Written by Forrest Wall, CAE, Staff Vice President and Industry Relations
Constitutionality of Nonrecourse Mortgage Loan Act Upheld
In another victory for the real estate industry, the U.S. Court of Appeals issued an opinion unanimously affirming the ruling of the Federal District Court that Michigan’s Nonrecourse Mortgage Loan Act (NMLA) is constitutional. As you may recall, AAM joined the Building Owners & Managers Association (BOMA), International Council of Shopping Centers (ICSC), and other real estate associations in the filing of an amicus brief in support of the constitutionality of the NMLA. This law, enacted in 2012 with support from AAM, corrected problems with the interpretation of nonrecourse loan carveouts by prohibiting a post-closing solvency covenant from being used as a nonrecourse carveout or as a basis for any claim against a borrower, guarantor, or other surety on a nonrecourse loan, and, by specifying that a noncompliant provision in loan documents would be invalid.
The legislation applied to the enforcement and interpretation of all nonrecourse loan documents in existence at the time or entered into in the future. The legislation was needed in response to two court cases in Michigan which essentially provided for personal liability within nonrecourse loans in the event of foreclosure. In 2013, the Michigan Court of Appeals upheld the constitutionality of the act in one of those cases, known as the Cherryland Mall case. Now, the U.S. Court of Appeals has come to the same decision in the federal case of Borman, LLC v. 18718 Borman, LLC and Schwebel.
Thank You Tom
AAM lost a great leader and a wonderful ambassador for the industry with the recent passing of Immediate Past President Tom Shumaker (see tribute above). Tom’s legal acumen and his high level of energy spearheaded important legislative victories and an increased focus on judicial advocacy. He led Association meetings with professionalism and purpose and his tireless volunteerism never ceased to amaze me. But accomplishments and accolades aside, what I will personally miss most is Tom’s genuine kindness, and his friendship. Thank you Tom.