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Thursday, October 26, 2000
Copyright © Las Vegas Review-Journal

Investors continue waiting

Failed firm's receiver pays interest on loan

The receiver for failed Interstate Mortgage Group is paying $30,000 a month in interest on an unsecured bank loan, while individual investors wait to recover their money.

Receiver George Swarts said Tuesday he has made a total of $300,000 in interest payments to U.S. Bank over the last 10 months, but Swarts said that is the proper thing for him to do.

Interstate Mortgage failed in late 1999 with $140 million in outstanding mortgage loans, which it brokered for 1,000 mortgage loan investors. The investors were in effect lending the money to borrowers, mainly developers and home builders, and requiring real estate as collateral for the loans.

Swarts was named receiver in February to oversee the liquidation of the failed company.

Attorney John Netzorg, who represents several Interstate Mortgage investors, complained that investors with loans secured by real estate, are still waiting to recover their money.

Yet, the bank is getting paid for an unsecured loan, which typically would be paid after the secured creditors have recovered their funds, Netzorg said.

"Widows and orphans are missing payments," he said, referring to some of the mortgage loan investors. "The bank should give it back."

Dotti Loader, vice president of U.S. Bank in Nevada, said it was working with Interstate just as it does with borrowers in other loans.

She declined to elaborate, citing confidentiality of customer information. But she acknowledged that the bank agreed to stop disclosing the names of customers to a marketing company in response to unrelated civil complaints filed by state attorneys general.

Paul Mann, an mortgage investor in Sun City Summerlin, questioned why the unsecured loan would be paid before loans backed by real estate.

"I suppose (Swarts) is acting in our behalf, but it doesn't seem so," Mann said.

Swarts said his attorneys are preparing a motion, seeking guidance on the issue from Chief District Judge Lee Gates, who is overseeing the receivership.

"Mr. Netzorg should be a little more patient," Swarts said.

The receiver, however, said the investors are owed money by borrowers, not Interstate Mortgage itself. Investors haven't made a claim against the mortgage brokerage, he said.

Netzorg also complained that Swarts has failed to make quarterly financial reports to the District Court, as required.

Swarts acknowledged that he is "a little bit behind" in making reports but said he intended to do so next week.

In a related development, some investors on Tuesday reacted with anger to news that Swarts persuaded Gates to postpone the revocation hearing on the mortgage license of David Ferradino, who owned Interstate Mortgage.

"I think it's a disgrace to let this guy go on like this," said Ray Kovitz, a retired investor who lives in Sun City Summerlin.

"This man (Ferradino) should be driven out of the business," Kovitz said. "There's no question about it."

Mann agreed: "We feel this guy (Ferradino) should be in jail." Mann said he made a mortgage loan on a property through Interstate. But Ferradino split the money between two other properties -- one in California and one in northwest Las Vegas -- without Mann's authorization.

"I understand (investors') frustration, and I just try to organize things so that everybody helps with the problem," Swarts said. "The license revocation hearing will come in due time."

Swarts said Ferradino was helping him persuade investors to accept the terms of an agreement to sell Iron Mountain Ranch, one of the major developments taken over for investors.