Earlier this week, Roosevelt Lofts LLC filed for Chapter 11 protection, but it wasn't clear whether the lender, in this case Bank of America, had started any foreclosure proceedings against the downtown building at 727 West 7th Street. In fact, they had. A document from the title company ( First American Title Insurance) shows that on March 23rd, a notice of default was sent to Roosevelt Lofts LLC. The note indicates that Roosevelt Lofts LLC had passed the March 9th deadline to repay the nearly $80 million loan that was granted by Bank of America back in 2006. You can download the default notice via this link. A notice of default is the first step in foreclosing on a property. In their statement released earlier this week, Roosevelt Lofts LLC reference Bank of America: "The decision to file for Chapter 11 protection was driven primarily by actions taken by the Bank of America, the construction lender, which refused to allow Roosevelt Lofts, LLC to start closing units at The Roosevelt."
Who knows what exactly was going in this case of Roosevelt Lofts LLC, but this is how it usually works when the economy hasn't nosedived: As the units sell, the developer pays off the loan. If a bank suspects that a line of income is going to dry up, they’ll try to work with the developer to extend the loan deadline. A notice of default is usually a last resort action because while the banks want their money, they don't want the building.
This notice of default is the first document that gets recorded. Roosevelt Lofts LLC now has 90 days to pay off the loan amount (there may also be other, separate liens). If they fail to repay the loan, then First American Title Insurance will announce the sale of the property—and that can take place after 30 days after First American's announcement. Who would want this property? Well, banks or developers. Anyone can come and try to outbid Bank of America on the building.
Meanwhile, First American Title Insurance, whose name is on the document, was hired by the Bank of America to be the trustee to carry out the handling of this case, which means, among other things, sending out the notice of default and handling the sale of the building.