A $2.4-million judgment against real estate developer David Schostak (of Schostak Brothers & Co.) is the subject of controversy and a legal battle in Michigan. Schostak guaranteed a loan that was pooled with others as a commercial mortgage-backed security (CMBS).

On March 29, Michigan governor Rick Snyder signed Public Act 67 into law. The law seeks to protect borrowers of certain “nonrecourse” collateralized loans from personal liability beyond the collateral in the event of default. The law would maintain the vitality of the commercial mortgage-backed securities market by assuaging investor concerns that they will be held personally liable every time a loan becomes non-performing. This law will likely lead to the reversal of the Schostak judgment.

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The matter is controversial because David Schostak is the brother of Michigan Republican Party Chairman Bobby Schostak.

Last Updated on April 17, 2012 by Ramin Seddiq