06-16-08 AgendaCITY OF RICHFIELD, MINNESOTA
. MONDAY, JUNE 16, 2008
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 (1) Special HRA/City Council Worksession of May 13, 2008
and (2) Regular HRA Meeting of May 19, 2008
2. HRA approval of agenda
3. Consideration of amendment to promissory note, security agreement and second
mortgage on real property located at 6432-15th Avenue to change maturity date to
October 22, 2012
• Staff Report No. 28
Notes:
4. Consideration of subordination request for HRA deferred loan at 6432-15th Avenue
Staff Report No. 29
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 # 3
REPORT # 2$
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~' STAFF REPORT
HOUSING AND REDEVELOPMENT
AUTHORITY MEETING
JUNE 16, 2008
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REPORT PREPARED BY:
REPORT PRESENTER:
INTERIM DEPARTMENT DIlZECTOR
REVIEW:
REVIEWED BY EXECUTIVE DIRECTOR:
KIRSTEN PARTENHEIMER, HOUSING
SPECIALIST
NAME, TITLE
JOHN STARK, INTERIM COMMiJNITY
ITEM FOR HRA CONSIDERATION:
Consideration of amending the maturity date of the Promissory Note, Security Agreement and
Second Mortgage on the real property located at 6432 15th Avenue to be forgiven in 15 years
October 22, 2012 .
I. RECOMMENDED ACTION:
By Motion: Approve an amendment to the Promissory Note, Security
Agreement, and Second Mortgage of the real property located at 6432
15th Avenue to change its Maturity Date to October 22, 2012.
II. BACKGROUND
On October 22, 1997 Ms. JacQueline Frazier, then JacQueline Richardson-
Crawford, signed a Purchase Agreement for the real property located at 6432 15th
.Avenue. Included in the purchase price was a Housing and Redevelopment
Authority (HRA) deferred loan in the amount of $25,000.
Staff discovered an error in the recording of the second mortgage in 1997. The
• mortgage erroneously lists the sum of $25,000 being due on the same day~as it was
recorded as opposed to the date on which it was intended to be forgiven. The
Promissory Note and Security Agreement defines the Maturity Date of the Note as
the date upon which certain events occur, such as the sale of the property or default
on the first mortgage. The document does not state a maturity date after which the
Amend Deferred Loan Agreement 6432 15th Ave S
DEVELOPMENT DIRECTOR
loan will be forgiven. The records kept on this project do not indicate the intended
• length of deferment.
III. BASIS OF RECOMMENDATION
A. POLICY '
• The HRA has had deferred loans with lien periods ranging from 15 to
30 years.
B. CRITICAL ISSUES
• An error was made in recording the maturity date for a second
mortgage provided by the HRA.
• The documents the HRA staff has on file for the real property. at 6432
15th Avenue does not indicate whether the loan shall. be forgiven and
after what period of time.
C. FINANCIAL
• N/A
D. LEGAL
• Staff consulted with HRA legal counsel and they concurred that a
• Maturity Date may be set for 15 years from the date of the original
Note and that the Borrower shall be relieved of the obligation to repay
the Original Note Amount, and that the lien may then be terminated.
IV. ALTERNATIVE RECOMMENDATION~S~
• Adopt a 20 or 30-year lien period and amend the Promissory Note and
Security Agreement, and Second Mortgage accordingly.
• Deny changes to the Promissory Note and Security Agreement, and Second
Mortgage.
V. ATTACHMENTS
• N/A
VI. PRINCIl'AL PARTIES EXPECTED AT MEETING
• N/A
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AGENDA ITEM # /~
REPORT # -~.9
STAFF REPORT
~ HOUSING AND REDEVELOPMENT
AUTHORITY MEETING
JUNE I f ~ 2008
REPORT PREPARED BY:
REPORT PRESENTER:
INTERIM DEPARTMENT DRECTOR
REVIEW:
REVIEWED BY EXECUTIVE DIRECTOR:
KIRSTEN PARTENHEIMER, HOUSING
SPECIALIST
NAME, TITLE
ITEM FOR HRA CONSIDERATION:
Consideration of a subordination request for the Housing and Redevelopment Authority's
Deferred Loan at 6432 15th Avenue.
RECOMMENDED ACTION:
By Motion: Approve appeal of a subordination request for the
Housing and Redevelopment Authority's Deferred Loan at 6432 15th
Avenue. '
II. BACKGROUND
.Longtime Richfield residents JacQueline and Martinas Frazier of 6432 15th Avenue
are appealing the denial of a subordination request fora $25,000 deferred loan.
They have submitted a Request for Subordination Agreement to the Housing and
Redevelopment Authority (HRA) so that they can consolidate debt and make home
improvements.
Ms. Frazier, then JacQueline Richardson-Crawford, purchased the property at 6432
15th Avenue in October of 1997 as part of the HRA's New Home Program. The
• New Home Program purchases substandard residential property from voluntary
sellers with the purpose of removing the older home and building a new one on the
site. The home is then sold to a family whose income does not exceed the 80% of
the state median income. The Frazier's home was built in cooperation with
Hennepin Technical College (HTC).
061608 6432 15th Ave S Subordination Appeal.doc
JOHN STARK, INTERIM COMMUNITY
Ms. Frazier's purchase agreement included a $25,000 deferred loan from the HRA
• for a second mortgage. Under the terms of the Agreement, the Fraziers make. no
payments and pay no interest on the HRA loan. In November of 2005, Ms. Frazier
refinanced her first mortgage for a lower interest rate and better terms. Her
subordination request was approved.
The HRA has ceased partnering with HTC because of concerns about the quality of
their housing construction. The Fraziers have experienced problems, especially
related to ice-damming, inadequate attic ventilation and exterior siding, dating back
to early 2001.
The refinancing currently sought by the Fraziers would allow them to make home
improvements. In order to obtain such financing, however, their financial institution
is requiring them to consolidate some personal debt into their proposed home equity
loan. The HRA's subordination policy prohibits any subordination that results in the
resulting proceeds being used for purposes other than home improvements.
The Fraziers want to maintain their largest financial asset -their home -and have
expressed their appreciation for the opportunity the New Home Program provided to
their family. They are committed to staying in Richfield and have been working with
the City of Richfield and HTC for over seven years to try to reach a solution to the
problems extending from the construction of their house.
III. BASIS OF RECOMMENDATION
• A. POLICY
• The current HRA's Subordination Policy requires any equity being
removed beyond the cost of the loan transaction to be used to
improve the property. The Frazier's subordination application does
not meet these criteria because they plan to remove some equity to
pay off the purchase of new living room furniture.
• All other criteria for approval of the subordination are met.
B. CRITICAL ISSUES
• Administratively, the Frazier's subordination request was denied,
because it does not completely conform to the HRA's subordination
policy. Mr. and Ms. Frazier are appealing the decision and are
requesting the HRA make a special consideration.
C. FINANCIAL
• Payment has been received for the subordination request.
D. LEGAL
• N/A
~ IV. ALTERNATIVE RECOMMENDATION(S) ~
Direct staff to revise the su
off personal debt. .
ination policy to allow the use of equity to pay
• V. ATTACHMENTS
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VI. PRINCIPAL PARTIES EXPECTED AT
ne a
ETING
homeowners
Addendum to Staff Report #29 regarding consideration of a subordination
request for the Housing and Redevelopment Authority's Deferred Loan at 6432
15th Avenue.
Fact Sheet
6432 15th Avenue South
Homeowners: JacQueline and Martinas Frazier
Hennepin Count 2008 Estimated Market Value $256,000
Appraised value April 2008 $260,000
HRA lien on ro ert $ 25,000
Amount of new mortgage loan $183,000
Equit bein removed $ 52,118.13
Total ro'ected indebtedness $208,000 (new mortgage + HRA lien)
Loan-to-value ratio 80%
Loan term for new mort a e 15 ears
Date of revious subordination agreement Nov. 14, 2005
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