Report: #321499

Complaint Review: Metro Funding Corp.

Metro Funding Corp. Took $23,500 upfront and wasted 2 months of valuable time with high hopes Paramus New Jersey

Reported By:

— Saint George Utah
Submitted:

Thu, March 27, 2008
Updated:

Wed, October 01, 2014

Metro Funding Corp.

1 Kalisa Way Suite 310

Paramus, New Jersey

U.S.A.
Phone:
Category:

Loans

*UPDATE Employee: Lenders Response *Author of original report: MF nice try to downplay what you did *Consumer Suggestion: Metro Funding Corp: Not a Rip-off *General Comment: Metro Funding Corp (MFC) and David Hecht alleged to behave fraudulently in federal court. *Consumer Comment: this is not Loan Officer David Hecht NMLS 368555 or business owner of Right Choice Marketing

Metro Funding claims they fund strong projects with good loan to values. After giving them $23,500 upfront for "due dilligence" and sending them more information than most banks have asked for they found a way out of the deal and kept our money. They could not find a real reason to decline our loan request because it was so strong. If they did decline the loan they would need to refund our money back. Granted they said it was non-refundable but they know what they are doing. I don't believe they have ever refunded anones money. They just make a loan offer that you would never accept, therefore justify keeping your money. More important than they money is the waste of time thinking they would finance our project. They insist you not shop the loan around or they will keep your money and decline the loan. After sending their "inspectors" (who were not qualified to value anything) they could not find fault with the property or our request. But they needed something to give Metro a way out.

So, they said that the value of highway commercial property accross from a new Wal Mart project with 10,000,000 cars per year could not be sold because of the current market. We have contracts to purchase parcels from us. They said if we got a letter of credit from the buyers bank and his down payment in escrow they would consider the buyers as real.

In the end they offered us less than 30% of what the banks have given us. These are Hard Money guys. The property appraised for $25,000,000 and they offered us $3,000,000. On top of that David Hecht was condesending and arrogant about it. We were always accomidating and forthcoming with anything they needed. We have borrowed $80,000,000 from bank and have never been treated like this or been insulted by an offer like this one. Beware of this company and their ability to fund all but their pet projects.

Lender
Saint George, Utah
U.S.A.

5 Updates & Rebuttals

ICG Home Loans

Hillsborough,
New Jersey,

this is not Loan Officer David Hecht NMLS 368555 or business owner of Right Choice Marketing

#6Consumer Comment

Wed, October 01, 2014

I would like anyone who reads this, this is another David Hecht and has nothing to do with me

Loan Officer David Hecht NMLS 368555 or business owner of Right Choice Marketing "RCM,LLC"

Black Hills

United States of America

Metro Funding Corp (MFC) and David Hecht alleged to behave fraudulently in federal court.

#6General Comment

Fri, May 21, 2010

David Hecht and the people at Metro are arrogant (my opinion). They seemingly pretend to conduct due diligence after you pay an enormous due diligence fee and promise a refund if they do not offer a loan. They will make up excuses or expenses not to fund and not to return your due diligence money.

The due diligence they conduct is amateurish at best. It's clear that they do not even bother to read any of the information they request. It appears they conduct one or two "real" deals per year to give them the appearance of legitimacy and probably keep them out of trouble with the FBI. Even the real deals they perform are corrupted.

This week a federal court in New York put a freeze on Metro's assets. This was in response to WestLB's request (paste below). Apparently David Hecht and Metro made false reports on the status of its mortgages that were underlying a $50 million facility from WestLB. Worse, the filing by WestLB reads that he misappropriated funds from a lock box, fraudulently sold assets serving as collateral and didn't provide WestLB with documents to allow them to service the underlying loans.

Ladies and Gentlemen, these are bad people. I feel bad for Adi Hecht, David's daughter, who works for him and has this bad example. It must be incredibly embarrassing for her. I hope the young people working for Metro and Mr. Hecht are not tainted by these seemingly illegal and unethical business practices. I hope the shareholders of WestLB can recover some of their money.

Below is a cut and paste from the filing by WestLB:

MEMORANDUM OF LAW

Plaintiff WestLB AG submits this memorandum of law in support of its motion

for a temporary restraining order and preliminary injunction preventing defendants Metro and

MFC from removing any funds from their bank accounts or transferring any other assets,

requiring Metro and MFC to preserve and turn over to WestLB all documents relating to the

Loan and Mortgage Loans involved herein, and requiring Metro and MFC to provide an

accounting to WestLB with respect to the Loan and the Mortgage Loans.

PRELIMINARY STATEMENT

This Court held in its March 19, 2010 Decision and Order in related action Metro

Funding Corp., et al. v. WestLB AG, 10 Civ. 1383, that WestLB was entitled to terminate its

Servicing Agreement with Metro and was entitled to immediate repayment of a $44.8 million

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loan WestLB had made to Metros affiliate MFC under their Credit Agreement. Since this

Courts decision, Metro and MFC have prevented WestLB from properly exercising its rights.

Most importantly, Metro and MFC have failed to turn over to WestLB their complete records for

the Mortgage Loans that are collateral for WestLBs Loan to MFC. This has prevented proper

servicing of the Mortgage Loans and recovery by WestLB against its collateral.

WestLB has now learned the reason for Metros and MFCs refusal to turn over

their records. They misappropriated a significant part of WestLBs collateral. In August 2009,

without notifying WestLB, Metro and MFC secretly sold one of the major properties securing a

Mortgage Loan (the Sovereign Marine Mortgage Loan) and pocketed at least $3.34 million in

proceeds. At the same time, Metro has always represented to WestLB that the Sovereign Marine

loan was performing either under its original terms or under modified terms agreed by Metro.

Metro and MFC also appear to have misappropriated an additional $290,000 from the Valley

National Bank lockbox account into which loan payments are made.

MFCs and Metros misconduct, if allowed to continue, will defeat the rights

WestLB seeks to enforce in this action and make any judgment WestLB obtains unenforceable.

WestLB has not previously requested the relief sought herein.

STATEMENT OF FACTS

Pursuant to the Courts March 19th Decision, WestLB terminated its Servicing

Agreement with Metro and appointed TriMont Real Estate Advisors, Inc. (TriMont) as

replacement Servicer. (Declaration of Jon A. Hellbusch, dated May 4, 2010 (Hellbusch Decl.)

5.) TriMont has been hired to service the 39 Mortgage Loans and/or properties that are the

collateral for WestLBs Loan to MFC. The Mortgage Loans were originated by Metro and sold

to MFC. TriMonts responsibilities include collecting amounts paid by borrowers under the

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Mortgage Loans and remitting proceeds to WestLB and the other participants in such Mortgage

Loans.1 (Hellbusch Decl. 5 & Ex. A.)

Servicing Agreement Section 6.2 obligates Metro upon termination to turn over

all records relating to the Mortgage Loans and to otherwise cooperate with WestLB. WestLB

needs Metros and MFCs records in order to service the Mortgage Loans properly. Without

such records, WestLB cannot determine, among other things, the status of the Mortgage Loans,

whether protective advances or other steps to protect the loans must be made, whether

foreclosure is warranted, the identity of participants in the Mortgage Loans, and how much is

due to (or from) such participant. (Hellbusch Decl. 6.)

Since TriMonts appointment as replacement Servicer, WestLB has made

numerous written demands to Metro for the records relating to the Mortgage Loans. However,

Metro has failed and refused to turn over to WestLB its complete Mortgage Loan records.

(Hellbusch Decl. 7 & Exs. B-F.) WestLB and TriMont need the files relating to the Mortgage

Loans and other participants in the Mortgage Loans in order to protect WestLBs security

interest in the Mortgage Loans, to protect its right to repayment, and to allow it to pay the correct

amounts to participants or seek reimbursement from participants for expenses.

The reason for Metros failure to cooperate with WestLB has now become clear.

Metro and MFC have been engaged in a fraudulent scheme to convert WestLBs collateral and

thereby prevent WestLB from enforcing its rights under the Credit Agreement and the Servicing

Agreement.

1 MFC and Metro funded Mortgage Loans by borrowing from WestLB and from various participants. Senior

participants share in Mortgage Loan proceeds (or losses) on a pari passu basis with WestLB.

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Specifically, WestLB has obtained a receivers motion showing that in August

2009 Metro and MFC misappropriated $3.3 million in proceeds from the sale of the property

underlying a $4 million Mortgage Loan called Sovereign Marine.2 (Hellbusch Decl. 8 & Ex.

G.) The receivers motion shows that the Sovereign Marine property was sold with MFCs

consent on May 27, 2009 at a public action for $3.52 million, that the sale was approved by an

Oklahoma court on June 24, 2009, and closed on August 18, 2009. (Id.) MFC received

approximately $3.14 million in proceeds at the closing on August 18, 2009, and an additional

$200,000.00 post-closing in satisfaction of the first lien on the Property. (Id.)

Credit Agreement Section 2.8 obligates MFC to remit all payments with respect

to a Mortgage Loan to the Valley National Bank lockbox account. (Hellbusch Decl. 9 & Ex.

H.) However, MFC did not deposit the $3.34 million in Sovereign Marine proceeds in the

Valley National Bank lockbox account. The Valley National Bank statements for August 2009

do not show any such deposit having been recorded at any time during that month. (Hellbusch

Decl. 10 & Ex. I.)

The Valley National Bank August 2009 statement does, however, show another

suspicious transfer by Metro. It shows an outbound transfer on August 7, 2009 to an unknown

party in the amount of $290,119.46. (Hellbusch Decl. 10 & Ex. I.)

Metro and MFC actively concealed their fraud from WestLB. Among other

things, Metro reported to WestLB in its July 2009 Loan Term Extension Summaries that Metro

and Sovereign Marine had agreed to a reduced interest payment plan under which Sovereign was

2 The property that secured the Sovereign Marine loan consisted of a 103 acre property comprised of a 117-slip

marina, 14 rental cabins, office buildings, tennis courts, a boat showroom, a swimming pool, a 12,000 square

foot boat service center and a 50-ton travel lift.

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paying $15,000 per month. (Hellbusch Decl. 11.) Metro reported that Sovereign had a

contract to sell the underlying property, with closing scheduled for August 2009. Metro reported

that the Mortgage Loan would be repaid at the closing. Metros Loan Term Extension

Summaries did not disclose that a receiver had been appointed for the property and had sold it at

auction months before for much less than the outstanding loan balance.3 (Hellbusch Decl. 11

& Ex. J.)

Metro reported in its August through October 2009 Monthly Reports to WestLB

that the Sovereign Marine loan was current. Metros November 2009 through February 2010

Monthly Reports to WestLB represented that the Sovereign Marine loan was 120 days overdue

but current as per MFCs payment plan. (Hellbusch Decl. 12 & Ex. K.)

Moreover, on or about August 25, 2009, a week after the Sovereign Marine

property already had been sold, David Hecht told Jon Hellbusch that MFC had received an offer

of $2.33 to purchase the Sovereign Marine Mortgage Loan. Jon Hellbusch advised Hecht that

WestLB would not consent to this sale. (Hellbusch Decl. 13 & Ex. L.) In other words, Hecht

was attempting to obtain WestLBs consent to a purchase of the Sovereign Marine loan for $1

million less than the $3.34 million MFC had already pocketed. (Hellbusch Decl. 13.)

MFC and Metro have also never accounted for the $290,000 Metro transferred

from the Valley National lockbox account. It may be that further fraud will be uncovered when

WestLB obtains Metros and MFCs records. (Hellbusch Decl. 14.)

At the same time that Metro is stone-walling WestLB in its effort to obtain the

Mortgage Loan documents, purported participants are demanding payment under the Mortgage

3 The July 30, 2009 Loan Term Extension Summary is the report that the Court found was materially

misleading in its March 19, 2010 Decision and Order.

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Loans. (Hellbusch Decl. 15 & Ex. M.) WestLB cannot make payments to participants until

Metro has turned over the relevant records that will allow WestLB to determine the identity of

the participants in each Mortgage Loan and the exact amounts such participants are owed. (Id.)

Absent injunctive relief, WestLB will suffer immediate irreparable harm as a

result of Metros and MFCs fraudulent conduct and wrongful refusal to turn over the documents

relating to the Mortgage Loans, because WestLB cannot collect the amounts due to it under the

Credit Agreement and is unable to make payments to participants without Metros complete files

relating to the Mortgage Loans and the underlying properties.

ARGUMENT

I. This Court Should Grant WestLB the Preliminary Injunctive Relief it Seeks Because

WestLB Has Demonstrated that it Will Suffer Immediate Irreparable Harm in the

Absence of an Injunction, and a Likelihood of Success on the Merits or Sufficiently

Serious Questions Going to the Merits to Make them a Fair Ground for Litigation and a

Balance of the Hardships Tipping Decidedly in WestLBs Favor

In the Second Circuit, a party seeking a preliminary injunction must establish:

(1) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to

the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly

in the movants favor, and (2) irreparable harm in the absence of the injunction. Faively

Transp. Malmo AB v. Wabtec Corp., 559 F.3d 110, 116 (2d Cir. 2009) (internal quotations and

citations omitted); see also Citigroup Global Mkts., Inc. v. VCG Special Opportunities Master

Fund Ltd., No. Civ. 6090, 2010 U.S. App. LEXIS 5025, at *11-23 (2d Cir. Mar. 10, 2010)

(finding no command from the Supreme Court that would foreclose the application of [the

Second Circuits] established serious questions standard as a means of assessing a movants

likelihood of success on the merits, and holding that the standard remains valid).

This Court should grant WestLBs motion for injunctive relief because both

requirements are satisfied.

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II. WestLB Will Suffer Irreparable Harm in the Absence of an Injunction

To satisfy the irreparable harm requirement, WestLB must demonstrate that

absent a preliminary injunction [it] will suffer an injury that is neither remote nor speculative, but

actual and imminent, and one that cannot be remedied if a court waits until the end of trial to

resolve the harm. Faiveley, 559 F.3d at 116 (quoting Grand River Enter. Six Nations, Ltd. v.

Pryor, 481 F.3d 60, 66 (2d Cir. 2007)). An applicant for a preliminary injunction must show

that it is likely to suffer irreparable harm if equitable relief is denied. Borey v. Natl Union of

Fire Ins. Co. of Pittsburgh, 934 F.2d 30, 34 (2d Cir. 1991) (internal quotations omitted)

(emphasis in original).

If Metro and MFC are not enjoined from removing any funds from their bank

accounts, WestLB will be irreparably harmed because Metro and MFC will empty these

accounts, and WestLB will be unable to protect its security interest in the Mortgage Loans and

its right to repayment of the $4.8 million loan it extended to MFC. Likewise, if Metro and MFC

are not compelled to preserve and promptly release to WestLB all files, bank records and other

documents relating to the Mortgage Loans and provide an accounting of the funds flowing in and

out of Metro and MFC, WestLB will be irreparably harmed because it will be unable to

determine the magnitude of the unauthorized sale of collateral and other misappropriation of

funds and fraud perpetrated by Metro and MFC, which may be ongoing. WestLB will be unable

to adequately protect its security interest in the Mortgage Loans and right of repayment of its

loan to MFC. Moreover, WestLB and other participants in the Mortgage Loans will be

irreparably harmed because WestLB cannot determine and pay the correct amounts owed to

participants in connection with the Mortgage Loans or seek reimbursement from participants for

expenses. Without complete access to Metros servicing-related documents, TriMont is at a

standstill in its ability to service the loans.

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III. WestLB Has Demonstrated a Likelihood of Success on the Merits and Sufficiently

Serious Questions Going to the Merits to Make them a Fair Ground for Litigation and a

Balance of the Hardships Tipping Decidedly in WestLBs Favor

WestLB will likely succeed on its claims for MFCs breach of the Credit

Agreement and its claim that it is entitled to collect full payment of the $44.8 million Loan, plus

interest and costs. The evidentiary hearing held on March 10th and March 11th showed and this

Court held that WestLB is likely to succeed in proving that MFC breached the Credit Agreement

by submitting documents to WestLB in which it represented that (i) no payment terms of

Mortgage Loans had been extended, (ii) all Mortgage Loans reported by Metro as being in the

Borrowing Base were Eligible Loans, and (iii) all information delivered to WestLB under the

Credit Agreement and Servicing agreement was materially true and accurate. (WestLB

Complaint 35.)

WestLB is likely to succeed on the merits of its claims against Metro in this

action for breach of contract and declaratory judgment based on Metros breach of the Servicing

Agreement. This Court has held based on the facts adduced at the evidentiary hearing held on

March 10th and March 11th, that WestLB had the right to terminate Metro as Servicer under the

Servicing Agreement because certain Servicer Termination Events have occurred under the

Servicing Agreement, including that Metro breached the Servicing Agreement. (March 19th

Decision & Order at 20, 21, 29-30).)

WestLB has certainly shown sufficiently serious questions going to the merits to

make them fair grounds for litigation and a balance of hardships tipping decidedly in its favor.

The balance of hardships tips in WestLBs favor because only an injunction will permit WestLB

to protect its security interest in the collateral and its right to repayment of the Loan. Metro and

MFC will not be prejudiced because Metro is obligated under section 6.2 of the Servicing

Agreement to cooperate with WestLB and to provide all records reasonably requested by it.

Case 1:10-cv-02874-CM Document 10 Filed 05/07/2010 Page 8 of 9

CONCLUSION

WestLB respectthlly requests that this Court enter a temporary restraining order

and preliminary injunction preventing defendants from removing any funds from their bank

accounts or transferring any other assets, requiring defendants to preserve and turn over to

WestLB all records for the Loan and Mortgage Loans, and requiring defendants to provide an

accounting to WestLB with respect to the Loan and the Mortgage Loans, together with such

other relief as is just and proper.

Dated: New York, New York

May 4, 2010

Twinkie

Westfield,
New Jersey,
U.S.A.

Metro Funding Corp: Not a Rip-off

#6Consumer Suggestion

Sun, June 22, 2008

Dear Lender,

I believe you have misinterpreted the idea behind Metro's lending procedure, so I'll try to clarify. Its "due diligence" fee covers their appraisal of the land, freezing of funds (its commitment to the project), and all the legal documentation from the Letter of Intent (LOI) all the way to the Loan Summary (closing of the deal). None of that money goes to the company's own profit, it only pays for those expenses.

Furthermore, if you've already signed the LOI (thus, paid the due diligence fee) and decide against working with them before you sign the Commitment Letter (CL), they not only refund every penny of the fee, they swallow all the legal costs of the documentation. It's only AFTER you sign the CL (thus, agreeing to their terms and ACCEPTING their initial loan-offer) that the fee is non-refundable. Since you've accepted the loan offer, you cannot possibly state that they "just make a loan offer that you would never accept, therefore justify keeping your money." After the CL has been signed, they must do their part and go out to appraise the land.

Also, keep in mind that hard money is a very risky business and most loan-to-value (LTV) ratios are upwards of 60%. Metro is a more conservative group and ADVERTISES it's LTV's to be 50%-65%. They will on occasion give higher LTV's if they feel the project is indeed very strong but that kind of project must clearly show a high demand in terms of the market.

When you say that the property was appraised for $25m, who appraised it and what did the appraisal include? When Metro decides how much to fund a project, their LTV is based purely on the "as-is" value of the land (and structure, if there is one). If it's a construction project, they'll also consider the "as-completed" value. If there's an operating structure on the land, that's also taken into consideration. My guess is that the project wasn't as strong as you thought is was.

I also think that banks financed you because many banks finance with high LTV's, regardless of background or credit info of the borrower. That's how the Subprime Mortgage Crisis started. Conventional banks tend to lend to riskier borrowers, but hard money lenders do not. I believe that's where your problem is. The project sounded good before the appraisal, but Metro probably felt that the demand wasn't high enough when they appraised it.

Now before you just throw $23,500 out into the open and make it sound like a huge number, let's take that number into consideration. The due diligence fee ranges from about a quarter of a Point to just above one Point. It's not an upfront committal cost like many hard money lenders charge (usually 4-6 Points). They take those at the END of closing, so you should be happy that you didn't deal with Kennedy Funding or something (THEY should be the real rip-off). You said that they offered $3m to help fund the project, which makes the fee seem very small already. You also believe that it's worth much more ($25m!!). Looking at those figures, the $23.5k is just chump change, so I wouldn't complain about that if I were you.

Honestly, your rip-off report says one of two things to me. Either you didn't know all the facts (which were all definitely presented) and you actually think you're being ripped-off; or you're just upset you didn't get the funding and decided to say something negative about the company. Either way, your report will not help people looking to avoid a rip-off. If anything, you might be scaring them away from an honest and diligent hard money lender.

Lender

St George,
Utah,
U.S.A.

MF nice try to downplay what you did

#6Author of original report

Tue, April 22, 2008

First of all the property have 10 Letter of Intents from buyers that you would not accept. Second you did not use 'as is' values. The property is across from a Wal-Mart site and there is major traffic and interest. You did not intend to fund, you knew all the facts and asked your inspector to find a way out. We have the most respected MAI appraiser in the state and you say it was worthless. Land can be sold in Southern Utah, we are not in that of a depressed state. Why would Wal-Mart build here in the fall? Just be honest you like taking money. I just want others out there to know your system and to be careful.

Jillian

Paramus,
New Jersey,
U.S.A.

Lenders Response

#6UPDATE Employee

Mon, April 21, 2008

MF Corp continues its commitment to funding loan transactions. However, we can only fund loans based on the current market as-is value of the property. The fee referenced in the post was applied towards due diligence costs, commitment to funds, underwriting, and legal costs. Unfortunately the market has taken a substantial hit in the wake of the sub-prime crisis and demand for vacant land in Utah has slowed down, therefore driving as-is prices down. As lenders we always have to focus on current as-is market conditions. The borrower believed that his property / location was not affected by the crisis and was thus left upset with the resulting evaluation. This process took two weeks and a loan offer of $3,670,000 was issued, based on the current as-is value of the property. This company is built on integrity and exceptional customer service which was provided during this transaction.

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