By SUSAN TAYLOR MARTIN
Times Senior Correspondent
While thousands of responsible Floridians struggle to keep their homes, a federal mortgage assistance program is making loan payments for felons, tax scofflaws and people with histories of running up debts they can't repay.
Among the recipients of taxpayer-funded aid: A St. Petersburg woman with a long record of fraud. A Largo man who owes the IRS more than $150,000 in back taxes. And a sex offender who couldn't live in federally assisted housing yet qualified for up to $42,000 in federal mortgage relief.
Those homeowners got help while many others were turned down or forced to wait so long they may lose their homes anyway. Today, almost three years after creation of the federal Hardest Hit Fund, less than 10 percent of the $1 billion set aside for Florida homeowners has been spent.
A Tampa Bay Times investigation found that state officials overseeing Florida's Hardest Hit program made a series of missteps and questionable decisions that may have cost families their homes. In reviewing government emails and other public records, the Times found:
• The office of Gov. Rick Scott — a sharp critic of federal stimulus programs — restricted efforts to publicize the Hardest Hit Fund and was instrumental in cutting aid amounts when the program went statewide in 2011.
• The vast majority of Florida's 557,000 condo owners were ineligible for Hardest Hit aid for more than a year because of an arbitrary policy that was later reversed.
• The state agency running the program ignored its own guidelines and approved aid to dozens of homeowners with histories of financial mismanagement including previous foreclosures, IRS liens and bankruptcies predating the housing bust.
• At least 15 people in Tampa Bay alone got Hardest Hit assistance despite felony records for fraud, grand theft, drug possession and other serious offenses.
Officials at Florida Housing Finance Corp., the public agency administering the Hardest Hit program, defended their record on using the federal money.
"Given the fact we have never done anything like this before, I think we are doing the best job we can possibly do,'' said Cecka Rose Green, the agency's spokesperson. "There are people out there that, but for this help, their homes would have been foreclosed on.''
Florida is one of 18 states whose high foreclosure rates qualified them for the Hardest Hit program, the Treasury Department's $7.6 billion effort to stabilize the housing market by providing mortgage assistance to homeowners who lose their jobs or take pay cuts. States primarily use the money to make monthly mortgage payments or make up late payments.
Nationwide, the Hardest Hit program has been knocked for poor cooperation from banks, fuzzy goals and slowness in spending the money. And though Florida has the nation's highest foreclosure rate, it has lagged behind other states in helping desperate homeowners.
As of Dec. 31, 7,314 Florida homeowners had received Hardest Hit assistance — fewer than in Michigan, Ohio and North Carolina, states with much smaller populations.
"I think it's been pretty much mismanaged from the beginning and very slow in getting help out,'' said Laura Johns, whose non-profit Home Defenders League is pressing the state to speed up aid.
"I think Florida Housing (Corp.) has good intentions but we can't afford to wait any longer and homeowners can't afford to wait. They're getting foreclosed on with all this money sitting there.''
Delays and cuts
Florida's problems began with a critical decision at the start of the Hardest Hit program.
Instead of opening the doors to all homeowners like other states, Florida launched a pilot project in Lee County in October 2010.
For three months, only Lee County residents could apply for help.
"When trying out anything new it's prudent to test it,'' Green said.
But three months came and went, and still no relief was offered to desperate homeowners in the rest of Florida.
"Every day the state waits, people are losing their homes,'' U.S. Sen. Bill Nelson, a Democrat, said in a statement in March 2011, four months after the Lee County kick-off. Nelson accused Scott of "stalling'' Hardest Hit assistance.
The Times obtained emails showing that Scott's office kept close tabs on the program. It got weekly updates and required the housing agency to clear "talking points.''
Scott aides also nixed requests from the U.S. Department of Housing and Urban Development and U.S. Rep. Kathy Castor, a Tampa Democrat, for agency staff to attend foreclosure prevention forums to speak about the Hardest Hit Fund.
"These public appearances are not consistent with our communications goals for HHF,'' Brian Hughes, then Scott's deputy communications director, emailed the housing agency in April 2011. "So, do not move forward.''
Hughes, who has since started his own business, did not respond to calls for comment.
A spokesman for Scott said there was no effort to downplay the Hardest Hit Fund and noted that housing officials attended other events.
By the time the program was rolled out statewide in April 2011, six months had passed and officials had decided to slash benefits.
Instead of 18 months of mortgage payments, as in the Lee County pilot, there would be only six — a decision made in consultation with Scott's office.
Homeowners also had to pay part of the mortgage themselves.
"The less amount of money you spend per borrower, the more folks we can help with this program,'' Stephen Augur, Florida Housing's executive director, said at the time.
It was too little help for homeowners like Sheila Ellison.
In 2008, while working for a drug treatment center, Ellison injured her back when a resident attacked her and she had to take a lower-paying job.
For six months, the Hardest Hit program made partial payments on her St. Petersburg home as Ellison tried to negotiate a loan modification. When the aid stopped, the bank filed to foreclose.
"I'd like to (have seen) it go longer than six months,'' Ellison said of the Hardest Hit help. "I'm still fighting Wells Fargo. Many nights I sit up and cry.''
Eventually Florida Housing Finance Corp. officials realized their mistake.
By last spring, only 12 percent of homeowners receiving Hardest Hit aid were able to resume their payments. So housing agency officials doubled the aid to 12 months and increased the amount that could be used to make up late payments.
"I think the program is going to be really productive, at this point in time'' board chairman Len Tylka said in April as the changes were announced.
But as of Dec. 31, just 18 percent of Floridians who applied for monthly Hardest Hit assistance had received it — the lowest percentage of any state.
Like other states, Florida bans Hardest Hit aid to people convicted of a mortgage-related felony. But in reviewing public records on more than 500 Tampa Bay homeowners approved for help, the Times found dozens with other offenses, including felonies. Among them:
• Andrea Destowet, 51, of St. Petersburg pleaded guilty in 2006 to fraud after her ex-husband said his signature had been forged on a $100,000 life insurance policy Destowet took out with herself as beneficiary. Destowet, who had previously pleaded no contest to unemployment compensation fraud, said a criminal record shouldn't disqualify someone from receiving Hardest Hit aid — in her case, up to $42,000.
• Crystal Eva, 45, of St. Petersburg pleaded guilty in 2005 to unemployment compensation fraud after claiming to be jobless for several months although she had been paid $2,427 working for a data processing company. She told the Times she received six months of Hardest Hit assistance.
• James Billings, 53, of Hillsborough County, pleaded guilty in 2010 to possession of child pornography and was sentenced to probation. He qualified for as much as $42,000 in federal Hardest Hit help.
Taxpayers also made mortgage payments for Tiffany Flournoy, whose record dates to the 1990s when she pleaded guilty to driver's license fraud and no contest to welfare fraud.
At least seven times since then, St. Petersburg police have investigated fraud allegations against Flournoy. Twice, charges were filed.
In 2006, while working in a dental office, Flournoy was arrested for using a patient's credit card information to book hotel rooms for a youth basketball team. She pleaded no contest and was put on probation.
Two years ago, Flournoy was working for a home health service when she used a client's credit cards to pay a storage bill, repair a TV and buy jewelry. She pleaded guilty in December 2011, four months before she was approved for Hardest Hit aid.
Flournoy, 41, is now in jail for violating her probation.
Green, of the housing agency, said the federal government requires only that Hardest Hit applicants certify they do not have a mortgage-related felony conviction. There is no requirement for criminal background checks.
"The purpose of the program is not to make a moral judgment on (homeowners) or say that because of something they may have done in the past they don't deserve help,'' Green said. "The purpose of the program is to try to keep people in their home.''
Mountains of debt
Felons are eligible for Hardest Hit assistance because there are no rules against most criminal offenses. But even when there are rules and guidelines, Florida's program doesn't always follow them.
Although homeowners are not supposed to have more than one property besides their residence, the Times found several Tampa Bay residents with multiple properties.
Among them is Thomas Lopez of Tampa, who listed two investment properties on his 2011 bankruptcy petition. Public records still list Lopez as owner of all three houses. He did not respond to requests for comment.
The Times also found a woman who bought a second house while getting Hardest Hit help on her home.
In 2011, Darlene Bell-Babineaux of Brandon was fired from her job as a state juvenile detention officer. She bought a house for $88,000 last April, four months after taxpayers began making mortgage payments on her primary residence.
Being fired can keep people out of Florida's Hardest Hit program, which is supposed to favor homeowners in financial hardship through "no fault'' of their own, according to program guidelines.
"Money mismanagement'' is also potentially disqualifying, although the Times found dozens of people getting mortgage help despite a bankruptcy or foreclosure well before the housing bust.
And Hardest Hit help is going to at least 10 Tampa Bay homeowners with large federal tax liens. Among them is Charles Jindracek of Largo, who owes the IRS $154,359 in back taxes.
"It's a wonderful program, without it I would have lost my house,'' said Jindracek, who said his income plunged after his wife left him and his new marine repair business struggled.
Georgia denies Hardest Hit aid to people with IRS liens on the premise that if they haven't paid their taxes they shouldn't get tax-funded mortgage assistance.
"I can't speak to what they did in Georgia,'' Green said. "We modeled our program after the federal mortgage assistance programs and none had that requirement.''
Condo owners denied
While helping felons and tax delinquents, Florida's Hardest Hit program denied mortgage aid for a year and a half to most of the 557,000 Floridians whose homestead is a condominium.
The reason: a policy unique to Florida that made people like Dale Bairstow ineligible if they lived in condo projects not approved by the Federal Housing Administration.
In 2005, Bairstow, a Canadian who is a legal U.S. resident, inherited a condo on Clearwater's Sand Key. He moved to Florida and worked for a mortgage company until he was laid off in 2010.
Unable to find another job, Bairstow, 65, fell behind on his payments but was denied Hardest Hit aid because his condo complex didn't qualify. He discovered that fewer than 300 of Florida's 25,000 condo projects have FHA approval, which requires associations to set aside enough money for maintenance of common areas.
Bairstow won an appeal, and in December 2011, the agency began making payments that eventually totaled $7,000.
By then, he had moved back to Canada.
It wasn't until April — more than a year after the Hardest Hit program began — that the agency decided owners of non-FHA approved condos could get help if their associations were financially sound. But the agency did little to get the word out.
Green told the Times she had issued a press release about the change. Asked for a copy, she acknowledged there was no release.
Green then said rejected condo owners were notified they could reapply. But the notifications were vague, referring only to "revised eligibility requirements'' that also affected people in other types of housing.
How many condo owners have received help since the change? Florida Housing Finance Corp. said it doesn't know. One housing agency report showed that at least 870 condo owners were rejected because of the old policy.
In December, Bairstow sold his condo in a short sale for $250,000. Because he sold so soon after receiving aid, he could have been required to pay back the full $7,000. But the housing agency wanted just $800.
Bairstow suspects that's because he agreed not to sue after first being rejected.
"I had all the facts,'' he said. "It was a discriminatory policy.''
Band-Aid on a tumor
In November, Florida's auditor general rapped the housing agency for its administration of the Hardest Hit program.
It cited numerous problems, including lax verification of homeowners' incomes. Auditors were unable to verify incomes in seven out of 20 files they reviewed.
Florida Housing said it is addressing the concerns.
The Treasury Department also has drawn flak, with federal auditors saying it failed to set measurable goals for assessing the $7.6 billion Hardest Hit program. Estimates of the number of homeowners to be helped were left to the states, which have frequently changed their estimates — Florida originally said it would help 20,000, then 40,000, now 52,000.
"Most states' goals are high-level expectations with no measurable target, such as Florida's 'preserving home ownership,' " auditors said.
Critics of Hardest Hit predict that the program will simply delay the inevitable.
"It's like a Band-aid on a tumor. They don't cut out the tumor, they just prolong the agony of the patient,'' said Anthony Sanders, professor of finance at George Mason University. "The best thing they could have done is speed through foreclosures, get all these people into apartments or even houses they rent and get out from under the burden of mortgage payments.''
But others say Hardest Hit could be an excellent program if Florida followed Arizona, California and Ohio and used some of the money to reduce the loan amount on severely underwater homes.
"There's still not enough of the kind of assistance truly going to what matters, which is principal reduction,'' said Johns of the Home Defenders League. "Unless (homeowners) can see their mortgage payments building equity, there isn't incentive there for them to continue to maintain the mortgage.''
Cynthia Bryant agrees.
Bryant's husband, who owned a St. Petersburg limousine service, was killed in a 2007 robbery and Bryant lost her job as an Albertson's store manager in 2008 when Publix bought the chain. Because of a sharp drop in income, Bryant, 53, qualified for Hardest Hit aid for her home of 24 years, but has struggled to get a loan modification since the help ended more than a year ago.
Retrained as a nursing assistant, Bryant said she could afford a $700 payment, not the current $1,093.
"What needs to be reduced is either the rate or principal. I went back to school and did everything I was supposed to. But I need help.''
Times researchers NatalieWatson, Caryn Baird and Carolyn Edds contributed to this report. Susan Taylor Martin can be contacted at firstname.lastname@example.org.