TO: Mayor and Commissioners
FROM: Michael Coleman, Director, Community Improvement
THROUGH: Chief Neal de Jesus, Interim City Manager
DATE: June 20, 2017
Title
REQUEST FOR SUBORDINATION OF SECOND MORTGAGE FOR 102 SW 8th Street
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Recommended Action:
Recommendation
Motion to Approve a request for the City of Delray Beach ("City") to subordinate its second mortgage position in the amount of $30,440.57 for the property located at 102 SW 8th Street Delray Beach, FL 33444.
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Background:
Ms. Carnegie participated in the City's Community Development Block Grant (CDBG) under its Rehabilitation Strategy in August 2012. Subsidies provided for rehabilitation assistance through the Neighborhood Services Division are secured by a Housing Rehabilitation Agreement. All deferred payment loans require the applicant to maintain ownership/residence for a specified period according to the amount of the grant. Loan amounts less than $35,000 per unit have a recapture period of fifteen (15) years.
Ms. Carnegies' bank has agreed to modify her current loan by reducing the interest rate from 7.00% to 4.50%, decreasing the monthly payment (including insurance and tax escrows) from $1,015.33 to $774.51. Also decreasing the total interest to be paid over the term of the loan by $84,203.06. The action before the City Commission is authorization and approval to subordinate its existing second mortgage loan to Ms. Carnegies' new loan, thereby enabling Ms. Carnegie to modify her mortgage to reduce the interest rate and total interest obligation. If approved by the City Commission, the City will continue to be in the second secured position behind the new first mortgage loan.
The City’s decision whether or not to subordinate is rendered on a case-by-case basis with the primary objective being “increasing the affordability of housing”. This request maintains the City’s mortgage in second position and allows Ms. Carnegie to modify the current first mortgage. There is no debt consolidation or cash-out involved in this modification; the lower interest rate will increase the affordability of her home which meets the intent of the program.
City Attorney Review:
Approved as to form and legal sufficiency.
Finance Department Review:
Finance recommends approval.
Funding Source:
No funding is necessary.
Timing of Request:
This request is urgent to meet homeowner’s deadline to close on the hardship modification with the lender.