When Deals Go Sideways: Litigation Strategies and Risk Mitigation for Private Lenders

Steven E. Ernest, Esq.:

The title of today's webinar when Deals Go Sideways, litigation Strategies and Risk Mitigation for Private Lenders. I am Steve Earnest, I am one of the partners at Fortune Law. I'm also the director of litigation and bankruptcy here, and I'm also the Western lawman. If you go on YouTube, I have a YouTube channel where many, many videos can be found. They are entertaining, they are edifying and they are free of charge, so I encourage you to like and subscribe to those. The housekeeping items I have for you are as follows. If you have questions, preta, as our Spanish friends like to say along the way, there are two ways that you can deliver those questions. One, the most effective way is to put them in the q and a, that the Q is your question. The answers will come later. I'll field those all at the end.

The other way is just to scream at your computer. Not very effective that way because we have you all muted. So unless you're somewhere geographically that screaming at your computer will cause me to be able to hear you. Just environmentally q and a is probably your best bet. Don't put your questions in the chat. Do put them in the q and a. These slides that you are while you're looking at the first one now, you're going to see the rest of them as we proceed together this morning. Those will be available for you, so don't feel as though you have to rapidly write down everything that I'm saying and all the things that are on the slides are screenshot and think that you're pirating those away from me because you're not. I'm going to share 'em with you free of charge or for whatever you paid for this webinar.

So there you have that. There will also be a recorded copy of this webinar that I think is going to be delivered to each of you probably today if you signed up with your email and if you didn't and you want to see the webinar and frankly why wouldn't you, you want to watch it again this evening with your family. I totally get it. It will be available and you'll probably find that under my page on the Fort Law Firm website. So there's all of that. If you have any questions, again, put 'em in the q and a and let's dive into what we came here to do and stop looking at a photograph of me. So as they say, when you give a talk to people, you tell them what you're going to tell them and then you tell them and then you tell them what you've told them.

So this is the, I'm going to tell you what I'm going to tell you the agenda for today. We're going to talk about the current risk landscape. I think it's a bit redundant current in landscape, but we'll have a look at it. We're going to talk about how loan documents ought to be structured to avoid litigation risks. We are going to talk about immediate steps to take after default because in many circumstances, sort of the triage, what you do right away is going to define kind of the next year and a half or the landscape of the existence of your defaulted loan. We'll talk about some litigation and bankruptcy strategies, which I have a keen understanding of, given that I've been doing it for just about three decades now. The best practices and portfolio protection. So we'll talk a little bit about auditing your portfolios and making sure that the things that you have are the way that they ought to be. And in the unlikely event that I don't just organically answer all of the questions that you may have, again, put them in the q and a and we'll do those at the end.

So that'll be fun. Here we go. Whoa, did I skip one? Yep, I skipped a bunch of 'em. All right. Current risk landscape, so default in bankruptcies are on the rise. You may know that from just dealing with the portfolios that you have. You may know that from watching the news or trade publications that you get, but default as quad defaults are up 3%, which sounds like a lot. It isn't as though defaults have gone from 1.8% to 4.8%. The 1.8% is 3% higher than it was, so those are up 3%. It's a decent number, but it isn't as though you need to start filling your garages with dry goods and oats and things like that. Bankruptcies are up 7% depending on where you live. You might see that number a little bit skewed. They're not tremendously up in California, but other parts of the world, Texas, for example, is having a large uptick in bankruptcy Broad.

Look at that guy in his hoodie at his laptop. He's probably at Starbucks stealing some old lady's money out of her Wells Fargo account in that avatar right there. Fraud is up. There are many, many ways that fraud visits itself on all of us. I had a client call me just last week that indicated her mother got one of those phishing links that led to her calling someone in India who drained their bank account for $85,000. That's real money. There's no insurance for that. Just lost, lost to the wind. You can make a police report, but you're not going to see your money back. So fraud way up. I could do an entire webinar on fraud and I did, and if you want to watch it, it's on the firm's website, you can find it there. I'm sure you remember it anyway because most of you're probably there, but if you weren't, you probably saw the fraud panel that I did at our Innovate conference just a few weeks ago. That one not recorded. So if you didn't go, you missed it. But it was brilliant and I had some great panelists. We talk about fraud quite a bit because fraud is an important thing to be wary of and understand these days.

Regulatory challenges, usury licensing and business purpose loans. So usury in California anyway, the usury interest rate is 10%. If you have a loan which has an interest rate of higher than 10%, that loan is usurious by definition. Now, California has myriad exceptions to the usury statutes and once all of those exceptions are applied, what I tell clients is there's not really very much usury left after you apply all the exceptions. The big one that most of you in the private lending industry use is the license. If you have a D or a, if you're a licensed lender, you probably are not subject to the USY statute, so you can charge your 18 20% interest rates without running a foul of usury. Licensing is an important part of what the offerings that the firm has and it gets you around usury. Now, business purpose loans, those don't directly relate to usury, but there are many, many myriad, as I said earlier, requirements, regulatory requirements related to consumer loans that are not required of business purpose loans, the Truth and Lending Act A, the HOR, those sort of things.

All Reg Z, all related to consumer loans, none of them related to business purpose loans. And so one must make sure at the beginning if what you think you're doing is making a business purpose loan, that you're documenting it correctly and you have the right waivers and disclosures from your borrower or your customer that have him essentially admit that this is a business purpose loan. So of course a consumer loan is something that's for personal family or household use. One of those three things. And how do we make sure that it's a business purpose loan and not a consumer or a household loan? Well, it can't be secured by your single family residence, right? Wrong. You can have a business purpose loan that is secured by a single family resident, even if it's a single family resident that the borrower and his family live in it.

That is not a determining factor. So the determining factor, what is important and kind of the only thing that is important in issuing a business purpose loan is the following question, which we do not need to put in the q and a because I'm going to ask it of myself and then I'm going to answer it for you. A business purpose loan, the important question is what is the money going to be used for? And if it's going to be used to purchase inventory so that someone can run a computer factory or it's going to something that is a business purpose, if that's what they're using the money for, then it's a business purpose loan. If they're using it to pay off their student debt, if they're using it to add a patio covering on their house and whatever the common family household items are that people spend money for, they're buying a new car to take their family to the grocery store.

That's consumer debt. If it's a business purpose for the money, then it's a business purpose loan. Doesn't matter what the collateral is. So super important that that is made clear and documented in your loan documents. And if it's not, probably you're going to get to the end of this story and you're going to have a borrower who told you all along he wanted a business loan, and you're going to come to find out that despite how vociferous he was during the loan documenting process, that at the end he's going to complain that this is actually a consumer loan and he used it to pay off his children's college loan debt and that you didn't send him the TA disclosures and you didn't comply with Regulation Z. And there are all kinds of H four violations and he is going to sue you and that gets expensive.

So the most important thing you can do during your loan transaction before it closes is to make certain that the borrower has disclosed to you that this is a business purpose loan and has told you what he is going to use the funds for. So there really isn't a more important part of the documentation process than ensuring you have done that. Real world example. There is one, here's another. We had a client call us who had issued a loan up in the Bay Area and the borrower, this woman had told them all the way through, this is a business purpose loan. I'm going to use it for my investment practice. She had a business that was financial advisory business and buying equipment or something like that. And it turns out what she did was use the money to renovate her kitchen and didn't tell us that at the beginning.

So loan fraud, there's some counterclaims that you can make in those circumstances, but it was rather prickly pair because you've got a user as interest rate. Now you've got a bunch of Tela disclosures that you didn't make. You've got some H four violations and all of those problems come with statutory attorney's fees. So while they're suing you, if they find a way to score on you, not only you have to pay me, you're going to have to pay the amount of the judgment, which is probably going to be substantial and you're going to have to pay their attorney's fees. So all of that can be avoided by proper documentation during your transaction process. And my firm, the transactional group does something that I think is really smart. What they do is they have a form that they require the borrower in their own handwriting got to take a pen and scratch this out.

What are you using the money for? And they have to write a couple of sentences about whatever they're going to do it for because you can have all sorts of disclosures with black ink on white paper that they check boxes and put their initials on and DocuSign things. And they always say at the end, well, I had 133 pages and I only had six minutes to sign them all and it was raining and the notary was hurrying me, rushing me through all this stuff. And I didn't read any of that. I didn't know what it said. That's not a good defense in California, but it does engender some sympathy. So if you have a piece of paper that the borrower in their own handwriting wrote, I'm using this money to I fund my whatever, my financial advisory business, and they wrote that down in their own handwriting, it's really hard for them to say, well, I didn't know what I was writing, right?

So it creates a good defense. So there's a little tip for you for charge or for whatever you paid for this webinar. See, it's worth it already. Isn't that great? Real world litigation examples? Do we have another one? Here's one. So there's a huge fraud case in Baltimore. You've probably heard of it. And in that one you had some deeds where individuals transferred property to LLCs and then they'd wait about four or six months and they'd want to do a cash out refi. Well, it sounds okay so far, right? Except the appraisals they would get were always overinflated, really inflated. And so they were getting more money probably in the cash out than the property was even worth. And then what happens next? Step four, they ghost you, they've got your money and you've got a property well upside down, the LTV was not working out in any of those.

So appraisal fraud, it's definitely nothing new, but it was a big, it is big in these Baltimore cases. And so it should just remind us to think a little bit more about, well, did the borrower bring this appraisal to me? Is this appraiser licensed? Have they ever used them before? Are they on an approved list? Are they someone I've heard of, something like that. Be wary of appraisals. And I think Apple, the American Association of Private Lending, which is tremendous, and if you're not a member of it, you should be. And we are going to do a free webinar on appraisals themselves and what to look for and how to dig through 'em and protect yourself in those. So be on the lookout for that. I digress. Leases. Here's another real world example of fraud. You get probably not a duplex, but a small apartment building as your collateral and your borrower produces all these leases to you.

I had this case, this is a real one. And they produce all these leases that say every one of these units is generating $6,000 a month, something like that. So you issue a loan based on DSCR and it seems like it's going to work out okay, well, it doesn't work out okay, and when it's time to take back your collateral, you start getting in touch with these lessees and you find out, well, the lessee doesn't exist or the rent is not $6,000 a month, it's $1,500 a month. And so the property's worth considerably less. So think about during your transaction project, at least spot checking a few of these, whatever your level of diligence is, you can pick up the phone and call 'em, find out if the lessee is a real entity and find out how much they're paying and rent might be a good idea for you.

So we're going to move on. This is slide number three. It says, so we're going to go to number four and see what's going on here. Structuring our loan documents. So these are fun ways to get in the weeds on those 133 pages of loan documents that I was talking about earlier, choice of law and venue. So there's a whole class that we take in law school about conflicts of law, and that's what choice of law and venue is. So choice of law is I'm sitting in California right now, your collateral could be in Kansas and your borrower could be in Montana and your lender is in New York. Say, so whose law do you apply? Kansas, Montana, New York. How do you know there's a whole, like I say, a whole class on figuring out how that law is applied and which one you pick. So there's an easier way to figure that out and it's to write into your loan documents in the event that dispute arises, the laws of the state of Colorado will apply whatever.

You can pick any state that you want. It has to have somewhat of a nexus to your transaction. Nexus fun word there. Connection is what that means. But you can safely pick most state laws. Surprisingly, this is surprising because California is reputed to be a terrible state in which to conduct business. However, California has some favorable laws for lenders. Usury is one of them. A lot of people select make their choice of law, the state of California primarily because of usury and the things that you can get away with in California as a lender. So be cognizant of choosing a state's law and do that intentionally. Don't just, I saw the Kansas City Chiefs won the Super Bowl, so I'm going to pick Missouri. Don't do it that way. Contact someone and figure out what the right state is to use venue a little bit different.

Venue means in what court are we going to sue and where will the trial be held in case there's a dispute on this. So that's, the venue does not have to be the same state as the choice of law. It can be a different place, but probably most of your loan documents have choice of law and venue provisions in them. Clever lawyers 60, 80 years ago always used to select the venue where they were licensed to practice. Why? Because, well, when there was a dispute, then their client would call 'em and they would say, I've got some good news for you, Jack. You've got to sue in Nevada. Well why Nevada? Well, because that's where my office is. That's why they would choose that. There are reasons to select venues. What sort of a jury are you going to get in these different venues? And again, the venue has to have a nexus to the transaction.

Can't just pick one out of the blue and say all of our cases are going to be venued in Broward County, Florida because it's nice in Fort Lauderdale during the winter. There's going to have to be a regular connection, but you'll figure out how to connect those things as long as you're intentional in your documenting usy safe harbor. So there are some states like I talked about before, where when you get finished applying the exceptions to usury, there isn't too much usury left. Those are the safe harbor states that you want to use. California, like I say, is one of them. So it's not just because my office is here. There are good reasons to select choice of law venue in California. So usury, safe harbor is one of 'em. Default interest in late charges. Those are vastly different items. Default interest, that's the interest rate listed on your loan is 12%, but if they default, you get sort of a kicker and there's an extra 6% interest in that.

So when they're in default, the interest rate is 18%. Say it's contracted for you, you can make it whatever you want, but be a little bit careful of those because in California anyway, there's this Hon Charu decision from about a year and a half ago. That strictly limits the opportunities you have to charge default interest. It's not always late charges. There's a lot of disclosure requirements, but generally you can get those. Number four, this is the greatest. If nothing else we learned today, we need to learn this. There must be an attorney's fees provision in all of your loan documents. I don't think in nearly three decades of practice of law I've ever seen a loan document that didn't. Well, I'm lying. I have, but as long as it's not a loan that you've written on the back of a napkin or orally promised like you're getting a loan from your dad to buy a lawnmower to start your gardening business or something, as long as it's a regular loan transaction, there is nearly always an attorney's fees provision in 'em. But you want to make sure that there is, there's one type of contract that I somewhat frequently review which never has attorney's fees provisions in them. What is that? We can put it in the Q and a maybe we'll see who gets price. Well, no, here's the answer, give it to you now because I'll probably forget, insurance contracts almost never have attorney's fees clauses in them. And there are good reasons for that. Primarily insurance companies don't like to pay attorney's fees for people who sue them for bad faith.

Denial of coverage. That's usually the reason. But in loan transactions almost always is there in insurance or I'm sorry, in attorney's fees clause almost always and good reasons for that because ordinarily the disputes that are made against lenders by borrowers either lack foundation, the claims that are made by the borrower against the lender or it's in a default situation. And in each situation you would expect the lender is going to win, especially if you hire my law firm to be your lawyers, your almost assured victory. And when you win after you've paid me, sorry, you have to pay me, you want to be able to collect those attorney's fees either from your borrower or from the equity that's in the property. So build some equity into your LTV when you're making it so that you can afford to hire the best attorneys on the planet, especially in the private lending field.

And that's the for lawyers right here, these guys, me and the people I work with, receivership and assignment of rents. These are really, really fun. When you have an income generating property, there's some tenants in there, rental condos, a medical building, something like that. People who are paying rent, but you have a borrower who's not making his mortgage payments. What these receivership and assignments of rent provisions, and most of them are found in standard deeds of trust. Certainly the deeds of trust that this firm will drop for you if you hire us to do it. And when your borrower defaults, you can get a receiver appointed, you can get a few different methods. You can get a writ from the sheriff to go and get what's called an assignment of rent. So instead of the tenants in these properties paying the rent to your borrower, the tenants in these properties pay their rent directly to you or give it to the receiver who gives it to you.

And if you want to find a way to get your borrower's attention, cutting off their income stream is a really good way to do it. If they've been ghosting you and not returning your calls and sort of ignoring your pleas for make your mortgage payments and you want to get their attention, get their income stream, get the rents that they're supposed to be paying to you or paid to them, paid directly to you, and you will have their full and undivided attention and they'll find a way to work things out with you. And if they don't, then you just collect their rent for a while. And that's kind of fun too. Guarantee waivers, be wary of those. The purpose of having a guarantee is so that if your borrower defaults, well somebody else, usually an individual is on the hook to pay you and you don't want to let them off the hook by waiving their guarantee.

And sometimes those circumstances of guarantee are limited and sometimes they're unwittingly waived and you don't want to do that. And I think we're going to talk about one of those primary ways later. But spoiler alert, it's failing to notify the guarantor of a modification to the loan document, but we'll get to that. And if we add no extra charge, put it in the q and a and I'll talk about it then. Okay, that's a deal. That's a contract. No, that's not a contract because there's no consideration, but I will free of charge. Immediate steps after default. What do we do after our borrower defaults? Well, according to the picture here, we start playing a game of Jenga. I'm not really sure why we would do that. I'm not really sure why that's the picture, but there it is. We're going to send some notices and demand letters.

You can do that. It used to be that most loan documents required a default notice or a demand letter, especially in consumer contexts not required anymore. For a while, we called those dunning letters if we wanted to be cool and use words that other people didn't understand that made us seem like we were worldly and smart. So there's a little tip for you. If someone talks about a Dunning letter, they're talking about a demand letter. We don't really, oh, I won't even couch that with really, we don't send demand letters anymore. The Supreme Court, both state and federal, has scaled back the sorts of things that one lender can put in a demand letter. It's pretty limited. You can't just sort of rant away at you've got to give me my money or I'm going to bomb your house. Certainly can't make terroristic threats.

Not a lot. You can put in a demand letter. Another problem with a demand letter. If you indicate in your demand letter that, well, you've got 30 days to bring your account current and the contract doesn't say that they have a 30 day grace period, I think you've just given them one. And I think that you may have modified the terms of your contract, which may have waived your guarantee. So there's two reasons not to do it. The final reason not to do it, I hasten to bring up because it diminishes me, but I'll say it anyway. There was a time when people would get a letter from an attorney on this. It's on letterhead and there's all the tiny letters that list who all the lawyers are and the satellite offices, and it looks imposing intimidating, if you will. And up to some point in the eighties when people would get a letter from an attorney, they, oh my God, look at this.

I've got to do whatever they say. I don't think that's ever been true since I've been a lawyer. I think those days, the sun sort of set on those days a long time ago. I don't think people really care what it says in a demand letter. And I think that if someone's not paying you, getting a letter from a lawyer isn't going to scare them into paying you. The letter's not very expensive. You can send it if you want, subject to the cautions that I gave you a few moments ago, I don't think tremendously effective. You might just spend an evening playing Jenga. And then moving on to item two, you want to preserve your priority. So hopefully you've done that before your customer defaults, but make sure you've got the priority that you think you are supposed to have. Definitely by the time they do default.

And if you don't, well stop waiting. Get your deeds recorded, get your security prioritized and perfected. You want to do that just as soon as you possibly can, hopefully at closing. But if you get to an event of default and you find that you haven't done it, it's probably not too late. You just want to do it right away. That's something to do even before you play a game of Jenga triage before spending legal dollars, I was reluctant to allow this line to stay in there because one of the highest callings for your dollars I think is spending them on attorneys and legal fees. If you don't agree with that, if that doesn't fit into your financial landscape, you want to do some triage on your loan. Figure out what is specifically the problem. What are your options? Who are your guarantors? What is your LTV?

Get a picture of where your loan stands, what your likelihood of success is, what your collection options are and what they cost. Legal dollars don't always associate themselves directly with every conversation you have with an attorney. I am an attorney and we're spending this hour together free of charge I believe. I think these are offered free of charge. So today's free. If you want to call me and Steve, I've got this defaulted loan and I just want to think about what my options are. I want to game this through with you. Well, you can do that. You can call on, well, you'd call on this one and it sits right on my desk and when it makes noise, I actually pick it up and those sort of general calls when we'd spend a half an hour together or so and talk it through, you don't get a bill for that. Well, what if I'm not in my office, I'm out screwing around on my boat or something. Well, when that happens, the phone on my desk rings through to this one. So, oh, we just saw a picture of my dog and my daughter in that.

So the point is, give us a call and we're happy to help you and talk through the generalities and what your options might be and it doesn't cost you anything. So that's before spending legal dollars. You're actually talking to a lawyer and you're not spending any money. Oh, here's the point. Oh, this is great. So last check mark here. Avoid informal workouts without forbearance. I have talked about this twice already during this webinar, but using different words, so I'm really glad that it's here. The informal workouts are the agreements that you'd make with your borrower. Hey, I need you to give your six months behind, so I need you to pay me your mortgage payment plus one sixth of a mortgage payment for each of the next six months, or I'm going to take those six months of default and I'm going to put 'em at the end of the loan and add them to your balloon.

Or I'm going to eat the fees and the interest for the last two months, whatever these sort of workouts are that you make with your borrower when you do that, have you modified your loan? I think you have, I think I'm right about that. You have modified your loan and so what did we learn a few minutes ago about modifying our loans? Do we have the right to do that? Of course we do. We're the lender. We can modify our loan in whatever way we want. But when we do that, what we must also do is send written notice to all the guarantors of the loan modification. Do the guarantors have to approve the modification? No, they do not. I don't care whether the guarantor like the modification or don't or whether they're going to screech about, I don't want this loan. I don't care what they say.

You just have to give them notice. You must give written notice to all the guarantors and well, Steve, it's a single purpose entity, LLC, which is the borrower and its principal member is the guarantor himself, and I've negotiated the modification with that person so everybody's the same person, so I don't have to send that notification, do I? Why wouldn't you? It takes five minutes out of your life to send an email, which counts as a writing. You can send a regular letter that will cost you, I dunno, what's a stamp cost these days? 74 cents. Scratch it out, keep a copy of it. Why wouldn't you do that? Always send notice of any modification to your guarantor. So if you're making an informal workout, perfectly fine, but you want to document the forbearance, whatever it is you're doing, adding the interest rate to the end and letting them whatever, whatever remedies you want to notify your guarantors or you're going to get to a point down the road where potentially the guarantors don't owe you anything and why go through the problems of getting a guarantee if you're not going to enforce it.

So there you go, check mark. All right, I think we're done with page Jenga onto page, whatever. This is six of nine, there's nine of these total, six of 'em we're into now. Litigation bankruptcy strategies you would think this is a slide that I'm an expert in and I suppose I am 30 years of it, foreclosure judicial versus non-judicial. So a non-judicial foreclosure sale is a trustee sale. We have a division of this law firm that does those for you. So if you're in a trustee state, you can do a non-judicial foreclosure sale. You send out the notice of default. Usually that requires about 90 days, three months notice at the end of those 90 days, you can publish what's called a notice of sale. Typically 30 days after that, there's the guy in the hoodie with the clipboard standing on the courthouse steps and a pair of shorts and he will auction off the house.

And ordinarily that is quicker. Almost in every circumstance a non-judicial sale is cheaper than a judicial sale. Sometimes it's cheaper, sometimes not, but sometimes it is going to depend on the outstanding balance on your loan, but that's a non-judicial sale. If the economy and speed is the determining factor that you want to pursue, a non-judicial sale is probably a good idea for you. Why then would anyone ever pursue a judicial foreclosure sale? Well, there are a few reasons. If you have a guarantor like we talked about before, and you sued judicially, you would sue the borrower for foreclosure, the borrower for the deficiency and the guarantor for the deficiency all in the same judicial lawsuit. So if you do a non-judicial sale and then you sue your guarantor for the balance owed, well you're going through the time and expense of a lawsuit anyway. If you do a judicial one, there's only one lawsuit, so you only have to spend the money once.

Another principle difference between a judicial proceeding and a non-judicial proceeding in a non-judicial proceeding, the only recovery you're going to have against your borrower is going to be the property. That's it. There's no deficiency action against your borrower during the non-judicial foreclosure sale and you cannot sue your borrower for a deficiency after the non-judicial foreclosure sale. The non-judicial foreclosure process is it, that's all you're going to get against your borrower, your guarantor. You can still sue for a deficiency after a trustee sale but not your borrower in a judicial context. You can get the sale of the property, your foreclosure, you can get a deficiency against your borrower and you can get a deficiency against your guarantor all at the same time. So those are some considerations for you. Remember what I said about the telephone, happy to talk to you about it when these circumstances arise and figure out what the right idea for you is receivership as a tool.

I told you when you get a receiver and he's interfering and he's standing between your borrower's tenants and his income stream and you're getting that money, you will have the full attention of your borrower and you can accomplish those receiverships through a judicial foreclosure proceeding. So there's another advantage to a judicial proceeding that's right there for you. Injunctions and TRS to freeze misconduct. That's misuse of the property. Someone's stealing part of the personal property that's on the real property if there's waste that's occurring, land use problems, you've got a golf course where the borrower has turned off the water. I had that case and you need injunctions and tear rows to make sure that stops happening because I'm not a golfer, but I'm led to believe that nobody wants to go golfing on brown grass for some reason. I don't know why, I don't know anything about golf, but that was a big problem at the golf course collateral when it wasn't being watered, it was out in Palm Springs.

Grass dies pretty fast. Bankruptcy playbook, sort of the last resort of the quickly sinking ship, which is a defaulted debtor, is the bankruptcy. They'll file bankruptcy in their own name, gets the automatic stay. The automatic stay applies. It's automatic and it applies universally. So it's going to stop whatever your procedures are. If you have a trustee sale tomorrow, if you have a judicial foreclosure proceeding, all of that is going to stop because of the bankruptcy. There are a lot of good ways to get what's called relief from the automatic stay so that you can proceed with all of your state remedies and we're pretty good at getting those from you. And in many cases that's sort of the end of the bankruptcy tail. What you see sometimes is your borrower will send a partial interest transfer that is they'll give 5% of the ownership title to your collateral to someone or something else and that'll happen on Monday and then on Tuesday, whoever that transferee is of the 5% will file bankruptcy themselves.

Well that sounds fraudulent and the automatic stay wouldn't apply to that, would it Steve? Yes, it would. If they own any interest in the real property, the automatic stay automatically applies. That's why they call it that. And you need to get relief from stay on their behalf. Bankruptcy judges, none of them were born yesterday. They all know what it means when they start seeing these partial interest transfers and they'll give you what's called in REM relief or they will stage their order of relief from stay in such a fashion that will facilitate your foreclosure bankruptcy. Judge in those circumstances are going to be on team lender. Bankruptcy courts are places where borrowers generally rule the day. That's what they're for, right? When they start with these partial interest transfers the sun has set on that day, they've lost sort of all the compassion they will ever get in those forums and the folks who are there will help you.

So bankruptcy playbook relief from state motions, we already talked about those. Chapter 11 verses chapter seven. So chapter seven is seeking a discharge of debt. It's a liquidation and if you're a person and you file a chapter seven case at the end of the chapter seven case, you get what's called a discharge of your debt. So everybody who thinks that you owed them money, you don't owe them money anymore and it's violation of the discharge injunction to take any act to collect that debt as a personal obligation of the debtor can't do it anymore. Well Steve, what about my collateral does not affect your collateral, so you're still allowed to recover the collateral that you have for the loan. You just can't call the guy and tell him that he owes you money and ask him to pay you anymore because he does not in a chapter seven case, the discharge only applies to a person.

It does not apply to an entity. So if you've got a corporation, an LLC, A partnership, any of those things, the rule is, well, this isn't the rule, but this is a good way to remember. You've got to have blood in your veins to get a discharge in bankruptcy and if you don't, if an LLC, they can file a bankruptcy case and the automatic stay will apply, but they're never going to get a discharge. The case will close but they won't get a discharge. Chapter 11 cases a lot more complicated. Sort of the most sophisticated area of common, most sophisticated common area of bankruptcy. Those are plans of reorganization that are generally filed by corporate entities and it's a little bit more complicated to get relief from staying those you can't just sort of a week after the case is filed, file your no equity motion for a leave from stay.

The courts generally give a little bit of scope to the debtor to figure out what's the purpose of the case and how are we trying to reorganize and what are you going to do with this property? That's that creditors' collateral. It's frustrating to be in bankruptcy court as a creditor because you're thinking, well, the reason that I got collateral was so that I could recover the collateral in the event that the borrower defaulted and this borrower has defaulted and I'm trying to get title to this real estate. And what they did is run to the bankruptcy court and now the bankruptcy court is saying, well, you can't have your real estate collateral because you got to wait. It's frustrating, but we're here to help you.

The general public used to call attorneys, counselors, and part of the reason is we can calm you down in these circumstances. So we're here to help. All right, slide number seven of nine for you. Star Trek fans best practices for portfolio protection. And if any of you got that Star Trek joke, put it in the q and a and I will send to you a Fort trade jacket. I'll have something fun for you if you got that one because that was a deep dive. Best practices for portfolio protection, self-audit checklist. So you want to periodically make sure that your portfolio of loans is organized and formed in the proper way and that you are pursuing them in the proper way because you don't want to find yourself in a circumstance where a borrower identifies a shortcoming in your loan process or the procedures in your office and you think, oh my God, we do that for every loan in our portfolio.

You want to avoid that day. So that's what the self audit checklist is about. Make sure your documents are current. But Steve, I bought these loan documents from, I'm not even going to say his name, this guy whose office is in that building right there and I bought 'em 30 years ago and he tells me that they're fine. And so I've just been reusing those because damn it, I spent the $700 back then and I don't want to spend it again. A great way to lose a lot of money is by trying to save a little bit of money. I had a client and I still have him, but he used to love writing his contracts literally on cocktail napkins. And once he sold an airplane and he wrote the contract for the sale of the airplane on the cocktail napkin, a couple years later, the airplane was parked in the median of freeway in Utah.

And he calls me and he says, what do I do? And I said, well, what are your rights here? Where's the contract? And it was back when he used fax machines. And so he found a way to, I think what he did is photocopy the napkin and then he faxed the photocopy to me. And it is wrong to say I couldn't believe it because I had come to expect those sorts of things from Doug. But you want to make sure that your documents are current. So probably don't write your own contracts, probably don't use your old forms because things change all the time. And we have an education and knowledge base here at this law firm that makes sure our documents are compliant with every state in the union. And you want to protect yourself on the front because you don't want to be, what's that thing?

Pennywise and pound foolish. I think that applies directly here. So make sure your documents are current recording assignments, record everything. You want to make sure that the deed of trust is recorded if you bought your loan from someone else, you want to make sure that you record that assignment. Sometimes there are strategic reasons to wait until the day before your foreclosing. I don't think a lot of times those strategic reasons are valid, but you might think about those for god's sakes. Make sure your deed of trust is recorded though bad things are going to happen if you don't do that. Tracking your guarantors, you just want to make sure you know where they are and what it is they are actually guaranteeing. And if they have the wherewithal to guarantee your loan anyway, you could find somebody at a bus stop to guarantee a loan, but they probably, that guarantee isn't going to be worth an awful lot if your $3 million project goes pear shaped.

So think about that Litigation budget framework. I'm happy to help you with those. I am not going to lie to you. Litigation is expensive, but the reason it's so expensive is because it's worth it and we'll sketch that out for you and figure out where the money is going to come from in sources that are other than you because we like to make sure that your borrower pays for as much as the litigation as they possibly can. So happy to do that with you. Portfolio triage, we talked about that a little bit early, but this is from a portfolio standpoint, not just a single loan default standpoint. Your self audit checklist hopefully will disclose some of these things, but if you want some folks to come in and conduct an audit and kind of spot check your portfolio, we can help you with that. Prevention.

Oh, the greater than less than they said. There would be no math. The big one points to the little one. So prevention is better than defense or it's bigger than defense. Alligator is eating the big thing. This is how we can remember these things in second grade, an ounce of prevention is worth something. We can Google that. But you always, the triage that I'm talking about, the audit checklist, the making sure your procedures in your protocols are appropriate on the front end of these things are going to save you an awful lot of money to prevent someone from suing you at the end. Because when you're defending yourself for a mistake that you've made, it can get expensive. Whereas the preventative steps that you can take to avoid those happenings just a lot cheaper. So case studies and lessons learned, here we are. Borrower fraud gone unchecked. There were those Baltimore cases that we talked about a little bit.

Appraisal fraud is kind of the biggest one. It's the most newsworthy one these days. So when you considering your LTV, which is a significant consideration in these circumstances, you want to make sure that the appraisal upon which you are basing your LTV analysis is sound. That's one that I would definitely tell you to think about. The second is probably figuring out the wherewithal of your guarantor. Just because someone is willing to sign in blue ink that they're going to guarantee the loan doesn't mean that they're guarantee is particularly valuable. The chapter seven considerations that we talked about, because most of your guarantees tors are people, so you want to make sure that they're going to have the scratch to pay you in the event that your loan goes bad success with receivership appointment. It's no big surprise that that arrow is pointing up out of that guy's head.

It's some interesting graphics in these anyway, you're going to have success if you get a receiver appointed. Like I say, there's no denying the attention you will get from your borrower if you cut off his income stream and all of the rent that is supposed to be paid by your borrower's tenants is being paid to you. He will find a way to get in touch with you and probably the rent that you're getting through the receiver or through the writ is going to pay the entirety of your monthly mortgage payments and then you can apply some of it to your back rent and happy days when that's happening. Bankruptcy stay and relief victory. And you're almost always going to win your relief from stay motions in a chapter seven case, chapter 11 cases. You generally have to wait a little while and we'll be able to tell you in advance whether you're going to win or not in most circumstances because if it's a viable chapter 11 case and the debtor in bankruptcy is going to repay the debt that they owe, the court is not going to grant relief from stay.

But the bankruptcy plan is going to pay off your arrearages, which is generally why you're involved in this and you are going to get some of your interest, probably not all of it but some of it. And so that news isn't all bad. It's nice to get money. You probably are in the business of collecting money more than you are in managing REO. So those are good events for you. So that's the end of slide eight. Number nine I am suspicious is just going to say Q and a. There it is. Well it doesn't say the A says the questions. So here we are. There's another nice photograph of me and it's got my email address if you want to get in touch with me, it's got my YouTube channel. Please go find that like and subscribe and let's see if we have any questions. It looks like we do. There are 18 of them. Good heavens. I'm going to move questions over here.

And how, question number one, how does from James Paulina, thank you. How does a lender who funds second deeds of trust try to avoid the extortion lawsuits resulting from AB one 30 if I have to record a notice of default starting a foreclosure? Alright, and this question was issued at 1133 when I think I was only 20 seconds into this procedure. So AB one 30 was recently enacted, I believe July 1st. It became effective in California. And it is very problematic for folks who are holding the beneficial interests in second deeds of trust. And it is the subject of quite a lot of confusion right now because none of those cases have found their way to the appellate court. And James, I would encourage you to get in touch with us directly. There's some content on my firm's website. We did a webinar on just AB one 30 about a month ago, and there's a lot there that I'm not going to be able to answer for you in this context, so I apologize, but it's a complicated field and you're right to ask those questions.

So Michael Dugan question number two. At 1137 when I was about five minutes in, you guys had questions right away. When you say defaults are up 3%, is that with all mortgage note payments or specifically hard private money loans? That's a fair question. That is not even with all mortgage note questions. That is all debt in the United States of America. So that is including your visa bills and your electrical bills and your mortgages and everything. So it's up 3%. Joe McNulty at 1144 is this business purpose. I don't know what is this owner occupied home with a current loan balance of $1 million. Borrower wants $200 for inventory and equipment in their business. We do not make second loans. If we loan 1.2 million is that business purpose? Remember the only relevant question, what are they going to do with the money? So in your analysis or in your hypothetical, $200,000 of it is going to be a business purpose loan, $1 million of it is to pay off the existing mortgage on their house and you don't get a circumstance that is very much more easily described as personally, family or household than paying off the house that they live in.

So that one sounds like a consumer loan to me, anonymous attendee. Some people don't like us to know who is asking the question Anonymous. In Texas, when a loan is in the foreclosure process and the borrower has become unresponsive, is it permissible for us as the lender to take over and manage the property's rehabilitation or must we see the foreclosure process through to completion before doing so? There is probably ways in Texas, oh you can't see behind me blurred screen, but right there you're going to have to take my word for it is a Supreme court of Texas certificate. I am licensed practice in Texas and there are pre-judgment ways through the court to get Ritz and receivers and keepers and things like that who can accomplish what you are saying. But it's not just you're going to show up with your cousin who's a really good property manager and start doing all of that. You're going to have to go through a judicial process. So there's your answer anonymous attendee. Another question, anonymous attendee. Can a receiver who was previously in control of a property that has since been released from receivership now file a motion to place a priming lien on the same property?

Well, you can file any motion that you want underpinnings for. It might be somewhat challenging for you to demonstrate there, but yes, the answer is yes. You can certainly file that motion. So there you go. Al Hinkle at 1159 on venue. A venue question. This is great. The lender investor is in Northern California, the borrower property is all in California. Can we specify venue for arbitration, et cetera to be the lender's county? Yes, you can. And the way you would establish the nexus that I was referring to is to say that the loan was made in the county where the lender is. That's the way to do it. A lot of times our lender clients not coincidentally select Orange County, California as their venue and there are good reasons for that among them. I'm sitting in Orange County, California right now. So good one. Al Anonymous attendee UCC liens.

So UCC liens are generally for personal, not real property. If the property reverts back to the lender and the UCC lien survives, how does the UCC lien holder, I think there's a missing word there, get their payment. Are we as the new owner needs to pay them off to clear the title? I'm kind of getting lost in this question. The lien gets their payment. Are we as the new owner, do you have to, oh, I see. So you're a third party buyer at a real estate foreclosure sale. And do you have to pay off the UCC lien to get clear title? So real estate is usually almost always perfected with liens filed with county recorders. And so that is foreclosed and there's a third party that now becomes the owner of the real estate. Real estate is land and improvements. A UCC lien relates to personal property, not personal like family household, but personal as in not real estate.

So if the real estate and the improvement, for example, is some sort of a factory and in that factory is a lot of equipment and forklifts and lathes and all manner of things. And that personal property, the stuff that's in the factory is subject to a UCC lien, which it is the way to properly perfect a security interest in personal property and the Kubota or whomever it is that holds that security interest and the personal property comes and says, Hey, I want my forklift and I want my lathe, and whatever else is out there, all the personal property is mine. The purchaser of the real estate does not gain a superior lien in that personal property just by virtue of being the successful bidder at the foreclosure sale. So you can work it out with the UCC lien holder. There are mechanisms where you can declare that personal property abandoned there.

There's a complicated sort of rubric of activity that can appropriately happen after that. But generally speaking, if Mitsubishi shows up and they say, I want my forklift right answer is probably to give 'em the forklift or work it out with them so that you get to keep it. That's a great question. That's a secured transactions question that we would've got in law school. Good one. Anonymous attendee. I wish you would've put your name on that. I would've sent you a jacket. Lou Pita Sano number five. What do you do with the rent you collect? Do you apply it to past due payments or do you send it to reserves until the situation gets resolved? No, you apply it. That's your money. So past due payments. Easy answer. Good question though. Thank you. Lupita Anonymous attendee. A lot of questions from this guy today. Given that Colorado is a non-judicial foreclosure state, what is the typical timeline from the initial filing of the notice of default to the final auction date? Also, what are the common factors that can cause this process to extend beyond the usual timeframe? So question number one on that wall up there? Yeah, right above the Texas one is in Colorado. I'm licensed practicing Colorado as well.

90 days for your notice of default, 30 days after that for your notice of sale. What are the common factors that caused this process to extend beyond the usual timeframe? Bankruptcy is one. If they go march down to court and get a TRO to slow the sale down, that's one. Maybe they floated some payments in that you've applied. Those are the standard ones. Paul Newsom an almost extraordinarily famous name can the winner of the property at the original foreclosure bid on the property, again at the deficiency judgment, the winner of the property at the original foreclosure bid on the property. Again at the deficiency judgment, I am not sure what this question means. So you get a third party who submits the winning bid. They become the owner of the property at the foreclosure sale. The deficiency judgment is the shortfall between the proceeds at the sale and the balance owing on the loan.

And so there isn't really a bidding process on the deficiency judgment, but if the lender gets a judgment against the guarantor after a non-judicial foreclosure sale or gets a judgment against both the borrower and the guarantor at a judicial setting, they're going to have a judgment and the lender is, or at that point the judgment creditor is capable and sometimes willing to sell the right to collect those deficiency judgments. So yeah, this guy owes me a hundred thousand dollars, you give me 70, I'll let you go collect that from him and you step into his shoes. So the answer to that is yes, but it's not just a sort of show up and say, judge, I want to collect the a hundred thousand dollars. Doesn't exactly work that way. Siva in the Bay Area, what is typical time for judicial foreclosure? How long does it take just in general?

So I think you can somewhat count on the judicial proceeding to get to the sale and the judge himself is going to conduct that auction. As long as you don't have a borrower who wants to burn the forest down, you can think about that taking somewhere between eight and 12 months to get to your auction date. If you have learned counsel and Siva, I know that you do because I've seen you at CMA several times. So thank you for coming to conferences and thank you for the question today. Anonymous attendee is back. Question number four, given that a property is already in default with a foreclosure action scheduled for November, this is a very specific question. We are exploring options other than foreclosure because it does not seem beneficial. The borrower wants to hire a general contractor who is willing to be paid upfront to complete the rehab with the remaining balance to be paid upon the sale of the property.

Okay, there's your lead in. Now we're going to get to a question. If we were to help the borrower by paying the general contractor directly, how would this affect our ongoing foreclosure process? So if you're going to pay a vendor who's helping the property, you can do that. There shouldn't be a problem with that. I don't think it's going to have a negative effect on your foreclosure. You'll want to document it and say, I'm not forbearing on my foreclosure remedies just because I'm making these advances in a construction loan context, which sounds like what this is, there are plenty of advances to be made. So you'll want to structure those as loan advances and not gifts and not sort of ultra virus. There's a fun Latin phrase, meaning otherwise they're not outside loans. You want to get those into the structure of your construction loan is the best way to do that.

I'm so impressed with you. I wish I knew your first name. I need a way to get in touch with you. So k na, I'm circling it on my screen, my email address. Send me an email today because you are correct. When I was on page seven of nine in my slides, I made a Star Trek joke and k Manir has correctly identified that it was a Borg reference and you could not be more correct. So well done. I'm going to say, sir, I don't know your gender. I shouldn't assume it. So well done. K Manir. There is a gift coming to you if you send me an email. Excellent, very well done. Alex Johnson, seven of nine was played by Jerry Ryan and Star Trek Voyager. You're totally right, everybody knew this. So Alex, same deal applies to you despite the fact that yours came in after K Man bars, you will have a gift coming to you as well.

But contact me at my email address and we'll get that sent out because you were even more specific than Caman war was. So good job. Oh, Caman war. Coming back at 1218 to tell us that specific character in Star Trek Voyager series. Well, you didn't say who it was, but it was seven of nine, so that's correct. You guys both win. Nicely done. I'm very happy that you enjoy some of the dorky things that I enjoy. Anonymous attendee at 1219. What items should we include in a self audit checklist to ensure best practices and portfolio protection? So what I would do, I think you probably all have policies and procedures that you follow during your loan transaction, your sort of diligence that you follow. Go through those and just take a hard look at 'em and think of what are the big ticket items here? What are the most important parts, important elements of what I'm doing in my loan transaction protocol? And then go spot check your portfolio to find out did I follow these procedures in all of those, especially if your procedures are evolving and some of your loans are older and are going to predate some of those procedures. So that's a good thing to do with a spot check. How often would you suggest lenders do the best practice for portfolio protection?

I think a good accountant is going to tell you that you're going to have to manage your inventory once a year for tax purposes. I would think about, it's kind of a lot to do it every year depending on how deep a dive you want to do. If you did it every year, I think you would want to highlight different arenas every year. If you don't want to do it every year and you just kind of want to do an encompassing one periodically, somewhere between two and five, I think some is probably the appropriate place to put those. Anonymous attendee. What item should we include in a self audit? Oh, those that was, whoa, these questions are moving around. What should we include in a self-audit checklist? So those are sort of the big ticket items in your policies and procedures. Anonymous attendee, again, a lot of questions from this guy.

Can you clarify what you mean by tracking guarantors? So you've got guarantors who are individuals. You want to make sure that you know where they are, how to find them, kind of just reach out and touch 'em every once in a while. There's not an awful lot you can do to ensure their financial viability, but it's a good idea to make sure they're still in existence. They haven't filed bankruptcy, they didn't move from Kansas City to Juneau, Alaska, and if they did, where to find them. Things like that. When times are good, it's a lot easier to check in on folks and get straight answers from them. Then you can when times are bad. So when you've got a performing loan, it's sort of nice to periodically spot check that kind of stuff. Anonymous attendee again, how do we make sure as a lender and first lien holder once the property enters receivership, that we have a strong case to order motion to release from receivership.

So you're the first priority lender and you've got a writ and a receiver and now you're thinking that you're going to release the receivership, not a guess. What you would generally want to know there is my loan current. Once they're current, the borrower doesn't owe you any more money and you don't need the receiver to collect it for you, but the receiver is going to handle that on their own because they're generally very diligent accountants and many of them have made a living as accountants before they became receivers. They'll take care of most of that stuff for you. Anonymous attendee again, how do we make sure as a lender, this is the same question. Oh no, subtly different. How do we make sure as a lender and a first lien holder, once the borrower files a chapter seven or 11 bankruptcy case, they have a strong case to order motion to lift stay in bankruptcy?

Good question. And there are two prime categories of this. The first, are they making their post-petition payments? That is they filed their bankruptcy case on January 3rd. There was a payment that was due on the first. That is a pre-petition payment, so disregard that one. But on February 1st, did they make that payment? If they did, they're making their post-petition payments. If they did not, you file your motion for relief from stay the next day. So post-petition payments category number one, category number two, equity in the property is there equity, they owe you 600,000. The property is worth a million. There's $400,000 of equity. The bankruptcy court is probably not going to give you relief from state of foreclosing those circumstances because they want that $400,000 to distribute to the other unsecured creditors. If the property is upside down, you'll probably get relief from stay. So post-petition, payments, equity in the property, those are the two things.

There's some real law there. That was a good question. Anonymous attendee. Ian Walker for the receivership appointment. Does the borrower have to be in bankruptcy? No. Bankruptcy does not need to be involved. You can file a case in the state court and get a receiver appointed that way and that's the most common way it happens. So there's your answer. Anonymous attendee. If a lender is in California or wait, the lender is in California, borrower is in Maryland, but the collateral is in Pennsylvania. Good one. Which governing law state is best to use to indicate in the loan documents. I would say California primarily because of the usury thing. And you're going to make it a little bit inconvenient for your borrower to defend themselves in California, which is good. It's an easy advantage for you. That's what I would do. Pick California. Besides I'm in California, Joe McNulty, he's back.

Does the majority rule of proceeds have any applicability for business purpose versus consumer loans? The majority rule of proceeds, yes it does. And that's sort of outside the scope of this webinar, but the answer is yes. James Paulina, he's back. Walk me through a lender. Forgiveness of all debt in exchange for ownership of the property. So these are the, I'm going to answer this question, but this is kind of the deed in lieu circumstance. Deed in lieu of foreclosure, you've got a defaulted loan. The borrower's ready to walk away from it and says, well, I'll give you title to the property as long as you don't pursue me and presumably my guarantor for any of the deficiency balance. I hate these. I think this is a terrible thing to do. I would counsel you to never do a deed in liebe because the quit claim deed that your borrower is going to give you, saves you a little bit of time.

You don't have to conduct a non-judicial foreclosure sale. So you save 120 days, great, saves you a little bit of money. There's fees involved in any of these things. Nothing comes for free. The quick claim deed, you can probably get one on the internet for 50 bucks and record it for another 35. Congratulations, you've saved some money. You have also caused yourself a lot of problems and left yourself open for a lot of headaches down the road because your borrower has given you a quick claim deed, which is effective between you and your borrower. It's effective between you and absolutely no one else. So if there's tax problems, if there's other creditors, if your borrower has quick claim to the property to his aunt the day before and you've got a wild deed, it solves exactly none of those problems. And a foreclosure sale solves all of those problems.

So please God, don't do those. That's the real estate foreclosure equivalent to my client who used to sell his airplane by writing a contract on a cocktail napkin. Really cannot recommend strongly enough against those four questions remain. James Paulina is back. Walk me through a lender forgiveness. Oh, I just did this one. Yeah, Dean Luke. So I already did that. Randy Rodin house. What states can you do a foreclosure in? So you can do a foreclosure in any state. I think what every state, what this question is probably driving at is which are the states that are non-judicial foreclosure trustee states and which are judicial only states. And those are too numerous to go through. It's like a 35 15 split, but that information is available, but there's a bunch of them on each side. Robbie James, thank you so much, Steve. You are most welcome.

Robbie James. I truly appreciate the knowledge you've shared and your clear explanations. Well, that's very generous of you. You're most welcome. I'll be sure to reach out via email if you have other questions. One of the, oh, Robbie James is disclosing that he was one of the anonymous attendees, so good job peeling back the mask. Thank you Robbie. And those are very generous compliments. So thank you very much. Here's our buddy Siva once again, Siva. Can we pursue the guarantor only for the personal guarantee without including the borrower? The answer to that question is yes. You can sue your guarantor at any time for any defaulted reason. You do not need to sue the borrower at the same time. In fact, I just filed one of those lawsuits yesterday. So yes you can. Can we pursue all guarantors without pursuing judicial foreclosure? The answer to that is yes.

If you have a loan with a borrower and you conduct a non-judicial foreclosure proceeding, you may not pursue the borrower for the deficiency, but you may pursue every single guarantor. Everybody who signed a guarantee of that loan you can pursue for the deficiencies. The answer is yes. Randy Rodin House, what states can you or your law firm do foreclosures in? There are a bunch of 'em. I'm going to say most of the Western states without naming each of them individually. And we can find someone who can accomplish a foreclosure for you and every one of the 50 states. So we're happy to help you with that. Joe McNulty, see you at the next pickleball. That's very kind of you. I look forward to seeing you at that one as well. I have played pickleball twice in my life and as Joe will back me up on each occasion, my shoe has exploded because, well, I don't know if there's a because, but that has happened and pickleball is great fun.

I've played it twice and I was just talking about, well, my firm is organizing its next conference, which is going to be during March or April next year in Scottsdale. And there's going to be a golf tournament. And I am, despite my appearance, not a golfer, and I'm hopeful that the resort where we hold it has pickleball courts because I want to organize a pickleball tournament for the folks who are not golfers. It's great fun. But Joe, thank you for that and I look forward to it as well. That is the last question I have. And so I humbly appreciate each of you spending the last one hour and 24 minutes with me and for your time and attention and your interest in this field. And we appreciate all of, well what you do to support my law firm. If there is ever a question you have, remember what I said, you can call this phone right here and when it makes noise, I will pick it up and I will talk to you and I will not send you a bill.

And if I'm not in my office, it will ring to this phone and look at that. There's Sebastian. I'll talk to you on that phone and I will not send you a bill. And my contact information is right there on your screen underneath that fun and recent picture of me, my email address, and we put quite a lot of my content onto the Western law man. So please like and subscribe there. And with all of that, I bid you a terrific remainder of your Wednesday. This is the second full day of autumn in North America. So I hope you're going to wear some fall colors and rake some leaves and maybe enjoy a pumpkin beverage from your nearby Starbucks. So thank you all so much and we look forward to seeing you next time. Adios.