A Polk County judge dismissed a lawsuit earlier this month that was filed to salvage funds from a $25 million loan that was issued in 2007 to save the state’s largest housing contractor.

The Regency development companies hoped to feed the money into their failing enterprises, which at one time included the state’s largest home builder.

Properties covered by the loan were recently sold at auction to a company controlled by Ankeny real estate developer Denny Elwell and represented a 19 percent growth in company holdings.

Regency ceased operations in April 2008. One of its principals, James Myers, son of Regency co-founder Michael Myers, has filed for bankruptcy.

Other Regency principals and others involved in compiling the financing have said they sought an $80 million loan in a last-ditch effort to keep the businesses afloat. However, real estate values were declining as properties used to secure the loan were being assembled, and the higher target could not be reached.

In May 2009, Bank of America Corp. filed a lawsuit seeking to foreclose on properties in Nebraska, Utah, Greater Des Moines and elsewhere in Iowa that were used to secure the $25 million loan, initially written by JPMorgan Chase & Co. and sold as a mortgage-backed security to a trust managed by LaSalle Bank, which eventually was bought by Bank of America.

Earlier this summer, Denny Elwell Family LC bought the loan at auction, then assigned it to DLE Four Way LLC, another Elwell company.

DLE Four Way replaced Bank of America as plaintiff in the lawsuit earlier this month and filed a motion to dismiss the case. Judge Karen Romano signed the order on Sept. 10.

Chris Murray, president of Denny Elwell Co., said the company is seeking nonjudicial foreclosures on the Iowa properties, located in Dallas, Muscatine, Polk, Pottawattamie and Story counties.

Properties in Lincoln, Neb., and Salt Lake City remain tied up in foreclosure lawsuits, primarily because laws in those states do not permit nonjudicial foreclosures, in which titles are transferred in voluntary agreements.

Murray would not disclose the amount of the sale.

A court document filed Sept. 13 noted that combined, the properties were generating nearly $1 million in net income and more than $500,000 in cash flow for a period that ended in December 2009. They had produced more than $1 million in net income from January through August of this year.

“These were good, functioning properties that span a large part of the market,” said Kurt Mumm, president of the NAI Ruhl & Ruhl Commercial Co. Des Moines region.

Mumm was appointed receiver for the properties shortly after Bank of America filed the lawsuit last year.

Murray said the properties will remain under the Elwell umbrella.

“The properties produce resources to maintain the properties,” Murray said. “There has been some deferred maintenance. We are making investments in each and every property.”

Denny Elwell Family LC prevailed in an auction that initially drew 18 bidders. Four were determined to have the wherewithal to obtain financing or have cash on hand within a few weeks of having their offer accepted.

When Regency principals sought the loan, they formed a real estate holding company called Regency Capital Fund I LLC and transferred deeds into it.

Another lawsuit is pending in Polk County District Court in which a former Regency business partner claims that one of the properties securing the loan was illegally transferred into the real estate holding company.

Murray declined to comment on the status of that property, located at 1422 Scott Ave. It was the location of a Regency construction and demolition debris recycling company that ran afoul of state environmental regulators.

The Iowa Department of Natural Resources has taken bids from companies seeking a $100,000 contract, financed by a bond forfeited by the Regency company, to remove asbestos from the property.