IN THE NEWS

Tuesday, February 7, 2012
CDC Takes Advantage of Mediation on Loan Default
Curt Baker

Indiana Statewide Certified Development Corporation Executive Director Jean Wojtowicz recently had surprising results utilizing a little known tool available to all CDC offices to help in liquidation – Third Party Mediation. The intervention is cost free to the CDC office, and provides a method of first choice when a default moves closer to a liquidation.

The scenario is a familiar one. The property was a hotel with a senior lien holder close to filing foreclosure, and the asset having depreciated considerably since the loan funding. Initial appraisals were now double what the current value was, and the even the senior lien holder was uncertain of a full recovery through foreclosure. Communication had all but stopped with the guarantor, and the secondary lien positions were all in jeopardy. Recovery looked bleak, as behind the CDC’s position was another lien holder and a mechanics lien.

Indiana Statewide identified Asset Solutions Group (www.assetsolutionsgroup.net) to assist as a mediator to put together a workout package and got the asset sold without a foreclosure. Surprisingly not only did the senior lien holder get a full payoff, but the CDC realized a substantial recovery and the mechanics lien was released allowing the property to sell.

“Working with ASG was very helpful as there was no out of pocket expense to us for the service, as their investors pay their fees.” Jean continued “The mediator acted as a go between with the guarantor and all lien holders, negotiating on our behalf to get the complete cooperation of the property owner to liquidate the asset. They also helped gather bids, evaluate them and negotiate the best offer. Mediation has proven to be a cost efficient alternative.”

Third party default resolution can be the option of choice for CDC’s looking for an alternative to foreclosure and liquidation. Recovery is indeed possible without lengthy litigation and cost is not an issue. Mediation has the additional benefit of still retaining all other liquidation options, should they be needed.