Barbara J. Hickson, 417 Kathy Lane, qualified for and received a Housing Rehabilitation Deferred Loan for $12,000 in March 1995. The loan does not have to be repaid as long as Ms. Hickson 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 current interest rate and will follow the City’s subordination policy, which requires a 0% payback of the Rehabilitation Loan. Ms. Smith will not roll over additional debt into the first mortgage and the City’s position will not be affected by this action.

City Council may:

• Approve subordinating the City's $12,000 interest in the property to a new first mortgage;
• Do not approve the subordination request, which could result in the homeowner not being able to refinance and to benefit from a lower interest rate on the primary mortgage.

The City is being asked to subordinate $12,000 of its interest to a new first mortgage from First Interstate Bank, not to exceed $27,000 that will refinance existing debt on the property. The property recently appraised for $150,000. The City will retain its $12,000 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 that secures a $12,000 CDBG Housing Rehabilitation Deferred Loan to Barbara J. Hickson, 427 Kathy Lane.