City to write off $767K

Borrowers never repaid home loans

The city of Lorain will not collect $767,178 owed from loans given to people who never repaid the money.

The city made 29 homeowner rehabilitation loans that will never be collected because the homeowners are deceased. Some of the houses that were remodeled or repaired, now are vacant, demolished or were sold via sheriff’s sale, according to city records.

On April 10, Lorain City Council’s Federal Programs Committee recommended the entire Council waive the loan debt — but not without questions and some hand-wringing about the program.

The loan amounts could be up to $35,000 per borrower, according to city records.

The money came from the federal Department of Housing and Urban Development.

That federal agency allowed the city the discretion to write off the loans entirely, according to a February letter from HUD to Leon Mason, former city director of building, housing and planning. Safety-Service Director Dan Given repeated that point to the committee.

The loan program originally offered loans for people at or

below 80 percent of the median income of the city, said Councilman Greg Argenti.

That means the money was intended for people who could not get other loans to repair their homes, he said.

“If you get that money back, that’s like a bonus,” Argenti said.

“The intent was not to get the money back,” Argenti said. “The intent was to get this money in the hands of people that could not otherwise get those funds.”

Now the city is getting “stuck with it,” but the money was intended to be written off, Argenti said.

Council heard from Given and Program Manager Kellie Glenn, who works in the Department of Building, Housing and Planning.

Argenti noted the government program had an automatic forgiveness provision for loans after 2011.

But the loans to the deceased homeowners were written before 2011, Glenn said.

At that time, the loan recipients had payments of $13.86, meaning there was no way the low-income recipients would repay them, Glenn said. She said she did not know how that figure was calculated for loan payments.

For the pre-2011 loans, the federal department was concerned the loan applicants were eligible under the income rules. Based on city loan files, it appeared everyone who got a loan had the qualifying income to receive the money, Glenn said.

Councilwoman-at-Large Mary Springowski had the harshest criticism of the program.

“I cannot believe that this program went on as long as it did, with nobody saying, hey, people aren’t paying on these things, this is in arrears,” Springowski said.

She added she could not believe a “complete lack of oversight” went on so long and called the situation “appalling.” Later in the meeting, Springowski joined the other committee members recommending the city forgive the debt.

If Lorain has a similar loan program in the future, there were several suggestions on how to improve it.

Given noted the city administration and Law Department would review any future applications.

If the city should not expect to collect the money, it should not be called a loan, Argenti said. Councilmanat-Large Mitch Fallis asked for a quarterly delinquency report on loans for Council to review.

City resident Chuck Becker suggested the city have annual meetings to review the loan portfolio with the person in City Hall who approves the loans. Resident Patrick Horn said credit checks are needed to buy cellphones, so the city could consider running credit checks on loan applicants.

Resident Denver Casto agreed with the purpose of the program because helping people stay in their homes is better for neighborhoods than having empty buildings.

Councilman-at-Large Joe Koziura agreed with Argenti about the program aiming “to help the poorest of the poor.”

However, Koziura included the loan program among other federal government plans that unintentionally created huge problems for the city over time. “The road to hell is paved with great intentions, you know,” he said.

“The intent was to get this money in the hands of people that could not otherwise get those funds.” — Councilman Greg Argenti