Fannie Mae Hits Bialostozky-Linked Entity With $6.2M Chicago Foreclosure

Fannie Mae has filed a $6.2 million foreclosure lawsuit in Cook County Circuit Court against Yellow Portfolio Holdings LLC, an entity managed by C. Yoseph Bialostozky, targeting 90 residential units across three South Side Chicago properties.

The suit, filed last week, covers buildings at 8200 South Maryland, 7845 South Avalon and 7901 South Drexel avenues. According to the complaint, the landlord stopped making monthly debt service payments in April and let the properties accumulate severe building code violations and unpaid municipal utility judgments.

The filing is the newest blow against Lakewood, New Jersey-based real estate investor Chaim Bialostozky, whose financial troubles have spread from a Chicago crisis into what public records show is a multistate mortgage fraud meltdown spanning at least three states.

In total, nearly $44 million in mortgage debt tied to real estate Bialostozky owns or recently owned in Illinois, Connecticut and Oklahoma is now working through foreclosure court proceedings. Most of that amount is secured by Chicago multifamily property. Bialostozky is personally on the hook for at least $25.5 million, according to public records. Another South Side Chicago apartment portfolio he sold to an LLC managed by Israel Bialostozky — who public records databases show has shared an address with Chaim Bialostozky — accounts for the additional $18 million now in the sights of lenders.

Lenders in all three states accuse Chaim Bialostozky of the same underlying conduct: fraudulently inducing loan originators into providing federally backed debts far larger than they should have been by misleading them about the size of his transactions.

The mechanics, as described in the Connecticut, Chicago and Tulsa cases, mirror each other across jurisdictions. Lenders accuse Bialostozky of orchestrating a scheme built on back-to-back property sales through an intermediary. He submitted paperwork reflecting artificially inflated secondary purchase prices while concealing lower-priced initial transactions that had closed days or even just hours earlier, the allegations state.

The result, according to the lenders: mortgages large enough to cover his true acquisition costs. That allowed Bialostozky to buy properties with zero down payment and walk away with cash, the complaints allege.

Fannie Mae did not make fraud allegations over the Yellow Portfolio in its filing. But the chains of title for the Maryland, Avalon and Drexel avenue properties show patterns similar to those that have drawn such accusations against Bialostozky elsewhere.

As with the Far West Side portfolios where lender Walker & Dunlop, acting on behalf of Freddie Mac, made fraud allegations against Bialostozky, he bought the three South Side buildings from Avraham Levin mere weeks after Levin took control of the properties in June 2021.

Fannie Mae's decision to pursue the portfolio through a managed LLC rather than a direct action against Bialostozky himself underscores how the alleged scheme's use of intermediary entities complicates creditor recoveries. With foreclosure proceedings now active across Illinois, Connecticut and Oklahoma, the roughly $44 million in distressed debt gives lenders a long and tangled path to claw back their losses.