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son" to petitioner. Hood and the Hams were the three
participants in a State-sponsored, low-income housing project in
Jackson, Tennessee, known as the Royal Arms Apartment project
(the Royal Arms or the project).
The Royal Arms Apartment Project
In late 1977, the Tennessee Housing Authority (THA) was
going to provide permanent financing for construction of the
Royal Arms. The Hams submitted a construction proposal for the
project to the THA, which was approved in the early part of 1978.
Accordingly, Redi-Built would be the general contractor on the
project. Although the THA provided the permanent financing for
the project, the Hams had to provide their own construction
financing of $2.5 million.
During that time, the banking industry nationwide was
charging interest rates on loans of up to 14 percent. The State
of Tennessee, however, had set a restrictive cap on interest
rates, proscribing banks from making intrastate loans at an
interest rate exceeding 10 percent. As a result, Tennessee banks
were reluctant to make intrastate loans at 10 percent, knowing
that they could go out of State and charge rates as high as 14
percent. Given the industry climate, the Hams found it difficult
to obtain the necessary construction financing. Jack Ham, to no
avail, even offered to pay a man at Merrill Lynch a $15,000
finder's fee if he could help the Hams obtain a construction
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