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r <br /> i <br /> ORANGE COUNTY <br /> BOARD OF COMMISSIONERS <br /> Action Agenda <br /> Item No. 8-M <br /> ACTION AGENDA ITEM ABSTRACT <br /> Meeting Date: September 16, 1997 <br /> SUBJECT: Housing Rehabilitation Program-Policy Revision <br /> DEPARTMENT: Housing and Community Development PUBLIC HEARING: (Y/N) ?' <br /> BUDGET AMENDMENT: (Y/N) ' <br /> ATTACHMENT(S): INFORMATION CONTACT: <br /> Resolution Tara L. Fikes <br /> TELEPHONE NUMBERS: --ext. 2490 <br /> Hillsborough 732-8181 <br /> Chapel Hill 968-4501 <br /> Durham 688-7331 <br /> Mebane 227-2031 <br /> PURPOSE: <br /> To revise the Housing Rehabilitation Deferred Loan Program Subordination Policy to safeguard the <br /> County's financial investment. <br /> BACKGROUND: <br /> All Orange County Housing Rehabilitation Programs provide funding for the repair of substandard <br /> housing utilizing a forgivable deferred loan program design. Under this program, no cash loan <br /> payments are required and the loan is forgiven over the loan term as long as the occupant continues <br /> to reside in the property and maintains the dwelling as required by the County's Deferred Loan <br /> Agreement. The loan term may be five, eight, ten, fifteen or twenty years which is dependent upon <br /> the source of funding and is secured by a Promissory Note and Deed of Trust. A clause in the Deed <br /> of Trust prohibits utilizing the property as collateral for future loans without obtaining the County's <br /> written consent. <br /> Due to the number of inquiries from loan participants, who wished to refinance their home for <br /> various reasons, County staff proposed the establishment of a Subordination Policy. On <br /> September 17, 1996 ,the Board approved a policy authorizing the subordination of the County Deed <br /> of Trust to a security interest in the property in an amount, with the combination of the new loan <br /> and the County's lien, not to exceed 90% of the Fair Market Value of property as established by an <br /> independent appraiser. <br /> In the last year, implementation of this policy has proven that loan subordination weakens the <br /> security interest of the County because our lien position becomes second to a higher first mortgage. <br /> Therefore, County staff recommends rescinding the September 1996 policy and establishing a new <br /> policy that prohibits subordination of the Orange County Deed of Trust. The new policy would <br /> require the homeowner to pay his/her outstanding County loan or the new lender would subordinate <br /> their loan to the County's lien. <br />