Submitted By
Tammie Grossman, Director of Development Customer Services
Reviewed By
LKS
Agenda Item Title
Title
A Resolution Authorizing the Execution of a Subordination of Lien (BPIP-045).
End
Overview
Overview
The loan recipient, Soledad Campos is requesting a subordination of a Barrie Park Investment Program Loan to a new first mortgage. The Village remains secure in a 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 April 4, 2005 pursuant to the Barrie Park Investment Program, the Board of Trustees approved a $15,000 loan to the owner of 1037 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 in first position.
Loans made under the Barrie Park Investment Program are deferred for repayment until conveyance or transfer of any interest in the property. The program guidelines provide that in cases where former loan recipients wish to refinance mortgages 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.
In cases of extreme hardship, staff may recommend that the Board consider subordination when the homeowner is requesting cash back from the refinancing and the equity taken out is being used for emergency home repairs. The homeowner shall provide a written statement
desribing the emergency.
BPIP-045
The homeowner is seeking to replace their current primary and secondary mortgages, each of which carry a 4% variable interest rate with a new primary mortgage at 3.5% interest rate. This new loan will provide a fixed rate, 15 year mortgage. The amount of the new loan will be $199,999. The homeowner is taking out $10,553.97 for emergency repairs. A statement of the emergency and repairs is on file with the Development Customer Services Department.
The issuing lender will not make the loan unless that mortgage is the first mortgage lien against the property. The lender is requesting that the Village subordinate its mortgage to their new first mortgage. The Village’s mortgage was created as a junior mortgage. By agreeing to subordinate, the Village is agreeing to remain in a junior position.
According to bank appraisal, the property has an estimated value of $295,000. The first mortgage of $199,000.00, and the Village’s $15,000.00 mortgage equal total debt of $214,000.00, leaving 27% equity. Staff believes that there is sufficient equity to protect the Village’s investment and is recommending the subordination.
The request complies with the Village guidelines requirements. Staff believes that there is sufficient equity to protect the Village’s investment and is recommending the subordination.
Alternatives
The alternative would be to deny the subordination request.
Previous Board Action
NA.
Citizen Advisory Commission Action
NA.
Anticipated Future Actions/Commitments
NA.
Intergovernmental Cooperation Opportunities
NA.
Performance Management (MAP) Alignment
A governmance priority of the Development Customer Service Department is community diversity.