12-03-07 Special
CITY OF RICHFIELD, MINNESOTA
MONDAY, DECEMBER 3, 2007
SPECIAL HOUSING AND REDEVELOPMENT AUTHORITY MEETING
RICHFIELD CITY HALL
COUNCIL CHAMBERS
6700 PORTLAND AVENUE
6:15 P.M.
AGENDA
Call to order
Roll call
Approval of agenda
1. Consideration of subordination request for HRA Deferred Loan at 6529 Humboldt
Avenue
Staff Report No. 49
Notes:
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.
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AGENDA ITEM # 1
REpORT # 49
.....
STAFF REpORT
RICHFIELD
HOUSING AND REDEVELOPMENT
AUTHORITY MEETING
DECEMBER 3, 2007
REpORT PREPARED By:
. VANESSA HAIGHT, HOUSING SPECIALIST
NAME, TITLE
REpORT PRESENTER:
JOHN STARK, ASSISTANT COMMUNITY
DEVELOPMENT DIRECTOR
DEPARTMENT DIRECTOR REVIEW:
NAME, TITLE
REVIEWED BY EXECUTIVE DIRECTOR: 0
ITEM FOR HRA CONSIDERATION:
Consideration to approve a subordination request for the Housing and Redevelopment
Authority's First Time AdvantaQe Loan at 6529 Humboldt Avenue.
I. RECOMMENDED ACTION:
By Motion: Approve a subordination request for the Housing and
Redevelopment Authority's Deferred Loan at 6529 Humboldt Avenue
South.
I II. BACKGROUND I
On March 4, 1999 a Richfield First Time Advantage Loan in the amount of
$9,600.00 was issued to Brent and Linda Wallace, owners of 6529 Humboldt
Avenue.
Since 1999, the HRA has subordinated twice:
- 2002 (89% L TV)
- 2005 (95% L TV)
Mr. and Ms. Wallace are requesting the Housing and Redevelopment Authority
(HRA) subordinate at this time. In 2005, Mr. and Ms. Wallace obtained a home
equity line of credit in addition to their first mortgage. Currently, the required
monthly payments on the two loans are too high for the Wallaces to continue
120307 Wallace Subordination
making on-time payments. The Wallaces wish to refinance in order to consolidate
the loans into one fixed-rate loan with a lower interest rate and lower monthly
payment. No equity will be taken out as part of this transaction.
I III. BASIS OF RECOMMENDATION I
I A. POLICY I
· In July of 2007 the HRA made changes to the subordination policy.
The revised policy lowered the loan to value ratio to 80%, restricted
the number of subordinations to two, and required any equity being
accessed to be reinvested in the property.
· The present subordination request by Mr. and Ms. Wallace fails to
meet two of these criteria. The loan to value ratio is expected to fall
between 85% and 90% and two subordination requests have been
approved in the past.
· The HRA has taken an active role in mortgage foreclosures and
supports mortgage foreclosure prevention. Approving the
subordination will allow Mr. and Ms. Wallace to consolidate their two
loans into one mortgage with an affordable monthly payment.
I B. CRITICAL ISSUES I
· If the subordination is not granted, Mr. and Ms. Wallace may be at risk
of entering foreclosure because they cannot afford the required
monthly payments on the two loans.
· An appraisal has yet to be conducted but the lender and homeowner
suspect a loan to value ratio of between 85 and 90%. If the loan to
value ratio is higher than 90%, the lender will not move forward with
the refinance.
I C. FINANCIAL I
· The value of the HRA lien will not be diminished by the proposal.
I D. LEGAL I
· Legal counsel has been involved in the changes to the subordination
policy.
· Given the short time frame in preparing this report, a tract index
summary is unavailable.
I IV. ALTERNATIVE RECOMMENDATION(S)
· Deny the subordination request.
· Suggest a modified approval.
I V. ATTACHMENTS
· N/A
I VI. PRINCIPAL PARTIES EXPECTED AT MEETING
· Linda Wallace, homeowner