Bank to sue Vermilion housing authority over default on $1.6M loan

Bank to sue Vermilion housing authority over default on $1.6M loan

ROSSVILLE — Officials with Longview Bank and Trust informed Vermilion County Housing Authority board members on Tuesday that they plan to file a lawsuit against the local agency for defaulting on a $1.6 million loan.

Perry Albin, chairman of the bank board, said the lending institution believes a lawsuit is its only course of action at this point. He said foreclosure on the loan is not viable, because the bank doesn't want the housing authority properties.

"We don't know what we would do with them," Albin said during a special meeting Tuesday night at the county housing authority office in Rossville.

The county agency is an entity of the U.S. Department of Housing and Urban Development and owns housing for low-income individuals in Hoopeston, Rossville, Georgetown, Allerton and other towns outside of Danville, which has its own housing authority.

Around 2005, the county housing authority's executive director, Tony Hasbargen, arranged a $1.6 million loan for property renovations through the Hoopeston Capstone Bank, which later merged with Main Source Bank.

Hasbargen used federal funds to pay on that loan, which was refinanced in 2012 by Longview Bank and Trust, which has locations in Georgetown, Paris and Chrisman.

In 2013, the housing authority fired Hasbargen when allegations of improper spending surfaced. At that time, the Office of Inspector General discovered the loan and brought to the attention of local housing authority board members that the 2005 loan was not legal under federal housing authority regulations, because it's illegal to mortgage federal property, according to Terry Prillaman, who came on the board in 2014 and is now chairman.

Since then, HUD officials have made it clear that no federal funds can be used to pay back the loan.

Prillaman said none of the five current board members were on the board during Hasbargen's tenure when the loan was originally arranged and later refinanced by Longview.

But they are now dealing with the aftermath, as the board and agency are on the hook for a loan in excess of $1 million and now facing a possible lawsuit with no other revenue stream to pay the loan.

Bank officials said Tuesday night that they have patiently been waiting — with no payments since 2012 — hoping HUD would grant a waiver allowing the local authority to use its federal funding to pay the loan.

The loan was used at the direction of Hasbargen to pay for renovations of housing units in Hoopeston, Rossville and Allerton.

Recently, Prillaman said, the housing authority spent months piecing together checks and other documentation accounting for how the funds were spent, hoping that would convince HUD to grant a waiver. But no luck.

Albin said the bank, like the local housing authority officials, feels like victims of the Chicago office of HUD. Bank officials told the board that they know their hands are tied by federal officials, but they've been waiting for four years and can't wait any longer to take this next course of action. They indicated they believe a lawsuit will be filed very soon.

Prillaman said they will reach out again to Danville Housing Authority officials about possibly merging with that agency as a possible long-term solution.

During the meeting, Prillaman said all five housing authority board members believe they have a moral and ethical obligation to pay back this loan, but they have no financial ability when HUD officials are directing them that they cannot use federal funds to do so.

"This board is not the one that's dragging its feet," Prillaman said.

Sections (2):News, Local