PROPERTY SEIZURE REVERSED – SW&B protects holder of $1 million mortgage from federal seizure of mortgaged property and negotiates settlement with United States to pay all client litigation fees.

The Firm successfully negotiated a settlement agreement for a commercial mortgage holder who became entangled in a federal civil forfeiture action. The client sold a piece of commercial property in New Hyde Park, and agreed to hold a $1,000,000 purchase money mortgage on the property from the new owner.  When the new owner of the property was indicted by a federal grand jury in Salt Lake City, Utah, for engaging in criminal activity related to the illegal sale of prescription drugs from the New Hyde Park property, the United States commenced a civil forfeiture proceeding in Utah federal court to seize the property, making the mortgage essentially worthless.

“As the mortgage markets continue to suffer, purchase money mortgage financing is likely to grow in popularity – but this matter serves as a lesson in the risks that owners should be mindful of,” commented Michael H. Sahn, Esq.   “Our client had a successful conclusion to this matter because of strong legal representation, and we congratulate our partner Jon Ward and the Firm’s litigation team on their outstanding effort.  But not every owner turned mortgage banker can expect a happy ending.”

After months of negotiation and the commencement of a mortgage foreclosure proceeding in New York that was ultimately removed to the Federal District Court in New York, the United States entered into a settlement agreement in which the government recognized the validity and priority of the original owner’s mortgage on the property. The United States agreed to promptly sell the property at auction to satisfy the outstanding balance owned on the mortgage (including principal, interest and all of the client’s attorney’s fees).  Additionally, the client was granted the right to credit bid the amount owed to it at the same auction, guaranteeing that it would either by paid in full on the mortgage, or regain ownership of the building.