Agenda

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County Administrator's Report 14. 1.

BCC Regular Meeting

Discussion

Meeting Date:	03/05/2020
Issue: Request for Subordination of the SHIP Mortgage at 519 North H Street
From:	CLARA LONG
Department:	Neighborhood & Human Svcs
CAO Approval:

RECOMMENDATION:

Recommendation Concerning the Request for Subordination of the State Housing Initiatives Partnership Mortgage at 519 North "H" Street - Clara Long, Interim Neighborhood & Human Services Department Director

That the Board take the following action concerning the Request for Subordination of the State Housing Initiatives Partnership (SHIP) Mortgage at 519 North "H" Street, as requested by Kimson Nobles:

A. Approve the Request for Subordination of the SHIP Mortgage at 519 North "H" Street, in the amount of $35,000, as requested by Kimson Nobles in order to allow the homeowner to refinance her first mortgage to obtain a lower interest rate;

B. Authorize the County Attorney's office to prepare a Subordination Agreement or loan modification as necessary to correct the scrivener's error regarding the loan term in the SHIP second mortgage; and

C. Authorize the Chairman or Vice Chairman to execute the Subordination Agreement and related documents required to complete this request, including actions that may be required of the County Attorney's Office.

[Funding: Not applicable]

BACKGROUND:

Kimson Nobles received $35,000 in State Housing Initiatives Partnership (SHIP) Program Principal Mortgage Reduction (PMR) assistance to purchase a new home in October 2008. The SHIP program placed a 0% interest second mortgage and note on the property (Exhibit I). The SHIP PMR strategy terms as provided in the 2008 SHIP Local Housing Assistance Plan (LHAP) state that the SHIP second mortgage term is 30 years or the term of the first mortgage, whichever is less (Exhibit II). The loan will depreciate to zero at this time provided that the borrower has not defaulted due to sale, transfer, rental, or other encumbrance of the property. However, Ms. Nobles' SHIP mortgage contains a scrivener's error in Section 2.08, which states that the SHIP loan must be repaid on a transfer or assignment after the first mortgage expiration, which is in conflict with the SHIP LHAP and requires correction.

On January 27, 2020, Ms. Nobles submitted correspondence (Exhibit III) to the Neighborhood Enterprise Division (NED) requesting that the SHIP second mortgage be subordinated so she can refinance and obtain a new first mortgage with Quicken Loans. The SHIP program policy is not to subordinate as is noted in the program loan documents. Ms. Nobles has provided the NED office with her proposed loan estimate and appraisal in order to review her request. The current appraised value of the property is $123,500, with the proposed new first mortgage loan amount being $75,007. The equity in the home is sufficient to provide a 89.07% cumulative loan to value ratio. The new monthly principal, interest, and escrow payment will be $688.49, which is slightly higher than the current $599.60 monthly payment; however, the new loan is a fixed loan term of 15 years. The new interest rate will be 3.65% fixed rate instead of the 6.15% on her current first mortgage, which will save Ms. Nobles money over the life of the loan. No funds will be received by Ms. Nobles at closing and any closing costs will be covered by the applicant. The homeowner has complied with all SHIP program requirements to date and the proposed loan is within affordability guidelines.

BUDGETARY IMPACT:

No impact to the SHIP program if the Board approves this request.

LEGAL CONSIDERATIONS/SIGN-OFF:

If approved by the Board, a closing disclosure must be provided by the homeowner before closing. Legal will review and approve a Subordination Agreement and/or mortgage modification as necessary.

PERSONNEL:

N/A

POLICY/REQUIREMENT FOR BOARD ACTION:

Current SHIP policy is not to subordinate liens or mortgages. Any deviation from policy requires Board approval.

IMPLEMENTATION/COORDINATION:

If approved by the Board, Neighborhood Enterprise Division (NED) will coordinate paperwork with the County Attorney's office and the homeowner as needed.

Attachments
Ex I-SHIP Loan Docs-519 N H St
Ex II-SHIP LHAP Excerpt PMR Strategy
Ex III-Nobles Subordinationn Request