DISCLAIMER

 

06-0644R

 

RESOLUTION AUTHORIZING NEIGHBORHOOD HOUSING SERVICES OF DULUTH, MINNESOTA, TO FORGIVE A PARTIAL AMOUNT OF A REHABILITATION LOAN MADE UNDER A PROPERTY REHABILITATION PROGRAM.

BY COUNCILOR GILBERT:

     WHEREAS, in 1988 the city of Duluth entered into City Contract #15515 with Neighborhood Housing Services of Duluth, Minnesota, (NHS) pursuant to which NHS agreed to administer and operate a housing rehabilitation program; and

     WHEREAS, pursuant to the rehabilitation program guidelines, NHS entered into an agreement dated June 20, 1988, (the agreement), with Martin J. Tezak (owner) pursuant to which NHS advanced a rehabilitation loan in the amount of $7,500; and

     WHEREAS, pursuant to the agreement, the owner agreed to repay NHS the full amount of the loan in the event owner sold, transferred or otherwise conveyed the rehabilitated property; and

     WHEREAS, the owner lived on the owner-occupied rehabilitated duplex property for five years.

     NOW, THEREFORE, the city council of the city of Duluth hereby authorizes a partial forgiveness by NHS of the repayment of the loan in the amount of $2,500, which is equal to 33.3 percent of the total loan amount of $7,500.


STATEMENT OF PURPOSE:  The purpose of this resolution is to authorize a partial forgiveness by NHS of a $7,500, 0% interest, due on sale community development block grant (CDBG) rehabilitation loan. NHS provided the CDBG rehabilitation loan in 1988 to Martin J. Tezak and it was secured by a lien on the property.


When Martin J. Tezak passed away (April 1, 1993) the property transferred to the ownership of his son, Martin E. Tezak, as evidenced by an affidavit of identity and survivorship filed with the St. Louis County Office of the Recorder on April 14, 1993, as Document #0571301. Martin E. Tezak sold the property to Robert Rodenwald by quit claim deed as evidenced by Document #960834 recorded on November 8, 2002. Subsequently, Martin E. Tezak died on May 19, 2003. Mr. Rodenwald was unaware of the NHS lien; he purchased the property without title insurance or a title opinion.


NHS was made aware of this issue through their most recent audit confirmation process. NHS proceeded to pursue payment of the lien through a mortgage foreclosure process. In order to avoid a mortgage foreclosure and sheriff’s sale, Mr. Rodenwald, through his attorney, Mark Knutson, has offered to pay $5,000 to NHS to satisfy the loan. NHS is requesting the authority from the city to accept this partial payment as satisfaction, thereby forgiving $2,500 of the original $7,500 CDBG rehabilitation loan. NHS considers this a reasonable settlement given the circumstances. The community development division manager concurs.