NY lender sues Park Avenue Bank to block additional real estate loan forgiveness

A Manhattan-based real estate fund has filed a breach of contract suit against the troubled Park Avenue Bank and asked for a restraining order to block any further attempts to forgive delinquent loans. Park Avenue Funding, which filed suit Thursday in New York State Supreme Court, asked for a restraining order to prevent the bank from settling any more loans that it claims would threaten more than about $3.9 million it has invested in the bank. “[Park Avenue] Funding is concerned that the bank will again breach its obligations as servicer of the participation loans in an effort to improve its equity capital and appease the FDIC by reducing its concentration in commercial real estate loans,” the lawsuit says. The Federal Deposit Insurance Corp. and the New York State Department of Banking issued cease-and-desist orders against the bank in February 2009, alleging the bank engaged in risky lending practices.

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