LORAIN — Lorain is suing a west side company after it defaulted on a loan given with federal funds.
According to a lawsuit filed last week in Lorain County Common Pleas Court, the city is suing First Choice Real Estate LLC, Brian Vogt, Jean Mahoney and the Lorain County Treasurer’s Office after the company stopped paying its loan.
The lawsuit said in 2011 Vogt and Mahoney, on behalf of First Choice, entered into an agreement with the city to pay back a $267,500 loan, which Safety-Service Director Dan Given said came from its now-defunct revolving loan program.
Building, Housing and Planning Department Director Kellie Glenn said the loan was for a building and equipment on the condition that the company maintain 25 jobs but earlier this year, payments stopped coming in.
According to the lawsuit, the company owes the city $37,132 with a 5.25 percent interest rate and because of the lack of payments, the city is seeking to foreclose on the company’s mortgage at 2201 West Park Drive, which the Treasurer’s Office also has a lien on.
“We’re going after them for this money,” Glenn said. “We’re going to go after anyone who hasn’t been paying.”
The city’s revolving loan program came under fire in 2016, when it came to light that $600,000 in loans had been written off by the revolving loan program’s board and thousands of others were delinquent.
Last summer, Glenn said the city was suing the people who weren’t paying back loans because the program, the Lorain Development Corp., was funded by the U.S. Department of Housing and Urban Development, and the agency is going to want its money back.
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 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.”
While a FBI investigation into the program still was going on last summer, Given said Monday the FBI doesn’t disclose the status of investigations.
According to documents from the Building, Housing and Planning Department dated June 11, First Choice is one of six companies delinquent on its revolving loan payments.
Both Veard-Fourth Street Offices and Derek’s Office Products have minimal delinquencies at $20 and $330, respectively.
Another company, Marxan Solutions Inc., which is owned by school board member Mark Ballard, is $2,110 delinquent with a $127,558 loan balance. Ballard could not be reached for comment, but a foreclosure case was filed in the County Common Pleas Court last year.
According to the documents, Ballard’s last payment was in April.
Two other companies, Prime Industries Inc. and Driscol Music Co. Inc., haven’t made payments since 2014.
According to the documents, Prime Industries is $144,980 delinquent on its $369,477 loan balance and a court case had not been filed yet.
Driscol Music Co. is delinquent $123,850 on a $194,738 loan balance. A court case was filed in February but many of the summons notices were returned because they were undeliverable, according to court records.