Both customers and lenders for Neumann Homes in Warrenton, Ill., received some good news today from the U.S. Bankruptcy Court in Chicago: Neumann filed for Chapter 11.
Neumann's customers will get relief on two fronts. For buyers who purchased homes not yet under construction, the court has approved the return of earnest money deposits. Neumann expects to return approximately $875,000 in earnest money under this program.
For those buyers who bought homes under construction, buyers get assurances their homes will be completed. The lenders that provided construction loans to Neumann will work to complete the homes and fulfill the purchase contracts. Former Neumann employees and other reputable home builders are expected to finish the construction of the homes. The lenders are receiving the titles to the homes in exchange for the reduction of debt owed by Neumann, the assumption of claims, and other considerations. The homes covered under this plan will include substantially completed customer homes, model homes, and quick delivery or "spec" homes.
The only lender who didn't agree to the plan was Bank of America, which financed the construction of homes in four Neumann communities. The builder says it will continue to work with Bank of America to seek alternatives for the completion of the partially-constructed homes it financed.
"I'm pleased that, through the efforts of all but one of our lenders and our other creditors, we have been able to work through this difficult situation and provide our customers these solutions," said company CEO Ken Neumann. "It took a lot of work on the part of the company and the creditors to put these programs together, and they represent a significant step as we work through our Chapter 11 proceedings."