Mentor Lenders Sue Chicago Single-Family Investors for Fraud

The head of a local real estate school is suing one of his students for allegedly running a “Ponzi-like scheme” that required taking on over $10 million in loans from individuals to pay off other troubled debts on dozens of South Side homes now headed for foreclosure.

Andrew Holmes and his longtime business partner, Mary Desloover, accused single-family investor Chris Urban and his sister Aneta Urban of breach of contract, fraudulent misrepresentation and unjust enrichment, among other things, in a civil lawsuit filed in Cook County Circuit Court last month.

Desloover and Holmes also sued Renovo Financial, the lender that filed for foreclosure on $13.7 million in mortgage debt it issued to the Urbans across 80 single-family rental properties. They also sued another individual lender, Shirley Pollock, who they claimed helped keep the Urbans’ mounting debt a secret from other investors in exchange for higher interest payments.

Shirley Pollock and her husband, Christopher Pollock, did not return requests for comment. Desloover declined to comment on the lawsuit.

Many of the Urbans’ investors who say they are now facing painful losses are fellow participants of the Andrew Holmes Real Estate Mastery Program, including Pollock. Holmes said he would have discouraged his students from lending to the Urbans earlier if he knew the full extent of the debt they’d taken on and how they were allegedly using it to pay off other debts or unrelated expenses.

However, Chris Urban maintained that things are fine with his and his sister’s businesses and the Renovo foreclosure complaints will be resolved by selling the homes before they can be seized by the lender. A handful of homes within the portfolio have already been sold, records show.

The Urban siblings spent about six years fixing up distressed single-family homes on the South Side and southern suburbs of Chicago, selling some but keeping most as rental properties, including the 80 homes now facing foreclosure. They amassed a portfolio of about 101 properties owned by their three companies: CA Homes, Klu Homes and CA Homes & Properties, records show.

Chris said he and his sister, who is a Chicago Police Officer, had already decided to sell off the distressed properties by the time they started having trouble keeping up with their mortgage payments to Renovo last year.

He declined to answer questions about the loans the Urbans took from individuals or the lawsuit filed by Holmes and Desloover, saying that he could not comment on pending litigation.

In the case’s first hearing held last week, a judge denied Holmes and Desloover’s request for an emergency temporary restraining order to force the Urbans to direct rental revenue from the properties into an escrow account until the case can be settled, court records show.

Most of the properties the Urbans have yet to sell are occupied, Holmes said. Chris Urban said most were occupied at some point, but said he couldn’t be sure, as he had been in the process of renewing leases when the foreclosures hit.

The properties generate monthly rent revenue of over $50,000, the plaintiffs alleged in the petition.

“I don’t want Chris to get the money and use it,” Holmes said before the hearing. “I want the money to be put aside in a separate account so that it’s accounted for properly.”

In denying the request, Cook County Judge Joel Chupack said Holmes, Desloover and their attorneys “did not establish an emergency as present,” according to notes from the hearing. Chupack also struck their first three legal complaints from the record. Holmes and Desloover now have until Wednesday to file a “restated complaint,” according to the order.

The judge also gave the Urbans and other defendants in the case until July 16 to file an answer to the new complaint once it is filed, and pushed back the next hearing date until the morning of Aug. 6.

The loans

As the Urbans’ fix-and-flip, single-family rental business grew, Chris Urban, who managed the acquisitions and renovations side, began taking on more and more properties and, with them, more and more debt, Desloover said in a May interview with The Real Deal.

She was in for more than $1.4 million in loans meant to help with buying and renovating various properties, renovations that allegedly went unfinished on six properties she invested in. They stopped making interest payments on the loans she gave them about two years ago, Desloover said.

Then the Renovo foreclosure filings hit at the start of this year. Renovo Financial didn’t return requests for comment.

The Urbans allegedly took out about 26 high-interest loans with Pollock, amounting to more than $5 million, according to the lawsuit.

When this came to light in September of last year, Holmes allegedly loaned the Urbans about $400,000 from his company, United Gap Funding, to try to help them get back on track with renovations so they could pay back investors, according to the lawsuit. In an earlier interview with TRD, Holmes said he loaned them $220,000 of his own money to help restructure the business.

Holmes also pushed Chris Urban to let Desloover and other mastery program investors file second liens against his properties to help them get paid out for their share of the homes’ equity if they are sold through foreclosure, he said. Many did, including Desloover.

The Urbans allegedly sold off the six unfinished homes to pay back part of the loan from Desloover, and gave her second lien positions on about a dozen other properties to account for the remaining debt.

Her second mortgage lien for just under $1.2 million was recorded in mid-October against 11526 South Aberdeen Street in Chicago, among other properties, to be paid off by the Urbans over time, property records show. That same day, the Urbans sold the property without Desloover’s knowledge, she said. In March, they did the same with a property at 9005 South Union Avenue in Princeton Park, records show.

Those sales form the basis for Holmes’s and Desloover’s allegations and were also part of their argument in pushing for the emergency temporary restraining order on the Urbans’ rent revenue, court records show. They claimed to have reached out to Renovo Financial for payoff statements and to the Urbans’ real estate broker to request notification before any further sales, but allegedly they are still being kept out of the loop.

Holmes and Desloover also alleged that the Urbans did not use loan funds for renovations but instead used them for personal use and to pay interest on other loans, such as those made to Pollock, according to court records and statements from Desloover. Pollock was allegedly receiving interest payments of 15 to 20 percent on the loans she gave the Urbans, allegedly in exchange for keeping them a secret from other mastery program participants, Desloover said.

They are requesting a jury trial and are ultimately hoping to be granted the right to collect all rents from cash-flowing properties they have an alleged financial interest in as well as punitive damages and compensatory damages of just shy of $480,000 for Desloover and $520,000 for Holmes and his company, according to the lawsuit.