In many cases where it is the responsibility of a participant in the conduct of an independent investigation, the OCC Banking Circular is cited as an authority. See Colorado State Bank of Walsh v. FDIC, 671 F. Supp. 706 (D. Colo. 1987) (recalling that the OCC guidelines provide that participants must conduct independent and prudent assessments of the loans offered for participation and that a participant is responsible for “determining for himself the value and security of the loan in which he has participated”) (citing Northern Trust Co. v. FDIC, 619 F. Supp 1340), 1343 (W.D.
Okla. 1985). Equity mortgage issuers are often non-traditional lenders. They can be entrepreneurs looking for real estate investments without having to bother to develop or maintain the real estate themselves. In other cases, these lenders may be pension funds looking for quality investments that generate more returns than bonds, but don`t have the volatility of stocks. By participating in this type of agreement, these investors act effectively as silent partners. However, the parties are not always able to agree on how best to make important administrative decisions regarding participation in the loan. In cases where there are only two parties – a lead and a participant – this can lead to a blockage. Therefore, an equity agreement should always include a buy-back provision in which the lead bank can choose whether it wishes to acquire the loan participant`s interest. At this stage, the lead bank would be free to make any administrative decisions deemed necessary.
The parties involved generally allocate the net operating income (NOI) – the sum of the income from the operation of the property, net of any operating costs. .
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