Unique Dynamics Of LIHTC Workouts: 3 Thoughts For Lenders

Law360, New York (December 10, 2014, 10:07 AM EST) -- In any negotiation, there is one critical factor that ensures a successful outcome: leverage. In the still-developing area of low-income housing tax credit workouts and bankruptcies, secured lenders may feel relatively powerless. But armed with knowledge concerning several key leverage points, a lender can better protect its interests and negotiate an advantageous outcome of a troubled loan.

To begin, a secured lender should carefully consider and have a firm understanding of the following three important topics: (1) the dynamics between the project developer and the tax credit investor(s) and what each has at risk in the project; (2) the status of...

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