022211Specialcompleteagenda (2)CITY OF RICHFIELD, MINNESOTA
TUESDAY, FEBRUARY 22, 2011
SPECIAL HOUSING AND REDEVELOPMENT AUTHORITY MEETING
RICHFIELD CITY HALL COUNCIL CHAMBERS
6700 PORTLAND AVENUE
5:45 P.M.
AGENDA
Call to order
Roll call
1. HRA approval of agenda
2. Consideration of request for subordination of HRA First Time Advantage Home Loan at
6620 Vincent Avenue
Staff Report No. 9
Notes: R -
3. 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#:
REPORT #:
•
J STAFF REPORT
HOUSING AND REDEVELOPMENT
AUTHORITY .MEETING
FEBRUARY 22, 2011
REPORT PREPARED BY:
MICHELLE LEWIS, HOUSING SPECIALIST
NAME, TlTI E
•
REPORT PRESENTER:
DEPARTMENT DIRECTOR R
REVIEWED BY EXECUTNE
ITEM FOR HRA CONSIDERATION:
Consideration of a request for a subordination of a Housing and Redevelopment Authority First
Time Advantage loan at 6620 Vincent Avenue.
I. RECOMMENDED ACTION:
By Motion: Approve or deny the request for a subordination of a
Housing and Redevelopment Authority First Time Advantage Home
Loan at 6620 Vincent Avenue.
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II. BACKGROUND
Eric and Rebecca Patenaude have requested a subordination of a $9,936 First
Time Advantage loan received on June 29, 2005. At 100 percent, the loan-to-value
ratio exceeds the Housing and Redevelopment Authority's (HRA) Subordination and
Satisfaction Policy limit of 80 percent.
The HRA's First Time Advantage loan is currently in first place ahead of the primary
mortgage of $159,364. The Patenaude's are proposing to refinance their primary
mortgage into a new mortgage of $164,554 lowering their interest rate from 6.125
percent to 4.25 percent. By refinancing, the Patenaudes will reduce their monthly
payment by $194 a month.
02222011 Patenaude subordination request appeal.doc
KAREN BARYON, ASSISTANT COMMUNITY
DEVELOPMENT DIRECTOR
The 2010 Tax Assessed Value is $167,000, down 6.6% from 2009. This qualifies
• the Patenaude's for the federal Home Affordable Refinance Program (HARP).
HARP is a streamlined refinance program that allows homeowners who currently
have an FHA-insured mortgage and are impacted by decreased property values,
the opportunity to refinance mortgages to secure better terms in order to help
stabilize the housing markets in the United States.
While the Patenaude's have expressed interest in repaying the HRA loan, HARP
guidelines do not allow them to do so in the midst of the refinance. The
Patenaude's also stated that they would be willing to repay the HRA loan after
refinancing. However, staff consulted legal counsel and found that there is no
viable method to obligate the borrowers to repay the HRA loan after the refinance is
complete. Additionally, any contingencies on the Subordination Agreement would
disqualify the Patenaude's from refinancing under the federal HARP requirements.
III. BASIS OF RECOMMENDATION
A. POLICY
According to the HRA Subordination and Satisfaction Policy:
• "The total debt secured by the property, including the HRA lien and all
superior mortgages, shall not exceed 80 percent of the documented
market value of the property." Astaff-authorized appeal of the Policy
can be granted if the loan-to-value ratio does not exceed 85 percent
• and all other requirements of the Policy are met.
o The Patenaude's request does not meet either of these
rules.
• "The overall value of superior debt must not be increased by more
than 50%."
o The Superior debt is increasing because the HRA's loan
is currently in first position. The Patenaudes refinanced
in January 2008, but the lender did not request a
subordination.
• "Closing costs are reasonable. Generally this shall mean that the sum
of all discount points, origination fees, and lender ancillary fees shall
not exceed 3 percent of the new first mortgage amount."
o Closing costs are 3.8 percent.
• The following are the other staff-authorized appeal requirements that
are satisfied:
o Payment terms are within the financial means of the
borrower.
o No equity is being removed.
o Property taxes are current.
o The HRA has not granted any previous subordinations to
the loan.
. B. CRITICAL ISSUES
• The combined loan-to-value ratio is 100 percent.
• The amount of debt in front of the HRA lien is increasing from $0 to
$164, 554.
• The refinance is a streamlined process that does not require an
. appraisal. The property value is estimated by an Automatic Valuation
Model to save the borrower money on the refinance.
• The refinancing will lower the primary loan's interest rate and will
reduce the amount of the Patenaude's monthly payments.
C. FINANCIAL
• The amount of debt in front of the HRA lien is increased with the
refinancing.
• There are closing costs associated with the refinance equal 3.8
percent of the mortgage amount.
• Payment has been received for the subordination request and appeal.
D. LEGAL
• N/A
IV. ALTERNATIVE RECOMMENDATION(S~
• Deny the subordination request.
V. ATTACHMENTS
• Letter from homeowner,
• VI. PRINCIPAL PARTIES EXPECTED AT MEETING
• Eric Patenaude
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~i 132011
Eric Patenaude
6620 Vincent t1ve:S
Attn: Housing Specialist
670Q Portland Avenue.:
Richfield, MN 55423
.Hello,
I am writing in order to request the Richfield, HRA'be willing to subordinate their lien on my home at 6620 Vincent:
Ave S. I ask this because with the. historically low rates, in conjunction with the HARP Freddie Mac loan program
refinancing: my current "30 year mortgage from the current .6.125 percent down to 4.25 percent will. save fur family
$200 dollars per month, in addition to over $"30,000 in interest over the life".of the loan,
We were; intending on paying off the loan in full with monies from my parents,. but were informed tonight fronn
Wells Fargo that this goesagainst;the policy of the 1dARP"program, quote:
Existing subordinate. financing must be re-subordinated ar paid ofF with borrowers' own funds.
Dawnpayment Assistance Programs (OAPs) arc; eligible to be re-subordinated. New subordinate financing.
or replacement subordinate financing is not allowed:.
Surely'we can come to a compromise: in this situation in"which all ponies are satisfied. We certainly would be willing to sign a
.contract. that states we"will. pay ofl'the balance of the loan: once the refinance is complete since myparents have lentit
tame.
Please respond to me as'soon as you are able, as my window of time with. Wells -Fargo and the rate: that. is locked fn
ends at the, end of business Friday
Sincerely,
~~
Eria Patenaude
6&20 Vincent Ave' S
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