Thursday, December 31, 2009

Macon Bank Alleges Fraud Re Wildflower Development Franklin, NC Lot Sales

At Issue: Ultima Carolina, LLC Wildflower Development Lot Sales

The Franklin Press reported on November 4, 2009 that Macon Bank, a major underwriter of Wildflower development mortgages, has filed lawsuits claiming it was “duped into making questionable loans in excess of $3.5 million.”

Macon Bank vs. Beverly-Hanks Mortgage Services

Macon Bank asserts in one lawsuit that Beverly-Hanks Mortgage Services of Asheville violated the bank’s loan standards by persuading land speculators to buy Wildflower development lots, “pay the interest with cash-back from the developer, and then ‘flip’ the property at a profit when the money from the interest cash-back ran out.” Macon Bank claims that its lot-loan program was limited to primary or secondary residence mortgagors.

Macon Bank is suing Beverly-Hanks for breach of contract, fraud, constructive fraud/breach of fiduciary duties, negligent misrepresentation, unfair and deceptive trade practices and participation in racketeer influenced and corrupt organizations.

Franklin Press reporters, Quintin Ellison and Barbara McRae, note in their article that of the 151 completed Wildflower sales, more than 30 property owners have defaulted. Macon Bank expects a “wave of defaults.”

Wildflower’s steep slope 2,000-plus acreage subdivision site is located in Macon County near the town of Franklin. Lots that were selling for up to $300,000 are now listed for $18,000 to $35,000. Wildflower’s private subdivision roads are a matter of public concern.

As to the Question of Fraud— Ultima Carolina’s Failure to Disclosure Wildflower Subdivision Hazardous-Land Conditions

It is not known whether Robert Ullmann and Hardy Smith co-partners of Ultima Carolina, LLC, ( registered as Ultima WNC Development, LLC in Macon County), have notified property owners of the recent Wildflower Subdivision hazardous-land report.

On November 17, 2009 a section of Thompson Road, a major Wildflower road, collapsed covering the neighboring down slope home site with a half-acre of debris. State geologists have determined that this slide poses a threat to home owners outside the subdivision. In addition to the Thompson Road landslide, geologists have found more than 20 endangerment areas on Wildflower’s 30-mile road system.

The Smoky Mountain News reported on December 16, 2009 that Macon County has notified the developers that since Wildflower Subdivision roads are private, they are liable for stabilizing the Thompson Road debris flow and for addressing other potential road-related hazards.

Digitized Macon County, NC Soil Hazards Map—NCGS

Wildflower roads were built on colluvial soils. The developers, Ullmann & Smith, knew or should have known that these soils are not recommended as a road construction base because of inherent instability and cost to repair. If Ultima Carolina declares bankruptcy, Wildflower property owners will be obliged to assume responsibility for the subdivision’s private roads.

Interested parties should visit the North Carolina Real Estate Commission ( Subdivision Street Disclosure Statement) Web-site for an explanation of property owners’ liability when developers become insolvent.

Pertinent Information for Wildflower Property Owners

1998— Federal Emergency Management Agency requires the state to notify Macon County and 22 other counties that land under their jurisdiction is landslide-hazardous.

2000— Western North Carolina real estate landslide hazard mapping program is instituted.

September 16, 2004— The Peeks Creek landslide kills five people and destroys 15 homes in Macon, N. C. Fifteen Western North Carolina counties are declared federal disaster areas in September 2004.

November 6, 2004 — “Wildflower Celebrates Its Grand Opening”

January 2005—Ultima WNC Development, LLC registers Wildflower subdivision with Department of Housing and Urban Development as mandated by the Interstate Land Sales Full Disclosure Act. Perspective buyers, by law, must receive a highly detailed Property Report. The Interstate Land Sales Full Disclosure Act requires developers to disclose hazardous-land conditions that are present in their proposed subdivisions.

February 2005 —North Carolina General Assembly recognizes the urgent need to accelerate Western North Carolina real estate landslide hazard mapping program.

October 2006—Macon County real estate landslide hazard maps are released with a press statement from then-governor Mike Easley:
These maps will show which areas are prone to landslides, and that will help developers, county officials, and residents decide where to safely build homes, roads, and other structures.
While Macon Bank is pursuing litigation, Wildflower property owners should be asking why Macon Bank loan officers, its closing attorney Steve Philo, Beverly-Hanks Mortgage Services sales staff and developers Robert Ullmann and Hardy Smith failed to disclose hazardous-land conditions on sales contracts and Subdivision Street Disclosure Statements.

No comments: