The Federal National Mortgage Association, also known as Fannie Mae, has a $1.8 mortgage foreclosure lawsuit pending with FFH of Fort Smith Limited Partnership and several other local entities over the Rock Creek apartments on North 50th Street in Fort Smith, Ark.
Attorneys for FFH of Fort Smith LP filed an answer May 11 in Sebastian County Circuit Court stating their client "admits the payments have not been made as agreed" but denies allegations the payments are past due and that the client owes more than $1.8 million on the mortgage originally signed in July 2009.
FFH of Fort Smith LP also denies allegations that "covenants were breached by the transfer of FFH of Arkansas' interest as general partner of Borrower to Rock Creek GP."
The Arkansas Development Finance Authority confirms most of the Fannie Mae lawsuit in an answer filed May 1, including section 22, which alleges the breach of contract for "an unauthorized transfer of a Controlling Interest in Borrower" to Rock Creek GP of Rogers. The transfer constituted an "event of default," according to Fannie Mae.
The ADFA's May 19, 2016 meeting notes include approval of a request to transfer general partner interests in Rock Creek from Foster, Files and Harris LLC to Rock Creek GP. There was also a separate transfer approved that meeting for general partner interests in a North Little Rock senior living from Foster, Files and Harris LLC and Placid Hills Development Group to Placid Hills Management LLC. The transfer of general partner interests in Placid Hills and Rock Creek took place on Jan. 19, 2016, "pursuant to an Assignment of Partnership Interests and Amendment to Partnership Agreement," the notes state.
"A special meeting of the partners (First National Bank of Fort Smith and Special LP LLC) removed PHDG as the General Partner of Placid Hills," the meeting notes add.
Sam Sicard, president of First National Bank of Fort Smith, said in an email request for information that First National was an investor in the Rock Creek project "in order to be able to receive the tax credits awarded to the project."
"Unfortunately, the project did not work out as planned," Sicard wrote. "Since it is in litigation, I am unable to share any additional information."
Default notice
A "notice of default" on the loan was issued by Fannie Mae attorneys Gill Ragon Owen of Little Rock on Jan. 9 of this year to the defendants. A "notice of acceleration" was sent Feb. 13 alerting the defendants that foreclosure proceedings were in action.
According to the Sebastian County Assessor's Office, FFH of Fort Smith LP owns the complex with 56 apartments at 3020 N. 50th St. The complex is valued at more than $4.8 million, the office records state. Rent ranges from $495 for the one-bedrooms to $525 for two-bedroom apartments. An emergency motion to appoint a receiver was filed April 26. Tarantino Properties Inc. of Houston was assigned as the new managing agent for the apartments.
Jake Files, who has represented Fort Smith in the Arkansas Senate since 2010, signed the Fannie Mae loan with then-FFH Construction business partners Jonathan Foster and Jett Harris as both borrowers and key principals. Files represented the area in the Arkansas House of Representatives from 1998 to 2002. FFH Construction is not named in the Fannie Mae suit.
Greystone Servicing Corp. of Georgia is named the lender on the $1.58 million multi-family note disbursed by Fannie Mae. Borrowers are named as FFH of Fort Smith Limited Partnership, FFH of Arkansas LLC, Foster, Files and Harris LLC and Foster, Files and Harris as individuals. The interest rate was 6.98 percent. Monthly payments were set at $10,490.
Fannie Mae contends that as of Jan. 31 the borrowers owe $1,428,974 on the original note, plus more than $441,071 in fees, yield maintenance and interest for a grand total of $1,870.045.
Lance Miller, attorney with the Little Rock firm Mitchell, Williams, Selig, Gates & Woodyard, would not provide comment on the answers filed for FFH of Fort Smith LP that offer a denial based on a lack of "sufficient knowledge to admit or deny."
Answers filed by Miller for other defendants named in the suit include First National Bank of Fort Smith, Special LP LLC, and Rock Creek GP LLC. Many of those responses were in the negative due to those entities being "without sufficient knowledge to admit or deny."
A waiver of trial by jury was signed by Foster, Files and Harris in the original loan agreement. The mortgage foreclosure lawsuit was filed in Sebastian County Circuit Court on March 23 by William David Duke and Kelly W. McNulty of the Gill Ragon Owen law firm.
Other lawsuits
Several writs of garnishment that total more than $540,000 were also recently filed in Sebastian County Circuit Court for lawsuit settlements owed by FFH Construction LLC. The company is owned by Files.
The city of Fort Smith is also suing Files and Sebastian County Election Commissioner Lee Webb to pay to finish the River Valley Sports Complex and to return $26,945.91 in state grant money. The city's lawsuit came after after four subcontractors who did work on the sports complex sued the city of Fort Smith for a total of more than $200,000.
