The passage of the Appropriations Act was an important measure in preserving such stability, for a time at least. (Photo: Diego M. Radzinschi/ALM) The passage of the Appropriations Act was an important measure in preserving such stability, for a time at least. (Photo: Diego M. Radzinschi/ALM)

In commercial mortgage lending transactions, it is essential that in the event the loan ends up in default, the lender has the ability to realize on the collateral upon the exercise of remedies. If the collateral is destroyed or severely damaged by, for example, a flood or an act of terrorism, the value of the underlying asset will be greatly diminished or, in some cases, fundamentally eradicated (save for the value of the land). Insurance plays a crucial role in protecting the lender from such a loss.

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