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A recent lawsuit filed by Banc of California claims that lenders and mortgage servicers are owed $1.5 million in proceeds from two notes owned and financed by Sprout Mortgage (now defunct) and Planet Home Lending.
The bank also claims that as of early July 2022, processing Sprout’s deposit lines has created a $2 million shortfall. Despite the bank’s demands, Sprout failed to pay.
Non-QM lenders abruptly ceased operations on July 6. Veteran mortgage lender Michael Strauss, the founder of Sprout, was also named as a defendant. According to the lawsuit, in November 2021, the directors provided personal guarantees in favor of Banc of California for Sprout’s obligations. Banc of California filed a complaint with the US on November 2.
Central District Court of California, Southern District Court. Representatives for the bank and Michael Strauss did not respond to requests for comment.
Planet Home Lending spokeswoman Dona DeZube said the company has no contractual relationship with the California bank and was disappointed that its name was mentioned in a dispute between the bank and Sprout.
The director’s email to HousingWire said he is confident that Planet Home Lending has fulfilled its obligations as a secondary servicer to Sprout and looks forward to a positive resolution of the matter.
The bank claims to be the owner and financier of the February 19, 2020 notes, which identify Craig Athide as the principal borrower, and the March 10, 2020 notes, which list Raymond Topps as the principal borrower.
Sprout agreed to sell the notes to a California bank in 2020, retaining maintenance responsibility but using Planet as a sub-service provider.
According to the lawsuit, the Ataide notes were canceled through refinancing and the Topps notes were forfeited. Planet received settlement money and foreclosure proceeds.
According to the lawsuit, Planet and Sprout did not wire the money to the bank despite numerous requests.
In addition to the lack of records and escrow lines, Sprout did not indemnify Banc of California from lawsuits involving the lender’s bank escrow account because both parties signed a bank escrow agreement.
Banc of California PNC Bank filed a lawsuit in New York State Supreme Court against the bank and Sprout, naming it as Sprout’s bank trustee.
The bank’s attorneys in the PNC case sent Sprout a settlement offer on Oct. 19, 2022, asking them to indemnify the bank in defense of PNC’s actions, the bank’s attorneys said in the lawsuit. Today, Sprout Limited Liability Company rejected it.
Since closing its doors in July, Sprout has been the subject of numerous lawsuits from former employees and business partners, including New Wave Lending Group, Indiana Merchants Bank, and FirstFunding.
According to sources, Strauss is looking to sell the Manhattan penthouse on Park Avenue. Zillow shows a Nov. 30 listing of $26.5 million.
Reference Source: Housing Wire
