Linda K. Wetzel qualified for and received a Housing Rehabilitation Deferred Loan for $20,000 in March 2009. The loan does not have to be repaid as long as Ms. Wetzel 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. In order to refinance and take advantage of the current low interest rates, Ms. Wetzel has requested the City subordinate its lien to a new first mortgage and will follow the City’s subordination policy, which requires a 33% payback of the Rehabilitation Loan due to the inclusion of $8,682 of consumer debt in the new first mortgage. The City will take a subordinate, second position to the new first mortgage.

1) Approve the subordination request to subordinate $13,400 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 $13,400 of its interest to a new first mortgage from Billings Federal Credit Union not to exceed $75,000. This new first mortgage will refinance existing debt on the property including 33% repayment of the Housing Rehab Loan in the amount of $6,600 and will partially pay-off consumer debt. The property was appraised 11/30/11 with a value of $145,000. The City will retain $13,400 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 $13,000 CDBG Housing Rehabilitation Deferred Loan to Linda K Wetzel, 2024 Clark Ave, Billings, 59101.