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Lorain acts on defaulted loans before HUD comes calling


LORAIN — The city is continuing to try and right the ship in the wake of the crumbling of the Lorain Development Corp. more than a year ago.

Foreclosure lawsuits have been filed in Lorain County Common Pleas Court regarding some of the bad loans related to the program, which dispersed the loans to small businesses in the city that were looking to start or were in danger of closing.

The city cut its ties with the program in the spring of 2016 when it came to light that $600,000 in loans had been written off by the program’s board and thousands of others were delinquent.

“This isn’t how business works,” Building, Housing and Planning director Kellie Glenn said. “You can’t just stop paying back money that you owe people. If we had been a regular bank, this would not have gone on for so long.”

Glenn said the city is hoping to get the money back for the loans because the Lorain Development Corp.’s funder, the U.S. Department of Housing and Urban Development, is going to want it.

“We’re going to have to pay HUD for this,” she said. “We don’t know how much yet, but HUD is going to want some of their money back because the program isn’t viable anymore.”

Glenn said the program was started in 2001 and the process of writing off loans and letting them go into default went on too long.

According to new Building, Housing and Planning Department policy, after the first time a borrower is late, a general late notice will notify them a payment hasn’t been received.

Once a payment has been late for 30 days, the borrower will receive a notice that the amount to make the loan current is due immediately. Once a payment has been late for 60 days, the borrower will receive a notice that the loan has to be made current or collection procedures will commence.

“If the loan is not made current by the date provided in the 60 days (after the first) late notice, the loan is considered to be in default and a default notice will be sent advising that the entire amount of principal, interest, and fees outstanding on the loan is due within 15 days,” the policy says. “After the 15th day, the loan is forwarded to the city Law Department for foreclosure or judgment.”

“The problem is, there’s only so many notices you can send people,” she said. “But there wasn’t a lot of follow-through before either, and that was a problem.”

Glenn also noted the FBI investigation regarding the program, which began last summer, is still going.

Some of the organizations that have taken out loans that have lawsuits filed against them include Marxan Solutions, a company owned and operated by school board member Mark Ballard.

According to records from the city’s Building, Housing and Planning Department, Marxan has a $138,410 loan balance, but Ballard said the foreclosure lawsuit, which was filed July 25, is on the way to being resolved.

“I’ve been in talks with the mayor, and it’s been resolved,” he said.

Mayor Chase Ritenauer confirmed the matter was in the process of being resolved through a loan modification.

Glenn said loan modifications would be an option for some, but with almost $1.2 million in defaulted loans between the Lorain Development Corp. and rehab home loans, that won’t be a possibility for everyone.

The largest loan in default is the one for former Broadway business Driscol Music Co. for $232,660. The business has closed.

Attorney Anthony Baker, who represents Elyria Avenue’s Worship Cathedral, which also received a loan, said he doesn’t think there was much intervention on the part of the city regarding the loan.

“From what I’ve been able to tell, the loan was for rehab on the building, but the work wasn’t done properly, and so they had to pay more money to fix it,” Baker said. “We’re not disputing the loan itself, though.”

Contact Katie Nix at 329-7129 or Follow her on Twitter @KatieHNix.

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