A borrower cannot be a guarantor on the loan. The specific borrower is not intended to be identified separately as a guarantor. By general operation of law, the borrower cannot "guaranty" the loan any more than they are in the capacity as borrower; attempting to do so may raise issues with the guaranty itself.
The Guarantor checkbox should be used to account for an individual or entity that is a Guarantor. Checking this box will generate the proper amount of entity authorizations and will reflect the Guarantors in the loan documents. (Note: Only 1 instance of the Individual/Entity needs to be checked as a Guarantor to avoid duplicates.)
If the Guarantor is not an individual, you can select the Guarantor Type that best matches your need, making sure to also complete the signatory of the entity information:
If you need to add a Guarantor that does not appear elsewhere in the documents (as signatory of a Borrower entity for example), you can manually add Guarantors with this section.
You can use the red trash can on the right to delete any unwanted guarantors (please note that all data fields must be empty to use red trash can). If you notice there is/are guarantor(s) that are greyed out and cannot be removed, they are from a previous selection made in the data entry and cannot be deleted except by changing selections elsewhere in the data entry fields.
All notices, demands and other communications ("notice") shall be given in accordance with section H.3 of the Loan Agreement. Any notices to Guarantor shall be addressed to Guarantor at the address of Borrower set forth in said section H.3 of the Loan Agreement. With regard to notices to the Guarantor, all correspondence goes through the borrower notice address. This is to keep all parties on the same page and allow for efficient servicing by the lender.
It is the Lender’s decision as to whether or not to include spousal waiver and consent language in the loan document package. Ultimately this is a business decision that the Lender will need to make based on its own internal processes for documenting spousal waiver and consents and its independent risk analysis of the transaction.
GoDocs has identified several states to be a community property state. The GoDocs default is to include spousal waiver and consent language for such states with identified married borrowers and the GoDocs system does allow each lender to make a selection on this issue based on its own internal processes and risk tolerance.
GoDocs advises customers to reach out to local counsel for legal analysis and opinions on the matter and to understand the risks of not including spousal waiver and consent language in the Loan Documents.
Guarantors are jointly and severally executing the single Guaranty as such one Guaranty document is all that is needed. The Guaranty can be executed in counterpart as documented at the end of the Guaranty document as written here: “This Guaranty may be executed in any number of counterparts each of which shall be deemed an original, but all such counterparts together shall constitute but one Guaranty.”
Types of Guaranty: For the guaranty drop-down menu, there are three main options based on the lender's business decisions and loan details.
For the guaranty drop-down menu, the three main options are the following:
- Payment - Full repayment guaranty
- Completion - a Lien Free Completion Guaranty with no repayment guaranty.
- Payment and Completion - Combined Full Payment and Lien Free Completion Guaranty
What is a Completion Guaranty?
The Completion dynamic in the guaranty templates should be considered by the lender if there are material improvements to be made to the mortgaged property. This correlates mostly with construction and fix and flip deals.
Where the intent of the loan is not true construction/fix and flip, rather the loan is just run-of-the-mill, ordinary improvements required to be completed following the closing of the loan (e.g., adding fresh parking lot asphalt, etc.) please note that those can be documented in the loan package via a Side Letter, tied to an Earnout, etc., and would likely be completed well before maturity. The purpose of the completion guaranty option is to address lien free completion of material improvements that may positively alter the value of the property and where completion of those material improvements could take right up until maturity to complete.
What is a Limited Guaranty? Limited Percentage - Plus Carve Outs / "bad boy" carve-outs
GoDocs calls this scenario Limited Percentage - Plus Carve Outs where the percentage is the amount of the Indebtedness the guarantor(s) (jointly and severally) will be responsible. There are "bad boy" carve-outs to make the guarantor fully responsible for the Indebtedness if those occur.
What is an unguaranteed loan?
A non-recourse plus carve-outs is an option to add a clause that would make an unguaranteed loan, a guaranteed loan under certain default circumstances. It puts the identified guarantors on notice that it is non-recourse to them unless certain conditions occur that make the "unguaranteed loan, a guaranteed loan". Please note, the guarantor cannot have more recourse than the borrower by operational law.
The Loan may include different recourse options for Guarantor than it does for Borrower. For example, the Loan may be full recourse for the Borrower, but the Guaranty may be non-recourse with carveouts.
Commercial - Guarantor Full Recourse WORD
Commercial - Guarantor Limited Percentage WORD
Commercial - Guarantor Non-Recourse WORD
We include the defined terms "Guaranty" and "Guarantor" even on loans without an identified guarantor at closing so as to have the language in the document for if a guaranty/guarantor is ever added to the loan over the loan term. When no guarantor is identified on the initial loan, the definitions are different and capture that concept.
SOME STATE PARTICULARS:
Wisconsin: has particulars to be considered with regard to married participants in a loan.The warning on the property page (as shown below) is a reminder to consider the guarantor's marital status since the property is in Wisconsin, but does not stop you from ordering the loan documents. If you have no internal issue with the guarantor's marital status, then there are no further actions required in the GoDocs system, and you may order the documents when ready, as normal.
If your internal compliance and business decisions require or do not require a spousal consent for the guarantor, please contact the Customer Support Team for assistance in activating or deactivating this feature.
California: Section 9 of the GoDocs guaranty is an effective waiver for the guarantor regarding Civil Code Section 2856. Without such waiver, guarantors of California real estate loans are usually protected by California’s anti-deficiency and one-action rules. With that, such waiver could allow the lender to pursue the real estate securing the loan, as well as a deficiency judgment for the remaining indebtedness from the guarantor. It should be noted that the borrower/guarantor relationship, as well as particulars of the loan, collateral and lender-remedy-process, may affect the remedies available to the lender at any point. Qualified counsel is recommended for any Lender who is looking to pursue default remedies before the pursuit of such remedies.
Non-US Guarantor Parties:
First, please note that the entities and foreign addresses will need to be handled manually as a special instruction/premium support.
Second, care should be taken with the UCC1. Please enter the known foreign entities and addresses as best as you can to be able to submit the order. As our data fields and validations are designed for US-centric entries, we need to follow your intention via the available data entry and the special instructions. We do not run international entity searches. We do not run international address checks. Any authorization documents for foreign entities in this document package are provided in DRAFT form. We do not represent or warrant that either such draft document is valid and enforceable under foreign (e.g. Canadian) law. Any references to such entities' names, titles, capacities, and entity designations in the loan documents are included in customers' specific instructions. A customer may wish to acquire valid, final authorizations which are compliant with the foreign (e.g. Canadian) law from an attorney licensed to practice law in said non US country. While it preferable to have a U.S. address for the borrower for notices to be delivered - particularly in the event of a foreclosure or enforcement action, it is recommended that you add an additional address in the U.S. or substitute a U.S. address. We will nevertheless reflect each Borrower/Guarantor address exactly as entered.