02-20-07 Regular
CITY OF RICHFIELD, MINNESOTA
TUESDAY, FEBRUARY 20, 2007
REGULAR HOUSING AND REDEVELOPMENT AUTHORITY MEETING
RICHFIELD CITY HALL
COUNCIL CHAMBERS
6700 PORTLAND AVENUE
7:00 P.M.
AGENDA
Call to order
Roll call
1. Approval of minutes of Regular HRA Meeting of January 16, 2007
2. Presentation by Jan Susee regarding City Bella streetscape
Notes:
3. HRA approval of agenda
4. Consideration of establishing foreclosure redemption revolving fund and authorizing
redemption of 7422 Fourth Avenue and repairs and related expenses not to exceed
$155,654
Staff Report NO.8
Notes:
5. Executive Director report
6. Claims and payroll
Adjournment
Auxiliary aids for individuals with disabilities are available upon request. Requests
must be made at least 96 hours in advance to the City Clerk at 612-861-9738.
AGENDA ITEM # 4
REpORT # 8
.......
STAFF REpORT
RICHFIELD
HOUSING AND REDEVELOPMENT
AUTHORITY MEETING
FEBRUARY 20, 2007
REpORT PREPARED By:
BRUCE P ALMBORG, COMMUNITY
DEVELOPMENT DIRECTOR
NAME, TITLE
REpORT PRESENTER:
BRUCE P ALMBORG, COMMUNITY
DEVELOPMENT DIRECTOR
NAME, TITLE
DEPARTMENT DIRECTOR REVIEW:
REVIEWED BY EXECUTIVE DIRECTO .
ITEM FOR HRA CONSIDERATION:
Consideration of the establishment of a revolving fund and authorization to redeem real estate.
1. RECOMMENDED ACTION:
By Motion: Establish the foreclosure redemption revolving fund and
authorize the redemption of 7422 4th Avenue and repairs and related
expenses not to exceed $155,654.
'1 II. BACKGROUND I
In the fall of 2006, the Housing and Redevelopment Authority (HRA) established a
process for responding to mortgage foreclosures. The primary objectives are three:
1. Help maintain the supply of affordable housing;
2. Protect the investment of the HRA; and.
3. Improve the condition of existing housing and .strengthen residential
neighborhoods.
An HRA memo dated February 7,2007 discussed 7422 4th Avenue matters. The
HRA has a mortgage lien of $12,500 dating from 2000. An offer was received from
HBC Enterprises to pay $.52 on the dollar or $6,500 for the release of that lien.
Staff responded that the HRA will be considering its right to redeem. The filing of
the Notice Of Intent To Redeem protects the position of the HRA and also makes it
0220077422 4th Ave
possible to redeem (however, filing the notice does not require the filing entity to
redeem). The notice was filed the week of February 12, 2006. The deadline for
filing was Friday, February 16.
The dollars needed for the HRA to redeem would approximate the following:
U.S. Bank National Association
MN Housing Financing Agency
HRA
Delinquent water bill
Attorney's fee
Sheriffs Fee
Other fees
$114,309
$ 11,000
$ 12,500
$ 45
$ 1,500
$ 300
$ 1,000
The Sheriffs office has been requested to determine the exact amount due. The
Sheriffs payoff letterwill be available but not until after the HRA meeting.
In addition to the cost to redeem other mattersof interest include the following:
. The house approximates 868-sq. ft. and was constructed in the early
1940's.
. A single car garage was added in the early 1960's.
. The house is comprised of a living room, kitchen, full bath and two
bedrooms on the main floor.
. The full basement is at least partially finished and includes a % bath
(above information taken from Assessing and Inspection file information).
. Many elements of the house have been renovated during the last ten
years including windows, furnace, central air, and vinyl siding for
example.
. Typically the condition of the property is determined from the street with
no information on the condition of the interior. However, early in 2006 the
property was considered for eligibility to participate in the CDBG Deferred
Loan Program. The file indicated that the cost of repairs/renovations
would approximate $10,000.
. The major components of that proposed renovation included new roof,
site grading to improve drainage and basement window repairs.
The Assessor's office has placed the market value at $189,000. In the
neighborhood are two other houses of approximately the same character, which
sold during 2006 for $195,000 and $183,000. (The softness in the real estate
market may have a leveling impact on the assessor 's market value and a sale may
be slow.)
I III. BASIS OF RECOMMENDATION I
I A. POLICY I
. The HRA has in place a process for responding to mortgage
foreclosures when the foreclosure involves a property with an HRA
lien.
I B. CRITICAL ISSUES I
. The mortgagor (homeowner) has been in contact with mortgage
foreclosure prevention service providers.
. A Notice of Intent to Redeem has been filed.
. The condition of the exterior and the condition of the interior as
suggested by file information is favorable.
. The estimated value of $189,000 exceeds the estimated cost of
$155,654 to redeem and repairs.
. A second foreclosure action on 6625 14th Avenue is being pursued
concurrently. The HRA took action on this property in September
2006. Additional action items will be scheduled for this property for
the March HRA meeting. Staff and funding levels indicate that should
these two properties be redeemed no additional redemptions should
take place until at least one is sold and a performance evaluation can
be undertaken.
I C. FINANCIAL I
. A foreclosure revolving fund should be established with monies from
the HRA Capital Fund. The Capital Fund was establi~hed in the early
1980's. The principal amount of one million dollars is protected and
interest earnings are transferred out to support programs. The
projected interest for 2007 is conservatively projected at $ 15,000.
(The interest earnings can be covered by other revenues when the
budget is revised this summer.)
. Since the funds are not committed (with the exception noted above)
no cash flow issues would arise. Over time the Capital Fund would be
reimbursed.
. The basic objective is that with careful selection of foreclosure
property income will exceed expenses making it possible to reimburse
the Capital Fund and maintain the separate revolving fund. (While this
is the concept there are many variables which could undermine the
objective.)
The estimated costs at this point are as follows:
7422 4th Avenue
Dollars to redeem
Dollars to renovate
Other Costs
TOTAL
$137,809
$ 10,000
$ 7,845
$155,654
Estimated Sales Transaction
Sell to four-member family with income at 80% of median or $59,600
1/3 of income for PITI is $19,668 or 1,639/mo.
Sale Price
HRA Lien
$189,000
$ 9,000
Mortgage Amount
$180,000
$ 5,000
$175,000
$ 1 ,533
$ 25,000
Balance
Buyer Down payment
Total monthly PITI
HRA cash out
I D. LEGAL I
. Staff at Kennedy & Graven has been extremely helpful in this process.
HRA staff will continue this relationship.
I IV. ALTERNATNE RECOMMENDATION(S)
. Do not authorize redemption.
. Director staff to pursue an alternative funding source.
I V. ATTACHMENTS
. N/A
I VI. PRlNCIP AL PARTIES EXPECTED AT MEETING
. Counsel from Kennedy & Graven