Expanded 'Bad Boy' Guarantees Undercut Nonrecourse Loans

Law360, New York (February 21, 2014, 9:05 PM EST) -- In recent years banks have stretched the definition of what is covered by “bad boy” guarantees attached to nonrecourse real estate loans to include actions such as involuntary bankruptcy in addition to fraud and intentional misrepresentation, putting onerous pressure on borrowers, experts say.

A long-running joke among real estate finance attorneys is that the definition of a guarantor is “the fool with a pen who shows up at the loan closing,” but some say banks have taken increasingly drastic measures in recent years that require a...
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