Policy 7-2 SUBORDINATION OF LOAN POSITION, COMMUNITY DEVELOPMENT HOUSING REHABILITATION.

PURPOSE: The Housing and Community Development Department administers a Housing 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 program. 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 consideration.

POLICY: When a request for release of a mortgage lien in the rehabilitation program is received, it shall be submitted to the City Council for consideration. A current appraisal must be 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.