To: Board of Supervisors
From: Planning and Building Department
Agenda Section: Consent
Vote Requirement: Majority
SUBJECT:
title
Cleaning Up Defaulted Housing Loans
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RECOMMENDATION(S):
Recommendation
That the Board of Supervisors:
1. Forgive accrued interest and authorize the Auditor to write off two loans discharged by Bankruptcy Court; and
2. Authorize the Auditor to remove the interest and write off the principle of a lien stripped by Receivership; and
3. Authorize the Auditor to remove the interest and write off the balance of a lien dissolved by foreclosure.
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STRATEGIC PLAN:
This action supports the following areas of your Board’s Strategic Plan.
Area of Focus: Housing for All
Strategic Plan Category: 4002 - Increase and prioritize housing development
DISCUSSION:
Staff requests consent to remove four failed residential loans from the county’s receivables balance. The loans defaulted for various reasons, described below, and have been discharged by federal or state law, with the result that neither principal nor interest will be repaid.
The housing program receives grant funds to assist low-income households with First-Time Home Buyer loans and Owner-Occupied Rehabilitation loans to make household repairs. The loans come from California Department of Housing and Community Development grants and are operated under federal and state regulations and locally approved program guidelines. These grants have been administered by the county since 1984. One loan was written off in 1998. One loan was written off in 2010.
Normally, loans are paid back to the county and go into a revolving loan fund so they can be used again to assist other homeowners. In the following four circumstances, the loans will not be paid back to the county and are immune from collection efforts.
1. On March 28, 2017, S. Burris accepted a HOME Investment Partnership-funded First-Time Home Buyer loan in the amount of $106,282.08. On July 1, 2020, the United States Bankruptcy Court discharged this debt in full (Attachment 1). As of the date of Discharge, the loan had accrued interest in the amount of $10,404.30. As Federal Bankruptcy Court overrides local program guidelines, staff requests forgiveness of the interest, and for the Auditor to write off the principal from HOME grant funds.
2. On May 20, 2010, J. Coutant accepted a CalHome-funded Owner-Occupied Rehabilitation loan in the amount of $29,851.00. On April 6, 2021, the United States Bankruptcy Court discharged this debt in full (Attachment 2). As of the date of Discharge, the loan had accrued interest in amount of $9,266.90. As Federal Bankruptcy Court supersedes program guidelines, staff requests forgiveness of the interest, and for the Auditor to write off the principle from CalHome grant funds.
3. On July 31, 2003, J. Adams accepted a CalHome-funded Owner-Occupied Rehabilitation loan in the amount of $30,000. On Feb. 5, 2024, this property went into receivership. On Aug. 30, 2024, the Humboldt County Superior Court signed an Order confirming the receiver’s sale of the property and stripping all liens from the property (Attachment 3). As of the date of the Order, the loan had accrued interest in the amount of $12,659.18. Staff requests a waiver of the interest and write-off of the principal balance.
4. On October 24, 2014, W. Yeater accepted a HOME Investment Partnership-funded First Time Home Buyer loan in the amount of $98,959.42 as a silent second to his primary mortgage. The primary mortgage holder foreclosed on the property (Attachment 4). The Department applied for surplus proceeds following the auction and received $74,683.90, leaving a principal balance of $24,275.52 and accrued interest in the amount of $26,043.95. HOME guidelines prohibit collection of the balance following foreclosure. Staff requests a waiver of the interest and write-off of the principal balance.
SOURCE OF FUNDING:
1100282202 HOME account and 1100282301 CalHome Grant
FINANCIAL IMPACT:
There has been and will be no effect on the General Fund. Grant funds are kept in separate accounts which are revolving loan accounts. An interest write-off does not change the overall accounts receivable balance, as only the principal is on the balance sheet. Write-offs will reduce the Department’s receivables balance.
OTHER AGENCY INVOLVEMENT:
None
ALTERNATIVES TO STAFF RECOMMENDATIONS:
The alternative is to leave uncollectible funds on the county’s books.
ATTACHMENTS:
Attachment 1 - S. Burris Court Order Discharge 07-01-2020 PDF
Attachment 2 - J. Coutant Court Order Discharge 04-06-2021
Attachment 3 - J. Adams COURT ORDER 08-30-2024
Attachment 4 - W. Yeater Excess Proceeds Determination
PREVIOUS ACTION/REFERRAL:
Meeting of: N/A
File No.: N/A