NO. JEFFERSON CIRCUIT COURT
DIVISION ELEVEN (ll)
JUDGE BRIAN EDWARDS

BROTHERS CONTRACTING, INC. I PLAINTIFF
V.
DANNY JOHNSON HEART OF FIRE MINISTRIES, INC.. ET AL. DEFENDANTS

DECLARATION OF THANN YOUNG

I, Thann Young, declare as follows:

1, My name is Thann Young. I have worked for the United States
Department of Housing and Urban Development (HUD) since October 2002. I am
currently a Senior Community Planning and Development Specialist for the U.S.
Department of Housing and Urban Development in Washington D.C. My current
responsibilities include managing the Rural Gateway Clearing House, the Rural
Housing and Economic Development Program, the Border Community Capital
Initiative, the Delta Community Initiative, the Appalachian Economic
Development Initiative, the Promise Zone Initiative, as well as Church Arson
Loan Guarantee Program,

2. For the past 13 years, I have been the HUD point of contact for
the Church Arson Loan Guarantee Program. My role has largely been to serve
as a facilitator for nonprofit organizations and financial institutions
seeking to participate in the HUD Church Arson Loan Guarantee Program. My
responsibilities have included reviewing all church arson loan guarantee
applications; working directly with lending institutions regarding the loan
guarantee program; monitoring the progress of church loan payments, as well
as handling logistics involved in efforts by lending institutions to seek
payment from HUD under the loan guarantee program. I have also worked with
churches on the logistics associated with the loan guarantee program,

including applications for loan guarantees as well as efforts to restructure

 

loan terms (such as interest rates) in an effort to avoid default. I have
also been involved in loans where the church has defaulted and HUD has taken
over management of the debt.

3. Based upon my 13 years of experience, I am familiar?with the
Church Arson Prevention Act of 1996, section 4 (P.L. 104e155)(the 
Section 4 of the Act created a fund for HUD to provide guarantees for loans
made by financial institutions to assist organizations described in section
501(c)(3) of the Internal Revenue Code of 1986 that have been damaged as a
result of acts of arson or terrorism in accordance with the Act and such
procedures as the Secretary of Housing and Urban Development shall establish
by regulation. Arson often deprives churches of the property they would
otherwise use as collateral in seeking a loan. Without that collateral,
financial institutions may be hesitant or unable to make loans necessary to
address the effects of arson. Congress has authorized HUD to serve as a
guarantor, thereby facilitating financial institutions in lending monies
necessary to remediate the effects of arson and terrorism.

4. Regulations implementing Section 4 of the Act and authority
to guarantee loans under the Act are codified at 24 CFR part 573. These
regulations were initially implemented in 1996, with amendments in 1997, and
1999. 

5. HUD describes the purpose and requirements of the loan guarantee
program on its website. (Exhibit 1) (?Section 4 is a loan guarantee
provision authorized under the Church Arson Prevention Act of 1996 (the Act).
It authorizes a Loan Guarantee Recovery Fund to provide certain nonprofit
organizations with a source of financing to rebuild property damaged or
destroyed by acts of arson or terrorism. Regulations governing the Section 4
Loan Guarantee Recovery Fund may be found at 24 CFR part The
language contained in Exhibit 1 has been on HUD's public website since_August

2004. By Statute and by regulation, the Loan Guarantee Recovery Fund exists

 

to fund loan guarantees, not grants. General information about the Church
Arson Loan Guarantee Program was also posted to the HUD website in March
2006. (Exhibit 2).

6. HUD provides an Application Kit for entities interested in
obtaining a HUD loan guarantee. Attached as Exhibit 3 is the Application Kit
HUD started using in February 2006. (Loan Guarantee Assistance for Places of
Worship and Other Nonprofit Institutions Damaged by Acts of Arson or
Terrorism,? HUD-40076WLGA (2/2006)). The first ten pages of the kit describe
the nature and requirements of the loan guarantee program.

7. Under the Loan Guarantee Program, nonprofit organization,
including a place of worship, applies to a Financial Institution for a loan
to finance eligible activities. The nonprofit's loan application must
provide information about the need for financing and the intended uses of the
funds, as well as a certification that the damage or destruction to be
remedied resulted from an act of arson or terrorism. pp. If
both the nonprofit organization and the lending institution meet the
requirements of the Church Arson Loan Guarantee Program, HUD may then enter a
loan guarantee with the lending institution.

8. HUD is not the only potential source of financial support for
victims of church arson or terrorism. Some nongovernmental entities?such as
the NatiOnal Council of Churches, the Congress of National Black Churches,
the National Coalition of Burned Churches as well as insurance companies?also
work to address the issues created by church arson/terrorism. Some of these
organizations, when they have funds available, provide grants to qualified
applicants. These grants are not funded by HUD. The organizations providing
the grants have their own criteria for deciding whether to make a grant, and
for deciding what amount of grant to provide. HUD does not instruct these

organizations how to use their funds, nor would HUD have authority to do so.

 

Each of these organizations has their own mechanism for providing information
to interested applicants.

9. I have sometimes been asked by financial institutions and victims
of church arson/terrorism whether there are any other organizations which
might provide assistance. I have listed some of the above-reference
nongovernmental organizations, and made clear that these organizations make
their own independent decisions on how they will allocate their resources.
Neither I nor HUD direct, or have authority to direct, how nongovernmental
organizations use their resources to address church arson/terrorism.

10. Some of the nongovernmental organizations mentioned above are
listed in the Application Kit for HUD Loan Guarantee. In deciding whether to
guarantee a loan, and in deciding what percentage of a loan to guarantee, HUD
considers the potential scope of the applicant?s need and liability. The
purpose of the loan guarantee is to help an applicant get a loan when other
resources are unavailable.

11. The HUD loan guarantee program involves loans, not grants. Under
the Church Arson Loan Guarantee Program, in the event of a default by the
church on its guaranteed loan, HUD is obligated under the guarantee agreement
to pay off the balance owed to the lending institution. The promissory note
evidencing the loan is then assigned to HUD. All monies still owed under the
note are owed to HUD.

12. In my role, I do not have authority to enter a loan guarantee
agreement on behalf of HUD. Nor do I have authority to modify a HUD loan
guarantee agreement on behalf of HUD. I advise applicants of the limits of
my authority in working with nonprofit organizations and financial
institutions seeking to participate in the Church Arson Loan Guarantee
Program. Authority for entering and modifying HUD loan guarantees rests with

the Assistant Secretary for Community Planning and Development, the Principal

 

Deputy Assistant Secretary for Community Planning and Development, and the
General Deputy Assistant Secretary for Community Planning and DevelOpment.

13. In 2006, HUD received an application seeking a HUDnguaranteed
loan for Danny Johnson Heart of Fire Ministries (Heart of Fire} under the
Church Arson Loan Guarantee Program. (Exhibit The application packet,
submitted to HUD hy.Stock Yards Bank and Trust Company (BYE), includes
documents signed by Dan Johnson on behalf of Heart of Fire. The ?amount of
loan request? is listed as $1.5 million. 

14. On November 13, 2006, HUD provided notice to SYB that HUD would
provide a ?guarantee of a promissory note in the principal amount of
$l,500,000, plus interest thereon, which note shall be issued by Heart of
Fire Ministries, Inc., located in Louisville, Kentucky (the
?Borrower'). . . . (Exhibit 5). On November 21, 2006, HUD executed a

loan guarantee for $1,500,000, with Danny Johnson Heart of Fire Ministries,

Inc., as ?Borrower.? {Exhibit 6). SYB accepted this guarantee. 
004110} .

15. In early December 2006, I received emails from Heart of Fire
expressing concern about the slow pace or the loan process. (See, 
Exhibit 7). On December 4, 2006, I received an email from Heart of Fire
stating, ?Once again we appreciate your help with our HUD Loan.? page
2.) The email described ?the most recent list that was given to us to comply

with before our loan is closed,? and described delays in the ?closing? date.
The email further stated, ?Given the duress we are under, it would be ideal
if this loan could be change {sic} to a grant.? I told Bishop Dan Johnson
via phone that, no, the Church Arson Loan Guarantee Program was only a loan
guarantee program and that the loan guarantee could not be changed into a
grant. On December 6, I received an email from Heart of Fire Ministries
indicating that they were ?still aWaiting Stockyard?s Bank decision on our

loan." The email indicated ?This is becoming very frustrating? and ?We would

 

love to know if there are any other Faith Based Initiatives that we could
work through to obtain help. Any grants or endowments that you might have
information on would be helpful.? I likely suggested the names of the
organizations listed in paragraph 8 of my declaration as places Dan Johnson
might go to see what those entities might be able to do. I made no
representations as to what those entities would actually do, as they have
their own processes for deciding how to allocate their resources and would
need to hear directly from Dan Johnson what his needs were. Since I work for
HUD, my role is not to project what a nongovernmental entity might do.
Rather, I focus on how to facilitate loan guarantee agreements between
eligible financial institutions, eligible nonprofit organizations, and HUD.
On hecember 8, 2006, I received an email from Heart of Fire expressing
frustration with Stock Yards Bank and asking me whether Heart of Fire could
?approach another bank? and if so ?what does HUD require in the process?"


16. On December 22, 2006, Stock Yards Bank and Heart of Fire had a
closing on the $1.5 million guaranteed loan. {Exhibit 8). The closing
documents included a ?Construction Loan Agreement? a
promissory note a mortgage and an

Assignment of Rents and Leases among other documents.


17. At no time before the closing did I make any representation that

the loan would or could be converted into a grant. Nor did I hear any such
representations being made. I had no authority to orally change the terms of
the note, mortgage or guarantee agreement. At no time before the closing did
Heart of Fire express to me the thought that Heart of Fire had been promised
that its loan would be converted into a grant or that Heart of Fire would not
be held liable for repayment under terms of the promissory note. Had such a

sentiment been expressed, I would have stopped the proceedings, and

 

emphasized what the closing documents all saidwthat HUD was merely
guaranteeing a loan, and that Heart of Fire was liable for repayment under
terms of the note and the guarantee agreement.

18. In the months following the closing, I received emails from both
Stockyards Bank and from Heart of Fire Ministries. Some of these are
attached as Exhibit 9. Heart of Fire expressed concerns and complaints in
its emails. However, at no time in the months following the closing did
Danny Johnson or anyone acting on behalf of Heart of Fire indicate to me or
anyone in my presence that the promissory note, mortgage, or other documents
misrepresented the nature of the intended transaction. Nor did Danny Johnson
or anyone acting on behalf of Heart of Fire say to me or anyOne in my
presence that the closing documents failed to describe a material term or
condition of the intended transaction. At no time in the months following
the closing did Danny Johnson or anyone acting on behalf of Heart of Fire
state to me that the closing documents were inaccurate in that they failed to
reflect that Heart of Fire believed it had been promised that its $1.5
million loan would be converted into a grant. Similarly, I did not hear
Danny Johnson or anyone acting on behalf of Heart of Fire state that Heart of
Fire believed that its loan would be converted into a grant.

19. In May 2007, I received emails from Stock Yards Bank and Heart of
Fire referring to Heart of Fire's loan. Some of these emails are attached as
Exhibit 10.

20. Under the Church Arson Loan Guarantee Program, we try to help the
nonprofit organizations avoid a default. We work with financial
institutions, and may suggest restructuring the time frame for repayment,
changing the interest rate, etc. In the case of Heart of Fire, I understood
that Heart of Fire had difficulties, and worked with Heart of Fire to help
Heart of Fire Succeed in the Church Arson Loan Guarantee Program. At no time

did I tell Heart of Fire that Heart of Fire would not be held liable for

 

repayment of its $1.5 million loan. Nor would have I have had authority to
make such a representation.

21. In July 2007, SYB and Heart of Fire entered into a ?First
Modification of Promissory Note and Construction Loan Agreement.? (Exhibit
11). This modification reflected an intention of the parties ?to extend the
construction and the interest only periods under the Loan Agreement and
Note," and ?to modify the Loan Documents? by extending certain deadlines,
including the ?Principal Payment Date.? (Edy). At no time either before or
immediately after this transaction did Danny Johnson or any representative of
Heart of Fire indicate to me that they had been promised that the loan
guarantee would be converted into a grant. Nor did any representative of
Heart of Fire express to me that Heart of Fire did not believe it was liable
for repaying the $1.5 million loan. Indeed, paragraph 5 of the First
Modification Agreement {signed by Danny Johnson) states, ?All other terms and
provisions of the Loan Documents are hereby reaffirmed and ratified by the
Borrower and all terms and provisions not specifically amended hereby shall
continue to remain in full force and effect.?

22. In August 2007, I received an email from Heart of Fire Ministries
indicating that its August loan payment was late. (Exhibit 12}. In
September 2007, I received an email from Heart of Fire describing a ?grim
situation? and the prospects that their September payment would be late. The
email indicated in part, asked Sam to hold off on whatever the Bank was
doing concerning our late mortgage payments till he could schedule a meet
with me next week. He agreed. . . . The main problem seems to bemoan we
Financially hold on and make it before they try to foreclose on us.? At no
time in August, September or October 2007 did any representative of Heart of
Fire say that Heart of Fire believed that Heart of Fire had been promised its
loan would be converted to a grant. At no time in mid to late 2007 did any

representative of Heart of Fire express to me that Heart of Fire had been

 

promised that the loan guarantee would be converted into a grant. Nor did
any representative of Heart of Fire express to me that Heart of Fire thought
it was not liable for repaying the $1.5 million loan.

23. In late December 2007, Stock Yards Bank and Heart of Fire entered
into a ?Second Modification of Promissory Note and Construction Loan
Agreement." (Exhibit 13). This modification reflected an intention of the
parties ?to extend the construction and the interest only periods under the
Loan Agreement and Note," and ?to modify the Loan Documents? by extending
certain deadlines, including the ?Principal Payment Date.? At no
time either before or immediately after this transaction did Danny JohnsOn or
any representative of Heart of Fire indicate to me that Heart of Fire had
been promised that the loan guarantee would be converted into a grant. Nor
did any representative of Heart of Fire express to me that Heart of Fire did
not believe it was liable for repaying the $1.5 million loan. Indeed,
paragraph 6 of the Second Modification Agreement (signed by Danny Johnson)
states, ?All other terms and provisions of the Loan Documents are hereby
Ireaffirmed and ratified by the Borrower and all terms and provisions not
specifically amended hereby shall continue to remain in full force and
effect.?

24. One responsibility of the financial institution (Stock Yards
Bank) under the loan guarantee agreement was to provide HUD with 
reports. A copy of reports for Heart of Fire?s $1.5 million is
attached as Exhibit 14.

25. On September 30, 2008, HUD received written notice from Stock
Yards Bank that the bank provided notice to Heart of Fire that Stock Yards
Bank intended to accelerate the loan. (Exhibit 15). Attached to the Bank?s
letter was a copy of a letter Danny Johnson had written to President George
w. Bush. The letter to President Bush indicated, ?The Church owes $1.5

Million to HUD. Please I ask for Mercy, forgive this debt and Save our

 

Church.? Further, the letter said, ?On 9/10/08 I spoke with former President
Bill Clinton at a Scholarship Banquet in New York where I opened in Prayer.
President Clinton said that it was structured were [sic] it could be turned
into a Grant." I have no personal knowledge of what President Clinton was
told about the loan guarantee. Nor do I have any personal knowledge of what
President Clinton said in reply. However, based upon my extensive experience
with the HUD Loan Guarantee Program, my review of the regulations, and the
documents involved, the_loan guarantee given to Heart of Fire Ministries

cannot be turned into a grant.

26. On October 14, 2008, Stock Yards Bank sent a notice of default to
Heart of Fire Ministries. (Exhibit 16}.

'27. On November 25, 2008, Stock Yards Bank sent a letter to HUD
requesting a Full Guarantee Payment from HUD as Guarantor. {Exhibit 17).

Thereafter, HUD reviewed the request, and ultimately agreed to make payment
in full to Stock Yards Bank.

28. On January 30, 2009, HUD paid Stock Yards Bank the amount of
$1,565,986.89, representing a principal halance of $1,491,784.00 and interest
accrued through January 26, 2009, in the amount of $74,202.89. Thereafter,
Stock Yards Bank assigned to HUD the promissory note, real estate mortgage,
security agreement and fixture financing statement to HUD (Exhibit 8).

29. On February 5, 2009, Heart of Fire Ministries sent a letter to
President Barack Obama. (Exhibit 19). In the letter, Dan Johnson said: ?The
Church owes $1.5 Million to HUD, Please I ask for Mercy, turn this into a
Grant or Restructure our Loan to Save our Church and Home." HUD Assistant
Secretary Mercedes Marquez responded to the request on August 20, 2009,
stating in part, ?Unfortunately, HUS has no authority to convert his loan to

a grant. . . (Exhibit 20).

 

30. As of December 11, 2015, Heart of Fire owes HUD $2,901,423.71,
consisting of $1,491,784.00 in principal and $1,409,639.71 in interest.
Interest continues to accrue at the rate of 13%.

Pursuant to 28 U.S.C. 1746, I declare under penalty of perjury that

the foregoing is true and correct. 

fh?nn Young (7
Executed this date: