It started as a $5 million plan to "open the doors of homeownership'' for MiamiDade's working poor.
Flush with one-time loans from the Miami-Dade Housing Agency ranging from $500,000 to $1 million, six local developers in 2002 promised to build more than 175 houses, then repay the county with interest as each home sold.
At least that was the idea.
Four years later, five of the developers are in default of the loans, owing the Housing Agency an estimated $2.5 million, plus $178,000 in unpaid interest. Two developers are in particularly bad standing they haven't repaid anything and have built almost nothing.
There were signs of trouble from the start.
In one case, the Housing Agency paid $940,000 to the Infill Development Group, run by mortgage lender Reynaldo Diaz. He promised 28 homes but owned no land to build on.
And then there was the letter Diaz submitted promising additional financing for the project, a requirement of the Housing Agency. That letter came from Southeast Financial Corp. of Miami his own company.
The letter pledging a $150,000 loan, in fact, was addressed to "Mr. Diaz'' and signed by "Reynaldo Diaz."
Diaz also provided a letter promising $600,000 in financing to a second developer, Oscar Rivero, whose development company got a $500,000 loan. Rivero promised in his application: "Financing has been secured for the project, personal guarantees are in place, and we are capable of completing this project on time and on budget."
Rivero hasn't built a single house and has never repaid the $500,000, due in 2003. Overall, his development companies were paid $1.6 million from the Housing Agency for two affordable projects that officials say are now dead.
Diaz's track record isn't much better, with only two houses to show. He hasn't paid any interest, which now stands at $90,240. And he hasn't repaid the $940,000 principal, due in January 2004.
Because Diaz didn't own land when he got the money, the Housing Agency never got a mortgage and has no collateral. The county sued Diaz, and this month he agreed in a settlement to pay all of the interest immediately and repay the balance of the loan within one year three and a half years after it was due. If he doesn't pay, the county will have to head back to court.
Diaz would not comment and did not respond to a certified letter sent to his home requesting an interview.
Earlier this month, the county also sued Rivero.
In a written statement to The Miami Herald, Rivero promised to repay the money, saying, ". . . Extenuating circumstances, including unforeseeable increases in construction costs . . . have delayed the delivery of the units."
The $5 million for the homeownership program came through the Housing Agency from Fannie Mae, the quasi-private lender created by the federal government to put low-income families into homes. Fannie Mae had offered the line of credit to the Housing Agency with an 18month repayment period.
The Housing Agency, in turn, immediately advanced the money to the developers even though the agency policy bans payments until construction starts. Tawana Thompson, head of the Housing
Agency's construction loan program, said Housing Agency chief Rene Rodriguez ordered the advances.
When the developers fell behind, the Housing Agency in 2003 simply dipped into the county's coveted surtax fund local tax dollars set aside to build affordable housing to repay Fannie Mae on behalf of the lagging builders.
All told, the Housing Agency paid off the $5 million, plus $250,000 in interest.
Rodriguez would not comment and did not respond to a certified letter sent to his home asking for an interview.
Since then, one company, Citywide Development, paid back the entire loan and built several dozen houses, but only after selling some to real estate investors instead of the poor, a violation of the Housing Agency program.
Three other companies Fortex Construction, Better Homes Development and Personal Paradise Developers built some of the promised houses, but still owe hundreds of thousands of dollars to the Housing Agency. Rivero and Diaz haven't repaid a dime.
In all, Housing Agency records show an estimated 75 homes promised by the developers were not built. Said Miami attorney Lida Rodriguez-Taseff, who has represented low-income families with housing disputes: "It's unconscionable."