Planning and Development Services Department
TO: David L. Corliss, City Manager
FROM: Margene K. Swarts, Assistant Director, Development Services
CC: Scott McCullough, Director, Planning and Development Services
DATE: September 9, 2009
RE: Mortgage Release
The department has received a request from Tenants to Homeowners, Inc. (TTH) regarding a mortgage the City holds for a property that was purchased through the City’s first time homebuyer program, Homeowners Out of Tenants (HOOT). The existing property owner is in the process of foreclosure and has made an agreement with TTH and Landmark Bank to sell the property at a reduced price to TTH. In order for the negotiation to work the City needs to forgive the second mortgage. TTH will subsequently sell the property through the Community Land Trust program, thus ensuring long term affordability for the property.
1417 Pennsylvania was purchased by Jonathan Merz on May 6, 2005. The total for the mortgage to the City was $30,859.00. At this time, only 20% of the mortgage has been forgiven and the balanced owed to the City would be $24,687.20. The Douglas County appraised value of the property is $111,580. As the primary mortgage holder, Landmark Bank has agreed to a sales price of $84,000 and a portion of closing costs to settle Mr. Merz’ mortgage. Mr. Merz will not be receiving any proceeds in this transaction.
This is another example of the continued partnership the City enjoys with TTH in the development of affordable housing in the community. TTH will retain interest in the property through the ground lease and will provide a lien to the City to ensure continued affordability. This type of situation has occurred previously and the City has forgiven the second mortgage to obtain long term affordability. Staff continues to believe forgiveness of the mortgage is a good use of grant funds because the property will remain affordable and recommends the mortgage be forgiven to allow this to occur. Please let me know if you have further questions.