obtaining transfer tax insurance or indemnities against potential tax claims in certain jurisdictions.

Discounted Pay Off Documentation
Stephen Bush (Atlanta)

The team discussed the documentation for lender-side discounted payoffs. A discounted payoff allows a lender to accept less than the outstanding loan balance as payment in full and release the borrower and its lien, which may be preferable to foreclosing and assuming ownership or operational responsibility for certain distressed properties. Diligence often involves reviewing the principal transaction documents, including the discounted payoff letter agreement and request for reconveyance, among other things. We also discussed conditioning the release and reconveyance on satisfaction of all payoff conditions, rather than receipt of funds alone, to protect the lender if a representation is breached or a bankruptcy occurs before closing.

Section 22 Affidavit & Cost of Improvement Issues 
Kevin Marks (New York)

We discussed considerations related to Section 22 affidavits and the allocation of costs between building loans and project loans in New York. Properly categorizing costs of improvement and confirming that sufficient building loan proceeds remain available are important to protecting the lender’s lien priority. The team also discussed the importance of preparing budgets and Section 22 affidavits early, as multiple drafts may be needed to address allocation issues. Early coordination among the parties can help identify potential shortfalls, preserve lien priority, and avoid delays in closing.