UH-OH! ARE VULTURES ALREADY CIRCLING?
Chemical Bank, the financial institution holding the Bay City Academy's $1.8 million dollar mortgage, quietly filed an "assignment of rents" document on April 10 against the charter school's 400 N. Madison Avenue property and an adjoining parcel at 412 N. Madison owned by Steven Ingersoll.
Assignment-of-rents is a provision in a deed of trust or mortgage. The clause entitles the lender (in this case, Chemical Bank) to collect rents from the mortgaged property in the event of default by the borrower. This clause provides that during such default, all rents and incomes from the secured property will be paid directly to the lender to help reduce the outstanding loan balance.
During Ingersoll's federal fraud trial, Randall Keinbaum, an Assistant Vice President and commercial lender at Chemical Bank, testified about Steven Ingersoll's Bay City Academy construction renovation loan.
Keinbaum said the $1,802,000 loan included two distinct phases: a twelve-month construction loan (interest only) that would convert to a post-construction mortgage with payments including principal and interest.
When asked by the prosecutor about the United States Department of Agriculture's involvement, Keinbaum stated that the bank required a guarantee from the USDA to enter into the loan agreement with Steven Ingersoll due to agreement's "unique collateral".
Keinbaum explained that a property like Ingersoll's converted church carried more risk than a "square-box office building" if the bank ever foreclosed on the property and attempted to sell it to recoup its investment. Citing the "limited pool of interested people" who might purchase the Madison Avenue property, Chemical Bank required a USDA guarantee to make the loan to Ingersoll.
Keinbaum stated that, according to the loan documents, "rental income from the management company running the school" would fund the mortgage payments.
Smart Schools Management (owned by Steven Ingersoll) would pay rent to the Bay City Academy (owned by Steven Ingersoll), which would use the revenue to pay the Chemical Bank mortgage loan.
With a 26 percent drop in student enrollment at its Bay City campus, Ingersoll's Bay City Academy may not survive long enough to provide Chemical Bank with those tax payer-generated "rent" payments.
USDA, Line 2!
Now, about that guarantee...
"Lien" on me, says the IRS to the Bradleys: