Fannie's Blacklist Blitz & a SY Retail Coup

Fannie Blacklists Eastern, Sevenstone

“Part time business analysts & street fighters. Also full time commercial real estate mortgage brokers. When you use one of us, you get the power of all of us. For better or for worse.”- Sevenstone Capital leadership page (taken down Friday am)

On Tuesday, Abraham Bergman, the co-founder & managing partner of prolific mortgage shop Eastern Union, was in a meeting when his phone started going nuts. One of his staffers was desperately trying to alert him to ominous correspondence that had just come in from Fannie Mae, one of the alpha dogs of multifamily finance.

The GSE had written in with unpleasant tidings: Eastern Union was being placed on Fannie’s do-not-fly list. “We have deemed that you engaged in a business practice that may seriously harm or present undue risk to Fannie Mae,” the agency said in the letter, a copy of which was reviewed by The Promote. (The correspondence cited an unacceptable percentage of delinquent & risky deals brokered by Eastern; it made no reference to any investigation into wrongdoing.)

By Thursday, Fannie had alerted its DUS lenders that Eastern Union was in the penalty box. Joining it in there was a familiar crew: Sevenstone Capital, a Lakewood-based debt shop whose founders had departed Eastern en masse in ‘20.

Fannie (Cont.)

It is that Sevenstone connection that Bergman feels has now landed Eastern on the agency’s blacklist. “It is our belief that we were dragged into this due to former brokers of Eastern,” Bergman said in a brief interview Thursday. “We take the quality of our loans very seriously and we’re confident we’ll be able to clear this.” Ira Zlotowitz, the Eastern co-founder w/ the cadence of a cattle auctioneer, deferred Qs to Bergman. Eastern has the ability to challenge Fannie’s decision, but agency bureaucracy can take a while, and in the meantime it’s in limbo on a key business area.

Fannie didn’t respond to requests for comment, and The Promote has not seen the correspondence it may have sent to Sevenstone. Sevenstone’s partners didn’t respond to requests for comment, which is normal in cases like these – what is decidedly not normal, however, is that sometime between last night and this morning, Sevenstone took down its leadership page, which had the photos and bios of its founders. (Luckily, we had grabbed a screenshot 🙏 )

Among the partners: Jeff Seidenfeld, who was known as a go-to debt guy for Rhodium Capital’s Moshe Silber. Silber, of course, was Barry Drillman’s 🚬 co-conspirator in a Cincinnati deal that market players say helped catalyze the agency mortgage-fraud crusade. (Silber pleaded guilty this summer to 1 count of wire fraud & is awaiting sentencing; this week, he reached (h/t TRD) an agreement w/ the DoJ that in practice bars him from CRE activities.)

Remember that a lot of deals now blowing up are relics of a different time, when money was cheap and the GSEs were far more laissez-faire about due diligence. This June, Fannie began asking lenders to analyze a property’s sales history and show support for increased value – it’s unclear if the pressure on them to beef up controls is coming from the FHFA, from note buyers of their loans, or a combo of the two. But what is clear is that Fannie has now woken up -in its Q3 10Q, it acknowledged that it had taken losses due to mortgage fraud and warned of the potential of further losses.

No word yet on whether Freddie is syncing up w/ Fannie on its latest action against the debt brokerages – the two GSEs, both overseen by the FHFA, sometimes do.

More: Your insider guide to mortgage fraud szn 

See also: The lads of Lakewood 

SY Royalty Pounces in DoBro

The SYs, a community of Syrian Jewish Brooklynites that have attained near-mythical status in retail real estate, have made their next big play: the Macy’s megastore in Downtown Brooklyn. The Laboz family’s United American Land bought (price not disclosed) the 440K sf space in partnership w/ the Chera family (Crown Acquisitions) & the Chehebar family (Jackson Group) w/ plans to redevelop, per TRD: That likely spells curtains for Macy’s, which has been in store-cutting mode and hopes to close 150 locations by the end of ‘26, putting heaps of primo CRE up for grabs. Macy’s had already sold the office portion of the DoBro property to Tishman Speyer in ‘15; Tishman refi’d that project w/ a $300M Starwood loan this summer.

The Labozes have substantial skin in the game in the area, compiling a mega-assemblage catty corner from the Macy’s - cool PincusCo tick-tock of that 22Y dance here.

Schwartz’s Day in Court

Quick update on the Elie Schwartz federal court case: our guy, who reportedly embezzled $50M+ of investor money through a CrowdStreet campaign, was charged Wed. w/ a single count of wire fraud stemming from a $30K transfer out of a JPM account. The DoJ unveiled a charging document after the hearing, and per Bisnow the $30K was part of a series of payments Schwartz made to a luxury watch dealer for a Grönefeld 1941 Remontoire, a high-end Dutch timepiece w/ a 6-figure going rate 👏 👏 👏 Prosecutors also alleged that Schwartz took at least $6.9M of investor money and YOLO’d it into First Republic & CS options trades (this move IMO seals a place for him in the scammer HoF – catch up here).

Schwartz, whose white-shoe attorneys quit in the fall citing nonpayment, was repped in court by a public defender, who told the judge that his client has “been working with the trustee and cooperating with the government in their investigation.” Schwartz waived his right to a grand jury hearing.

Quickies

• Caisse 🇨🇦 commits $250M to SL Green’s 🗽-focused distressed fund

• Taubman lines up $1B CMBS on thriving 🐬 mall in South Florida 

• Brookfield goes nuclear (power) on 40-building DC-area portfolio ⚡️

• Vanbarton’s office-resi FiDi project lands $280M loan from Tyko

• Seattle office kingpin Selig defaults on $240M debt 🌧️ 

• “Foreclosure is part of the process:” Rechler insists conversion still in the cards @ distressed Helmsley Building - catch up w/ that saga here 🧘 

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