Weekly Real Estate News
Fannie Mae has filed a $6.2 million foreclosure lawsuit against a Chicago multifamily portfolio as a widening series of foreclosure cases puts additional scrutiny on properties tied to the Bialostozky family and federally backed apartment debt.
The new Cook County Circuit Court action targets Yellow Portfolio Holdings LLC, an entity managed by C. Yoseph Bialostozky, and covers 90 residential units across three properties on Chicago’s South Side, according to court-record reporting by The Real Deal.
The properties are located at 8200 South Maryland Avenue, 7845 South Avalon Avenue and 7901 South Drexel Avenue. The complaint alleges the borrower stopped making monthly debt-service payments in April and cites building-code violations and unpaid municipal utility judgments.
Fannie Mae’s complaint against Yellow Portfolio does not allege mortgage fraud, according to the reporting.
Foreclosure cases spread across multiple states
The Yellow Portfolio action arrives amid a broader collection of foreclosure proceedings involving properties connected to Chaim Bialostozky in Illinois, Connecticut and Oklahoma. Current court-record reporting puts approximately $44 million of mortgage debt into foreclosure proceedings across those states.
Some of those separate cases contain allegations of mortgage fraud. Those allegations have not been proven in court and are not allegations made by Fannie Mae in the new Yellow Portfolio lawsuit.
Walker & Dunlop, acting in matters involving Freddie Mac-backed debt, has alleged in other litigation that Chaim Bialostozky used back-to-back property transactions with different purchase prices to obtain inflated mortgage amounts. The lender alleges that documents submitted for financing reflected higher secondary transaction prices while lower-priced acquisitions occurring shortly beforehand were not disclosed.
Bialostozky has not responded to those allegations in the cited proceedings, according to current court-record reporting.
Fannie has already pursued another Chicago portfolio
The new lawsuit is not Fannie Mae’s first recent foreclosure involving properties connected to the same network of investors.
In August, Fannie filed a separate foreclosure action against Blue Portfolio Holdings LLC involving three other Chicago properties. A public foreclosure notice for that case identifies Fannie Mae as plaintiff and Blue Portfolio Holdings as the mortgagor and title holder of record.
Fannie has also pursued an $18 million foreclosure involving a separate Chicago portfolio owned by an entity controlled by Israel Bialostozky. That portfolio entered receivership as lenders and courts dealt with deteriorating property conditions and other financial problems.
Why the cases matter to multifamily lenders
The expanding litigation puts a spotlight on underwriting, property valuations, borrower equity and oversight in federally backed multifamily lending.
Fannie Mae and Freddie Mac play major roles in financing U.S. apartment properties, frequently purchasing or guaranteeing multifamily loans originated through approved lenders. Allegations involving transaction values or borrower contributions can therefore extend beyond an individual property when federally backed financing is involved.
For now, the latest Yellow Portfolio case is a foreclosure action. Any allegations made in the separate fraud cases remain allegations unless established through court proceedings.
Sources: Cook County Circuit Court records and foreclosure notices; The Real Deal court-record reporting.
Photo: Shep McAllister/Unsplash.
