Back from brink: Desperate landlords get another chance

Allen Stein, Leo Schwimmer dodge foreclosure on Upper Manhattan rentals

A photo illustration of Customer Bank's Sam Sidhu with 417 West 180th Street (left) and 570 West 182nd Street (right) (Getty, Google Maps, LoopNet, Customers Bank)
A photo illustration of Customer Bank's Sam Sidhu with 417 West 180th Street (left) and 570 West 182nd Street (right) (Getty, Google Maps, LoopNet, Customers Bank)

As more lenders take a hard line on pandemic-era delinquencies, pursuing foreclosures instead of workouts, one bank showed it’s still willing to strike a deal.

Customers Bank settled a foreclosure action against Brooklyn-based investor Allen Stein and Leopold Schwimmer, the guarantors on a $12 million loan covering Upper Manhattan rental buildings at 417 West 180th Street and 570 West 182nd Street.

The investors struggled with the mortgage during Covid, making 22 late payments in the 28 months between May 2020 and August 2022, according to the Pennsylvania-based bank. Stein and Schwimmer also failed to pay property taxes and water bills on time and didn’t maintain the minimum debt service coverage ratio required by the mortgage agreement.

In November 2021, Customers claimed it had sent the borrowers three default notices and as many opportunities to cure the delinquency, to no avail.

Customers alleges it also tried to collect the buildings’ rents, which exceed $1 million each year, but Stein refused to hand them over. That triggered another default.

Before lodging the foreclosure suit in August 2022, the bank claims it gave Stein one last shot to right the loan, either by refinancing with another lender or selling the buildings. Instead, the investor continued to make partial, sporadic payments.

Stein and Schwimmer had tried to get ahead of the foreclosure action, asking a judge to declare the bank’s default claims settled about six weeks before Customers sued.

The investors claimed they had met their debt service obligations and in November 2021 had asked Customers to reinstate the non-default interest rate of 3.5 percent.

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The pair said they believed a December 2021 statement from the bank showed they were no longer being charged 24 percent. But a notice the following spring showed the loan remained in default, the entire accelerated balance was due and default interest had been accruing since August 2021.

In early December 2022, the court appointed a receiver in the foreclosure action to collect rents on the Upper Manhattan properties. (The receiver would collect over $40,000 in rent in three months.)

Days later, Stein and Schwimmer filed separate motions to dismiss the complaint. Schwimmer claimed Customers had failed to allege any “bad-boy” acts by him that would allow the bank to take recourse against the guarantor.

Stein claimed the bank had conflated the mortgage’s full guaranty, which demanded total repayment of the loan if the borrower claimed bankruptcy, with its limited guaranty, which would allow the bank to recover damages if it found the borrower had misappropriated rents, as Customers claimed.

“[Customers] meshes the two parts together … as if any violation of the carveout guaranty makes the guarantor automatically liable for the entire mortgage debt,” his motion to dismiss reads.

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Customers Bank's Sam Sidhu, 517 West 180th Street and 570 West 182nd Street (Ariel Property Advisors, Getty, Customers Bank)
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On Feb. 27, the court denied both building owners’ motions, finding their claims that Customers suggested full recourse under the guaranty in its initial complaint “is not a basis for dismissal.”

The next day Stein, Schwimmer and Customers agreed to a modification of the loan. Customers agreed to give them time to refinance and pay off the loan and mortgage and to discontinue the suit, court documents show.

Lawyers for Customers, Stein and Schwimmer did not respond to requests for comment.