A Sarasota attorney said Thursday he has filed 50 lawsuits against Coast Bank on behalf of borrowers whose homes were being built by failed builder Construction Compliance Inc.
Alan Tannenbaum said he is seeking to have the mortgages of the borrowers rescinded and forgiven by Coast Bank.
Tannenbaum said he was in a meeting in New York with some of the borrowers and was not immediately able to provide official stamped copies of any of the lawsuits, although he did provide a draft copy.
He contacted the Bradenton Herald after 5 p.m. when the Sarasota Courthouse was closed.
Tramm Hudson, a spokesman for Coast Bank, said he had not seen the lawsuits, but they would be turned over to the bank's lawyers once they were received.
"We have tried to work in good faith with Mr. Tannenbaum and his clients and we regret that they have taken such a position that it has come to this," Hudson said.
Tannenbaum said he planned to file 75 more lawsuits in Sarasota, Charlotte and Highlands counties today and Monday. Coast Bank committed to $110 million in loans to 482 borrowers whose homes were being built by St. Petersburg-based CCI. In January, the bank announced that the builder was unable to complete the homes because of financial problems.
The developer has since claimed Chapter 11 bankruptcy.
Many of the borrowers were northern investors seeking to flip the homes.
In the complaint he provided to the Herald, Tannenbaum alleges Coast Bank committed fraud and breached its fiduciary duty by allowing the homes to be sold to investors with no money down in return for the promise of a profit once the homes were sold.
The complaint alleges that Coast Bank officials should have known CCI was insolvent and that the investment scheme would leave borrowers with an "indebtedness substantially in excess" of each home's value.
Tannenbaum said he tried to negotiate with Coast Bank on behalf of the borrowers, but those efforts were unsuccessful.
"Coast was in a substantially weak financial position," Tannenbaum said. "We felt that the bank's exposure was very significant and that a fair resolution would have required a very substantial adjustment to those mortgages and the bank was just not in a position to offer a substantial-enough adjustment."
Hudson said the borrowers were savvy enough to know what they were buying and they're obligated to pay the bank the money it is owed.
"They have a contractual obligation for these loans," he said.
Since news of the problem loans first surfaced, the stock of Coast Bank's parent company, Coast Financial Holdings Inc. (NASDAQ: CFHI) has lost roughly 80 percent of its value.
In May, Coast Bank was hit with a cease-and-desist order from the FDIC, which ordered the bank to fire Brian Grimes from his position as president and replace him with new management.
The FDIC also gave Coast Bank very specific timelines for reducing its impaired loans and established minimum limits of capital it must maintain.
"In terms of the road map that the bank and the FDIC agreed to, we've had a lot of progress," Hudson said. "We've had a number of loans repaid and modified and we continue to make progress every day with it." Suit states bank defrauded buyers in loans, should have known builder insolvent
Coast Bank committed to $110 million in loans to 482 borrowers whose homes were being built by St. Petersburg-based CCI.
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