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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.”

(by 2006, the total owed on the property had suddenly ballooned to $583,00 from a purchase price in 2000 of only $200,000)

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.

8 Responses

  1. concerned

    When Politicians start to listen the misappropiation of funds, and corruption can be brought to a halt. Unless these folks are exposed nothing will happen because those in government will hide the truth.

  2. brian white

    Wow – what a terrible article for explaining the work of NHS, but a great example of how a thin set of facts can be made to look like a conspiracy. NHS Chicago has an extensive history in Chicago, as anyone who bothered to research could find out. They have made thousands of loans and in neighborhoods many lenders wouldn’t touch. Shame on the authors. NHS can certainly be trusted. Moreover, it’s depended on by Chicago residents and other community groups working in the city.

    • disappointed

      Mr. White’s message is the only intelligent, well-written comment on this page (Mr. Volpe’s article included). Everyone else seems a little caught up in conspiracy theories.

      Schubert claims that he went through the necessary zoning appeals to convert the commercial property into a residential property. Then, the author quotes Pimentel as saying that commercial loans shouldn’t be available for residential properties. Did Volpe mention to Pimentel that Schubert claims he went through the zoning process? That’s a pretty important fact to check. Folks convert commercial properties to residential all the time.

      By claiming that Schubert has refinanced these loans far in excess of the purchase price, I suppose the inference is that he’s pocketing these loans and ripping of the lenders (a classic mortgage fraud situation). But wait, he’s an insider…so that doesn’t make sense that he’d rip off the hand that feeds him…

      And if Schubert is really on the hook for $1.5m in loans on a property he paid $200K for, it sounds like he’s stuck in a bad mortgage — not a sweetheart deal at all.

      A final inference is that a non-profit shouldn’t be making high-risk loans like this. I agree. I think you could’ve written a solid, well-researched article on this point. But you didn’t.

      Loan fraud is a serious problem across the country and in Chicago. It’s ironic that you’d try to highlight the problem with an article like this.

      You started with the conclusion that NHS was dirty and tried to work backwards into a story. The only people who will be agreeing with you are those who are already in your echo chamber.

  3. concerned

    But Mr. White when proof is present with the documentation you don’t have the autority to say thin when they give millions of tax payers funds to their colleagues isn’t thin but truth. when others come forth that no one would listen BEACUSE OF THEIR POLITICAL TIES then yo
    u must pay attention. When documents don’t jive and it shows misappropiation of funds then you listen. The problem is they appear to help as you say many neighborhoods no one would touch one reason is because they could easily take advantage of these neighborhoods as they have done. In the recorder of deeds it shows what appears to be illegal activites of their own Attorney Paul Cerasoli who filed blank documents that was notarized BLANK October 28, 2009. So their are many facts if you dare to want to know the TRUTH.

  4. whistleblower

    Mr. Henderson, owned his home for 34 years @ 2949 w. Washington an old three story single family home. NHS/NLS gave Mr. Henderson a Predatory loan of $350,726.00 balloon payment payable in one year June 1, 2004 the maturity date. Mr. Henderson never receive a monthly statement, a annual escrow analysis, monthly interest payment statement. nor any yearly tax information for EIGHT YEARS. ‘when Mr. Henderson contacted Mr. James K. wheaton, Mr. Bruce Gottschall their Attorney Paul Cerasoli, NEVER heard nothing from these so called good peoiple that lend in many neighborhoods. Mayor Rahm Emmanuel was contacted since they do businees. But under City Ordinance the city won’t do business with anyone who practice Predatory Lending and Deceptive Practices. But the City of Chicago does. Other people are surfacing let see how this all will turn out sure will be interesting to see if THE FEDS go into NHS. HOW DO YOU THINK THE MAYOR IS ALLOWING THIS MAN HOME TO BE TAKEN UNDER FRAUD WHEN THEY HAVE BEEN NOTIFIED FOR THE PAST EIGHT YEARS OF THE CORRUPTION AT NHS WITH DOCUMENTS TO BACK IT UP.


    When will people be for the people instead of for Corporate America and their greed. With the Mortgage Melt down why is so hard to see that these non – for profit make a profit for themselves. All I want to know is President Obama where are you you say you’re EVERYBODY’S PRESIDENT. Stop the corruption don’t bail them out

  6. Michael Volpe

    Normally, I don’t respond to comments after my articles but I’ll make an exception to the pseudonmy disappointed because you’ve misconstrued not only things I did write but even things I didn’t write. I never made any suggestions about what was done with the proceeds of Mr. Schubert’s original loan because I don’t know, and frankly don’t care. My guess and hope was that it was used to turn the property into a two unit as that should have been its intended purpose. Like I said, I don’t care.

    That’s because all I care is that the loan was for nearly twice the value of the property, highly unusual and only to be done by a high risk lender not a lender affiliated with a charity.

    As for the zoning process, Mr. Schubert was quoted accurately, in context, and nothing important was left out. I shared the entire email with Mr. Pimentel. I hid nothing, nor did I attempt in any way to try and get him to say things he shouldn’t say. The suggestion that I did is wholly inaccurate and quite scurrilous since you have absolutely no evidence to back it up.

    Your suggestion that because Mr. Schubert got all the right zoning approvals this means he was eligible for a residential loan is inaccurate. That means he could legally change the property from a warehouse to a two unit. That doesn’t mean he could do it with a residential loan.

    I spend seven years in mortgages so all your fancy technical jargon may intimidate someone else but not me. I know what is and isn’t proper in the field as I lived it for nearly a decade. Simply having zoning issues covered doesn’t make you eligible for a loan. It only makes you eligible to do the work you want to do. it doesn’t mean a bank should give you money in a certain way.

    Banks do not give loans based on future plans because no one knows the future. But hey, if you are convinced I’m wrong you should simply do this. Call up your local bank, call up any bank, call up several banks, and ask them if it’s possible to qualify for the loan that Mr. Schubert qualified for.

    Tell them you’d like to get 192% of the value of the property for construction. Tell them that your property is currently a warehouse but you have all the zoning permits for a two unit. Tell them you’d like to get a 192% loan to value loan on a warehouse, but you’d also like that loan to be a residential loan.

    Just one thing. Don’t just claim that a bank said yes. Tell everyone the name of the bank. That way we can check your work. My guess is you’ll be laughed at on the phone and told you are naive when it comes to loans.

  7. Mylene Respes

    Fantastic comments . I loved the specifics , Does anyone know if my company can get access to a fillable a form example to edit ?


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