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Won’t Get Fooled Again?

Published on January 14th, 2020

The Department of Housing and Urban Development is selling a group of nursing homes it took over 18 months ago after the biggest default in the history of a government mortgage insurance program that provides support to the nursing home industry. The housing agency has managed the chain, Rosewood Care Centers, with the help of a court-appointed receiver since the previous owners defaulted on $146 million in government-guaranteed mortgages.  The agreement involves Greystone, a New York real estate finance firm, for the chain of Chicago-area elder care facilities. Greystone is a major lender to the nursing home industry, and was servicing Rosewood’s mortgages when the former owners defaulted.

Greystone was identified as the incoming owner of the Rosewood chain in a licensing application filed in December with the Illinois Department of Public Health. The application documents indicate that Greystone will own and operate the facilities through a series of shell and sham limited liability companies. The firm also intends to rename each of the facilities, according to the application.

The default raised questions about the department’s oversight of a decades-old mortgage insurance program that backs 15 percent of the nation’s nursing homes.  It is not clear how Greystone is paying for the facilities, or if the firm is getting any credit from HUD for the losses it may have incurred in the default.

HUD solicited bids for the Rosewood facilities — a dozen nursing homes and one assisted living center — until the end of May, but it has repeatedly and suspiciously declined to disclose the name of the prospective buyer or the purchase price. According to court filings, there were four bids for the properties, which the department had valued at $95 million. The department has spent nearly $30 million since August 2018 to make up for shortfalls in funding at the Rosewood facilities and to pay for repairs.

Court records also show that federal securities regulators are close to reaching a financial settlement with a former owner of the Rosewood facilities. The Securities and Exchange Commission in September charged a Chicago-area rabbi, Zvi Feiner, with defrauding a group of Orthodox Jewish investors who had put money into the Rosewood properties and other elder care facilities. HUD said in court documents that the owners had improperly diverted millions of dollars in federally insured funds to another nursing home that was not part of the program. Mr. Feiner paid a $1 million penalty to HUD this summer for failing to file several years of audited financial reports required by the mortgage insurance program.

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