08-25-08 Special Agenda• CITY OF RICHFIELD
MONDAY, AUGUST 25, 2008
SPECIAL HOUSING AND REDEVELOPMENT AUTHORITY MEETING
RICHFIELD CITY HALL
COUNCIL CHAMBERS
7:30 A.M.
AGENDA
Call to order
HRA approval of agenda
2. Consideration of a subordination request for the Housing and Redevelopment
Authority's Transformation Loan at 7300 Logan Avenue
Staff Report No. 40
• Adjournment
Auxiliary aids for individuals with disabilities are available upon request.
Requests must be made at least 96 hours in advance to the Administrative
Services Director at 612-861-9702. -.
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AGENDA ITEM # 2
REPORT # LFQ
STAFF REPORT
HOUSING AND REDEVELOPMENT
AUTHORITY SPECIAL MEETING
AUGUST 25, 2008
REPORT PREPARED BY:
REPORT PRESENTER:
KIRSTEN PARTENHEIMER, HOUSING
SPECIALIST
NAME, TITLE
JOHN STARK, INTERIM COMMUNITY
DEVELOPMENT DIRECTOR
NAME, TITLE
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INTERIM DEPARTMENT DIRECTOR
REVIEW:
REVIEWED BY EXECUTIVE
ITEM FOR HRA CONSIDERATION:
Consideration of a subordination request for the Housing and Redevelopment Authority's
', Transformation Loan at 7300 Lo an Avenue.
I. RECOMMENDED ACTION:
By Motion: Approve appeal of a subordination request for the
Housing and Redevelopment Authority's Transformation Loan at 7300
Loaan Avenue.
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II. BACKGROUND
Malcolm LeFever and Cheryl Downey of 7300 Logan Avenue are requesting a
subordination of their Transformation Loan. The subordination request was denied by staff
because it does not meet the HRA's requirement that, in order to subordinate, the new
loan must achieve an 80% loan to value ratio. In this case, the resulting loan to value ratio
would be 96%. Staff is recommending approval of the subordination request, however,
because it would not change the overall position of the HRA. Currently the HRA's lien is in
3rd position behind $237,500 of debt; in the situation sought by the applicants, the HRA
lien would be in second position behind that same amount of indebtedness.
082508 7300 Logan Subordination Appeal.doc
Subordination Summary
• • Home appraisal value: $260,000 (as of May 22, 2008)
• Hennepin County Estimated Market Value (2008): $257,000
• Deferred Loan: August 24, 1998 for $11,951.00
• Summary of indebtedness:
o New mortgage: $237,500
o HRA lien: 11 951
o Total indebtedness: $249,451
• Loan to value ratio* = 249 451 = 96%
$260,000
III. BASIS OF RECOMMENDATION
A. POLICY
• The HRA's lien is currently in 3rd position.
• The HRA subordinated in October 2006 to a $90,000 adjustable rate
revolving line of credit. The revolving line of credit has since been fully
expended and the interest rate has re-set to 8.5% currently.
• Due to the outstanding primary and secondary mortgages, the new
mortgage cannot be increased to pay off the HRA lien, as it would push the
• Loan-to-Value (LTV) ratio beyond the FHA limits.
• The proposed debt consolidation will significantly improve the applicant's
financial position by decreasing the interest rate to 5.75% and lowering the
payment.
• Without the debt consolidation, the applicant is likely to fall behind in
payments and could ultimately end up in foreclosure.
• The HRA's lien will move to 2nd position if it agrees to the subordination and
the HRA's risk will not be increased.
• Staff will strongly encourage Mr. LeFever and Ms. Downey to take a financial
counseling course through Lutheran Social Services or another organization.
B. CRITICAL ISSUES
• Administratively, the subordination request was denied, because it
does not completely conform to the HRA's subordination policy. The
applicants are requesting the HRA make a special consideration.
• The applicant in is danger of having their home fall into foreclosure
unless they are able to refinance in the very near future.
C. FINANCIAL
• Payment has been received for the subordination request.
• The subordination would not put the HRA into a less desirable
financial position.
D. LEGAL
• N/A
IV. ALTERNATIVE RECOMMENDATION~S~
• Deny the subordination request.
V. ATTACHMENTS
• N/A
VI. PRINCIPAL PARTIES EXPECTED AT MEETING
• None
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