RACINE — A local nonprofit that was given federal funds to fix up and sell an inner-city house has allegedly defaulted on its mortgages and a lawsuit over the matter could cost it and a church their home.
North Milwaukee State Bank filed a foreclosure lawsuit this spring against Racine-based nonprofit Project New Life Community Development Corp., and loan guarantors Abundant Life Christian Center Ministries Inc., and Elliott K. Cohen, claiming the parties owe them more than $468,000 after Project New Life defaulted on four mortgages.
The mortgages were secured by two properties Project New Life owns. The first property, 3433 Douglas Ave., is where Abundant Life and Project New Life operations are located. The second property is 1017 Marquette St.
In April 2009, Project New Life submitted an application to the city seeking $28,175 in federal HOME Investment Partnership Program grant dollars to rehabilitate the Marquette Street property, a four-bedroom house that had been badly damaged in a fire the year before.
Two months later, the nonprofit — whose executive director, Cohen, is also the senior pastor of Abundant Life — applied for $45,677 in additional HOME funds, stating it needed the extra dollars to complete the project.
Last June, the city filed suit against Project New Life asking for the grant dollars back. The money should be returned, the city claimed, because the nonprofit violated more than a dozen elements of the grant agreement surrounding the project — chief among them, that the now-rehabilitated home be sold to an “income-qualified” buyer.
The funds should also be pulled back, it alleged, because Project New Life failed to “account” for the grant dollars it received, used grant funds “for unauthorized purposes” and failed to “document the receipt and expenditure” of funds it obtained from a man who rented the property for $600 a month.
Project New Life denied the bulk of the city’s claims, asking for the lawsuit to be dismissed. In August, Cohen told The Journal Times that the nonprofit had always been “working to provide a bona fide homeowner for the property,” but that it has been a challenge given the depressed housing market and tight lending climate.
Plans were being made for a jury trial in the case as early as November, according to online court records.
Those plans and other movements in the case were put on hold Thursday, when, according to online court records, an order was entered by Racine County Circuit Court Judge Gerald Ptacek staying the matter until the foreclosure lawsuit is resolved.
Receivership for buildings
Although both the foreclosure and grant lawsuits are still pending, what will happen with the church and the Marquette Street home — at least in the short term — appears to be a bit more clear.
On Thursday, Ptacek signed an order appointing a special asset manager as the receiver of the properties, making the bank the temporary custodian of the properties while the litigation plays out. Having custody means the bank can ask that Project New Life and Abundant Life vacate the properties.
When the court learned that Cohen had filed for bankruptcy on June 20, the receivership request had been briefly put on hold. It was lifted after the bank’s attorney pointed out that it was just Cohen that had filed for personal bankruptcy, not Project New Life.
Called about the situation on Thursday, Cohen directed all questions about the cases and the church to two church members and two lawyers, Joseph M. Capelli and Felix Servantez. Calls made to the attorneys on Thursday were not returned.
Speaking on behalf of Cohen, church member Kyle Laurenz stated that the pastor “has confidence in the people that we work with, who understand our mission to help the marginalized and disenfranchised of our community.”
Asked if he knew if Abundant Life leadership knew whether the congregation would be able to remain in the Douglas Avenue location or if it had found a new place to worship, church member Stephen Olugbemi stated that, with the case still pending, he could not say one way or another.
“Regardless of what happens, the church will go on,” he added. “We are more than a building.”
While the City of Racine might never see the return of the grant dollars it believes Project New Life owes, it is not the only creditor mentioned in the foreclosure lawsuit that could end up being unable to collect debts they say they are owed by the nonprofit.
According to the North Milwaukee State Bank lawsuit, the nonprofit took out two other mortgages on the properties: a $47,500 mortgage with Tri City National Bank, and a $25,000 mortgage with Florencio and Susan Alvarez.
In addition to the two additional mortgages, the lawsuit says Project New Life owes AJMA, LLC just more than $1,321.
There are also four tax liens on the properties from the Internal Revenue Service. All but one of them are for back employment taxes. The largest of the four liens — in the amount of $13,377.35 — was filed in November 2012.