A prospective client, who holds a promissory note, which requires an upcoming balloon payment, and a mortgage on commercial real estate securing the note, had these questions for us:
1. Could the client (effectively, a lender) pursue a default the day after the balloon payment was due?
2. What did #1 require?
3. How long would the loan collateral be tied up?
Since I've written about each of these topics in the past, I thought the prospective client's questions made for a nice, short blog post. Here are the quick answers (as I prepare to head on a fall break vacation with the family):
1. Depending upon the language in the note, usually yes. The default and enforcement provisions in the note control. But, some lenders provide a notice and cure letter as a courtesy, or to initiate settlement discussions. For more, see Notices of Default, Who Should Send the Letter. Moreover, while residential/consumer foreclosures require pre-suit notice in Indiana, commercial cases do not: Indiana's Pre-Suit Notice And Settlement Conference Statute Not Intended For Commercial Foreclosures.