The Federal Deposit Insurance Corp. will decide the fate of Maria Vista Estates, a 77-lot development near Nipomo that is in Chapter 7 bankruptcy proceedings.

The FDIC became the project’s largest creditor after it shut down Los Angeles-based Security Pacific Bank on Nov. 7. Security Pacific Bank had provided two loans worth about $23.7 million to Maria Vista Estates and had been wrangling in court with the project and its developers to foreclose on the loans.

The FDIC turned over Security Pacific Bank’s deposits – about $427 million – to San Diego-based Pacific Western Bank. But government regulators kept Security Pacific Bank’s other assets, including the two large and troubled construction loans provided to Maria Vista Estates.

David Barr, an FDIC spokesman, said it’s too early to say whether the FDIC will continue to pursue foreclosure on the Maria Vista Estate loans.

“We’d prefer to not foreclose, but if that ends up being the only option, then we will do so,” Barr told the Business Times in an e-mail. “We typically sell the loans, even the non-performing ones. There is a market out there for troubled loans, but we must first analyze things to determine the best course of action to take with the loans.”

Court officials had set a hearing date for February to begin deciding whether Security Pacific Bank was entitled to foreclose on its $23.7 million loans to Maria Vista Estates. But even those hearings are uncertain now that the FDIC owns the loans.

“We don’t know if that will impact that particular evidentiary hearing date or trial date,” said John Fricks, a San Luis Obispo-based attorney who is representing Maria Vista Estates in state-court litigation. “It sounds like we’re going to be dealing with the FDIC, so we’ll see.”

Maria Vista Estates filed for bankruptcy in March 2007. The 84-acre development contains 77 buildable lots, according to bankruptcy court filings. On those stand 24 completed homes, 15 homes that are about 70 percent finished and 37 lots with utility entitlements but no homes built.

The developers estimated the worth of what remains at $49 million, according to bankruptcy court filings.
This summer, the development’s bankruptcy was converted from a Chapter 11 case, a reorganization, to a Chapter 7, a liquidation. Maria Vista Estates is also involved in more than 20 other civil lawsuits, according to bankruptcy court filings.

In a swirl of litigation, Security Pacific Bank had gone after Maria Vista Estate’s developers, Erik Benham and Mark Pender, for personal guarantees they had signed for its construction loans. It received a judgment against the two, but Maria Vista Estates has cross-complained for lender liability.

On Oct. 31, Security Pacific Bank had total assets of about $510 million and total deposits of about $440 million. The loans to Maria Vista Estates were worth nearly 5 percent of the bank’s total assets.