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Special problems of syndicated loans

Syndication continues to grow in popularity among lenders. Here, the authors explain the significant legal issues surrounding such transactions.

According to a recent study, lenders closed $244.2bn of commercial/multi-family mortgage loans in 2012. The multi-family property category accounted for $103.2bn of that total, leading all real-estate loan originations in dollar volume. Due to the rapid growth in volume and the escalating size and complexity of mortgage loans and the projects securing such loans, lenders have been forced to further develop methods to adequately diversify their risk. While most mortgage loans are sold into the CMBS securitisation market, mortgage loans held for syndication still represent a significant share of the loans made by many real-estate lenders. The syndication market provides mortgage originators with an opportunity to create a customised lending product that extends beyond the standard requirements of the rating agencies. The syndication market has recently gained significant momentum for ‘value-added’ lenders who are willing to incur above-average risk by placing loans in higher leveraged loan positions in the capital stack or provide financing outside a conduit structure for construction projects, land acquisitions and/or lease-up projects…

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