07-17-89 agendaHOUSING AND REDEVELOPMENT AUTHORITY
HRA LETTER NO. 18
• Agenda,July 17, 1989
Issue Statement:
Authorization of an amendment to the Richfield Rehabilitation
Deferred Loan Procedural Guides which increases the HRA's ability
to provide loan funds to applicants purchasing on a Contract for
Deed.
Background:
The HRA's Richfield Rehabilitation Deferred Loan program provides
CDBG funds as loans to lower income homeowners. Each loan is
secured by a Repayment Agreement filed as a lien against the
property. Repayment of the loan is required in full when the
property is sold or transferred.
When property is being purchased on a Contract for Deed, current
procedural guidelines require that both the resident/owner
applying for the loan funds (vendee) and the owner/contract
holder (vendor) execute the Repayment Agreement. The vendors
signature on the Repayment Agreement secures the loan if the
vendee defaults on the Contract for Deed. (The number of
properties in the program with a contract has been about four or
five in the last five years).
In many instances, vendors refuse to sign Repayment Agreements
because of the risk of large amounts of debt should a vendee
default. In January, 1988, the HRA authorized an Amendment to the
• Repayment Agreement which reduces this burden of debt. The
amendment allows the vendor to repay the loan in monthly
installments, with interest, rather than in a lump sum payment.
Because the risk of debt is still present, some vendors remain
unwilling to enter into the Repayment Agreement.
Often, a Rehabilitation Deferred Loan is the only funding
available for the applicant to make necessary home repairs and
improvements. In some instances, problems exist which affect the
safety and habitability of the dwelling and/or funding is needed
to correct housing maintenance code violations. Without the
vendors signature, funds cannot be provided to lower income
homeowners for these needs.
A situation, as described, has recently arisen. Staff has
explored alternatives and devised a solution that can be used on
a case by case basis.
An amendment to the Deferred Loan Procedural Guides has been
drafted which allow the Repayment Agreement to be accepted
without the signature of the vendor provided that:
1. Defects or deficiencies exist in the property which
directly affect the safety and habitability of the
property.
• 2. The applicant has been notified by the City of a
housing maintenance code violation.
Only improvements relating to 1. and 2. above will be eligible
for funding. The procedure will be utilized only when no other
. alternative exists.
Although this procedure could create future situations where some
Block Grant funds may not be recovered if a vendee defaults on a
Contract for Deed, the procedure would have benefit in:
1. Achieving the HRA's goal to preserve and maintain
Richfield's existing housing stock.
2. Enabling lower-income homeowners to remain in the home
where ongoing deferred repairs and maintenance might
otherwise become unmanagable.
This amendment has been reviewed with Hennepin County and their
response has been favorable. Staff is awaiting written notice
of approval by the County.
Recommendation:
Adopt the attached resolution authorizing the amendment to the
Richfield Rehabilitation Deferred Loan procedural Guides as
described.
Basis of Recommendation:
1. Provides an alternative to assist a low-income homeowner
in immediate need, to obtain rehabilitation funds.
is 2. Improve the HRA's ability to provide funds to low-income
homeowners in need of health, safety, and housing
maintenance code related improvements.
Alternative Recommendation:
Not authorize the amendment to the Deferred Loan Procedural
Guides. This would prevent some lower income homeowners from
securing funds for necessary improvements because a Contract for
Deed vendor refuses to participate.
Discussion/Decision Mode:
HRA authorization of the amendment to the Deferred Loan
Procedural Guides provides an alternative for a client presently
requesting assistance to correct a housing maintenance code
violation.
ReVD. lly submitted,
Ja Prosser
Ex Director
JDP:sae
0
HRA RESOLUTION NO.
RESOLUTION AUTHORIZING AMENDMENT TO RICHFIELD
DEFERRED LOAN REHABILITATION
PROCEDURAL GUIDES
WHEREAS, the Richfield Housing and Redevelopment Authority
has a Rehabilitation Deferred Loan program which utilizes CDBG
funds to assist lower income homeowners with rehabilitating their
homes; and
WHEREAS, loans are subject to a Repayment Agreement; and
WHEREAS, in some instances, program applicants are contract
for deed vendees; and
WHEREAS, in those instances, the fee owner (contract for
deed vendor) and the vendee must sign the Repayment Agreement to
facilitate a Deferred Loan; and
WHEREAS, contract for deed vendors may refuse to sign the
Repayment Agreement due to the risk of large amounts of debt
should the vendee default on the contract for deed; and
WHEREAS, an amendment to the Richfield Rehabilitation
Deferred Loan Procedural Guides has been developed which allows
• Deferred Loan Repayment Agreements to be accepted without the
vendors signature given:
1. Defects or deficiencies exist in the property which
directly affects the safety and hability of the property.
2. The applicant has been notified by the City of housing
maintenance code violation; and
WHEREAS, written approval of the amendment from Hennepin
County is forthcoming.
NOW, THEREFORE, BE IT RESOLVED by the Housing and
Redevelopment authority in and for the City of Richfield,
Minnesota that the Executive Director is authorized to amend the
administrative procedures for the Richfield Rehabilitation
Deferred Loan Program as described herein.
Passed by the Housing and Redevelopment Authority of
Richfield, Minnesota this 17th day of July, 1989.
Thomas E. Harms, Chairperson
ATTEST:
Joan Helmberger, Secretary