CITY COMMISSION AGENDA ITEM

Department:	Community Development (PDS)		Commission Meeting Date:  9/11/18
Staff Contact:	Danelle Dresslar, Community Development Manager
Recommendations/Options/Action Requested:
Accept an offer to settle an outstanding Community Development Block Grant (CDBG) Comprehensive Rehabilitation Program loan and authorize the Mayor to sign a Release of Mortgage for Rosemary Seiger, 340 Pleasant Street.
Executive Summary:		Rosemary Seiger participated in the CDBG Comprehensive Rehabilitation Program for the address located at 340 Pleasant Street, and signed a mortgage on December 24, 2002 to protect the City’s interest in the property. The mortgage amount was for $19,232.00, with no interest charged and no monthly payments required. The terms of the mortgage did provide a forgiveness schedule based upon the number of years Ms. Seiger remained the owner/occupant of the property. Ms. Seiger remained in the property for four (4) complete years, earning thirty-five percent (35%) forgiveness of the beginning loan amount; ten percent (10%) of the total loan amount was forgiven after each of the first three (3) complete years, and five percent (5%) was forgiven after the fourth complete year. The terms of the mortgage also required repayment of the remaining principal balance when Ms. Seiger was no longer the owner or occupant of the property. Ms. Seiger moved out to the property on July 16, 2007, and her daughter now resides in the property. In 2015 the Community Development Division began a mortgage recovery program to address out of compliance CDBG and HOME mortgages held by the City of Lawrence. Mortgages were signed by eligible homeowners to protect the City’s financial interest in the properties. The terms of the mortgage stipulate the full or remaining principle balance of the mortgage shall become due and payable whenever the homeowner shall fail to occupy the property as the principal place of residence, or when the ownership of the property changes. As properties were identified as being out of compliance, the homeowners were contacted to discuss repayment options, on a case by case basis. In some situations, the original homeowner had passed away and the property ownership was transferred to the heirs of the estate. Staff would contact the heirs to explain the mortgage terms, and discuss the plans for the property. In most of those cases, the heirs would list the property for sale, and the City’s mortgage would be repaid by the title company at the closing of the sale. If the heirs desired to keep the property, staff would work with the heirs to collect the balance due and release the mortgage on the property. In other situations, the original homeowner no longer occupied the property as their principal place of residence but still owned the property. Staff would contact the homeowner to discuss their options on repayment of the mortgage balance, including refinancing with a private lender to pay off the City mortgage, selling the property to pay off the City mortgage, or agreeing to a mortgage modification detailing an accelerated repayment schedule. Repayment terms under a mortgage modification would be reviewed by staff on a case by case basis, always with the goal of not imposing additional financial hardships on the homeowner, but still protecting the City’s interest in the property. Staff contacted Ms. Seiger on March 3, 2015 to discuss repayment of the remaining principal balance, which was determined to be $12,500.80 at that time. Ms. Seiger indicated she would be selling the property to her daughter at some point in the future, but could begin a payment plan to pay off the balance in the meantime. A loan modification agreement was signed by Ms. Seiger and former Mayor Amyx on September 29, 2015, after City Commission approval, which stipulated a repayment plan of 24 monthly payments of $150.00, and a final balloon payment of $8,900.80 due on or before October 19, 2017. This agreement would allow 24 months for Ms. Seiger to complete the sale of the property to her daughter before the balloon payment would become due. On June 6, 2017, Ms. Seiger contacted staff to request an extension on the balloon payment date, to allow her daughter to complete the purchase of the property. On August 1, 2017, a new loan modification agreement was signed by Ms. Seiger and former Mayor Soden, after City Commission approval, which stipulated a repayment plan of 12 monthly payments of $150.00, and a final balloon payment of $7,100.80 due on or before October 19, 2018. Staff has calculated the current mortgage balance to be $7,250.80, as of August 22, 2018.  On August 21, 2018, Ms. Seiger contacted staff to offer a payoff settlement. Ms. Seiger indicated she could make a one-time payment of $6,000, but had no other way to continue with the current repayment schedule. Staff recommends accepting the payoff settlement offer of $6,000.  Ms. Seiger no longer lives in Kansas, and has indicated she will not be able to pay the final balloon payment of $7,100.80 due on or before October 19, 2018, due to her current financial situation. If Ms. Seiger were to default on the balloon payment due on or before October 19, 2018, the City would have to hire outside counsel to explore beginning foreclosure proceedings on the property, a scenario that may cost more than the difference between the outstanding balance and the offer to settle for $6,000. Accepting the settlement offer would not violate any HUD regulations in regards to the CDBG grant program, or current City policy of the Comprehensive Rehabilitation Program and places these funds back into the CDBG program for future allocation and use.
Strategic Plan Critical Success Factor		Safe, Healthy, and Welcoming Neighborhoods
Fiscal Impact (Amount/Source):		The fiscal impact to the City is $___0_____.  This is a CDBG Mortgage Note repayment that the City places back into the CDBG program for future allocation and use.
Attachments:		None.

Reviewed By: (for CMO use only)

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