Julie Ann Galles qualified for and received a Housing Rehabilitation Deferred Loan for $20,000 in December 2005. The loan does not have to be repaid as long as Ms. Galles 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. Galles has requested the City subordinate its lien to a new first mortgage with a lower current interest rate and will follow the City’s subordination policy, which requires a 0% payback of the Rehabilitation Loan. The City’s position will not be affected by this action.

Ms. Galles will not roll over additional debt into the first mortgage, except the repayment of a $5,000 First Time Homebuyer lien which requires repayment in the event of sale or refinance.

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.

Staff recommends that the City subordinate $20,000 of its interest to a new first mortgage from Stockman Bank not to exceed $77,000 that will refinance existing debt on the property. The property was appraised 11/9/2011 with a value of $111,000. 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 Council subordinate the City’s lien securing a $20,000 CDBG Housing Rehabilitation Deferred Loan to Julie Ann Galles, 4511 Mitchell Avenue, Billings, 59101.