Monarch Mortgage president files for Chapter 11

NORFOLK

After battling with a bank over bad real estate-development loans, the president of Monarch Mortgage filed in federal bankruptcy court to restructure more than $5 million of personal debts.

In his Chapter 11 filing in the Norfolk court, Edward O. "Ted" Yoder included $5.25 million in claims involving Hampton Roads Bankshares Inc. and its Bank of Hampton Roads subsidiary. A Chapter 11 bankruptcy enables a business or an individual with significant debt to restructure the debt under a court's supervision.

As president of Monarch Bank's Monarch Mortgage unit, Yoder has managed a key source of earnings for Monarch Financial Holdings Inc., a Chesapeake-based bank holding company. Monarch Mortgage closed $1.62 billion of loans last year and generated almost two-thirds of the company's revenue for 2010.

According to his bankruptcy filing Thursday, Yoder provided personal guarantees on $2.5 million of bank loans that financed the development of a residential project in Manteo, N.C. He also listed bank debts of $2 million for an unimproved lot in Manteo and $360,000 for a rental property in Kitty Hawk, N.C.

Bank of Hampton Roads sued Yoder, a partner and their real estate partnership two years ago to recover $2 million that the bank said Gateway Bank & Trust lent in 2006. Hampton Roads Bankshares acquired Gateway at the end of 2008 and later absorbed it into Bank of Hampton Roads.

Yoder and Mark C. France, managing partner of the Down East Equity Partnership, agreed to use the loan to buy 10 acres and develop the property into a 41-lot subdivision, Bank of Hampton Roads said in its lawsuit.

The suit, filed in Virginia Beach Circuit Court, said Gateway granted the borrowers a one-year extension for the loan in 2007. A year later, the bank granted another extension, increased the loan's size and reduced the interest rate, according to the suit.

In a counterclaim filed against Bank of Hampton Roads last year, Yoder and France acknowledged that their partnership became delinquent in its interest payments in 2007. However, their real estate project was damaged by shoddy underwriting standards, improper documentation and misappropriations of funds by Gateway, Yoder and France alleged. Gateway, they contended, made unauthorized transfers from the partnership's line of credit for construction to cover interest payments for the partnership's acquisition-and-development loan.

Bank of Hampton Roads denied the allegations. The bank's suit, which had been scheduled to go to trial on Monday, was transferred to the U.S. Bankruptcy Court in Norfolk on Friday.

Yoder's bankruptcy filing still lacked several parts on Monday, including lists of assets and creditors with secured claims and schedules of current income and expenditures. Yoder said he was negotiating with Bank of Hampton Roads and hoped to resolve the case by moving the disputed loans elsewhere.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com