Neighborhood Resources Department
TO: David L. Corliss, Interim City Manager
THRU: Victor Torres, Director, Neighborhood Resources
FROM: Margene K. Swarts, Community Development Manager
SUBJECT: Tenants to Homeowners, Inc. (TTH) Request Regarding Affordable Housing
DATE: May 1, 2006
The department has received a request from TTH regarding two mortgages the City holds for properties that were purchased through the City’s first time homebuyer program, Homeowners Out of Tenants (HOOT). The existing property owners are selling the properties and have made an agreement with TTH to sell the properties at a reduced price if the City will forgive the second mortgage. In both cases, TTH will subsequently sell the properties through the new Community Land Trust program, thus ensuring long term affordability for the properties. The information regarding both requests follows:
2825 Fenwick was purchased by Josh and Heather Stein on June 21, 2004. In addition to the regular HOOT program, the Stein’s were able to access the Home Of Your Own (HOYO) program because of a qualified disability. The total for their mortgage to the City was $46,682.27. At this time, only 5% of the mortgage has been forgiven and the balanced owed to the City would be $44,348.16. The Douglas County appraised value of the property is $151,300 for this 3 bedroom, 2 bath, 2 car garage, 1600 square foot house. The property is in very good condition and market comparables value it at $160,000 to $170,000.
The Stein’s are getting a divorce and are selling the property. According to Rebecca Buford, Executive Directory of TTH, the Stein’s appreciated their ability to originally participate in the HOOT program and are willing to sell the property back through the program instead of on the open market, in order to afford another first time homebuyer the same opportunity. They are willing to sell the property to TTH for $107,500 if the City will forgive the second mortgage. This amount will enable the Stein’s to repay the first mortgage and the pro-rated Federal Home Loan Bank (less than $4,000), and allow approximately $5,000 profit for them to split. In this scenario, a new first time homebuyer could purchase the property with a land and trust sales price of $112,000 rather than the $160,000-$170,000 that the open market would likely demand.
The situation with the second property is a little different than the case above. 1229 Laura was purchased by Elizabeth Dumortier on December 21, 1994. The total for her mortgage was $25,704.92. At this time, the balance due the City would be $12,852.46. The Douglas County appraisal for this property is $99,900, but the property is not in very good condition and would need numerous repairs before it could be placed on the market again. There is some question whether the City’s interest (even at one-half of the original amount) can be regained.
Ms. Dumortier wishes to sell the property and has agreed to a sale price of $60,000 to TTH if the second mortgage is released by the City. TTH staff has visited with the Planning staff and under the new development code, this lot can be divided into two lots. TTH plans to raze the existing house and build two new affordable, accessible units to be sold through the land trust program. This property is located in the Brook Creek Neighborhood. One of the TTH board members resides in this neighborhood and states that the neighborhood supports this new development.
This is but two examples of the continued partnership the City enjoys with TTH in the development of affordable housing in the community. In both cases, TTH will retain interest in the property through the ground lease and will provide a lien to the City to ensure continued affordability. Staff believes forgiveness of the mortgage is still a good use of grant funds because the properties will remain affordable and recommends that the mortgages should be forgiven to allow these developments to occur.
The requests from TTH, Douglas County appraisals, and documentation regarding the original mortgages are available if desired. Please let me know if you have further questions.