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HomeMy WebLinkAboutAgenda - 09-16-1997 - 8m r i ORANGE COUNTY BOARD OF COMMISSIONERS Action Agenda Item No. 8-M ACTION AGENDA ITEM ABSTRACT Meeting Date: September 16, 1997 SUBJECT: Housing Rehabilitation Program-Policy Revision DEPARTMENT: Housing and Community Development PUBLIC HEARING: (Y/N) ?' BUDGET AMENDMENT: (Y/N) ' ATTACHMENT(S): INFORMATION CONTACT: Resolution Tara L. Fikes TELEPHONE NUMBERS: --ext. 2490 Hillsborough 732-8181 Chapel Hill 968-4501 Durham 688-7331 Mebane 227-2031 PURPOSE: To revise the Housing Rehabilitation Deferred Loan Program Subordination Policy to safeguard the County's financial investment. BACKGROUND: All Orange County Housing Rehabilitation Programs provide funding for the repair of substandard housing utilizing a forgivable deferred loan program design. Under this program, no cash loan payments are required and the loan is forgiven over the loan term as long as the occupant continues to reside in the property and maintains the dwelling as required by the County's Deferred Loan Agreement. The loan term may be five, eight, ten, fifteen or twenty years which is dependent upon the source of funding and is secured by a Promissory Note and Deed of Trust. A clause in the Deed of Trust prohibits utilizing the property as collateral for future loans without obtaining the County's written consent. Due to the number of inquiries from loan participants, who wished to refinance their home for various reasons, County staff proposed the establishment of a Subordination Policy. On September 17, 1996 ,the Board approved a policy authorizing the subordination of the County Deed of Trust to a security interest in the property in an amount, with the combination of the new loan and the County's lien, not to exceed 90% of the Fair Market Value of property as established by an independent appraiser. In the last year, implementation of this policy has proven that loan subordination weakens the security interest of the County because our lien position becomes second to a higher first mortgage. Therefore, County staff recommends rescinding the September 1996 policy and establishing a new policy that prohibits subordination of the Orange County Deed of Trust. The new policy would require the homeowner to pay his/her outstanding County loan or the new lender would subordinate their loan to the County's lien. v 2 , RECOMMENDATION: The Manager recommends adopting a resolution revising the subordination policy regarding the County's Housing Rehabilitation Deferred Loan Program. 3 RESOLUTION HOUSING REHABILITATION PROGRAM DEFERRED LOAN PROGRAM WHEREAS,the County provides funding in the form of deferred loans to homeowners to repair substandard housing in the County; and WHEREAS, the County secures its monetary investment by the property owner executing a Promissory Note and Deed of Trust with the later being duly recorded in the Orange County Register of Deeds Office; and WHEREAS, on September 17, 1996, the Orange County Board of County Commissioners approved a Subordination Policy which allows the subordination of the County's Deed of Trust to security interest in the property for purchase or refinance to an amount, with the combination of the new loan and the County's lien, not to exceed 90% of the Fair Market Value of property; and WHEREAS, approval of this policy has proven to be very burdensome to County staff as well as caused concern regarding the actual benefit to homeowners who are often subjected to high interest rates when refinancing; NOW, THEREFORE, be it resolved by the Board of County Commissioners of Orange County, that the Subordination Policy approved September 17, 1996 be and is hereby rescinded; Be it further resolved by the Board of County Commissioners of Orange County that Orange County will not subordinate its mortgage security under the Orange County Deferred Loan Program. This the 16th day of September, 1997.