Submitted By
Tammie Grossman, Director of Development Customer Services
Reviewed By
LKS
Agenda Item Title
Title
A Resolution Authorizing the Subordination of a Lien for the Property Located at 1023 Lyman Avenue
End
Overview
Overview
The loan recipient, Jerome Kurtenbach and Susan Kurtenbach, is requesting a subordination of their Barrie Park Investment Program mortgage to a new refinanced second mortgage. The Village remains secure in junior position on the title.
Body
Staff Recommendation
Approve the Resolution.
Fiscal Impact
There is no impact on the General Fund. Staff time to prepare the subordination and assignment are the only cost to the Village.
Background
On September 19, 2005, the Board of Trustees approved a $15,000 loan to the owner of 1023 Lyman Avenue. The loan is supported by a mortgage which was recorded against the property. The mortgage was recorded as a junior mortgage on the property with the purchase loan mortgage being first.
Loans made under the Barrie Park program are deferred for repayment until conveyance or transfer of any interest in the property. The guidelines were amended in September 2008 to clarify under what circumstances requests for subordination will be granted. The guidelines provide that in cases where former loan recipients wish to refinance mortgage(s), other than the Village's, and request that the Village maintain its subordinate position, the Village will agree to maintain its junior position if:
a. The terms of new first mortgage are more advantageous to the homeowner and are reasonable under current market conditions; and
b. There is adequate equity in the property to support the total proposed encumbrance, at least 15% equity (if necessary, homeowner(s) will submit an appraisal as proof of equity); and
c. The cost of the refinance is the only allowable equity taken out of the property unless the homeowner can show an emergency repair is needed and asks for a hardship exception.
The homeowner is seeking to replace their current mortgage, 15 year fixed rate at 5.375% interest rate, and a home equity loan, no term with a floating rate of 4.49%, with a new mortgage at 4.75% interest rate. The amount of the new loan will be $200,000.00. The current mortgage loan is being combined with a home equity loan that will reduce payments and provide for a tax deduction.
In addition to the cost of the refinance, the homeowner is requesting a hardship exception to make emergency repairs to the roofing and siding. The existing garage roof is leaking and the house existing roof is in bad condition as it was last replaced over 30 years ago. The existing siding on both structures is cedar shingles that are over 50 years old.
The issuing lender will not make the loan unless that mortgage is the second mortgage lien against the property. The lender is requesting that the Village subordinate its mortgage to their new second mortgage. The Village’s mortgage was created as a junior mortgage. By agreeing to subordinate, the Village is agreeing to remain in junior position as a second mortgage.
In this case, the property is appraised at $390,000.00. The refinanced mortgage of $200,000.00 and the Village’s $15,000.00 mortgage equal a total debt of $215,000.00, leaving $175,000.00 (44.87%) equity.
The request complies with the Village subordination requirements, including the exception for cash back for emergency repairs.
Alternatives
If the Village does not approve this Assignment and Subordination of Lien, the owner would be unable to obtain their new financing.
Previous Board Action
N/A
Citizen Advisory Commission Action
N/A
Anticipated Future Actions/Commitments
N/A
Intergovernmental Cooperation Opportunities
N/A
Performance Management (MAP) Alignment
A governance priority for the Development Customer Services Department is administering the Multi-family and Single Family Grant and Loan Programs.