The borrower allegedly claimed repairs were done. Inspectors told a different story
Fannie Mae is suing a Houston apartment owner for allegedly neglecting a property tied to a $13.2 million loan — and misrepresenting the repairs.
The mortgage giant filed a federal lawsuit on February 18, 2026, against Kajal Housing Group, LLC, a Texas-based company that owns the Bellfort Village Apartments, a multifamily complex on West Bellfort Street in Houston. The case, filed in the Southern District of Texas, offers a stark look at what can happen when a multifamily borrower allegedly ignores property upkeep — and then tries to paper over it.
According to court filings, Kajal Housing Group took out a $13,204,000 loan in August 2022, originally through Greystone Servicing Company LLC, with the loan later assigned to Fannie Mae. The apartment complex served as collateral.
Trouble surfaced in September 2025, when a Property Condition Assessment flagged serious problems at the property. Inspectors identified deteriorating exterior staircases, sidewalk trip hazards, wood rot on upper walkways, and microbial growth from water damage — all described as conditions impacting tenant safety. The borrower was given until December 20, 2025, to address the most urgent repairs.
A demand letter followed in November 2025, calling for corrective action and a deposit of $826,150 as additional security. According to the filings, the borrower did neither.
Then came what Fannie Mae alleges was a misrepresentation. Ahead of a follow-up inspection in February 2026, the borrower reportedly told Fannie Mae that most repairs were done. But when inspectors from the loan servicer and CW Financial Services LLC — Fannie Mae's asset manager — arrived on February 9, they allegedly found a very different scene. Staircases were still rusted and unstable. Workers were spotted painting over the rust without removing it — hardly a proper fix, according to the filing. Inspectors also documented sinking concrete, cracked walkways, trash bags draped over exposed electrical wiring, broken windows, exposed rebar, missing fire alarms, and missing GFCI outlets in units supposedly ready for tenants.
Fannie Mae wasted no time. It accelerated the loan in January 2026, making the full balance due immediately. By early February, it had posted a foreclosure notice scheduling a sale for March 3, 2026. It is also asking the court to appoint a receiver to take over the property — a remedy the borrower had already consented to in the original loan documents.
The lawsuit brings two claims: breach of contract and specific performance for appointment of a receiver. Fannie Mae is also seeking damages, attorneys' fees, and costs.
No court rulings have been issued, and the claims remain unproven. But the case serves as a pointed example of how swiftly enforcement can escalate when a multifamily borrower allegedly falls behind on property condition obligations and misrepresents the state of repairs to a GSE lender. For mortgage professionals watching from the sidelines, the message is hard to miss: in Fannie Mae's multifamily portfolio, property maintenance is not a suggestion — and misrepresentation can fast-track a default into a foreclosure.
