Things took a turn on February 21, 2024, when a fire tore through the property and destroyed one of the residential buildings known as Building 7. What followed was a disagreement over two key issues: how to rebuild the damaged property and whether certain loan payments were being met. Fannie Mae claimed the borrowers were in default. The borrowers disagreed. 

By March 2025, Fannie Mae moved to foreclose, scheduling a sale for May 6, 2025. But the borrowers pushed back. Days before the scheduled sale, Del Sol and two of its members, Shlomo Sorotzkin and Elliot Menchel, filed for emergency relief in a Galveston County state court. They won a temporary restraining order that halted the foreclosure. By September 2025, that order had been converted into a temporary injunction, effectively freezing Fannie Mae’s efforts while the case played out. 

The standoff did not last. In December 2025, the parties reached a settlement. On January 9, 2026, they jointly asked the state court to dismiss the case and dissolve all injunctions. The borrowers have since agreed to the appointment of a receiver to manage the property and facilitate its transition to Fannie Mae. 

The federal case now seeks court approval for that receiver. According to the loan documents, the borrowers had already consented to such an arrangement in the event of default, including on an ex parte basis. 

For mortgage professionals, the case underscores a familiar risk in multifamily lending. When unexpected property damage disrupts cash flow or raises questions about rebuilding obligations, even well-documented loans can become contested. The path from fire damage to foreclosure fight to settlement took nearly two years and required both state and federal court involvement.Â