By Gina Edwards

Naples City Desk

Federal officials from the U.S. Department of Housing and Urban Development are seeking $427,472 from Collier County, the amount of federal grant money the county awarded to H.O.M.E., a now defunct charity that purchased 11 blighted houses, remodeled them and sold them to low-income families.

Last year, Collier Clerk of Courts Dwight Brock called for a controversial law enforcement and HUD investigation of H.O.M.E., the charity founded by Brock’s 2012 political challenger John Barlow, a retired CEO. Attorneys for Barlow disputed Brock’s allegation at that time in a letter to HUD and publicly said Brock had engaged in the audit as part of a political vendetta.

Brock, in a press release issued late Tuesday, said he raised questions about the concerns relayed by HUD in its June 8, 2015 letter, which was first published by the Naples Daily News.
Brock’s press release stated he “had questioned the oversight and monitoring of the H.O.M.E. program, including concerns with appraisals, program Income, multiple conflicts of interest, lack of documentation, reasonableness of costs and the use of program income.”

“If county staff spent half as much time working with the Clerk as they do fighting the Clerk, the County could avoid wasting taxpayer dollars,” Brock said in a statement.

An attorney for John Barlow, Jeff Fridkin, said the HUD letter finds fault with county documentation and the county’s accounting of the grant.

“Nowhere in [the June 8, 2015 HUD letter] does it say that H.O.M.E. misused program income,” Fridkin said. Fridkin said H.O.M.E. officials were not contacted to meet with HUD officials.

The letter from HUD faults Collier County’s oversight of H.O.M.E. and says the agreement with H.O.M.E. as to how it would use profits on the sales of the houses, or program income, was “vague.”

Barlow’s H.O.M.E. had approval from county staff to use the program income for $427,472 in down payment assistance for the low-income buyers. Low-income buyers are required to pay Collier County back the down payment assistance, with zero interest, when they eventually sell the houses or in 30 years, whichever is sooner. The down-payment assistance was used to reduce the monthly mortgage payments for low-income buyers.

H.O.M.E. signed over the notes so the county can collect those payments. But Brock told Naples City Desk last year that H.O.M.E.’s assignment of the notes to Collier County didn’t count as a return of program income to Collier County because Collier Commissioners hadn’t voted to officially accept the notes.

An investigation by Naples City Desk in 2014, “Good Deeds: Punished,” found that Brock’s staff urged county officials to not accept the notes and pull a vote to accept the notes from Collier Commissioners’ agenda.
The letter from HUD notes that Collier County is required to report any program income it receives to HUD. READ the HUD LETTER.

HUD also raised questions about whether H.O.M.E. officers had conflicts of interest and said its review revealed that “several members of H.O.M.E. Inc. … received financial benefits.”

“We totally disagree that anyone received financial benefits,” Barlow’s attorney, Fridkin, said. “Nobody received financial benefit tied to these grants other than the people enjoying these homes. It’s just a false statement.”

Fridkin said board members thought they were doing favors to help the non-profit H.O.M.E. help low-income buyers. H.O.M.E. board member Russell Budd was on the board of directors of the bank that offered first mortgages to the majority of the low-income buyers. Board member Julie Schmelzle’s husband provided builder’s insurance through his company. H.O.M.E. board member Mel Engel, of Boran Craig Barber & Engel, did the rehab construction on the houses. Engel stepped down from H.O.M.E.’s board before work was done and later rejoined the board afterward.

Gina Downs was also on H.O.M.E.’s board and she ran as a political candidate in 2010 against Collier Commissioner Georgia Hiller, who was a vocal critic of H.O.M.E. with Brock.

HUD also said the county failed to conduct an environmental review and said it found issues with appraisals.

Barlow’s attorney, Fridkin, said it appears H.U.D. is requiring the return of the $427,472 based on a lack of environmental reports that the county failed to submit. However, Fridkin said the county did conduct environmental reviews.
“I think there was inadequate documentation provided by the county to HUD,” Fridkin said. “We know for certain those [environmental audits] are there.”

HUD also questioned appraisals.

“Our review of appraisals revealed that mortgages exceeded appraised values,” HUD wrote in its letter.

Foreclosures in the areas, including where the H.O.M.E. houses were located, had caused depressed market values at the time, and this was noted by appraisers on their reports.

An analysis by Brock’s staff sent to HUD, based on the appraisal reports, said that collectively the sales prices of the houses were $1.7 million, which is $300,000 more than the $1.4 million appraised market values of the 12 houses at the time they were sold in 2009 and 2010. The buyers are paying monthly payments on bank-offered first mortgages on those 13 houses totaling $1 million. (Brock included two houses that weren’t part of the federal program.)

However, the houses were sold in the depths of the foreclosure crisis and appraisers noted at the time on their reports that the real estate market was depressed by the large number of foreclosures in the area, particularly Golden Gate where many of the houses are located.

A review of value estimates on the real estate site Zillow by Naples City Desk in 2014 showed that the collective value of the houses in Brock’s analysis was $1.8 million. Two of the houses remained under water based on Zillow’s values at that time, but it’s unknown if the owners would fetch higher prices because of the extensive remodeling upgrades down to the houses by H.O.M.E. which included new kitchens, baths, roofs, new A/C units and other major upgrades.

Budd said if HUD only took a cursory look they may not have understood the reason for the zero interest second mortgages, which were assigned by H.O.M.E. to Collier County. It’s the second mortgages that could have inflated prices above sale prices. Budd said the second mortgages were placed on the properties so the buyers wouldn’t turn around and become flippers.

“It’s astonishing they are coming to this five years later,” Budd said. “We didn’t misappropriate or misspend a penny… I’ve learned no good deed goes unpunished. We were all volunteers and nobody collected a penny of pay. We spent a lot of time. We were able to get people into homes that were abandoned and unfit. We did a good thing. Now five years later we’re being chased by someone trying to get even.”