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J <br />~~ <br />i/ <br />ORANGE <br />COMMUNnY <br />HOUSING a. <br />LAND TRUST <br />Board of Directors <br />Jim Tucker <br />President <br />Mary Bratsch <br />Vice President <br />Lisa Inman <br />Secretary <br />Michael Hansen <br />Treasurer <br />John Cooper <br />Laurin Easthom <br />Gary Giles <br />Jacquelyn Gist <br />Pam Hemminger <br />Brian Lowen <br />Bruce Runberg <br />Mary Jean Seyda <br />Jonathan Weiler <br />Robert Dowling <br />Executive Director <br />Funding Provided by: <br />Town of Chapel Hill <br />Orange County <br />Town of Carrboro <br />Town of Hillsborough <br />PO Box 307 <br />104 Jones Ferry Road <br />Suite C <br />Carrboro, NC 27510 <br />919.967.1545 <br />Fax 919.968.4030 <br />www.ochlt.ore <br />Date: June 11, 2009 <br />To: Members of Town Council and the County Commissioners <br />From: Robert Dowling, Orange Community Housing and Land Trust <br />Re: Use of the Fannie Mae Community Land Trust Ground Lease Rider <br />As we recently explained to Town and County staff in a position paper, (please see <br />attached) Orange Community Housing and Land Trust (the Home Trust) <br />recommends using Fannie Mae's "Uniform Community Land Trust Ground Lease <br />Rider" (the "Rider") with our ground lease, so that we can increase the number of <br />lenders available to our homeowners and allow our homeowners the ability to <br />refinance their homes at more favorable interest rates. The Rider accomplishes these <br />goals by allowing the banks that finance our homeowners to sell Home Trust <br />mortgages to Fannie Mae. <br />Currently the Town of Chapel Hill and Orange County provide funds to subsidize our <br />homeowners. The use of these funds places certain restrictive covenants on the <br />homes. These covenants mean that the banks who finance our homes must keep the <br />loans as "in-house" or "portfolio" loans. They cannot sell them to Fannie Mae, which is <br />customary bank practice with private sector residential mortgages. Most lenders limit <br />the number and amount of mortgages they hold as portfolio loans, which means that <br />some lenders will not participate in our program. Because our lenders are unable to <br />sell the loans, we have only three local lenders that are willing to finance Home Trust <br />properties and hold the loans as portfolio loans. None of these three lenders allow our <br />owners to refinance their loans at market rates and benefit from lower interest rates.. <br />As a result, land trust homeowners are unable to borrow against their equity to pay for <br />home repairs. Therefore, this is a matter of some urgency to us and to our <br />homeowners. <br />We have determined that we could work with more lenders if we use the Fannie Mae <br />Rider. For example, almost one third of our homeowners are members of the State <br />Employee's Credit Union, yet they cannot finance their homes through the Credit <br />Union because the Credit Union would require use of the Rider. Other banks, such as <br />Wells Fargo, would also be willing to lend to our homeowners if we are permitted to <br />use the Rider. <br />Further, we are aware that one of our lenders may be reluctant to make portfolio loans <br />for condominium properties. This reluctance causes us great concern as the majority <br />of properties we will be selling in the coming years, particularly in Chapel Hill, are <br />condominiums. <br />For the above reasons, we foresee that the future success of the land trust model in <br />Orange County will require that we start using the Fannie Mae Rider with our ground <br />lease in order to expand our lender options, ensure that we continue to have funding <br />sources for the housing stock in our portfolio, and allow our homeowners to have <br />access to the best possible interest rate for which they qualify. <br />