Neighborhood Housing Services, a nationwide non-profit that claims it helps protect low- and moderate-income borrowers from such things as mortgage fraud, is again itself appearing to engage in curious lending activity through its own mortgage financing division. This time it appears that Neighborhood Housing Services gave a series of sweetheart deals to a former official in the administration of the former mayor of Chicago, Richard Daley.
Since 2000, the Daley official, Michael Schubert, has financed and refinanced a total of more than $1.5 million in home loans on a single property on the South West Side of Chicago according to records at the Cook County Recorder of Deeds. While many of those refinances did in fact pay off prior loans, that is only the beginning of a pattern of suspect lending behavior, according to an analysis of mortgage documents, county records, and the testimony of a mortgage professional.
The curious behavior began as soon as Schubert purchased the property, said Paul Pimentel, a mortgage broker and realtor. Pimental has more than a decade of experience in all facets of real estate sales and financing. He also says, the Cook County Recorder of Deeds records show that the property was purchased by Schubert for $200,000 on December 29, 2000. Two mortgages are recorded on that property with Schubert as a mortgagee, on the exact same date for $385,000. As such, Schubert was able to get financing for 192% of the purchase price.
Schubert, speaking exclusively with Rebel Pundit, explained how he was able to get nearly 200 percent of the value of the property. “I received a purchase rehab loan from NHS. The proceeds covered the purchase price less my down payment and the funds to rehab the property.”
Pimentel said that while such a scenario is possible, it is only appropriate for a niche lender that specializes in high-risk, high-interest-rate loans. Neighborhood Housing Services is a 501(c)3, non-profit, and so, said Pimentel, should never come anywhere near such a high-risk loan.
Pimentel found what Schubert said next even more troubling.
Schubert said, “This was a residential loan although the property was originally an industrial property. I went through the necessary zoning appeals in order to get the building permit.”
Schubert originally bought a property that was a warehouse. He’s since converted that warehouse, which is a commercial property, into a two-unit residential property. Pimentel said that a residential loan can’t be done on a commercial property. That, he said, is a basic violation of mortgage rules. Because the property was a commercial property at the beginning of the process, Pimentel said the loan should have been done as a commercial loan.
Pimentel said that classifying a commercial property with a residential loan is no small matter. That’s because commercial loans have significantly higher rates, a much more difficult and slower underwriting process, and such things as balloons and points are standard on most commercial loans. As such, by receiving a residential loan, Pimentel said that Schubert avoided all those pitfalls. Furthermore, both the bank that provided the money, NHS itself, and the title company, in this case Chicago Title and Trust, should have understood that such a loan is fraudulent. Both, Pimentel said, should be considered responsible for their part if they misrepresented the property.
In 1987, Michael Schubert was appointed by then Chicago Mayor Richard M. Daley to be the Housing Commissioner for the City of Chicago. According to a biography from the Healthy Neighborhoods Group, a philanthropic group Schubert is attached to, he also has a long history with NHS. “Mike Schubert, principal of Community Development Strategies (based in Chicago), formerly served as Commissioner of the City of Chicago Department of Housing, a cabinet level position in the administration of Mayor Richard M. Daley. Before that he worked in various capacities for Neighborhood Housing Services in Chicago.
Schubert’s loan is curious even based on NHS own mission statement, “To create opportunities for people to live in affordable homes, improve their lives, and strengthen their neighborhoods.” The former Head of Housing for the entire City of Chicago can’t be considered the type of borrower one would expect for such a description. Furthermore, it’s not entirely clear how getting rid of a warehouse and turning it into a residential two unit falls under community development. Citing privacy issues, NHS didn’t respond to emails and phone calls for comment on this story.
Schubert’s case is the second time that NHS has been attached to allegations of wrong doing in the last few months. Last year, Michael Henderson, a former City of Chicago employee, accused NHS of carrying out an eight-year mortgage fraud designed to take away his home. Among several accusations, Henderson claimed that from 2003-2007, he was allowed to make a monthly mortgage payment of only $183.85 a month, even though payoffs during that time period state that NHS had him owing in excess of $300,000. While one would need to have a negative rate to be able to pay only $183.85 on such a high balance, $183.85 also happens to be the exact amount of the taxes and monthly insurance payment on Henderson’s home at the time of the original loan in 2003.
If that’s not a coincidence, this would mean that NHS didn’t collect principal or interest for a matter of four years on a loan they now claim has a balance of over $500,000. Pimentel said in all his years of working in mortgages, an industry known for graft and corruption, he’s never seen a loan where a borrower was allowed to only pay the taxes and insurance.
While both of these cases originate in Chicago, NHS has a presence all around the nation. In fact, conservative journalist Matt Vadum examined the list of funders of NHS. He recently wrote a book on ACORN entitled Subversion Inc: How Obama Red Shirts Are Still Terrorizing and Ripping Off American Taxpayers. Vadum said that the list of funders of NHS is a “who’s who” of liberal money folks, calling the list, “impressive.” Those funders include The Pritzker Fund, the John and Catherine T. MacArthur Foundation, and the Ford Foundation.
While Vadum cautioned anyone from drawing conclusions based simply on that, he did stipulate that its breadth and wealth of fundraising capacity is evidence of powerful reach.
Little is known about NHS beyond what is available on its own website. Prior to the two cases of suspected mortgage fraud, NHS was rarely in the news. They maintain offices all around the country: along with Chicago, some other areas they serve are Northwest Indiana, Phoenix, Silicon Valley, Brockton, Massachusetts, New York City, Washington D.C., New Orleans, and Cleveland. At least one person near their sphere said that the allegations are in line with things they hear. Holly Krig is a community organizer all over Chicago. She often winds up working on many of the same issues that NHS claims to help including: foreclosure relief, loan modification, community development, and anti-eviction campaigns. Krig said that according to the general majority of the people she has worked with, NHS is not to be trusted and NHS takes care of its own needs before it takes care of the needs of the people it claims to help.