DISCLAIMER

 

07-0764R


RESOLUTION AUTHORIZING NEIGHBORHOOD HOUSING SERVICES OF DULUTH, MINNESOTA AND THE HOUSING AND REDEVELOPMENT AUTHORITY OF DULUTH, MINNESOTA, TO FORGIVE PARTIAL AMOUNTS OF TWO REHABILITATION LOANS MADE UNDER PROPERTY REHABILITATION PROGRAMS.

BY COUNCILOR STAUBER:

     RESOLVED, that in 1997 the city of Duluth entered into City Contract #18400 with Neighborhood Housing Services of Duluth, Minnesota, (NHS) pursuant to which NHS agreed to administer and operate a housing rehabilitation program; and

     In 1998 and 2000 the city of Duluth entered into city contract #’s 18220 and 18681 with the Housing and Redevelopment Authority of Duluth, Minnesota, (HRA) pursuant to which HRA agreed to administer and operate a housing rehabilitation program; and

     Pursuant to the rehabilitation program guidelines, NHS entered into an agreement dated March 8, 1999, (the NHS agreement) with Marie Baust (owner) pursuant to which NHS advanced a community development block grant (CDBG) rehabilitation loan in the amount of $6,010; and

     Pursuant to the rehabilitation program guidelines, HRA entered into agreements in 1998 and 2000, (the HRA agreements) with owner, pursuant to which HRA advanced three rehabilitation loans totaling $10,466; and

      Pursuant to the NHS agreement and the HRA agreements, the owner agreed to repay NHS and HRA the full amount of the loans in the event owner sold, transferred or otherwise conveyed the rehabilitated property; and

     The owner lived in the rehabilitated property for seven years,

     NOW, THEREFORE, the city council of the city of Duluth hereby authorizes a partial forgiveness by NHS of the repayment of the NHS CDBG loan in the amount of $3,850, which is equal to 59 percent of the total NHS loan amount of $6,010 and authorizes a partial forgiveness by HRA of the repayment of the HRA HOME, CDBG and MHFA loan payments in the amount of $8,408.51, which is equal to 80 percent of the total amount of $10,466 owed the HRA.


STATEMENT OF PURPOSE:  This resolution is to authorize a partial forgiveness by NHS of a $6,010, 0%, due on sale community development block grant rehabilitation loan and a partial forgiveness by HRA of three loans totaling $10,466, 0%, due on sale HOME and CDBG program rehabilitation loans, provided between 1998 and 2000 to Marie Baust. Each loan was secured by a lien on the property. The company holding the first mortgage on the property pursued foreclosure due to the owner’s death.


Ms. Baust has passed away and the Realtor handling the sale of the property for the Estate of Marie Baust received an offer on the property just prior to the Sheriff’s Sale held on November 7, 2007. The offer is insufficient to cover the four mortgages on the home plus the expenses to sell the property and settle the estate.


The realtor has requested the three subordinate mortgage loans take a reduction based on a percentage of the anticipated shortfall. The sales price is $55,000 with the total of the mortgages and expenses being approximately $65,497.


Proposed partial payment payoffs of all mortgage liens:

NHS America – First Mortgage  $15,942.06 as of 11/7/2007

NHS loan  $6,010 reduced to $3,850*

HRA loans  $10,466 reduced to $8,408.51*

MHFA loan  $10,000 reduced $3,720

Additional medical liens will not be paid off.


*NHS and HRA are requesting the authority from the city to accept the partial payment as satisfaction, thereby forgiving a total of $7,937.49 of the total ($16,476) rehabilitation loans. NHS and HRA consider this a reasonable settlement given the circumstances. The community development manager concurs.