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We did some work for this hard money lender during the height of the boom and found them to be very conservative with appraised values in the NYC region. We got the impression that much of appraisal work (oddball, complex properties) in NYC had market values written down during the mortgage process.
They began to have trouble as the market dropped and we haven’t worked for them since the market correction. When I read yesterday’s OTS notice, I stumbled onto a familiar former client.
The “factual allegations” are fascinating.
III. FACTUAL ALLEGATIONS AND CHARGES 19. Without the knowledge or consent ofESSA, and contrary to the intention of ESSA, Respondent altered his Restated Guaranty so that instead ofrestating his personal guaranty ofthe Loans. the altered Restated Guaranty released Respondent from all personal liability for the Loans.
Respondent concealed the changes he made to his altered Restated Guaranty by having the changes typed in an identical type size and font as the original Restated Guaranty. In order to conceal the changes further. Respondent duplicated ESSA’s internal document management system authentication and identification mark in the original Restated Guaranty in Respondent’s retyped altered Restated Guaranty.
Respondent made the modifications to his Restated Guaranty without the knowledge, authorization, or approval of ESSA.
Respondent returned his altered Restated Ouaranty to ESSA without disclosing that he had made modifications to the document that materially changed the legal effeet ofhis Restated Guaranty.
With the belief that it had obtained unaltered executed Restated Guaranty documents from each of the members of Ivy Ridge, ESSA approved an extension on the maturity date ofthe Loans.
On or about August 7, 2008, Ivy Ridge defaulted on the Loans.
Yikes!
Personal guarantees are what join developers and construction lenders at the hip. Nothing is likely more sought after by developers than removing that guaranty from the books.
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