Corus Swept Up in Florida Condo Undertow

The three projects are suffering from less-desirable locations and the fact that they are being built late in the Miami housing cycle, Morgan says. He estimates that condo flippers have made up 90% of the buyers at the projects Corus has lent to in Miami.

"These flippers are now under water in most Corus buildings based on what they paid and where the market is today," he says. "But the market is getting worse."

Moreover, the flippers will have a tough time getting a mortgage now that lending standards for major mortgage providers like Countrywide Financial (CFC Quote - Cramer on CFC - Stock Picks) have tightened, he adds.

"I don't know anyone that is loaning on these condos to investors," Morgan says. "If it is not your primary [residence], you have a problem."

A Corus representative did not return a call seeking comment for this article, while iStar declined to comment. Brian Brodeur, a Corus senior vice president who worked on the Jane Ocean deal, also declined to comment.

'Really in Trouble'

Over the last 10 years, Corus has recorded only $16 million of charge-offs related to condo loans, with the bulk coming in the second quarter of this year on one condo project in Naples, Fla.

However, in its most recent quarterly report, filed in late July, the bank acknowledged that "a surge in buyer cancellations could be especially painful for Corus, particularly if a substantial percentage of a given project's pre-sale buyers did not close."

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