Expert Witness Services: Loan Participation and Litigation

Lending is a massive industry, so it comes as no surprise that there is also plenty of litigation regarding loan participation. In the course of his banking career and financial expert witness services, Michael F. Richards has encountered all manners of ways in which loan participation goes sour.

First, lenders sell off participation in loans for many reasons, from originating loans that exceed their legal lending limit to reducing the originator’s exposure to a particular type of loan and much more. While these arrangements can become exceptionally complicated, they are typically fully legal relationships in which all lenders benefit.

What matters more is clarity about who is responsible for what; this is where things tend to go wrong based on Michael F. Richard’s extensive experience with expert witness services. Since these arrangements vary greatly across the industry, they are controlled by the individual documents that the parties sign. Typically, the controlling document is a “Loan Participation Agreement” accompanied by participation certificates, but some cases may only utilize the certificates. To avoid litigiously, “he said, she said,” disagreements, everything must be put into writing and signed upon. Furthermore, both the originating lender and participating lenders should perform due diligence before entering an arrangement together.