Hermani Hotels Among New Wave of Foreclosures

PHILADELPHIA (CN) - U.S. Bank's foreclosure suit against a hotel chain operator ended with a federal judge entering a $17.5 million judgment, the court's largest award this year.

Though foreclosures linked to the financial collapse were on the decline in recent years, the rates of such failures increased 2 percent in July and 5 percent last month.

The foreclosure judgment entered against Hermani Hotels on Thursday is part of what analysts are reportedly lumping into a new era of defaults for troubled property owners who were unable to stay afloat with loan modifications.

Hermani, which operates hotel franchises in the Delaware Valley, had taken out the loan at issue to construct a new Crowne Plaza hotel in Trevose, Pa., months before the nation's financial collapse, reports show.

Though New York-based mortgage originator Column Financial issued that loan, it assigned Hermani's account to Park National Bank (PNB) among several loans that it unloaded as mortgage defaults rose in 2008 and 2009.

Larger financial institutions were meanwhile gobbling up small community banks, and federal regulators soon ordered the sale of the failed PNB to U.S. Bank.

Though the government had fueled the Troubled Asset Relief Program with $431 billion to purchase toxic assets at the heart of the financial crisis, PNB was denied relief in the first round of TARP funding, which was targeted at publicly traded banks, and in the second round.

Hermani and U.S. Bank executed three loan modifications, but Hermani paid only $600,000 of the nearly $18 million original loan.

The hotel operator defaulted two months ago, and U.S. Bank brought a foreclosure action against Hermani last week, on Sept. 15.

U.S. District Judge Michael Baylson entered a $17.4 million final judgment in the case just three days later.

In addition to PNB, U.S. Bank also acquired RBS Citizens and the Chicago branches of Charter One during the financial collapse.

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