Stefanie M. Ruegamer qualified for and received a Housing Rehabilitation Deferred Loan for $20,000 in August 2009. The loan was modified in January 2010 decreasing the principal balance to $19,980.61. The loan does not have to be repaid as long as Ms. Ruegamer 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. Ruegamer 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. Ruegamer will not roll over additional debt into the first mortgage and the City’s position will not be affected by this action.

Council may:

• Approve the subordination request to subordinate $19,980.61 interest in the property in a second position to a new first mortgage;
• 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 proposes that the City subordinate $19,980.61 of its interest to a new first mortgage from Little Horn State Bank not to exceed $98,000 that will refinance existing debt on the property. The property recently appraised for $129,400. The City will retain its $19,980.61 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 $19,980.61 CDBG Housing Rehabilitation Deferred Loan to Stefanie M. Ruegamer, 1648 Lewis Avenue.