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U.S. Rep. Vern Buchanan of Sarasota secures large loan using Habitat for Humanity mortgage as collateral

A faded sign marks undeveloped Cortez Landings. Habitat for Humanity pays $50,000 yearly in an interest-only balloon mortgage.

SUSAN TAYLOR MARTIN | Times

A faded sign marks undeveloped Cortez Landings. Habitat for Humanity pays $50,000 yearly in an interest-only balloon mortgage.

By 2009, Florida's real estate market had plunged, dragging with it a Bradenton project being developed by the brother of U.S. Rep. Vern Buchanan.

Only a few homes had been built in the community, known as Cortez Landings. Work had been at a standstill for almost two years.

Yet in the depths of the financial crash, Cortez Landings LLC found a buyer willing to pay $1.4 million for some weedy vacant lots. Manatee County Habitat for Humanity, a nonprofit group that builds homes for the poor, is now stuck with undeveloped land worth less than $500,000, about a third of what it paid.

"It was not a good deal, it absolutely wasn't,'' said Patricia Staebler, a certified general appraiser who joined Habitat's board last year. "They overpaid in 2009.''

Ed Buchanan, brother of Sarasota's Republican congressman, lost money on the sale compared with what he originally paid. But he mitigated his losses by selling to Habitat at a time when traditional real estate deals had all but shut down.

Rep. Buchanan benefited from the deal, as well.

Habitat still owes $1 million to a company owned by Buchanan's wife and one of his top executives. And unbeknownst to Habitat until Thursday, Buchanan has been using the Habitat mortgage as collateral for a multimillion dollar loan he got from Bank of America.

If he defaults, Bank of America would own the Habitat mortgage and could require the nonprofit to pay the full $1 million it owes when the final payment comes due less than two years from now.

Although Habitat officials say they could come up with the funds, the organization already has so much money tied up in Cortez Landings — at least $450,000 — that it has affected the pace of its building projects.

The Habitat mortgage is part of the collateral for a $3.9 million loan Buchanan got in 2008 from Bank of America, according to official records filed in 2010 in Manatee and Hillsborough counties. Other collateral includes a mortgage on land in New Tampa owned by one of Buchanan's former campaign contributors.

In a statement to the Tampa Bay Times, an attorney for the congressman said the loan was "fully and properly'' listed on Buchanan's federal financial disclosure statements.

The attorney did not respond to a reporter's questions about the Habitat for Humanity deal.

Financial squeeze

First elected in 2006, Buchanan has risen to positions of power in both the U.S. House and the Republican Party. He is the only Floridian on the tax-writing Ways and Means Committee, and he is a major fundraiser for the National Republican Congressional Committee.

But throughout his career, Buchanan, 61, has been dogged by allegations of unethical business practices, illegal campaign contributions and misrepresentation of personal finances. The House Committee on Ethics found numerous errors on his disclosure forms but said in July it would not pursue punitive action.

Buchanan faces a tough challenge this year from Democrat Keith Fitzgerald, who says the three-term congressman has "refused to come clean'' about the allegations against him.

During his second House race, in 2008, Buchanan took out a loan from Bank of America for $3.875 million, records show.

In his statement to the Times, Buchanan's attorney did not address questions about how the loan proceeds were used.

At the time, some of Buchanan's real estate ventures were souring. He faced hefty bills defending against lawsuits filed by former employees claiming they had been pressured into making illegal campaign contributions. He was in a reprise of his expensive 2006 race against Democrat Christine Jennings.

It also was the start of the global financial crisis, when banks had largely stopped lending.

"The foundations of the economy were already shaking,'' said David Bacon, a St. Petersburg lawyer and expert in real estate law. "There was a lot more scrutiny and lenders were a lot more cautious.''

During the 2008 campaign, however, there were no questions about how Buchanan got such a sizable loan because no mention of it appeared in public records until 2010.

That's when Bank of America told Buchanan it would not renew the loan unless he produced some collateral, official records show.

A good deal?

For part of the collateral, Buchanan turned to the land in Manatee County.

In 2005, at the height of the boom, his brother's Cortez Landings LLC had paid $2.3 million for 64 lots in a run-down area of east Bradenton. Plans called for dozens of three-bedroom, two-bath houses, but only 11 were built.

By 2009, Cortez Landings had stalled. As money dried up, potential buyers and investors for Florida real estate projects were almost nonexistent.

Enter Manatee County Habitat for Humanity. With one housing project nearing completion, Habitat was looking for more land. Treasurer Vicky Followell said Cortez Landings "rose to the top'' among several sites being considered because it already had roads and other infrastructure.

"It was an exciting opportunity,'' she said.

After negotiations involving Habitat's attorney and Buchanan's brother, Habitat agreed to buy 53 lots for $1.4 million in March 2009. Followell said an appraisal showed the land was worth "a little more than we paid.'' Habitat, which has since moved offices, was unable to locate the appraisal last week.

But Staebler, the appraiser who later joined Habitat's board, said the price was too high.

"If they would have done a market study for subdivision development in the low-income bracket they would have seen this land is being overpaid,'' she said.

When Habitat bought the land, property appraiser records showed that a typical lot in Cortez Landings had a market value of less than $23,000. Habitat paid $26,415 per lot.

At the time of the purchase, Habitat was interviewing candidates for executive director, a job that would involve shepherding Cortez Landings and other projects. Habitat selected Ronald Turner, who had recently resigned as Vern Buchanan's chief of staff and campaign manager after his second DUI arrest. Turner said he had no role in the decision to buy from Buchanan's brother.

"As far as I know, it was a standard business transaction and I don't know anything else to say about it,'' said Turner, now working for the Sarasota supervisor of elections.

Habitat put down $400,000. The organization gave Cortez Landings LLC a balloon mortgage with interest-only payments until 2014, when the full $1 million becomes due.

More surprises

In July 2010, records filed in Manatee County showed Cortez Landings LLC had assigned Habitat's mortgage to Bank of America as collateral for Vern Buchanan's $3.9 million loan.

Shown the mortgage assignment Thursday by a reporter, Followell, the Habitat treasurer, and Diana Shoemaker, the current executive director, were surprised to learn Buchanan had used the mortgage to secure his loan.

"We should have known about this, right?'' Shoemaker said. She added: "We as a nonprofit like to keep ourselves transparent, and we would hope for the same from those we deal with.''

Until it finishes a project in Ellenton and sells those houses, Habitat doesn't have money to build in Cortez Landings because fundraising has been slow, Shoemaker said. Meanwhile, Habitat is paying $50,000 a year in interest to Cortez Landings LLC, whose current owners include Buchanan's wife, Sandra.

"I had the feeling he (Buchanan) was anxious for us to get started on it,'' Shoemaker said of Cortez Landings, "and we reiterated the challenges of the fundraising. I specifically asked him if there was any chance the interest could be abated for a period of time and he said he wasn't interested in doing that.''

One reason Buchanan could be eager to see Habitat start building — Habitat agreed to pay down the mortgage by $30,000 every time it sold a home in Cortez Landings.

A Tampa connection

Other collateral for Buchanan's Bank of America loan came from Hillsborough County.

In 2008, Sandra Buchanan incorporated Tampa Real Estate One and loaned $1.85 million to a company owned by Tampa home builder Tim Mobley, records show.

As security, Mobley gave a mortgage on vacant land in New Tampa, part of the K-Bar Ranch area he is developing near the Pasco County line.

Mobley has known the Buchanans since they moved in the early 1990s from Michigan to Tampa, then to Longboat Key. In 2008, Mobley, his relatives and employees were the biggest group of contributors to Buchanan's second House race.

Mobley was drawn into the campaign finance controversy when a former business partner claimed Mobley illegally reimbursed him for $8,800 in contributions to Buchanan's campaign in 2008. Mobley has denied the allegations.

Sandra Buchanan's loan to Mobley's company only became public two years later, when documents filed in Hillsborough County showed Mobley's mortgage was also used as collateral for Vern Buchanan's borrowing from Bank of America.

Buchanan's statement to the Times said the transaction with Mobley was a "routine business loan.'' The statement did not address questions about whether Buchanan is a partner or investor in any of Mobley's Tampa real estate projects.

If Buchanan defaulted on his Bank of America loan, the bank would own the Mobley and Habitat for Humanity mortgages. Habitat officials say they have enough in the bank to pay off the $1 million they owe, though it would mean less money to build homes for needy families.

"This is one of the challenges we're going to have to face,'' said Shoemaker, the executive director. "It does impact on our ability to go forward.''

Susan Taylor Martin can be reached at susan@tampabay.com.

U.S. Rep. Vern Buchanan of Sarasota secures large loan using Habitat for Humanity mortgage as collateral 09/09/12 [Last modified: Sunday, September 9, 2012 9:14am]
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