Heritage Oaks Bank files big foreclosures

January 17, 2009


Heritage Oaks Bank has filed foreclosure notices against developer Kelly Gearhart’s Vista Del Hombre project, as well as Karen Guth and Joshua Yaguda’s Pasolivio Olive Ranch.

Bank officials did so despite a state move on all Guth-Yaguda assets. Following the Oct. 16 arrest of the Estate Financial Inc. (EFI) mother-son team, state officials filed a lis pendens on all properties owned by either suspect. (That’s a formal notice of pending action on a real property claim.)

The petition “seeks to preserve from transfer conveyance or encumbrance real property or any interest in real property which the people of the state of California believes belongs to or is in control of either defendant (Guth or Yaguda)…,” according to court records.

A multi-agency task force took the pair into custody at their Pasolivo ranch, and they remain in San Luis Obispo County Jail pending $5 million bail each, accused of 26 felonies.

Estate Financial Inc. (EFI) investors were not directly invested in the Pasolivio ranch, but that didn’t stop Guth from regularly paying employees and venders of her ranch with checks drawn from EFI accounts.

Deputy District Attorney Steve von Dohlen informed investors his office had seized the assets of Guth and Yaguda and said, “An investor could make the argument that the loans were made with unclean hands,” explaining why authorities had seized assets already over-encumbered by Heritage Oaks Bank.

Heritage Oaks Bank reportedly lent Guth approximately $20 million in unsecured loans. Following reports by this Web site that EFI was in serious financial distress, HOB placed liens on Guth and Yaguda’s Pasolivio ranch, their service stations, and a commercial property on Ninth Street in Paso Robles that once housed the failed lender.

Also last month, Heritage Oaks Bank filed a notice of default against Kelly Gearhart regarding a $1.5 million loan obligation to the bank.

In January 2008, Gearhart secured the loan from Heritage Oaks Bank on his Vista del Hombre property — already over-encumbered by more than $27 million in loans through Hurst Financial Inc. The bank’s own appraisal shows the loan had been based on erroneous claims about Vista del Hombre’s value which the bank’s report states is worth approximately $4.3 million.

Shortly after receiving the bank loan, Gearhart stopped making interest payments to the hundreds of private investors, primarily seniors, who had already put millions into the project through Hurst Financial Inc. during 2005 and 2007. Those investors now hold approximately 8,000 percent beneficial interest in the planned development and are positioned above Heritage Oaks Bank in case of a default.

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By: Newsome on 1/21/09

I see in the legals of today's Trib that the trustee's sale for lots 16 and 18 in The Links is set for 2-10-09, with Gearhart as trustor…

By: Josixpack on 1/20/09

Diablo Grande in Stanislaus…google it for the "ag cluster" sprawl mess of the century,

tainted water and all…Thats our Margarita

Citizens of the year!

By: shingh on 1/20/09

Well Now add more to the game, Ron hertel, RW Hertel & Sons, Robert JS Fowler his wife Sandra Fowler etc.. have all been sued again for defaulting on some funny loans from East West Bank of California, big lawsuit in Superior Court in Stanislaus Court Case #628900 from what the Federal investigators and Bank officials have said this is going to be very involved and big….

By: shingh on 1/18/09

HOB is out even more with Hertel and Robert Fowler having defaulted on over $7 Million recently and more to come. My bet is the feds will investigate all defaulted loans from HOB that are over 500K for Criminal activity.

By: unlisted on 1/18/09

Interesting link, mccdave. Thanks.

By: mccdave on 1/18/09

And coincidentally, Calculated Risk has another interesting post on regional bank exposure to bad commercial real estate loans:


By: Nameless on 1/18/09


In my opinion, HOB will not fail however shareholders will loose much of their equity as the leadership gambled away assets. EFI was not their only bad loan, just one of many. I can see new leadership and oversight from the Feds and State regulators. They may not have acted criminally, but the losses are significant regardless.

By: mccdave on 1/18/09

For maximum comedic value, this story should note that a few days ago Heritage Oaks Bank announced that it would be accepting $21M in capital from the TARP, the US Treasury's Troubled Asset Recovery Program. This amount is suspiciously similar in size to HOB's loan to Guth. So, when EFI suckers and the rest of us pay their taxes in April, they can console themselves with the knowledge some fraction of it will recover this particular troubled asset.

HOB doesn't look too big to fail to me, though I guess small banks are important to keep local lending flowing. Seems like the TARP capital would better serve the community if it was in the hands of local banks that kept their heads out of their butts (if any did). Letting Lehman fail may have been a big mistake, but I don't see the downside of Heritage Jokes failing.

By: Nameless on 1/17/09

The bank must initiate their NOD and Foreclousure regardless of the Lis Pendense by the DA or the State. They will not be able to sell it anyway until the mess is resolved. HOB has a big mess on its hand.