Buy Back Loans
In fact, joint guidance from the Treasury Department, Federal Reserve, and the Federal Deposit Insurance Corporation formally recognizes owner-occupied commercial real estate as lower-risk for lenders. Local ownership of commercial real estate has been found to help stabilize rents and support vulnerable businesses in withstanding economic shock. Additionally, an Urban Institute study found a positive correlation between small businesses which received loans to purchase real estate and increased sales and job creation.
buy back loans
To correct for these challenges, local leaders could establish dedicated loan funds to help supply the large upfront capital (e.g., down payment assistance, closing costs, proof of operating cost) needed to supplement conventional commercial real estate loans and/or Small Business Administration loans. These loans should be borrower-friendly, with either zero or below-market interest and lenient repayment terms, and administered quickly to meet the pace of commercial real estate deals.
The Coronavirus (COVID-19) pandemic has not been in play long enough for market participants to properly assess its long-term impact. In the short term, however, the pandemic continues to affect the markets, with many loans being priced at a significant discount. As a consequence, sponsors and borrowers are evaluating opportunities to buy back their outstanding loans at significantly reduced prices to allow them to build up equity at a discount, reduce leverage or generate capacity under ratio-based incurrence baskets, for example. Growing attention to transfer restrictions coupled with a slow market on the buy-side has led to a particular interest in buy-backs, although they have historically been subject to certain limitations. Below we set out a general overview of buy-backs together with some key considerations for borrowers, sponsors and lenders.
Loan buy-backs came into particular focus during the 2008 financial crisis. Lenders have traditionally been concerned about potential abuse of the equal treatment doctrine (i.e., where loan buy-back offers must be made to all lenders in the relevant tranche at the same time) and asserted that any debt reduction should take place via voluntary prepayment provisions only. Sponsors successfully challenged these concerns, and the majority of credit agreements now contain express provisions governing the structure of loan buy-backs, which can typically be undertaken as follows:
Sponsors are generally subject to fewer loan buy-back conditions than borrowers, but additional considerations do apply. In particular, sponsors should have regard to their ongoing relationships with lenders and investors alike, and to whether they should take advantage of loans trading at a discount or support portfolio companies trying to de-lever throughout the COVID-19 pandemic. Sponsors should also doublecheck any portability conditions in credit agreements if they plan on selling portfolio companies in the future.
Lenders might be supportive of a loan buy-back if the deal is trading at a loss and they are looking to exit. Lenders should carefully review the transfer provisions in credit agreements with particular focus on distressed debt or other transfer restrictions, as a buy-back may be the only credible way of transferring out. If a borrower or sponsor undertakes a loan buy-back, lenders should consider the following items:
The forgoing focuses predominantly on the institutional TLB market, primarily because revolving credit is not architecturally or economically attractive to buy back, and because private credit does not typically trade with the same frequency or in the same way as the more public loan market. Note that the same flexibility for debt buy-backs exists in many private credit documents, but sponsors may simply approach their lenders to repurchase debt at a discount as a private agreement, depending on how the documentation is set up.
Our team has substantial UK and cross-border experience on buy-backs and a wide array of financing, restructuring and capital markets matters. Please connect with your regular McDermott contact or one of the authors below.
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This program can help individuals buy a single family home. While U.S. Housing and Urban Development (HUD) does not lend money directly to buyers to purchase a home, Federal Housing Administration (FHA) approved lenders make loans through a number of FHA-insurance programs.
The Federal Housing Administration (FHA) makes it easier for consumers to obtain affordable home improvement loans by insuring loans made by private lenders to improve properties that meet certain requirements. Lending institutions make loans from their own funds to eligible borrowers to finance these improvements.
The U.S. Small Business Administration (SBA) is responsible for providing affordable, timely and accessible financial assistance to homeowners and renters located in a declared disaster area. Financial assistance is available in the form of low-interest, long-term loans for losses that are not fully covered by insurance or other recoveries.
This program helps homebuyers or homeowners save money on utility bills by helping them get loans to cover the cost of adding energy saving features to new or existing housing as part of a Federal Housing Administration insured home purchase or refinancing mortgage.
The Native American Direct Loan (NADL) program makes home loans available to eligible Native American Veterans who wish to purchase, construct, or improve a home on Federal Trust land or to reduce the interest rate.
Reverse mortgage loans typically must be repaid either when you move out of the home or when you die. However, the loan may need to be paid back sooner if the home is no longer your principal residence, you fail to pay your property taxes or homeowners insurance, or do not keep the home in good repair.
If the you are away for more than 12 consecutive months in a healthcare facility such as a hospital, rehabilitation center, nursing home, or assisted living facility and there is no co-borrower living in the home, anyone living with you will have to move out unless they are able to pay back the loan or qualify as an Eligible Non-Borrowing Spouse.
A mortgage is a loan that a potential homeowner takes out in order to finance the purchase of a home. Most homes cost more than an individual can afford in cash. In order to purchase the home, an individual will need to borrow money from a bank. The money borrowed is a mortgage.A mortgage-backed security (MBS) is a financial security, like a bond, that consists of many different mortgages bundled into one financial security. An investor will purchase an MBS as an investment like they would a bond or stock, from a bank and will receive the mortgage payments on those loans as an income stream; the return on their investment."}},"@type": "Question","name": "What Is a Mortgage Repurchase?","acceptedAnswer": "@type": "Answer","text": "A mortgage repurchase is the same as a mortgage putback; when the investors in a mortgage-back security (MBS) demand that the originator of a mortgage repurchase that mortgage due to perceived issues related to when the mortgage was approved by the bank.","@type": "Question","name": "What Is a Loan Buyback?","acceptedAnswer": "@type": "Answer","text": "A loan buyback, also known as a debt buyback, occurs when a borrower repays a portion of the loan for less than the promised amount. For instance, a bond issuer with $1,000 par bonds may buy back 80% of the issue for $900 per bond. This is often done as an emergency concession when the borrower is dealing with financial issues and the lenders become worried that there might be a more severe default."]}]}] Investing Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All Simulator Login / Portfolio Trade Research My Games Leaderboard Economy Government Policy Monetary Policy Fiscal Policy View All Personal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All News Markets Companies Earnings Economy Crypto Personal Finance Government View All Reviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All Academy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All TradeSearchSearchPlease fill out this field.SearchSearchPlease fill out this field.InvestingInvesting Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All SimulatorSimulator Login / Portfolio Trade Research My Games Leaderboard EconomyEconomy Government Policy Monetary Policy Fiscal Policy View All Personal FinancePersonal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All NewsNews Markets Companies Earnings Economy Crypto Personal Finance Government View All ReviewsReviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All AcademyAcademy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All Financial Terms Newsletter About Us Follow Us Facebook Instagram LinkedIn TikTok Twitter YouTube Table of ContentsExpandTable of ContentsWhat Is a Mortgage Putback?Understanding a Mortgage PutbackHistorySpecial ConsiderationsFAQsPersonal FinanceMortgageMortgage PutbackByAli Hussain Full BioAli Hussain has a background that consists of a career in finance with large financial institutions and in journalism covering business.Learn about our editorial policiesUpdated May 31, 2022Reviewed by 041b061a72