Archive: 14 March 2016

1
A Guaranty Is Only As Good As The Person Who Signs It: Enforcing Commercial Lending Guaranties In Massachusetts
2
Federal Court of Appeals Holds That Fannie Mae and Freddie Mac Are Not Agents of the United States, But Open Questions Remain

A Guaranty Is Only As Good As The Person Who Signs It: Enforcing Commercial Lending Guaranties In Massachusetts

By: Robert W. Sparkes, III and David A. Mawhinney

Guaranties are common practice in the commercial lending industry. Typically, the borrower is a small corporation, limited liability company, or similar entity that is thinly capitalized with few (likely encumbered) assets. Under these circumstances, the borrower’s promise to pay a debt is cold comfort to a commercial lender in the event of a default, where its only source of recovery is likely to be the collateral it holds. For this reason, commercial lenders often condition loans not only on a security interest in the borrower’s property, but also on a separate, individual guaranty agreement executed by a third party, usually the principals of the corporate borrower. Such guaranties provide another avenue through which commercial lenders may recover loan amounts and damages due to the borrower’s default.

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Federal Court of Appeals Holds That Fannie Mae and Freddie Mac Are Not Agents of the United States, But Open Questions Remain

By: Amy Pritchard Williams, Roger L. Smerage

Affirming the dismissal of a qui tam lawsuit based on certifications made to the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), the U.S. Court of Appeals for the Ninth Circuit recently held that neither entity is an officer, employee, or agent of the United States. Therefore, demands or requests for payment made to these entities are not claims under 31 U.S.C. § 3729(b)(2)(A)(i) of the False Claims Act. United States ex rel. Adams v. Aurora Loan Services, Inc., — F.3d —-, 2016 WL 697771 (9th Cir. Feb. 22, 2016).

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