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Compliance Companion®
Standard Procedures Manuals (SPM)

Loan Workouts & Collections August 2023

SPM #12 provides an in-depth review of the laws governing all aspects of the collection process, including some of the procedural aspects of litigation. The Manual represents a comprehensive and understandable review of issues such as the current expected credit losses (CECL) methodology, workout strategies, non-judicial foreclosure of various forms of collateral, and commercially reasonable disposition of personal property collateral. The text of this Manual is 631 pages, plus 19 pages of appendixes.

Section II discusses structuring loan workouts, including identifying a problem loan, appropriate due diligence prior to a loan workout, and documenting a loan workout.

Section III addresses the extensive regulatory issues affecting loan workouts, such as the current expected credit losses (CECL) methodology and the allowance for loan and lease losses, real estate appraisal regulations, handling impaired loans, internal review and classification of loans, the California and NCUA rules regarding the capitalization of interest, OREO requirements, in-substance foreclosures, the California and federal Fair Debt Collection Practices Acts, reporting discharges of indebtedness, and the federal and California UDAP/UDAAP/UCL statutes.

Section IV reviews the bankruptcy issues affecting loan workouts and collections, including the automatic stay, preferences, fraudulent conveyances, reaffirmation of a debt, and post-petition financing.

Section V deals with a creditor’s rights and remedies upon default. The topics addressed in this section consist of events of default and acceleration clauses, recovery alternatives, bankers’ right of setoff and the banker’s lien, the procedures for collecting a loan from a deceased borrower’s estate, and a junior lienholder’s request for notice of delinquency.

Sections VI addresses foreclosing personal property collateral. Topics addressed include servicemember protections, competing lienholders, collection rights in connection with accounts receivable, contract rights, and negotiable instruments, sale of pledged securities, and the repossession procedures in connection with automobiles, undocumented vessels, and recreational vehicles.

Section VII addresses foreclosing real property collateral, discussing such topics as nonjudicial foreclosure procedures (including the California Homeowner Bill of Rights), judicial foreclosure procedures, bidding strategies at foreclosure sales, deeds in lieu of foreclosure, the one-action rule and anti-deficiency limitations under California law, and handling mixed collateral transactions.

Section VIII discusses the foreclosure procedures involved with manufactured homes, mobile homes, truck campers and floating homes.

Section IX examines the procedures for enforcing guaranties, as well as the terms a well-drafted guaranty should generally include (such as waivers), and a guarantor’s defenses to the enforcement of a guaranty.

Section X addresses the laws governing collateral seized under the federal and California asset forfeiture laws.

Section XI provides a review of civil proceedings in California superior courts, and Section XII discusses small claims court proceedings.

Section XIII examines the issues involved in arbitration proceedings, such as the enforceability of arbitration clauses, arbitration procedures, AAA and JAMS services, judicial reference, and mediation.

Section XIV provides a detailed discussion of California’s Enforcement of Judgments Law under the California Code of Civil Procedure.

Section XV addresses the topic of credit disability insurance and a creditor’s rights and remedies.


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SPM 12
* Janet Bonnefin is retired from the practice of law with the firm.
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