Abstract

http://ssrn.com/abstract=902368
 
 

Footnotes (210)



 


 



Once a Mortgage, Always a Mortgage - The Use (and Misuse) of Mezzanine Loans and Preferred Equity Investments


Andrew Berman


New York Law School


Stanford Journal of Law, Business, and Finance, Vol. 1, pp. 76-125, 2005
NYLS Legal Studies Research Paper No. 05/06-23

Abstract:     
The mortgage remains one of the most common and successful techniques to finance real estate transactions. In the last 25 years, mortgage loans have also been sold in the secondary market and included in mortgage-backed securitizations. The amazing growth of mortgage securitizations has also led to the development of novel financing techniques, including mezzanine financing and preferred equity investments.

This article discusses the historical development of real estate financing from the early beginning of mortgage law and the equity of redemption through the modern advent of mortgage-backed securitizations (MBS) and other non-traditional financings. It argues that the phenomenal success of real estate securitizations along with the growth and power of the national credit rating agencies gave birth to two new popular non-traditional financing techniques - mezzanine loans and preferred equity investments.

Employing a detailed explanation of the legal structure and basic underpinnings of mezzanine loans and preferred equity investments, this article argues that lawyers carefully structure mezzanine loans and preferred equity investments to avoid many of the borrower protections associated with junior mortgages, and that these new financing techniques are simply modern day mortgage substitutes. The article concludes that courts should apply traditional property law and recharacterize these financings, thereby treating junior mortgages, mezzanine loans, and preferred equity financings similarly.

Number of Pages in PDF File: 53

Keywords: real estate, mortgage, mezzanine financing, mortgage-backed securitizations

Accepted Paper Series


Download This Paper

Date posted: May 15, 2006  

Suggested Citation

Berman, Andrew, Once a Mortgage, Always a Mortgage - The Use (and Misuse) of Mezzanine Loans and Preferred Equity Investments. Stanford Journal of Law, Business, and Finance, Vol. 1, pp. 76-125, 2005; NYLS Legal Studies Research Paper No. 05/06-23. Available at SSRN: http://ssrn.com/abstract=902368

Contact Information

Andrew Berman (Contact Author)
New York Law School ( email )
185 West Broadway
New York, NY 10013
United States
Feedback to SSRN


Paper statistics
Abstract Views: 3,311
Downloads: 740
Download Rank: 17,773
Footnotes:  210
People who downloaded this paper also downloaded:
1. Risks and Realities of Mezzanine Loans
By Andrew Berman

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.266 seconds