Section 7 Housing & Community Development
Policy 7-2 SUBORDINATION OF LOAN POSITION, COMMUNITY DEVELOPMENT HOUSING REHABILITATION.
DISTRIBUTION: All Departments
SUBJECT: Subordination of Loan Position, Community Development Housing
PURPOSE: The Housing and Community Development Department administers
Rehabilitation Program. A lien in the form of a second mortgage is placed on the property of
participants. Participants periodically request a loan subordination. This policy establishes
criteria for placement of the request on the City Council Agenda.
BACKGROUND: The City of Lawton provides certain grants which result in
liens and low
interest loans which require a modified mortgage filed against the real property to obtain housing
funds. To insure that recipients of Community Development grants, or low interest loans for
housing rehabilitation, abide by the agreements in the housing rehabilitation program, a lien in
the form of a second mortgage has been placed on property rehabilitated in the
Periodically there are requests from participants in the program for subordination of the City's
lien position to another loan. This requires action by the City Council to amend the existing
mortgage. Since inception of the program, funding to rehabilitate more than 750 homes; there
have been less than 20 defaults on mortgages before the 7 year period of the lien has expired.
Requests for lien subordination have been made to use the equity in the home for doctor bills,
hospital bills, home improvements, and others for consumer debt. A recommendation must be
made to the City Council when an agenda item is prepared and submitted for Council
POLICY: When a request for release of a mortgage lien in the rehabilitation
received, it shall be submitted to the City Council for consideration. A current appraisal must
attached to the request. If it is determined that any and all liens and mortgages do not exceed
75% of the current appraised value of the rehabilitated unit, the item will be placed on the agenda
with a recommendation for approval. In such cases, such items will be placed on the "consent"
portion of the agenda. All other requests will be recommended for denial
and placed the
regular business portion of the agenda.
DEPARTMENT: Housing and Community Development
Gilbert H. Schumpert Jr.
July 15, 1997