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Answer the following questions after reading the article on juror perceptions of trial issues. Use the answer form provided to send the test, along with a $20 processing fee, to the State Bar. Please allow at least eight weeks for MCLE certificates and answer rationales to reach you in the mail.
1. A lender has a duty to:
a. Work out a troubled loan
b. Work out a troubled loan and exercise good faith during the workout negotiations
c. Attempt to work out a troubled loan in good faith
d. None of the above
2. The primary aim of the borrower during workout negotiations should be:
a. To postpone the lender's initiation of litigation against the borrower for as long as possible
b. To set realistic terms and conditions which the borrower can meet and the lender can accept
c. Both of the above
d. None of the above
3. All lenders share a similar philosophy concerning their troubled loans, which is:
a. Lenders try to "clean up" their past loan portfolios to make themselves attractive to either bank examiners or potential purchasers.
b. Lenders typically refuse to take any loss on their investments because they can afford the expense and delay of judicially foreclosing and obtaining a deficiency judgment in order to be paid in full.
c. Lenders generally engage in protracted litigation of large loans and quick workouts of smaller loans.
d. None of the above
4. In reviewing the client's documents prior to engaging in a workout, counsel should be sure to examine:
a. The loan documents
b. Correspondence between the lender and borrower
c. Guarantees
d. All of the above
5. After counsel for the borrower has determined who is the client and who is the lender, counsel should always enter into a pre-negotiation agreement with the lender to provide the borrower with written assurance that the lender will not pursue its post-default remedies during the negotiations.
a. True
b. False
6. In determining whether the borrower has any legitimate lender liability claims, counsel should consider the following:
a. Common law lender liability claims
b. Violations of California's anti-deficiency laws
c. Federal statutory violations
d. All of the above
7. The best alternative to a workout is always:
a. Litigation
b. Bankruptcy
c. A deed in lieu of foreclosure
d. None of the above
8. When faced with a pending trustee's sale, a borrower's best option is to file a bankruptcy petition to stop the sale.
a. True
b. False
9. The tax consequences of a workout agreement should be addressed by the borrower after the workout agreement has been finalized with the lender so as not to unnecessarily complicate the workout negotiations with the lender.
a. True
b. False
10. Bankruptcy may be an acceptable alternative to a workout because:
a. It provides the borrower with an opportunity to regroup and reorganize his or her business affairs without the threat of imminent litigation by the lender.
b. It will prevent the lender's foreclosure of the borrower's real property for the duration of the bankruptcy.
c. The borrower can maintain control over his or her business for the duration of the bankruptcy.
d. All of the above
11. A deed in lieu of foreclosure usually provides the following benefits to the borrower:
a. A foreclosure will not appear on the borrower's credit report.
b. The debt will be discharged.
c. The lender will not pursue the borrower for a deficiency.
d. All of the above
12. It is always in the best interests of the lender, rather than the borrower, to execute a pre-negotiation agreement.
a. True
b. False
13. A borrower should agree to affirm facts in a pre-negotiation agreement, such as that the borrower is in default or the amount of the debt.
a. True
b. False
14. Bringing the borrower's financial problems to the lender's attention before the lender raises them is generally the best strategy in dealing with a lender.
a. True
b. False
15. By agreeing to a release in the final renegotiated loan documents, the borrower is giving up all past, present and future claims against the lender.
a. True
b. False
16. A borrower can interrupt a trustee's sale that has been properly noticed only by filing a bankruptcy petition.
a. True
b. False
17. After the borrower has decided to pursue workout negotiations, borrower's counsel generally should, as the next step, approach the lender and request a workout.
a. True
b. False
18. A threat to file a lender liability lawsuit is always an effective way to get a lender to agree to a workout.
a. True
b. False
19. A lender who insists on approving the borrower's every business decision as part of a workout is entitled to do so with little risk of incurring liability.
a. True
b. False
20. If a workout cannot be negotiated and real property secures the loan, most lenders will proceed against the borrower through a judicial foreclosure rather than a trustee's sale.
a. True
b. False
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