Guaranties: Selecting, Creating, and Enforcing – What Every Lender Should Know

Steven E. Ernest: Good morning everyone, and thanks for joining us. The directive from our organizers is that we wait a couple of minutes until the crowd fills in, which we'll do, although in the Marine Corps they will tell you that being on time is being late and you're supposed to be five minutes early. Nonetheless, we're going to give everyone a few minutes. I'll start the general part of the introduction though. Thank you again for coming. My name's Steve Ernest. I am the director of litigation and bankruptcy here at the Geraci Law Firm. We are coming to you live from Geraci world headquarters in Irvine. Right now on the line with us, we have one of our partners, Dennis, who's going to present some things and we also have Matt Gunter who's going to talk to us at the end about the in re Moon decision.

Some housekeeping matters there's an outside chance that what we're going to say today isn't going to answer 100% of all of the questions you have in your heads. And if that's the case, we would love to provide solid answers to those questions and it'll probably edifying for everybody else. So when those questions occur, if you could put those in the q and a box, it might be inviting for you to write them in the chat, but I guess that messes something up. So please don't put them in the chat. Do put them in the q and a and the Q part is of course the question that you're going to write, the answers we will give to you verbally toward the end.

We're also sponsoring a contest here at the Geraci Law Firm today. If somebody can keep a tally of the number of times anyone on this video says the word guaranty at the end, the per well put in the chat or the q and a, you can pick on this one what your prediction is for the number of times that word is used, person who is closest without going over at the end will get a special prize mailed to them, and so that will be exciting. Some of you might be familiar with Dwight Yoakum who has a country song called You are the One. In that song he says the phrase, you are the one 37 times. I think we're going to hear the word guaranty a lot more than 37, so let that be your guide. I think we have waited long enough. My guess for the number of guaranties is 137, but I'm ineligible to win the prize, so if somebody wants to copy mine, there you have it. To get started, we have Dennis R. Baranowski who is one of the partners at this firm. He knows an awful lot. Just yesterday we learned that he has been here at this Geraci law firm for 11 years. If the firm has a sage, it is obviously him. Everybody would acknowledge that he's one of my favorite people in the world, top 20 at least he knows as much as anyone about all of these things and he's going to tell us about guaranties and the sort of transactional drafting part of it. Dennis, here you go.

Dennis R. Baranowski: Thank you Steve. I appreciate those kind words and I'll make sure I deliver the cash to you after we're done with this. It's always nice to have myself pumped up like that. I always can use an ego stroke. Yeah. Well, welcome everyone and thank you for attending our webinar here this morning or this afternoon if you're on the east coast. So let's just jump right in. So we're talking about guaranties today and I think the first thing we really need to do is just kind of establish the parameters and go back to guaranty 1 0 1 and kind of look at the basics and figure out what is a guaranty. By definition, it's a written arrangement where a person that can be a natural person or an entity agrees to be responsible for the performance of another person's duties, liabilities, or obligations. The are two key components to that definition.

One is that one party is agreeing to be responsible for another party's obligations and there's some emphasis on the word another, and this will help us define who can actually be a guarantor. The second portion of the definition that's important is being responsible for performance of a duty, liability, or obligation, and that portion of it will help us determine what is being guaranteed. So let's jump into it and go look at who can be a guarantor. As a general rule, any person natural or entity can be a guarantor as long as they can legally contract. So if you're a minor, can't issue a guaranty. If you're Dennis or Steve or Matt, you can be a guarantor. Generally speaking, there are some exceptions and those exceptions to understand the them is probably best to understand and go back to the definition where I emphasize that it's guarantying one party guarantying for another's party obligations.

Again, emphasis on the word another. So of course a limitation on being a guarantor is you can't guaranty your own obligations. Steve Ernest as a borrower can't also be Steve Ernest on a guarantor. You can't guaranty your own obligations. Why? I think the first reason really is common sense. It wouldn't make sense that you can be obligated on the same or liable for the same obligation twice. You're already principally obligated as the borrower. So adding you as a guarantor really doesn't add anything, doesn't add any value to a lender. The second reason and probably more compelling at least from a legal standpoint, is public policy. And the first is the lender shouldn't be able to have two bites at the same apple. Now you shouldn't be able to sue a borrower, get a judgment or foreclose on a property, get a return on whatever the foreclosure provides, and then turn around and sue the borrower again under the guaranty.

Which kind of leads us into the second reasoning on this is really for public policy is the lender can't use the guaranty to circumvent statutory limitations on the lender's recourse from the borrower after foreclosure or their collection action. A common example of this is in a non-judicial foreclosure states lender, non judicially forecloses on the borrower and there ends up being a deficiency, meaning the property sells at foreclosure for less than what's the outstanding balance on the loan. And that instance in most non-judicial foreclosure states, including California, the lender can't go after the borrower for any deficiency. That difference between the sale price and the outstanding balance owing otherwise you create a loophole in that statutory scheme and then it would be pretty much rendered useless. So that protection of the borrower is there for a reason and that's why they can't really guaranty their own obligation.

There are two kind of areas where the guarantor can appear and be deemed as the same individual or the same as the borrower. The first instance is where it's the same party name. So Steven Ernest is a borrower and Steven Ernest can't also be a guarantor on the same obligation. Pretty straight, straightforward, right? The second instance is where it's the same party pretty much with respect to assets and there's really no delineation between the identity of the two parties. A common example of this would be ABC trust is a borrower and John Doe is a guarantor. If John Doe also created the trust retains power to revoke the trust and continues to exert power over the assets of the trust. A guaranty by John Doe more than likely in most states is not going to be enforceable, although the name is different. You know ABC Trust versus John Doe because the assets are pretty much the same. There's nothing that's added as far as what the lender would be able to pursue going after John Doe as a guarantor. They're one and the same.

So let's move on to the second component of this discussion and help us determine the types of guaranties that you have to choose from. And that second component just for a reminder, is the guarantor is agreeing to be liable for the obligations of another. As I mentioned, this will dictate the type of guaranty that you would choose. I would simplify and break this component down into two smaller, simpler questions. And the first is, what is the extent of the guarantor's liability and then under what circumstances does that liability arise and that will help us determine and differentiate between the different types of guaranties that are available. So the first and most common and my personal favorite guaranty is the full recourse guaranty and putting it in terms of our questions, the extent of the guarantor liability, there is no limitation if the borrower fails to pay.

The guarantor is on the hook for the entire loan balance. There is no limitation on how that occurs. When does the liability arise? Typically it'll arise after the borrower fails to make a timely payment on any amount due under the loan. There's some other limitations and tricks on that or tips that we'll talk about a little bit further when we're talking about actual guaranty terms. But it's important just to note no limitation on the extended liability. Liability arises just upon a date default, typically a failure to pay. Another common type of guaranty is the limited recourse guaranty.

The extended liability is limited in some way it could be a cap on the dollar amount. So maybe the guarantor says, look, I'll agree to be liable on this loan and for the obligations of the borrower, but I only want it to be up to $200,000. I don't want to be liable on the full million dollars of the loan. I'm only a partial owner of this company. Why should I assume the entire liability? I'm only willing to give it up to $200,000. So there's a cap on the dollar amount. It can also be limited on what a guarantor is going to be liable for and we'll talk about that a little bit more in conjunction with when the LI liability arises. So the second component of course, on a limited recourse guaranty in our analysis of the different guaranties is a limitation on when liability arises.

Liability under a limited recourse guaranty is often triggered by the occurrence or failed occurrence of some event and it's usually an act or failure to act by the borrower, but it doesn't always have to be. These are typically referred to as bad boy carve outs and examples of these bad boy carve outs would include fraud or misrepresentation by the borrower waste of any property. Securing the loan waste means that they don't take care of it or intentionally damage the collateral property. A failure to pay property taxes or obtain and maintain property insurance. Failure to deliver insurance or condemnation award proceeds to the lender if they're required by the loan documents, gross negligence, willful misconduct or criminal acts by the borrower, an affiliate of the borrower or guarantor that results in the forfeiture seizure loss or decrease in value of the collateral. One common area where this could occur and probably is a pretty good theme here and things that I've talked about if you've attended any other of my webinars, it's this, the lender allow or the borrower allows a cannabis business to operate at the property without a license or the license expires and it doesn't get renewed.

In that instance, if the license doesn't get renewed and the federal government comes in and says, look, you're a bad actor, you're not operating under the licensing scheme of the state in which you're located, so we're going to go ahead and seize this property. If there's a loss that occurs and it's occasioned by that, then the limited recourse guaranty would be triggered under these circumstances. The guarantor liability is going to be limited to typically to the loss that's suffered by the lender as a result of those bad acts occurring. So to be clear, and I just want to make sure that everybody understands this, when these bad acts occur, it does not automatically trigger an obligation on the part of the guarantor to repay the entire loan amount. What it does trigger is it's an obligation on the guarantor to make the lender whole on whatever damages are, whatever damages are exacted on lender as a result of those bad actions.

So in my example about the seizure of the property, in the event there's a legal cannabis business property operating on the property, if for some reason the federal government doesn't want to play ball or decides that, okay, well you know what, we're going to foreclose and you're going to be able to take money off your lien, but maybe the lender only gets principle back but doesn't get interest in that instance, it's not repayment of the entire loan, but the lender's damages would be measured by that interest that wasn't received. So there's still that loss, but again, it's not an obligation itself to pay the loan, there has to be a determination of how the lender was damaged and then that would create the liability and define what it is.

Good side of the so is oftentimes it limited guaranties there are some provisions baked in which will allow the lender to and to go after the guarantor with respect to any repayment of the loan and it's a handful of actions. They're typically the same in most of these instances. So when that would be triggered, some of those triggering events would be the borrower filing for bankruptcy relief, transfers of collateral of the collateral property without the consent of the lender or change in ownership of the borrowing entity. If those events occur, it's now not just the loss that's incurred by the lender, the lender can actually not proceed against the guarantor for repayment of the loan, the principal interest in any other loan cost that may have been incurred. So moving on to the next type of guaranty, we're looking at the spring guaranty. The spring guaranty is what I would consider a little bit of a hybrid between an unlimited, unlimited guaranty in that there is a limitation on when liability arises, but once it arises, so that's similar to a limited guaranty, but once it arises, the extent liability is not limited in most instances, meaning the lender could go after the guarantor for the complete principal interest in other amounts going under the loan.

The spring guaranty, the form of it typically won't include a list that's similar to the bad boy acts that you'll see in a limited guaranty. It just won't have the additional limitation on it that states that lender's recovery is limited to the damages that are actually occasioned by those acts, but instead we'll say upon the occurrence of these A acts that the guaranty will become a full unlimited guaranty and that the bar guarantor will be obligated to pay the entire outstanding balance owing on the loan. The final one is a performance guaranty, and this one, there's a little bit of a limitation on when it occurs as well as the liability because a performance guaranty is guarantying performance of a certain act that's usually not payment, the most common performance guaranty that you'll come across as a construction completion guaranty. So in that instance, the construction completion guarantor is not guarantying repayment of the loan.

What the guarantor is agreeing to is that if for some reason the borrower and the other parties that are responsible for completing construction at the property fail to do so in accordance with the terms of the loan, the lender can go to and submit a demand on that performance guarantor to complete the construction in accordance with the requirements of the loan documents and the plans. So those are your typical types of guaranties that you're going to run into. Next we'll kind of take a look at some key terms within a guaranty that are going to impact how the guaranty is going to be enforced in the future as a general rule and from a practitioner standpoint, ideally the guaranty should be absolute and unconditional. What this means is there's no limitations or preconditions to the lender taking action against the guarantor once a default has occurred or there's another event that triggers the default.

Well talk a little bit more about that when we get into the waivers, but some examples of the limitations would include a requirement that the lender exhaust exhaust all efforts to collect from the borrower or possibly even other guarantor prior to seeking recourse against that guarantor. Another limitation would include a requirement that the borrower foreclose on all collateral prior to going after the guarantor. And in that instance what ends up happening is from a guarantor standpoint, it's great because hopefully the foreclosure of the property will result in lessening the liability of the guarantor and it's a more defined amount or if it's collection from the borrower being exhausted first, hopefully some principle and other things get paid down and then the guarantor really knows what that liability is. That's the advantage for the guarantor, which is kind of a disadvantage for the lender and it's also a disadvantage for the lender because they have to wait before proceeding against the guarantor.

And as I'm Steve I'm sure will discuss there's value to being able to sue the guarantor at the same time as you are moving against the borrower and foreclosing on the property. Don't want to step on his toes too much there, but really what it does is it helps to create leverage, especially in instances where let's say it's an entity borrower and you have an individual guarantor guarantor that maybe are the principles of that like an L L C or the shareholders of the corporation. In those instances, when you start suing them individually, a lot of times they figure out how to get you paid because now you're not dealing with just the liability of an entity that they can just close up the entity, allow foreclosure to happen, wash their hands and walk away. And personally there's no pain caused for them and no really no motivation for them to pay.

But if you put 'em in a position of where they're personally going to be liable and their personal assets are going to be subject to any type of collection or judgment against them pursuant to a guaranty, you'd be surprised how motivated people come become in figuring out how they can pay the lender back or working out some type of terms to pay the lender back. They're become much more cooperative when you kind of give them that shot over the bow and threatening their personal livelihood and not just an energy that they could walk away from. So also the guaranty when applicable should be a guaranty of payment and not just collection. There's a distinction. A guaranty of collection means that the guarantor is guarantying that all amounts owing under the loan will be paid back. So typically that will also delay and be related to requirement that the lender seek recourse against the borrower and exhaust all efforts prior to moving forward against the guarantor.

So if it's a guaranty of payment, if a payment's not received, boom, the lender's able to go right after the guarantor. There is no limitation on that for the most part, but it makes it a lot easier and they don't have to wait and try and exo exhaust all other means of collection and foreclosure prior to going after that guarantor, which again, as I mentioned before, can be a great source of leverage to getting any default resolved. So in addition to that key term, there are also waivers of defenses and rights by the guarantor that you should really focus on and make sure there are included in your guaranty documents standard. Some standard waivers would include the waiver of the right to receive notices that may be required in the loan documents, the waiver of the right to require the lender, as I mentioned before, to proceed against the borrower, other guarantor or exhaust off collateral kind of already explained to you why that is important. In addition to stating that the guaranties having an affirmative statement that it's not required of the lender, it's also good to include a waiver of those rights because oftentimes there's some sort of statutory protection in each state that provides that this is required of the lender prior to going after a guarantor. So the guaranty by including a specific waiver of it hopefully should effectuate an effective waiver of those rights or defenses. There's also the waiver of the right to review and approve any modifications to the loan documents.

Typically that's coupled with an affirmative statement that the guarantor agrees to be bound by any modification. This is really kind of twofold of why you would want to include it. One is that if that guarantor is not actively involved with the borrower but is maybe ancillary involved, it could be really tied and slow down any modification efforts that you might have If it's an individual that could be out of the country. There's all kinds of reasons that if you weren't to follow that the and provide notice and get approval by the guarantor, it could really slow down and impede a lender's ability to seek recourse under the modified under the loan. As the terms are modified, they would have to more than likely revert back to the original loan documents that weren't modified and that would define what their recourse would be. So it it's good not to have to involve and bring in the guarantor if possible because again, it just slows down the process.

And then finally there's a waiver of surety defenses and probably one of the biggest ones that you're looking at is if the borrower's no longer liable, then the guarantor shouldn't be liable and that can be very problematic, especially instance if the borrower files bankruptcy and gets a discharge, then that would mean that the guarantor is no longer reliable under the loan as well. So those are just kind of some highlights that I would think that we deem are important and to make sure that you have included in your loan documents and your guarantor are guaranteed documents to maximize your recovery against the guarantor and also to remove roadblocks and challenges to proceeding against them. So on that note of roadblocks and challenges to proceeding again against the guarantor, I will now turn it over to my good friend Steve.

Steven E. Ernest: Thank you Dennis. Yeah, I guess I'm the road crew, so we'll talk about the roadblocks and challenges now. So we're going to assume that you as a lender have done all of the things and followed all of Dennis's advice in the negotiation and documentation of your transaction and nonetheless, your borrower has defaulted. So here you are, what are we going to do? The first thing to think about is make sure your guaranty was a written document. You can't have a guarantor who is just pinky swearing to pay you. You can't have oral representations. There's the statute of frauds that we all learn about in law school and it's actually on the bar. One of the five items in the statute of frauds is if you're going to answer for the dead of another, which is what a guaranty is, it needs to be in writing and it needs to be signed by the parties.

So make sure that your documentation is the way it needs to be. You've got a written guaranty and it's got a blue signature on the bottom of the last page. If you don't have that, you're going to have tremendous challenges. Challenges prevailing in any litigation and probably if I were your guarantor or representing him, I would tell him to just stop taking your phone calls. So has to be in writing. Does your contract have an attorney's fees clause that is going to change your business analysis of what you want to do to enforce your contract?

The loan documents ordinarily always would the guaranty, which is a separate document ordinarily always would, but you want to check that because depending on what your loan balance is, it might modify your strategy in collection, but if you have an attorney's fees clause, then all of the money that you spend chasing these people around is ultimately born by the folks that you are chasing around. They're going to have to pay their lawyer, they're going to have to pay your lawyer and you just get to sit on the beach and sit fruity drinks and count your money, which is kind of a nice way to spend your declining years litigation planning. Ensure you have all of the evidence that you need before you start. You don't want to get to the night before trial where you're looking around in your attic in your garage and sorting through boxes and trying to find where your signed contract is and which computer you saved to the account history and or isn't there a thumb drive in my desk at home?

Do that at the start. There's no good reason not. There's not a lot of evidence that you would put in a trial brief or a summary judgment motion in a breach of contract case, but the things you would are the signed contract that we talked about. It's probably six or eight pages long in an account history. Well, what in the heck does that mean? That is the record of your payments, the record of the charges on the account and at the bottom probably in the right corner with two black lines under it is a line that shows the balance out. And before you start your lawsuit, you want to understand what it is that you think you're going to get at the end because it's much better when presenting these things to a judge or jury if everything matches up at the end as we predicted it would at the beginning because it makes us all look smarter and correct, which we are.

But those are the things to have enforcement steps. So what are we going to do if we're going to sue these guys because we've been foreclosing on their property and calling them on the phone and sending them scary letters and saying, where's my money and they're not responding and so now we're going to sue them. So again, we're going to make sure we have the documents that we need. If it's me filing the lawsuit for you, I'm going to prepare a breach of contract complaint. Exhibit one is going to be your guaranty, your signed contract Exhibit two is going to be your account history. At that point, I think we've gone 85% of the so of the way to winning your case and all we've done is file it not so hard, but as long as we know at the beginning that we're going to be right at the end, I feel pretty good about it.

So you go out and file it. Well, how much does it cost to file a case? Lawsuits are expensive, aren't they? Most counties in California, there are 58 of them filing a lawsuit costs about $430. That's what the clerk wants from us just for the privilege of availing ourselves of the government's assistance. Tax dollars aren't always enough. You got to pay an extra $430, then you have to go out and you actually touch your customers with the papers. That's a copy of the summons, which explains in English and Spanish in California. What they need to do when they get their lawsuit, you go out and touch them with the summons, which is a one page document. I thought I might have one here, I don't think I do. Anyway, you go touch them with that and the complaint itself, which has all the charging allegations, Hey, we think this guy owes us 1,000,003 and here are the reasons that we do.

You have a processor hand all that stuff to your guarantor. You find them at their, your house or their business or whatever. The process server generally charge us 130 or so dollars for each defendant that he's serving. Not particularly expensive there, but Steve, I don't have any idea where my guarantor, it's been three years, haven't heard from him. He won't tell me he could be anywhere. So you still have some options. I know a good private investigator who is really good at finding these people and they'll go out and find them. People can't hide. It's an electronic society we live in now. It's kind of hard to just live in your mom's garage and not have anything connecting you to it. So we can generally find them, but what if we can't? They're in the West Indies and there's just nothing connecting them to anything.

Well, the courts will let you serve by publication which you know those newspapers that get thrown on your driveway sometimes and you pick 'em up on the end of your driveway and you just bring 'em and put 'em in the recycle bin. Those newspapers oftentimes have beyond the classified ads, legal notices, and if you publish a copy of the summons and it says the person's name, the court will do what's called deeming them served and then you don't have to serve 'em any other way that counts. So then you would proceed and get a default because I had, well that's a lie. In one circumstance during my legal career has someone been served by publication and actually appeared in the lawsuit? I don't think they read the newspaper and found out about it that way. I think they were just being coy. But they did appear the overwhelming number of circumstances where someone is served by publication, they're not going to appear.

If they're served in any capacity though and they don't respond for 30 days, you can get what's called a default at the court and that makes the clerk issue a order essentially that says they're not allowed to contest the lawsuit anymore. So 5 85 judgment. Why would I want 5 8585 judgments in my lawsuit? You wouldn't. There's a California rule of court and it is numbered 5 85 which allows a litigant to submit documentation to the court saying, we served the guy, he didn't respond and here's what we're owed. Please give us a judgment. And that's what you get. Those are pretty inexpensive and they're pretty expeditious I would think if your case was proceeding by default, roughly 90, a hundred days after you have filed it is the time you're getting a judgment contested case a little bit different. Your customer wants to come and make a nuisance of himself.

He's going to file an answer. He's going to file preser and pre-judgment motions saying, I don't owe you the money, I don't owe you as much of the money. He didn't do some things that you were supposed to do. Heaven knows what they're going to say. Wrongful infliction of money, which isn't a defense, is ordinarily the one that they will raise in these circumstances. So in those you have to engage in some discovery and what discovery is is when you take their deposition and say, why do you think you don't owe me the money? You send them some written questions that ask why they don't think they need to owe you the money, request for production of documents. Give me all of your stuff that would support any of your defenses. And finally request for admissions where we just say, admit that you owe me the money and quit with this nonsense a following those as long as we're right and as long as they don't raise a meritorious defense, you file some dispositive motions.

Ordinarily that is a motion for summary judgment where we tell the court that nothing the guarantor has said merits a trial and we should have judgment. Now we would expect to win the lion's share of those. The standard by which the court adjudicates those is whether or not there is a tribal issue of material fact. Ordinarily there is not. And so the case would end right there if it doesn't, you go pretrial stuff, you file your trial brief, you get your witnesses ready, motions in limine, which are really fun and I think I have a video on those if you're interested in learning about in limine or what even in limine means from Latin work. Then you have a trial which is not like the trials that are on television, but it's similar where you call witnesses and they sit up on the stand and you raise your right hand and you prove up your case.

Hey, are these your guaranteed documents? Yes they are. Great. That's exhibit one for us. Did they pay as agreed? No, they didn't. How much did they owe you? Well, looking at the last page of this account history, they owe us 1.36 million. Terrific. There it is. That's essentially what your case in chief is. It takes more than eight seconds like I just described, but those are the parameters of how it would go. And then you get a judgment and a judgment you get is a couple of pages long and you can take it from the fifth floor where your trial was in your courtroom and take it down in into the clerk's office on the first floor and hand it to the clerk and the clerk will give you 1.2 million in cash. No, she won't. So you're going to have to go collect it and I'm hopeful that this slide is about collection. No it isn't. We're going to get to collection later. Then hold the phone on that.

So your loss, your deficiency is atta established at the time of sale. If you've sold, if you had collateral, which most of the people on this call probably do, they're probably real estate secured. If you sell the collateral first and kind of why wouldn't you? That's the easiest source of money for you. Whatever your deficiency is going to be, what your guarantor owes to you and you know might double track those. Dennis mentioned that earlier. There are some reasons to do that. Do you have to sell the collateral first? No, you really don't, but you can and that's probably your easiest source of money. But if you don't want to for whatever reason, give us call and we can work through a pre-sale breach of guaranty lawsuit for you.

You can your guarantor even after your sale. This is one of the most frequent questions we get in this field of law. I've already exercised my rights to a non-judicial foreclosure sale. Does my guarantor still owe me the deficiency? Yes, they absolutely do. So before you filed the lawsuit, well, I don't know if my guarantor has any money. I don't know if he has a pot to pee in or a window to throw it out of. Same private investigator we were talking about before can look into those things and find out if they do, if you're interested in that or you can just sue and find out later. But you've got interest accruing on your loan and the interest continues to accumulate and folks owe you that money. Whether you wait three years in 364 days or whether you sue him the next day. I use that reference for the dates because breach of written contract in California, the statute of limitations is four years.

You're going to want to file that case within four years from the breach, which is probably the date of default on the loan, not the date of sale. So you know you want to calendar those things and don't wait longer than that because when I talked about their defenses that they might raise earlier, statute of limitations is probably one of the best. If we wait too long, you might not win and nobody likes not winning. Keep your records like we talked about before. Don't just stick 'em in a box and put the box in storage out in Corona somewhere. Keep 'em where you know where they are. Why not do it now, just get after it and get your loan performing again because probably the more stale that it gets, the less likely you're going to be to find the assets or your guarantor. So you might as well get going.

Enforcements, this is the slide that I thought was next, which wasn't. So here we go. What do we do? We've got to judgment. The clerk's not going to give us 1,000,002, we've got to go out and find it ourselves. So these are some options. These are not all of the options, but these are some of them to collect a judgment. I would always recommend almost insist that my clients record abstracts and when I say you do it, I don't mean you actually don't do it. We know how to do it. We'll do it for you. Recording an abstract, I think I mentioned earlier, there are 58 counties in the state of California. You would record abstracts in each of the counties where you think possibly your guarantor. Now a judgment debtor has any real estate or might have real estate in the future. Now what difference could it possibly make if they don't have any real estate now but they do in the future?

Here's the answer. So you don't need to put this in the q and a. You record an abstract in the county. It references your customer by his name, his social security number if you know it, and his California driver's license if you know that. If you don't know them, what are we going to do? We're going to get in touch with our private investigator who can find that information out very quickly within probably a half an hour. You put that information on the abstract, you record it in the county. If he's got property there already, it automatically attaches. You don't have to do anything else. You don't have to know the legal description of the property, you don't have to know the address. All you have to know is that it's in the county you record, it costs $35 as economical as anything you will ever do in jurisprudence $35 to record it with the county recorder and it's good for 10 years.

So title companies will figure out whether the guy free of charge to you, whether the guy has an interest in any real estate, if he wants to sell that real estate or refinance that real estate anytime during 10 years is title company is going to get me probably on the phone and say, Hey Steve, what's your payoff for this one? And that's the only question they'll ask. The only thing they care about. So you compute the principal balance, which is 1,000,002 plus costs the $130 for the process server, the $430 to file the lawsuit, that kind of stuff, plus your attorney's fees, which will win. So he is probably into you at that point for 1,000,003 or so. And we then compute simple interests, which in California by statute is at 10%. Doesn't matter if it's a good economy or a bad economy, doesn't matter what the Federal Reserve is doing, doesn't matter what the prime is, doesn't matter about any of that.

It's 10%. You get 10%, doesn't matter what your contracts said, 10% loans, you compute interest since the date the judgment was entered and you just send 'em a one page letter to the title company and say, if you guys want to close escrow, you've got to give me whatever it is, million seven 50. Here's our wiring instructions. It makes your customers furious, it makes you wealthy, and both of those things are good results and lots of fun. So record abstracts, if you know where their property is, you record 'em in that county. If you don't know where they are, we generally counsel clients to record them in the larger counties, Los Angeles, Riverside, San Bernardino, orange, San Diego, and then anywhere where they have contacts, if they grew up in Humboldt County up there, if they're Barry sort of people while the county's there are small and you hit a few more.

If you want to do all 58, all you got to do is pay $35 times 58. There's no reason that you can't. So that's what that is. Bank levees a little bit different. Used to be really hard to do because you had to serve the bank levee at the actual branch where your customer had a deposit account in their tens of thousands if not more in the state of California. If you would serve your bank levy at the Newport Beach branch of Bank of America and the guy had his account at the Costa Mesa branch of Bank of America four blocks away, you didn't get any money since then with the miracle of the interwebs. Centralized banking has taken over and if you serve your bank levy to the centralized branch, which most of the banks in California have that spiderwebs out and it gets to all the branches.

So what I recommend in those is that you serve the five largest branches or the five largest banks in California, which would be Chase, Wells Fargo, bank of America, city and Bank of the West. If you hit those five, you're probably going to touch 80% of the banking customers in the state. Now what good does a bank levy do you? Well, the sheriff will serve that to the bank and the bank will tell us whether this judgment debtor has any accounts at that bank and if they do, you're entitled to a hundred percent of the funds that are in that account. Well, what if your guarantor is only a signer on his elderly mother's account during her declining years? Doesn't matter. You get all of mom's money. What if it's a joint account with their wife and the wife already hates him and she doesn't want to give him her money?

Doesn't matter. You get a hundred percent of it, that's really going to cause some additional marital strife, but that is a problem. That is not your problem, it's their problem. So those are bank levies. This reminds me a little bit, all of these things that are on this page and that we're talking about kind of ruminate to. One of the things that Dennis said, you put pressure on these folks, they don't want to pay you. The last thing they want to do is spend their good money on a non-performing or now non-existent project that they thought was going to make them money and they hate even thinking about it and they certainly don't want to pay it. Well, pressure burst pipes. So you start putting pressure on them and you make it easier for them to do the things that you want them to do than it is for them to do the things that they want to do.

So if they want to refi or sell their house and they find that they can't until they pay you, well, that's why you have the abstract. You put some pressure on 'em if they're trying to pay their rent or make their car payment or do whatever they're supposed to be doing with the money that's in the bank and the sheriff has taken it and given it to you, well you put some pressure on him. Bank levy only works once. So if the sheriff levies the account on the 14th and they get paid on the 15th, you get nothing. But if they put their lottery winnings in their bank account on the 10th and the sheriff levies it on the 12th, you get all of them. And that actually happened in one of my cases once. So that was fun. Maybe that should be a Steve story hour one day moving on.

Wage garnishments, what are those? Those are a lot like bank levies. You get a writ from the court, but you send to the sheriff and the sheriff takes it to their employer. Their employer will then give you 100% of the wages that that person is entitled to twice a month. No, you get 20% maximum, but that's something, right? We still are going to let them pay their rent and buy some beans and groceries or whatever it is they're going to buy, but you get 20% of their take home pay until your judgment is satisfied in full. Those work particularly well with folks who have government jobs because people with government jobs tend to not quit those jobs. So if they work at the dmv, they're a school teacher, they're a member of congress, heaven knows whatever they are, if they're getting a government paycheck, they're probably going to keep that job and you're probably going to get 20% of their take home pay forever until you get paid off.

Additionally, they're probably going to be annoyed because they didn't budget to lose 20% of their take home pay and your phone's probably going to ring. That's true of the bank levies. That's true, the abstracts, all of those things, each of these events, it lets you put some pressure on them. It lets your guarantor know that you are interested in having them pay you and it makes them reach out and try to play. Let's make a deal with you, which is the satisfactory result. Generally speaking, let's say you can't find any property, you can't find any bank accounts, you can't find wage garnishment. I neglected to mention I did this with the abstracts and not with the bank levies and garnishments. So cost a bank levy is probably going to cost you four, $500. Not that much. Wage garnishment, similar costs judgment debtor exams. If you have watched my webinars in the past, you know the special place in my cold dead heart that I reserve for judgment debtor exams.

These are the greatest part of being a lawyer and I'm not exaggerating, this is not hyperbole. So judgment debtor exam, you go to the courthouse, you serve your customer again or your judgment debtor, your guarantor, and he's got to come there and he's got to answer questions. But it's not like an order normal deposition where you just ask him about sort of anything. The only subject you're there to talk about is where are his assets and what does he do with his money? And he has to tell you if he doesn't, the judge will find a bailiff who will put a pair of handcuffs on him and he'll have to stay with the judge for a little while until he does want to tell you where his stuff is. Additionally, while he's sitting there, if he's wearing a nice wristwatch, you can take it. If he's wearing a wedding ring, you can take it.

If he's got 50 bucks in his pocket, you can take it. If you like the whatever Gucci shoes that he's wearing here is Nike Air Jordans for Dennis's benefit, whatever he has on whatever he's got, you can take and you sell it at auction and that will generally make people pretty mad. So you going to get that much money for his air used Air Jordans? Probably not. Although I read in the paper, which is not a paper anymore this morning, that the Air Jordan shoes that Michael Jordan was wearing during that N B A funnels game when he got really sick, sold for 1.3 million yesterday or auctioned. So maybe the guy's wearing expensive shoes and it'll pay off your whole judgment. You never know. Judgment debtor exams. So if you're ever driving in your car and you're falling asleep and you want somebody to talk to, call me on my office phone and say, tell me about judgment debtor exams and I will talk to you all afternoon about those for free.

I love judgment, debtor exams, extraordinary relief, receivership if the economics makes sense, you know, can do things like that. You probably heard about Britney Spears in the news during the past year. She had a conservatorship or a receivership. You can do those things. They're not tremendously common. They're called extraordinary, not because they're fantastic, but because they just don't happen very much pre-judgment, attachment of assets. You can definitely do those when circumstances merit, especially if you organize your collateral the correct way at the onset. It's freezing bank accounts and replevin, which are where you go out and pull their car out of their garage or seize their collection of expensive watches, whatever that is. But you can think about those but don't sort of plan your life around extraordinary remedies because they're extraordinary but fun. So the defenses that folks would raise are ordinarily twofold. One, I didn't sign that. That's not my signature. Or two, you waited too long. Statute of limitations. Those are the only defenses that are really going to work. But once in a while we see this one and we've seen it a few times recently, the sham guaranty. Dennis talked a little bit about these when he said, who can be a guarantor? I think this is a sham defense. I've never seen it work, but you put it in the papers. Sometimes this one will get them beyond a summary judgment motion. That is they create a question of fact.

Don't get too upset if they raise this one because it's not going to work ordinarily, but it'll be raised. So what is a sham guaranty? So if somebody comes to you and wants a loan and you tell them, well, I'll give you a loan, but I want you to form an LLC to be the borrower and I want you to be the guarantor that if you did that, you have set up a sham guaranteed defense for them, especially if you sent them in email that outlines that that's what you want them to do. It's in an overarching view of what a sham guaranty is. That's what it would be. So as long as you're not telling your borrower how to organize their business entity, but rather telling them, I want an individual guaranty because I want you to have some skin in this game because you're taking a lot of my money for your business entity and after what is a business business entity, it's a legal fiction so they can incur debt and borrow funds and own property and do all of those things, but if it all goes south, what is a business entity?

Well, it's some papers that are on file with California Secretary of State. It's not an awful lot. So pal, I want you to be my guarantor. If that's the conversation you have, you're fine. If what you've instead told him is, well, I could loan the money to you, but instead I'd like to loan it to a corporation and have you guaranty it, you're probably going to lose and he's going to prevail on his sham guaranty defense. But as long as you haven't done that, you're going to be fine.

So here we have arrived at the end of my presentation, I think. And so the more exciting part with apologies to Dennis of this entire hour that we've been spending together is my introduction now of a person whose name is Matt Gunter and he has almost the perfect Anglo-Saxon features that you've ever seen in your life. I don't know if he's live on your screen yet, but he will be in a moment when you see this beard. He is the sort of person that looks like his fraternity brothers were probably Jonathan Keats and Lord Byron and William Shakespeare or something. He's just the perfect vision of an Englishman. He has to be with. Looks like that. A spectacular writer. And he's going to tell you about something he has written and submitted to I think the ninth Circuit and it'll be riveting and interesting and there's a chance that he's going to moon us. So here we go. Matt Gunter.

Matthew Gunter: Thanks a lot, Steve. A couple of those points are right. I don't know about mooning, but I could be a reference to the case name. Very unfortunate name I guess. All right, so we're talking about loan modifications. A little bit of a pivot from the guaranties we were just talking about. So the issue here is revolving around interest rates and in California, the California constitution limits interest rates generally for commercial loans at 10% per year just across the board. But there are just so many exemptions from that. And the most common are the exemption for A C F L licensed lender or for a loan that's arranged by a D R E Department of Real Estate licensed broker. And so for unlicensed lenders who are relying upon a licensed broker to arrange the loan for them, they can enjoy the exemption from usy, which is the exemption from this 10% limit on the interest rates.

And so they can make the loan and they can go about their business and have this loan at 10% or 12% or 20%. They can just really go above and beyond and do anything they want. Then the statute, the statute in California that provides for this exemption from the constitutional provision. And so for the past 40 years, the statute has been providing this exemption, but only in the last year or so there have been a couple of successive bankruptcy cases based out of California that have reinterpreted the statute in a much more kind of a strict version or a narrower or literal reading of the statute that has narrowed the exception and limited it so that modifications of existing loans that have these exemptions will very likely lose their exemption. So you can have a loan that was exempt from user, you have a 20% interest rate on a loan, you go to modify it to extend the maturity date by three months, and maybe you reduce the interest rate from 20% to 15%.

You're cutting your borrower break right there. Now you, you've gone over the user limit of 10% because you have not followed the strict definitions under the statute as now interpreted by the bankruptcy court. So why do you care about this? It's because any loan in California for an unlicensed lender who was relying upon the broker's license to originate this, if the broker was the one arranging the loan for you, you're going to need to pay attention to this, is if you go over that limit. If you start charging interest beyond the 10% when you're not allowed to, there are several consequences. Again, this is going to require a borrower to bring it up. The borrower's going to have to sue over this and bring you to court to complain about it. But if that happens, the court will do one of these four things. Most likely it'll be just the first thing and you'd have to kind of take further bad actor steps to get to the more egregious consequences.

But the first and most likely is that you're going to have to repay the usurious amount. The amount of interest over and above the 10% would have to be repaid, refunded to the borrower. In addition to that, a court could order that you pay back all of the interest collected, not just the overage, but all of it back. The court could also require to pay triple damages. So triple the amount of all of the interest collected could be paid back to the borrower as a penalty. And then of course, if you have engaged in real loan sharking, which is what this statute is aiming to prevent, it could cause it to have up to five years in prison.

So it's very important to pay attention to these issues as soon as you become aware of them. So the next time you're deciding upon a modification in California for a loan in California, you need to think about how this is working. And of course you can give us a call at Geraci. I am available to take any calls and to set up meetings to discuss particular circumstances for lenders because again, there so are some exemptions that still exist. They are now much more rare to be put into place or to rely upon. Again, if it's an unlicensed lender that is with, who relied upon a broker to arrange the loan, that's where this is really going to be a problem. If it's a licensed lender, a C F L lender, and you're continuing to hold that loan as a C F L lender, then the modification provisions of this is not going to affect you.

But lot of lenders do rely upon a broker to get these done. So modifications from brokered loans will likely have some sort of problem. So happy to take any kind of questions and take calls and set meetings. We can go over it. Any of your particular circumstances as a lot of the American Association of Private Lenders out there has been involved in this. We just did a webinar on this a week or two ago. We covered this kind of same material a p l has asked us, and on behalf of them as their general counsel, we filed an amicus brief in the ninth Circuit, which is the appeal of those bankruptcy cases Steve mentioned. That's called in re Moon, that's the name of the borrower is Mr. And Mrs. Moon. We filed a brief on the behalf of a P l supporting the lender's position and trying to encourage the court to rule in favor of the lender a more generous interpretation of the statute, the interpretation that we've all understood it to be for the past 40 years, and to kind of alleviate the state and all of our lender partners from kind of the absurd result of the bankruptcy courts, the lower courts opinions.

In addition to that, we have Geraci and myself are the EXOFFICIO member on AAPL's government relations committee. And in that committee we've already discussed this matter, and it's probably going to be a legislative solution to this statute. The court, in all likelihood, is going to go for the borrower's interpretation, the lower court's interpretation of the statute. And so the most likely way to fix this problem is a legislative fix. And so through the government relations committee, we're discussing ways to go about doing that. There's only a limited amount of kind of political capital we have as a small organization. So it's really going to depend upon individual contributions and individual work from another level. And if you go to the next slide, you can see that it's the California Mortgage Association is one of the entities that's leading the charge, and they look for donations to their political action committee.

You can go to their website and look at the information they're providing about this and how you can help them. They need funds to be able to hire lobbyists and get people in front of the legislator's faces and explain why this is such a problematic statute. Again, it hadn't been for quite a while. Now that the courts are reading it much more literally, it's being a problem. So there needs to be a fix to the statute, a replacement of the statute that provides for this exemption. And C M A is going to be leading the charge on this. So they'll take any and all donations. Of course, you can always talk to your legislators yourself, pick up the phone, knock on their door and see what happens. We very much appreciate it, but thank you to Steve and everyone who's been listening. Steve and Dennis put on a great show and very interesting to watch and learning a lot about guaranties more than I ever knew, so appreciate it guys.

Steven E. Ernest: You're welcome. Thank you, Matt. So one follow on that modifications are I think what that Inri moon case is about. Modifications are the best way I know for a lender to really screw up their guaranty. If you as a lender are ever modifying your loan that is deferring payments to the end or changing the interest rate or any sort of material modifications to your loan and not notifying your guarantor, you've probably taken your guarantor off the hook. They probably don't owe you a dime anymore, so fine to modify your loan, but every time you do that, you want to give written notice to your guarantor because if you don't, you're probably walking away from an awful lot of your money that you didn't intend to. So just make sure it's noticed. Don't use a telephone call because you will probably remember that call differently than your guarantor does. Just send 'em a letter every time if you're modifying your loan. So with that, let's go to the questions we have in the q and a. What happens if the beginning auction price is less than the last demand price for paying off the loan? Why would the lender do that? Especially if there's a lot of equity in the property. So bidding strategies are something we here at the Geraci Law Firm do prior to foreclosure sales. There are a variety of reasons you would adopt bidding.

They're going to be entirely case specific, but we've got a team of lawyers and paralegals who can help you develop those. It's hard to say what happened in a particular loan that's already closed and why the lender did it without being more fact specific, but there are good reasons to do that at times. Dennis, do you have anything you want to add to that one or is it just Hey, depends on the facts.

Dennis R. Baranowski: It does depend on the facts, but I do want to also mention that one of the waivers that I failed to mention during my portion of the presentation is that there oftentimes the guaranty will include a waiver of any requirement that the deficiency balance from a foreclosure sale be calculated using the fair market value of the fair of foreclosed property versus the sale price. Actual sale price of the foreclosure obviously will impact the amount that's recovered. So I don't know how much it fully addresses that, but one of the things that you would want to make sure of from a lender standpoint is that your guaranteed does have that waiver included in there. But then again, as Steve mentioned, strategy beyond that and what you're doing and as a lender and how you're deciding what to bid is really going to be facts specific at the time, and we would really have to kind of analyze the situation as it comes up.

Steven E. Ernest: Great. Dawn Hensel asks, in the event of a default on the underlying loan, is there where to go? Is there a requirement to send a written notice or demand letter to the guarantor? Not by statute in California, it's not a requirement that the government has placed on you. That is not to say that in your loan documents, you haven't placed that requirement on yourself. So statutorily, no, there's no requirement that every loan has to have a demand, but have a look at your documents and see if it's required by them, in which case do it, and the time. The second part of that question, is there a timing requirement? It'll specify 15, 30, 45 days, whatever the notice provision is in your contract. If you have them, you'll want to comply with those. Otherwise, sometimes you get in the position where you're making the argument that the summons was the demand itself. I've seen that one win. It is not an argument that I love making because the judge is sort of nodding at you, understanding that you forgot to send the notice a year and a half ago and it's sort of embarrassing and it's a problem that you don't need.

Okay, Charles King, what benefit could be realized by using a confession in cases where it's applicable and what are the mechanics of using them? Confession. Confession to me sounds like a criminal case, and I don't know really what they would be confessing to. Sometimes in other states, they have what's called a confession of judgment, which is a declaration in advance of getting your formal judgment where one of the customers essentially says, yeah, I'm guilty. I did all of these things. That would be a part of discovery, makes it easier for you to win. If what you're saying is, Hey, that guy owes me 1,000,002, and what that guy is saying is, Hey, I owe those guys a sort of a closed loop at that point. So I think that would be the advantage,

Dennis R. Baranowski: And I can jump in a little bit on this as well. So there are a handful of states that do allow for confessions of judgment in the loan documents, but just a handful like Pennsylvania, I think Virginia, Ohio, and there's specific strict statutory requirements of what needs to be in the loan documents and how the documents are executed that will impact enforceability. So how the process works and whether or not it's effective is going to vary by state. But typically the confession to judgment is not going to give speed up any type of foreclosure process. There's still going to have to be a separate foreclosure process that the lender follows. So if you're hoping to get a confession to judgment that it will allow you to foreclose instantly, and especially in a judicial foreclosure state, kind of circumvent the longer judicial process that would go with filing a foreclosure action. That's not what you'll get. It's actually for a money judgment and it has advantages from a negotiation standpoint and other things, but it's not going to speed up your foreclosure at all in most instances. And again, it's going to vary by state as far as what those requirements are and what the actual advantages are that you would realize as a lender.

Steven E. Ernest: Cool. If your borrower has property in another state, Jeff Smallowitz asks, can you file an abstract there? Yes, it's a little bit more complicated than just the way you've described. I'm only a lawyer in California, so I'm only giving California advice and this'll work prophylactically, which is a word I really didn't anticipate using during this webinar, but there it is. If you have a judgment in another state, but your borrower turns out to be here and has property here, you get what's called a sister state judgment here, and then you can levy all of his assets here. That works the same way in other states. If you've got a judgment here and you find out that in Missouri he's got a horse ranch and you want to levy that, well, same thing. You can get a sister state judgment over there. Well, Steve is sister state judgment, do I have to do all that stuff again, generally speaking, no, they work a lot more expeditiously.

They're far cheaper. It's going to go faster and not cost you very much, and you can then sit the million two that you owe him on his horse ranch, and that's lots of fun. Anonymous attendee asks, sorry if I missed this, but what happens if an asset is held in the corporate company and the loan is guaranteed by an individual? Well, that'd be, I think you're standard setup with these company has little or no assets other than fix and flip. Can we go after the in individual, that one? The answer is a hundred percent yes. That's most of what this seminar is about. So if you missed the first part, please re-watch it or call us. But yeah, a business entity making or borrowing money, being the borrower, having it guaranteed by individuals is most of the time going to be the setup and the reason that you have guarantor and the reason that you chase them is they're the ones who have the assets.

So yes, you go after the individual, what can we get from the individual? Well, it depends what they have. If they've got a bunch of money, then you get a bunch of money. If they've got a bunch of property, you take their property and you sell it. If they've got, it depends what they have. I can't tell you what assets your hypothetical borrower has, but if you want to determine what they have before you start, that's the private investigator that I talked about. There's also some public records avenues that we can search out before you get started. So get your arms around what you're doing.

Kelly asks, is the 20% garnishment rule the same in Nevada as it is in California? I don't know the answer to that question because I'm not a lawyer in the, although for one week during my career I was, which is a fun story that I'm not going to tell now. Maybe a Steve story hour. But yes, it was kind of like my cousin vi. I was a lawyer in Las Vegas for one week of my life, 20% garnishment rule. I don't know. Could be a hundred percent, could be 20, could be five, I don't really know, but there probably is some sort of a limit in Nevada. He can anticipate that, but I can't give you an answer for sure. James Chung, if they expect the lawsuit is going to lose and they decide to remove his title on the bank accounts and real estate holdings, can we go after those assets in bank accounts?

So there are a lot of fraudulent transfer rules. If you start transferring assets the day after a lawsuit is filed, it generally is not going to be effective. So the short answer to I think what the question is that you're asking is, well, my guarantor took his name off of the title to his property when he found out I was suing him. Can I still get his property? The answer yes, it's a little bit harder, but not tremendously. Same answer with the bank accounts and all that other stuff. Question number two, questions for the price of one. Oh, question number two went away. We'll move on to Sherry Criso tomo for soo, for the penalties for the user exemption, does the interest returned start from the modification date or from the origination date? I know that one's not for me.

Matthew Gunter: Yeah, so that it's, that's not exactly clear. It's certainly not defined by that statute, so it's going to be more what the judge ate for breakfast that day, it's going to depend on how much they're going to be punishing you, but I would expect that it's going to come out for from the modification date, from the date it becomes usurious. So if you're extending for three months from a 12 month loan, it's only going to be those three months. I can't guaranty that. And that's another word guaranty you can add to the total for this webinar, but it's likely going to be limited to from the modification date forward. But again, it could be more because it could also be all interest and it could be triple damages interest as well.

Steven E. Ernest: Well, next question for anonymous attendee. If we have three guarantor on a loan, are we responsible each for 33 and a third percent or if the two guarantor refuse to pay as the other guarantor responsible for a hundred percent. So here's a fun phrase that is both prevalent in law schools and on the bar. The phrase is joint and several, the joint part has nothing to do with Humboldt County and it has everything to do with the three communal guarantor. Each one of them is responsible for a hundred percent of the debt. You don't have to chase all three of 'em if you don't want to. If there's one that has all the money, you want to start with him first. Go ahead. Each one of 'em is responsible for a hundred percent until it is paid. So if one of 'em files bankruptcy, you get a hundred percent from the other two if you want, or you can just chase one. It's totally up to you.

Next one, also from anonymous attendee. What are the ramifications if a lender cancels a foreclosure sale at the exact time of the sale and at least one qualified bidder shows up at the sale and then, wow, this is quite a question. And then does not cancel the sale in the afternoon in a different county, but for a property part of the same loan in the morning and cancels the sale at the time the afternoon sale is scheduled to start and a qualified buyer has shown up for the foreclosure sale. So this one sounds like there are two foreclosure sales in two different counties, one in the morning and one in the afternoon, and we're going to cancel the morning one. What does that do to the afternoon one? Dennis? Go for it. This one's all you, bud.

Dennis R. Baranowski: I think this probably is going to be more of a situation where we need more information. Frankly, I don't fully understand the circumstances and the facts. I think it would really require a phone call to kind of walk through the question, because at this point there's real, I don't understand the situation completely. So please reach out to us. We can jump on a call and discuss this further.

Steven E. Ernest: Cool. Next question. Oh, this is a great one. I love this one mostly because I know what the answer is. Can a social security payments be garnished? The answer is generally no. You're not going to be able to send a writ to the Social Security Administration and have them send the social security payments to you if your customer is clever. What they're also doing is taking their social security payments and putting them in a bank account with nothing else. That is, they have a bank account that's exclusively for social security benefits because then even if you levy that bank account, you're not entitled to those proceeds. Social security proceeds are protected unless your borrower is doing something that probably everyone does. They have one bank account and they put all of their money in it. So if they commingle their social security payments with their rent payments and their paychecks and whatever else with anything else, as long as they have not kept their social security payments completely separate and you levy that bank account, you get to have that money even if it, there's no tracing. So if they put their social security payments in an account with anything else and you levy that account, you can have the money.

Katie Gillespie, are Oregon laws similar? I don't know. I would guess so. Or most common law jurisdictions in America are about the same with the exception of Louisiana, but most states laws are roughly the same. I think that's probably a yes, Sean? Oh my goodness, dog Harmen. Sorry if I mess that one up. Any risks that, can I

Dennis R. Baranowski: Jump in here real fast? I just want to make sure on something. Sorry is for that last question about the Oregon laws. Can you reach out to us too, because if it's something generally about guaranties, then yeah, what Steve said, we really don't have an idea, but if you're referring to Matt's presentation about modifications that is specifically a California issue,

Steven E. Ernest: Cool. Back to Sean's question. Any risks or concerns to lender if they have a guarantor who's not on the loan? I think this might mean a couple of things. So ordinarily you have your set of loan documents and that's your borrower, and then you have your guaranty, which is a separate written document. So typically the guarantor would not be a member of the loan. And Dennis talked a little bit about the guarantor also being a borrower and why they can't do that. So if your guarantor is a borrower on your loan, I think there might be a problem. But if the guarantor is not a borrower on the loan, that's the ordinary circumstance where that you would expect.

Cool. James Chung with, I think the last question of the day, if he owns 25% of the real estate, assuming the deficiency is a hundred thousand dollars and the equity of the property is $200,000, are we able to recover only 20% of the equity? I think this is what happens if I get a big judgment and record an abstract and the guy doesn't own all of the property. So there's going to be some complicating factors in the circumstance that you have outlined there. But don't get hung up on foreclosure analyses as it relates to abstracts, because generally the way you get paid after having recorded an abstract is where the property owner themself is trying to either sell or refinance the property. And then all we do is issue a demand. We just say, this is the balance that's owed on the date of your closing. So it doesn't in that circumstance, matter what their particular stakeholder interest is in the real estate because you're not foreclosing it. You're not foreclosing their 20% or a hundred percent or 75 or anything. You're just participating in their closing transaction and making a demand for the payment that you owed. So it generally speaking, doesn't matter what their percentage, your interest is.

All right. Anything else from you, Dennis? Parting thoughts?

Dennis R. Baranowski: I think we're all set. I appreciate everyone taking the time to come and listen to us, and it's been an honor and pleasure to share this panel with you and Matt, two guys that are definitely much smarter than me, so that's always nice.

Steven E. Ernest: Impossible that that's true. Matt Gunter, anything to drop on us just before all go?

Matthew Gunter: Yeah. A lot of these things are really fact specific, so if after this call webinar, anyone has any questions for any of these topics, give us a call. Happy to take them.

Steven E. Ernest: Okay. Well, guys, Dennis, Matt, it's been a unique pleasure from Geraci World Headquarters here in Irvine. I'm signing off for today, and thank you to everyone who has joined us. This has been the highlight of my day so far. So thank you.