Investor says BB&T should have told him ‘no’

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In March of 2009, Neil Allran defaulted on his $620,000 mortgage.

But that’s not his fault, he says.

Instead, Allran blames BB&T, saying the bank should have known he wasn’t able to pay back the loan.

In Gaston County, Allran is suing BB&T over the ordeal. He says the bank should have rejected him when he asked for the loan. But by approving his borrowing of $620,000, the bank was “setting him up to fail” in his plan to purchase property and sell it for a profit in the tony Cannonsgate development in coastal Carteret County.

Neither Allran nor his lawyer would comment on the suit, which was filed Nov. 18. Judge Calvin Murphy has granted BB&T’s motion for an extension to continue the case until today.

According to court documents, Allran, of Gaston County, was denied the loan at first. In the initial pleadings for the case, he claims that he went to the bank’s branch in Gastonia in October of 2006 to begin applying for a loan on a property worth about $690,000. According to court documents, loan officer Laura Corbett, who is named as a defendant in the case, was the first to review his application.

At that point, Allran says in his suit, Corbett told him he did not qualify “for a loan sufficient to purchase the lot in Carteret County,” and he left the bank. But, the next day, Corbett called him and told him that if he could deposit $10,000 into his checking account to improve his asset-to-debt ratio she could get him approved for the loan, Allran claims.

Ready to move on the property in a then-hot — and yet to burst — real estate bubble, Allran claims that he borrowed the $10,000 from his employer and made the deposit. On Nov. 18, 2006, he closed on the property with financing from BB&T for $621,000.

But Allran says the bank began to play fast and loose with his loan documents. He claims BB&T documentation shows he made a down payment of $69,000. He denies making any such down payment.

Allran also claims that he filed complaints that BB&T breached a fiduciary duty to him and engaged in various types of fraud, including common law fraud, and in going so the bank violated the Unfair and Deceptive Trade Practices Act.

BB&T filed a motion to dismiss all of the complaints. Murphy agreed and on July 6 approved dismissing all of the charges except for one. The bank then asked for an extension of time in regard to the complaint about the violation of the UDTPA.

Allran contends that his plan was to invest in the Cannonsgate property and then flip it to make a profit. He actually began making some money on the property at closing in 2006, with court documents indicating that $86,940 was deposited at closing into a special account Allran set up at BB&T for interest payments.

Like many real estate transactions during the boom years, Allran’s BB&T loan was arranged to have 35 monthly payments of interest only in the amount of $4,380 — drafted from his BB&T account — and a final balloon payment of $627,205 due at the end of the term.

In his complaint, Allran lays out his idea of how to work the deal and says the bank, and specifically Corbett, “knew that the plaintiff could not repay the loan as approved unless the property was resold, or flipped, within a short period of time.”

Allran says the bank violated the UDTPA because Corbett and other loan officials knew the property was overpriced in its appraisal. Specifically, Allran’s complaint says the bank knew that “the appraisal of the lot purchased by plaintiff, which appraisal came in at exactly the purchase price, was flawed in that it utilized only comparable sales within the Cannonsgate development and was ultimately inaccurate.”

When Allran defaulted on the loan, it was only then that he discovered Corbett or some other banking officer had falsified information on his HUD-1 form, he claims. Allran also claims in the suit that further BB&T executives — only identified as “John Doe 1” through “John Doe 4” in the suit — had a responsibility to review Corbett’s work and determine whether Allran himself, and not the property’s seller, was making those loan interest payments.

BB&T reps would not comment on the suit. But at least one Charlotte banking expert says the bank has a very strong case.

“Occasionally you’ll hear of some off-the-wall suits involving bank borrowers claiming the bank’s underwriting procedures or documentary procedures were responsible for the default, but these usually never make it to court because they’re so ridiculous,” said Tony Plath, associate professor of banking at the University of North Carolina at Charlotte.

Plath explained that because of the system of checks and balances at the U.S. Department of Housing and Urban Development and banks like BB&T, a falsified HUD-1 form was highly unlikely.

“Actually it’s almost impossible unless there’s a rogue employee involved,” Plath said. “On the other hand, it is possible there’s some sort of unintentional and inadvertent error on the HUD-1.”

But Plath said that wouldn’t expose the bank to a charge of lender fraud and wouldn’t give a get-out-of-jail free card to the defaulted borrower.

Scott Baughman can be reached at [email protected].