Terri A. Smith qualified for and received a Housing Rehabilitation Deferred Loan for $20,000 in October 2011. The loan does not have to be repaid as long as Ms. Smith remains the owner/occupant of the property. The loan is to be 100% repaid when the property is sold or when the owner no longer occupies the property. Ms. Smith requested the City subordinate its lien to a new first mortgage with a lower interest rate. Ms. Smith will not roll over additional debt into the first mortgage and the City’s position will not be affected by this action.

1) Approve the subordination request to subordinate $20,000 interest in the property in a second position to a new first mortgage; 2) Do not approve the subordination request which could result in the homeowner not being able to refinance in order to benefit from the current low interest rates.

The property has a Market Value of $153,000. The City will retain its $20,000 interest in the property in second position, and the City is still protected by the current value of the home.

Staff recommends that the  Council subordinate the City's lien to Terri A. Smith, 1220 Avenue F, securing $20,000 interest to a new first mortgage from First Interstate Bank not to exceed $78,000 that will refinance existing debt on the property.