GLOUCESTER - What hurts Nancy Schwoyer most is blaming Wellspring House for the problems of the failed Cape Ann Housing Opportunity Inc.

"I can see how people can link them," said Schwoyer, retired director of Wellspring House, a longtime provider of shelter and services to the homeless on Cape Ann. "What makes me sad is that some people have linked them negatively."

Cape Ann Housing Opportunity Inc., or CAHO for short, was formed to redevelop the old LePage glue factory in West Gloucester into 125 units of apartments and condominiums called Pond View Village. But the nonprofit filed for liquidation this month in US Bankruptcy Court in Boston. Wellspring's board voted in 2002 to set up Cape Ann Housing Opportunity as a separate nonprofit to redevelop the LePage site, Schwoyer said.

"The purpose really was so that we could file paperwork to apply for grants and loans available for community housing projects," she said. "It was never meant to be a Wellspring project. It was meant to be a community project."

The Massachusetts Housing Investment Corp., a nonprofit community development bank that put $16 million into the project, asked that the nonprofit developer have a staff person working on the project before committing money, said Schwoyer, who as president of the developer's board was chosen to work 10 hours per week on the LePage project.

"The [Wellspring] board voted to let me do that, which was not part of my job," she said.

But because the developer was set up by Wellspring's board, many in the community link the troubled project to Wellspring, Schwoyer said. "The idea that this was Nancy Schwoyer's pipe dream, and Wellspring, as a nonprofit, is at fault, just isn't true," she said.

Joseph Flatley, president of Massachusetts Housing Investment Corp., said the project was a casualty of the real estate collapse. "There never was really anything wrong with the project," he said. "It got completed at the wrong time, in terms of the condo market. It really was a matter of timing."

The $35 million project was financed with both public and private money. But construction delays, rising costs, and other factors delayed progress.

Cape Ann Housing Opportunity developed the first two phases, 43 apartments and 41 condominiums. But it gave Massachusetts Housing back the deeds on about half of the unsold condo units.

"The condo units were completed when the market was collapsing," Flatley said. "It was pretty tough."

Last summer, Massachusetts Housing foreclosed on three lots still to be developed. A new developer is interested in building apartments on the site, Flatley said.

But the developer's troubles raised questions about the amount of money put into the project, particularly public dollars. Massachusetts Housing estimates it lost $2 million. An editorial published in The Gloucester Daily Times last summer called Wellspring House a "champion of social justice," but urged Schwoyer and other members of the Cape Ann Housing Opportunity board to explain the project's financial woes.

"As the recipient of millions in grants, loans, and contributions from both private and public sources, Cape Ann Housing Opportunity and its leaders owe the public a complete and accurate accounting of what happened - and where the money went," the editorial stated.

Schwoyer said she could not comment while lawyers prepared the Chapter 7 bankruptcy filing. "Our attorneys . . . told us we couldn't make public statements at that time," she said. "What we really wanted to say was: We're a volunteer board. Not one of us has taken a penny. Our intention was to meet a community need for housing. We all feel very bad about what happened . . . especially for our creditors."

Schwoyer said she is glad the project is headed toward the finish line. "It doesn't matter that it's not CAHO," she said, "just that people in Gloucester and Cape Ann have good housing."

Kathy McCabe can be reached at kmccabe@globe.com.

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