Challenges and Strategies in Form Management for Mortgage Loan Transactions

Most commercial lenders (and their law firms) rely heavily on form documents as a starting point for loan documents and most other pieces of paper generated in connection with the origination of a loan.  Good forms that fairly contemplate and account for most common scenarios reduce negotiation friction and speed up the loan documentation process, however creating really solid forms and making sure everyone uses them takes a lot of work and thought.

📃 Clean Ups / Language Improvements - No matter how many times you proof a document, you always find clean-ups or improvements to language as you work with the documents on transactions.  In the heat of a deal the last thing you want to do is worry about updating the form, so it can be hard to motivate at the end to get changes back in.

✉️ Distribution to Team - Many forms are maintained by one or two people and live on some folder on a share drive (or maybe a DMS).  This becomes a problem when transactions are moving fast and changes do not get distributed to outside counsel before they start drafting (or before documents are finalized).  Distributing forms to hundreds of attorneys via email is not efficient and risks some people missing the email or failing to adopt the changes.

🧩 Document Automation - For those leveraging document automation, usually two copies of the form need to be maintained - a Word version and a "coded" template.  If each counsel has it's own automation platform, form changes end up causing a lot of work for everyone and inconsistencies can be prevalent as firms may use different automation platforms (or more likely none at all).

📗 Law Firm Specific Forms - A close relative to the previous two issues, often law firms keep their own copy of forms that include non-material stylistic changes (bold vs. underline defined terms, justification, etc.) or good form improvements / clean-ups (that maybe are not merged into the lender form).  They may also have their own state specific inserts.  The result is inconsistency of documentation across firms.

🎯 Fallback Provisions - This is probably it's own topic, but maintaining a library of approved provisions to use during a negotiation with the Borrower can be a full time job.  You almost never use these in the first draft (so they always need to be deleted), but you somehow need to communicate where they go if used and the ripple effect through the documents. This usually results in a maze of footnotes and brackets (if it is even attempted). 

🏦 Audit Final Documents - Create an audit process at the end of transactions where you look at two sets of blacklines:

➡️  First run the form vs. the first draft of the documents circulated to the Borrower.  This will highlight (i) any clean-ups to the form such as typos, formatting, etc. that need to be made every time and (ii) any new concepts that are not provided for in the form that might come up often (ex. state specific inserts, apartment vs. hotel, reserve language that might be new but could be re-used).

➡️  Next run the first draft circulated to the Borrower vs. the final draft of the documents.  This will highlight negotiated provisions that might be considered as either (i) form changes because they are middle of the road and you want pre-empt the Borrower comment in the future or (ii) fallback provisions to be used when certain common comments are received from the Borrower.

The audit process has a second benefit of giving you a change to review changes accepted from the Borrower. 

👔 Encourage Counsel to Share Form Updates - Encourage all outside counsel to share form updates (even if very minor).  Often counsel may not want to bother the client with this but if all share the little clean-ups and other good ideas the forms will keep getting better and more consistent.   

😊 Set Aside Time for Form Updates - Don't try to make the form updates on the fly.  Other than urgent form changes, set aside a quiet time once a month or quarter to review the audits and make the changes.  For lawyers maintaining forms, a good time to do this might be while drafting a new set of documents as you kill two birds with one stone.  It is just as much work to clean-up the form before you create the document as it is to make the changes in the deal document (and then again on every future deal!).

🖥️ Maintain Forms in a Central Repository - Leverage a cloud based repository (preferably with document automation included) to maintain forms that can be accessed by all counsel.   

🙏 Leverage Technology for Fallback Provisions - There are some great technology solutions available powered by AI that allow you to favorite approved fallback provisions or find negotiated language.  Hopefully this will help to alleviate one of the hardest form / knowledge management problems.

If you are still creating documents by saving your last set of documents and finding and replacing parties and dates with new terms, hopefully this motivates you to jump into the world of form management!