Back in 2003, Michael Henderson thought that Neighborhood Housing Services (NHS) was a god send. After more than two decades of searching for a loan to fix up the gutted home he’d first bought in 1977, NHS approved him for a construction loan that would transform his home into the dream home he and his wife had always wanted. Eight years later, Henderson’s dream has turned into a nightmare and he believes that NHS, and it’s top brass including its CEO Jim Wheaton, are all criminals who gave him a loan only looking to steal his home from him. Furthermore he believes that powerful politicians like Lisa Madigan, Anita Alvarez and President Obama have all turned a blind eye to mortgage fraud and other federal and local crimes.
There’s cruel irony to Henderson’s accusations because on its website NHS boasts, “Since 1975, NHS has strengthened low- and moderate-income neighborhoods through successful partnerships with residents, block clubs, financial institutions, insurance companies and other key partners.”
Michael Henderson first heard about Neighborhood Housing Services (NHS) through Mayor Richard Daley’s 311 system. They’ve been recognized as a “nationwide leader in foreclosure prevention”. They’ve been certified by Housing and Urban Development (HUD) as counselors for foreclosure prevention. In Illinois they helped to create the HB4050 predatory lending database.
Specifically on the topic of foreclosure prevention it says, “NHS offers free foreclosure prevention workshops, counseling, and ‘Fix Your Mortgage’ events throughout Chicagoland. Gather the required documents and see if you qualify for a loan modification.”
“I figured if Mayor Daley is for them, they must be all right,” Henderson now says.
A close examination of closing documents like: the Settlement Statement, the Truth in Lending, and the Note along with payment statements, tax assessments and payoffs finds a troubling pattern of predatory lending behavior, fraudulent and misleading documents and numerous potential violations of federal law even though no law enforcement agency has officially announced an investigation.
Henderson currently lives at 2900 block of West Washington in Chicago in the Garfield Park neighborhood.
He bought this property gutted in 1977. At the time, Henderson blames “redlining,” for denying him loans to fix it up. With the mortgage boom, came gentrification to the area and as 1999 became 2000 the property became more attractive to banks.
Henderson says he first applied in 2000 with NHS but was denied. When he and his wife tried again in 2003, the loan got approved. Michael Henderson and his wife signed closing documents for a construction loan of $352,726 at an interest rate of 6.71% on May 30, 2003.
The most troubling violation is in the second page of the HUD 1 Settlement Statement, one of the entries is, “construction escrow is held by Neighborhood Lending services.” That statement violates the definition of an escrow account. An escrow account is money that a THIRD party holds. If the lender holds the construction money, there’s an inherent conflict of interest and a serious violation of federal law. It’s one of many potential federal crimes committed by NHS against Henderson.
On the Truth in Lending, the payments were spelled out. It was $1961 per month for the first eleven months and $352,726 for the twelfth and last payment. Henderson was receiving a balloon loan, only he wasn’t sophisticated enough to know what that was. “I was a dummy,” admits Henderson, who’d never gotten a mortgage before. In fact, Henderson says that he wasn’t made aware of the fact that his loan was a balloon loan until the winter of 2011 when 2nd Ward Aldermanic candidate Federico Sciamarella sat down with him and pointed it out on his Note.
HUD lists balloon loans among red flags of predatory lending. It says this on HUD’s site, “higher-risk loans such as balloon loans, interest only payments, and steep pre-payment penalties.”
HUD isn’t the only group to warn against balloon loans. On its web site, NHS also warns against balloon loans saying of balloon loans, “has payments based on a 30 year amortization schedule with the unpaid principal balance due in a lump sum at the end of the payment schedule.”
Yet, that’s exactly the loan Henderson was given. Worse yet, while the loan matured, ended, in June of 2004, Henderson provided receipts of mortgage payments he made until 2007. NHS continued to accept his regular monthly payment for three years after the balloon payment of $352,726 was due.
Henderson also paid exorbitant fees. Henderson was charged 1.5% in up front points. Neighborhood Lending Service also charged a “project development fee” of another $9094, or another 2.578% in fees. That’s more than 4% in up front fees charged by NHS. Illinois allows no more than 5.5% total fees by all parties. Given that NHS is a 501(C)3, and thus pays no federal income taxes, it’s highly inappropriate for that entity to collect such an extraordinary amount of fees up front.
Furthermore, Henderson’s income is fraudulent on the second page of an application in the closing documents.
It says that Henderson made $5232.12 per month in income and $1650 in rent. Since the house was gutted and a single family residence it was impossible to collect rent legally. Meanwhile, Henderson says, “I don’t make more than $20 an hour.” Henderson says he handed in proper pay stubs and W2’s. He only initialed that page and says he made approximately $52,000 yearly at the time of the loan. The application was drawn up by NHS, which didn’t respond to multiple emails and a phone call for comment.
Finally, while some documents label Neighborhood Lending Services as the lender, other documents label Neighborhood Housing Services as the lender. These are two separate entities with a questionable firewall. Reminiscent of ACORN, both claim 1279 West Milwaukee Ste 500 as one of their offices. Only Neighborhood Lending Services has a mortgage license. NHS is a 501(C)3 tax exempt non profit with no mortgage license. Funding mortgages without a mortgage license is against the law.
The monthly payment isn’t entirely spelled out on the closing documents. Instead, this nebulous statement explains it in the Note, “My monthly payment will be in the amount of interest charged for loan proceeds disburse for acquisition or refinance and/or construction. This amount may change each month.”
In fact, that language describes a Home Equity Line of Credit not a traditional mortgage as it was identified. The industry website Mortgageloan.com describes the difference this way, “a second mortgage refers to single loan taken out and secured by the equity you have in your home. You get all the money in one chunk and pay it off over a number of years. The interest rate is typically higher than that on the primary mortgage, because the primary mortgage gets paid off first in the event of a foreclosure – so the risk is higher for the second mortgage lender if the property declines in value. But closing costs are less than on a primary mortgage, primary because the amount borrowed is much less.
“A home equity line of credit (HELOC) is somewhat similar, but with a key difference. When you set up a HELOC, the bank agrees to lend you a certain amount, but you don’t necessarily take out any money at that time. Instead, you have the ability to borrow any amount up to your credit limit as you need it, and pay it back over time. You pay certain fees to set up the HELOC, but these tend to be less than for a second mortgage.”
Henderson’s problems with NHS began immediately. Henderson was told at closing by his senior loan officer, Imelda Lopez-Blanco, that he would only pay $185.83 monthly. Then, he received his first bill and it was $1861.06. All day at work Henderson says, “I was worried and couldn’t wait to get to MB financial”. MB Financial is the loan servicer, the entity that collects, monitors and reports loan payments, handles property tax, insurance, escrows and late payments, forecloses on defaulted loans, and remits payments. Henderson had already dealt with three entities and he hadn’t even made a payment yet. When he got to MB Financial, he was initially told that amount was correct.
When he heard that Henderson said he told the representative, “I’ll make this one payment but then take the rest of the loan back”. When the staff heard this a senior banker went into the back and when they came out, Henderson was told that there had been a mistake and he was to pay $185,83. He says he was allowed to pay and given a receipt. Henderson provided numerous receipts for payments he made to MB Financial for $185.83. It’s unclear why Henderson only paid $185.83 monthly though that amount is equal to his monthly taxes and insurance payment. If all that was collected was enough to pay for taxes and insurance, this would mean NHS never collected any principal or interest for his loan. Blanco didn’t respond to two emails and a phone call for comment.
In fact, MB Financial, the loan servicer, confirmed that Henderson was only paying for the taxes and insurance. According to a letter from then MB Financial Vice President Tom Fitzgibbons, “Until the construction disbursement are completed through NHS, there is no principal and interest payments made through our office.”
Generally, it is the title company, not a lender, that makes construction payments.
Fitzgibbon also made this shocking admission later, “in other words NHS is still the lender and still owns the loan that they made to you for your property.”
Henderson responds furiously to this revelation, “Neighborhood Housing can’t be my lender. They’re a 501 (C)3, they don’t have a mortgage license,” continuing, “Neighborhood Lending has the license. Why is Fitzgibbon saying Neighborhood Housing is my lender?”
Henderson says he first became suspicious of NHS after he began having problems with one of his contractors. This contractor turned out to have no license, no insurance, or performance bond.
Henderson says that it was the reaction of NHS that concerned him. “I hired these people but they took all their paperwork to Neighborhood Housing,” says Henderson.
He continues, “They (NHS) said ‘it’s your fault because you picked them (the contractors),” continuing, “I got suspicious because the construction specialist (assigned by NHS to the project) was supposed to be watching.”
As a result, Henderson began to learn about his rights as a mortgagee and asked for his mortgage statements and his escrow analysis, both documents he’s required by law to receive regularly. He asked, says Henderson, to no avail and says that he still hasn’t received these documents, nearly eight years later.
It’s also not clear where the funds came from to fund Henderson’s loan. Henderson, who made about $52,000 yearly at the time he received this loan, did NOT qualify for any low and moderate income subsidies. In a response to Henderson’s complaints to HUD, NHS claimed, “NHS/NLS contend that the complainant’s loan was financed by NLS using private funds raised by the agency for the purpose of providing loans to rehabilitate homes and revitalize neighborhoods in the City of Chicago. The lender indicated that the complainant, because of his income, did not qualify for grants or forgivable loans from the respondent.” At least one check made out by NHS on Henderson’s behalf cam from federal money meant only for those who qualify for low and moderate income housing subsidy. It’s to a contractor named Chuck Construction, and it’s for $20,531.70. The Chicago Family Housing Fund, a grant from HUD to the city for low and moderate income loans, is listed as a guarantor on that check.
Several pay outs to contractors were made by NHS to contractors long after the loan had matured in June 2004 on Henderson’s behalf. Once a loan matures it is over and the contract no longer exists. Any payments made there after would be done with no contract.
He was never told to pay anymore. Henderson finally stopped paying when, after not being to get documents he was entitled to by law for four years, he stopped paying because, “I though if I stopped paying, they might finally get me my documents”.
As Henderson continued investigating, he found other troubling things on his mortgage. The legal description was changed on his Mortgage to include three empty lots currently owned by the City of Chicago adjacent to his property along with his own home. He also found several documents that were missing his signature.
Concerned that NHS was trying to take his home, Henderson reached out to every politician and government agency he though could help including: State Senator Rickey Hendon, Cook County State’s Attorney Anita Alvarez, the Office of Banks and Real Estate, HUD, the Department of Justice, Secretary of State Jesse White, and even then US Senator Barack Obama. All ignored his complaints.
Lisa Madigan dismissed Henderson’s pleas out of hand saying in her response letter dated September 7, 2010, “As I informed you April 5, 2010 we investigated your complaint against NLS and NHS of Chicago and we see no merit to your claims. Your race or ethnic background has nothing whatsoever to do with that determination as you seem to suggest in your September 5, 2010.”
Henderson approached the US Senator from Illinois Barack Obama in 2006. Obama’s office responded two years later with his office saying, “Thank you for your recent correspondence to Senator Obama’s Chicago office. However, while we are committed to assisting all constituents, we are only able to assist in matters of federal concern.”
In 2009, President Obama passed The Fraud Enforcement and Recovery Act of 2009. The bill begins, “To improve enforcement of mortgage fraud, securities fraud and commodities fraud.”
In Henderson’s letter to Obama, he accuses NHS to systemic mortgage fraud.
The office of banks and real estate also dismissed Henderson replying on January 19, 2011, “the assistance you seek is not within the scope of our authority.”
Henderson also got a first hand look at the maze of government bureaucracy. For instance, Henderson reached out to the Office of Comptroller of the Currency (OCC), one of an alphabet soup of regulators that govern financial matters, and received this response, “your complaint is against an entity that does not fall under the jurisdiction of our office, we are referring your letter to the appropriate supervisory agencies, which are the Board of Governors of the Federal Reserve and the Illinois Department of Financial Professional Regulation.”
Neither the Federal Reserve nor DFPR responded to those letters.
Henderson also sent a letter to the main office of the Department of Housing and Urban Development, where he was told to forward that to HUD’s Office of Inspector General (OIG). That letter was also sent with no response. The Office of Inspector General didn’t respond to a voice mail for comment for this story.
Henderson also filed a complaint with HUD under the RESPA Act (Real Estate Settlement and Procedures Act) claiming that NHS refusal to provide him with his yearly escrow analysis violated RESPA. Brian Sullivan, press spokesperson for HUD, initially agreed that a refusal to provide yearly escrow analysis would violate RESPA but continued, “I’m full confident in our investigators.” Sullivan never returned a phone call asking for comment on Henderson’s specific claim however.
Sullivan also refused to address one other complaint by Henderson. Henderson claims that his loan came from the Chicago Family Housing Fund, which Henderson says came from HUD grants designed only for low and moderate income borrowers. NHS own paperwork says Henderson was in the 120 percentile and thus did not qualify as low and moderate income.
According to Monica Sullivan, spokesperson for the Chicago Low-Income Housing Trust Fund, a grant program administered by the City of Chicago, the Chicago Family Housing Fund was a fund created by NHS for funds generated from private sources only. Sullivan said she confirmed this with high level contacts at NHS.
Paperwork from HUD and NHS indicates that Henderson’s loan was in fact generated through HUD grants. An NHS advertising flyer said this about the Chicago Family Housing Fund, “Through the Chicago Family Housing Fund, NHS has created 1,400 new homeowners while investing more than $158 million in low and moderate income neighborhoods.”
Meanwhile, in a filing associated with HUD case number 05-04-1191-8, (a case Henderson filed with HUD against NHS), HUD identified the funds this way, “the recipient is a sub recipient of federal funds from the City of Chicago. The City of Chicago receives federal funds from HUD’s Community Development Block Grant, Home Investment Partnership, and Homeless Program.”
Even then US Senator Barack Obama’s office claimed to have forwarded his letter to Henderson’s State Senator Kwame Raoul’s office but Raoul’s office never reached out Henderson and it was another dead end.
Henderson even sent a letter to the Department of Treasury, which forwarded his case to the Home Affordability Modification Program (HAMP) with this hopeful response, “Your case has been escalated to the HAMP Solution Center, which has a team dedicated to evaluating these cases.”
That was the last Henderson said he heard from any official at Treasury.
Henderson also contacted Secretary of State Jesse White’s office. In his complain to the Secretary of State’s office, Henderson claimed that NHS funded his loan even though it didn’t have a mortgage license and thus should have its business license revoked.
In their letter back, the Secretary of State’s office explained, “this office does not conduct mortgage fraud investigations. Your complain should be filed with the Illinois Attorney General’s Office.”
Rachel Ferrar, Spokesperson for Jesse White explained, “we do not have investigative authority.”
Dick Durbin’s office initially sent a form letter back to Henderson proclaiming that his office takes mortgage fraud seriously without actually addressing any of the specific complaints of mortgage fraud that Henderson alleged.
However, after the office was contacted for this story, Christina Mulka, press secretary for Dick Durbin, issued this statement, “We reviewed the information and determined that the response sent from our office did not adequately address Mr. Henderson’s concerns. In order to address his concerns as soon as possible, I would encourage Mr. Henderson to call our Chicago office 312.353.4952 and ask to speak with a member of our staff. From the letter that he sent, it looks like in order to open up a case and fully address the issues he brought up, we need to have Mr. Henderson sign a privacy release form – something that Sen. Durbin’s staff can easily talk him through over the phone. I will pass this information along to them in anticipation of his call.” Durbin’s office has since assigned a case officer to his case and is in the process of investigating his claims.
Unfortunately, the help came too late. For six long years, Henderson desperately went to every politician and other powerful person he could find and no one would help. Meanwhile, Henderson said, “I wasn’t getting my documents,” continuing, “I’m not a wealthy man. All I have is my home. I was worried that these guys were trying to take it and no one was helping.” Henderson says the stress from this finally broke him.
Everyday he worried that he’d lose his home and one day his body finally broke down.
“March 8, 2009, I was on my way to work, and I didn’t make it.” Henderson says he then collapsed and was rushed to a hospital. “Eight years of this stuff,” explains Henderson of the physical toll of this process, continuing, “I almost died.” Henderson says he was on the critical list until April 8, 2009 and has had to go on disability since and says he’ll never be able to work again.
Upon returning home on the 8th of April, Henderson says He received a call from Kathleen Walsh, CFO of NHS. “She called my house and wanted to come over,” continuing, “I didn’t want them coming over, so I went over there.”
Still groggy and on prescription medication, Henderson ventured to the office of NHS. He was greeted by Walsh, says Henderson, who provided him with a payoff letter for $554,747.07.
Henderson says he asked for foreclosure paperwork and got this response from Walsh, “I didn’t say I was going to give you foreclosure paperwork.”
Henderson attempted to stand and immediately, “I needed to use the restroom,” he says.
He says security guards blocked his access to the restroom while he says Walsh condescendingly said, “you can go now.”
After minutes of arguing, Henderson says he was allowed to use the restroom but, “I didn’t make it and urinated on myself.” Henderson also says that hospital officials noticed that his newly installed pacemaker indicated that his heartbeat had increased to a dangerous level during the time of the incident.
Henderson says he was ignored by NHS for another three years, until Jesse Jackson Jr. wrote to NHS on November 15, 2010, “He (Henderson) requested but has not been provided a number of documents from NHS, including a copy of the promissory note he signed on May 30, 2003. Further, he claims he has not made a payment in over seven years (sic) and he is concerned that his home will be taken from him. Mr. Henderson seeks copies of the documents he requested and information regarding the status of his loan.”
In December of 2010, about a month after Jesse Jackson Jr’s last letter to NHS, Neighborhood Lending Service attempted to file for foreclosure. Henderson says he was never served, even though he’s required by law to be served in person.
His daughter, Tiede, says that a representative attempted to track down her dad at her residence. “She (the representative) came to the door. She was there for a minute and she asked for Michael Henderson,” and the younger Henderson continued that she responded, “he doesn’t reside here. Is there anything I can take?” Tiede Henderson says the representative refused to share the documents and left.
Michael Henderson says he was only made aware his home was in foreclosure when he received a flyer from a foreclosure attorney, Timothy Liou, saying in part, “Neighborhood Lending Service filed a foreclosure for $322,983 on 12/3/2010 and is trying to take your home.”
Henderson can’t find a lawyer and has represented himself so far. H says, “every time I say Neighborhood Housing these lawyers dismiss me.”
Henderson pulls no punches in court once saying of NHS, “they’ve committed a fraud on me for eight years.”
In a recent court filing Henderson accused NHS of extrinsic fraud, a sophisticated legal term normally used by US Attorneys. Extrinsic fraud is, “fraudulent acts which keep a person from obtaining information about his/her rights to enforce a contract or getting evidence to defend against a lawsuit. This could include destroying evidence or misleading an ignorant person about the right to sue. Extrinsic fraud is distinguished from “intrinsic fraud,” which is the fraud that is the subject of a lawsuit,” according to the website legal-explanations.com.
In a recent filing in the Circuit Court of Cook County Chancery Division, Henderson explained his charge, “For the past eight years of letter writing to James K. Wheaton, attorney Paul L. Cerasoli, they denied me my documents that would enable me to get evidence to defend against this lawsuit as they still have not complied with the request given.”
Henderson raised all these concerns at a hearing on September 14th in front of Judge John Griffin, at the Cook County Circuit House. Griffin denied his motion, ruled a summary judgment for NHS, and Henderson is scheduled to lose his house on January 14th, 2012.