01-0280R

RESOLUTION AUTHORIZING SUBORDINATION OF A MORTGAGE UNDER A HOME PROGRAM GRANT AGREEMENT WITH LIFEHOUSE TO A MORTGAGE OF THE DULUTH ECONOMIC DEVELOPMENT AUTHORITY (DEDA) AND THE NORTH SHORE BANK OF COMMERCE (NORTH SHORE).

BY COUNCILOR FENA:

        RESOLVED, that the proper city officials are hereby authorized to execute a subordination of mortgage, substantially of the form of the copy on file in the office of the city clerk as Public Document No. , subordinating a mortgage under a HOME Program Grant Agreement with Lifehouse aka Lifehouse, Inc., to a mortgage of DEDA and North Shore.



STATEMENT OF PURPOSE:  The purpose of this resolution is to authorize the execution of a subordination of mortgage in favor of DEDA and North Shore. In December of 1998, the City and Lifehouse entered into a HOME Program Grant Agreement pursuant to which the City granted $175,000 for acquisition and rehabilitation of a building located at 102 West First Street, formerly the Ideal Market, for short-term transitional housing and a drop-in services center for homeless youth. The Local Initiatives Support Corporation (LISC) has provided funds to the project in the amount of $350,000 which will be "taken-out" by the Minnesota Housing Finance Agency (MHFA)at a later date. MHFA requires that its mortgage take priority over the City mortgage, and the City has entered into an agreement subordinating the City's mortgage to that of LISC/MHFA.

The project ran into cost overruns related to structural difficulties encountered during construction and additional funding is required to complete the project. Lifehouse has obtained a storefront loan through DEDA and North Shore in the amount of $130,000. The storefront loan is conditioned upon the subordination of both the LISC/MHFA mortgage and the City mortgage. This resolution authorizes said subordination, and the priority of mortgages will be as follows:
        1.     $135,000 Storefront loan - DEDA/North Shore Bank
        2.     $350,000 - MHFA, successor to LISC
        3.     $175,000 HOME Program Grant - City of Duluth