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Bank Issues Default Letter to 3569 DeKalb Owner 
Despite Legal Obstacles, Building Work Continues

By JORDAN MOSS

Washington Mutual, the bank that holds the mortgage to 3569 DeKalb Ave., a severely neglected Norwood building where a boy died in an August 2002 fire, has issued the landlord a default letter, the first step in potential foreclosure proceedings. 

The Seattle-based bank told a small group of community residents and advocates their decision at a meeting at their Manhattan headquarters last week (see sidebar on this page) with members of the local community organization that has been organizing the tenants of the building and other buildings owned by Frank Palazzolo. The letter was apparently issued because a receiver, known as a 7A administrator, was appointed to take over the building to make renovations more than a year ago.

A default letter is the first step in the foreclosure process, but does not necessarily mean the landlord will lose the building, after the 7A, Fordham Bedford Housing Corporation, completes the renovation work. 

Washington Mutual would not comment on the letter or related matters, citing "client confidentiality." But, in an e-mail response to a list of questions concerning 3569 DeKalb Ave. and other buildings owned by Frank Palazzolo, Lotus Lou, a bank spokeswoman, said: "I can only confirm that Mr. Palazzolo is a customer and that we're currently working with him to ensure these issues are resolved satisfactorily." 

Meanwhile, Fordham Bedford Housing Corp-oration, the city-appointed administrator of 3569 DeKalb Ave., has made progress despite some legal roadblocks erected by the building's owners, who had charged that there were irregularities in the bidding process. (Michael Toikach and John Cirillo insist they're the only owners of the building, though Washington Mutual appears to exclusively deal with Palazzolo.) Last week, a judge in state Supreme Court lifted the restraining order that had prevented contract work paid for through city's 7A program from going forward. "The court lifted the stay on Dec. 10 which means the rehab work can continue," said Carol Abrams, a spokesperson for HPD. "That's a good thing for the tenants. They're living in substandard conditions."

However, using money from the building's rent roll (19 out of 54 apartments are currently empty), FBHC has renovated bathrooms, floors, walls, and kitchen cabinets, (see pictures) in 12 apartments and six more will probably be completed by January, said John Reilly, head of FBHC.

"Every apartment will look like this," said Reilly while giving a recent tour of one of the completed apartments. Approximately 30 percent of the renovation work in the building is complete, Reilly said. 

Tenants are pleased with the progress, said Gus Birru who lives in the building and has gotten involved in a grassroots campaign to pressure Palazzolo and his associates to make repairs in other buildings they own.

"The work that was stopped that has been done is just immaculate," Birru said. "The tenants are even talking about it. Since they have seen those places, the others are ... anxious now for the repairs to be done." 

There are still some hurdles to clear. Cirillo and Toikach have raised in Bronx Housing Court issues similar to those in Supreme Court, said Reilly, who is nonetheless hopeful that steady progress can be made on the building.

"What I hope comes out of the last [Bronx Housing] court appearance," Reilly said, "is we get an agreement between the court and all of the parties involved, to get all the appropriate work finished - a plan put in motion that everyone agrees on that can get done as quickly as possible."

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