Agenda - 09-01-2009 - 4c - Laserfiche WebLink

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"1 "request for notice of foreclosure sale" against our properties, and including a clause in our ground lease that will allow us to buy back leaseholds that face foreclosure. The other risk is that if we use the Rider and a land trust home goes into foreclosure, our lease's restrictions against renting the home would no longer be in effect after the foreclosure. The removal of this restriction might conceivably make the home more attractive to investors, who could buy the leasehold and use the Land Trust home as a rental property. Impact on the Restrictive Covenants of Local Governments The restrictive covenants that the Town of Chapel Hill and Orange County record against Land Trust properties make both governments successors to the Land Trust's rights under the lease. Therefore, it is important for the local governments to understand how using the Rider will change the terms of the lease. Under the terms of our can-ent ground lease: If a land trust home goes into foreclosure, the lender may sell it to any buyer at any price. In other words, the ground lease's buyer restrictions and resale price restrictions are removed. Lenders require this provision, because they do not want to be restricted when dealing with a foreclosure. The only restriction which remains in place in a foreclosure is the restriction against renting the property. We believe that restriction will discourage investors from bidding on land trust properties. Under the terms of the Fannie Mae Rider: If the Fannie Mae Rider is used with our ground lease, our lease's buyer restrictions and resale price restrictions would still be removed for homes sold at foreclosure. In addition, our lease's restrictions against renting the home would also be removed at foreclosure. These terms would make the home more attractive to investors, who could buy the leasehold and use the Land Trust home as a rental property. The Land Trust might face more competition when it tries to buy the leasehold back at a foreclosure auction. In summary, under our current ground lease there is some risk that a Land Trust home could lose its affordability restrictions Through a foreclosure. Using the Fannie Mae Rider may increase that risk to some extent, by removing rental restrictions and making the property more attractive to investors. However, in either case it is important for the Land Trust fo be prepared to purchase homes to save them from foreclosure. Need for Funds to Save Homes in Foreclosure When a Land Trust homeowner experiences a financial crisis, we make every effort to help that homeowner avoid foreclosure. However, if an owner's financial crisis cannot be resolved, the Land Trust should be prepared to buy back the leasehold before it goes into foreclosure. Our lease gives us the right to receive 20 days notice before any foreclosure sale, and buy back the leasehold before the sale. These rights will remain in place after we start using the Rider. This buy-back provision should enable us to `save' every home from auction -providing we have the necessary funds to pay off the lender.