Note: This post is part of a
continuing series on the Credit Report Blog on the subject of
workouts and bankruptcies involving low-income housing tax credit
(LIHTC) projects.
Because there is currently a very robust market for distressed
debt, a lender's first option for dealing with any
non-performing loan is often to look to sell the loan. This post
addresses the unique considerations and difficulties involved in
the sale of a loan secured by an LIHTC project (referred to herein
as an "LIHTC loan").
The difficulties involved in the sale of an LIHTC loan are tied
to two features of such loans. The first feature is the highly
specialized nature of the affordable housing business and the
limited market for such projects (and consequently for LIHTC loans
secured by such projects). This feature pervades all LIHTC loans.
The second feature relates to the way the loan is structured and
comes into play only with respect to LIHTC loans secured by
projects involving
