Title
Resolution to Adopt a Policy Regarding Foreclosures on Affordable Housing Covenant Units
Memorandum
Attached for your review and approval is a resolution to adopt a policy regarding foreclosures on Affordable Housing Covenant Units.
The City currently has Affordable Housing Covenants on three owner properties: Stone School Townhomes, Ashley Mews and Northside Glen. The Affordable Housing Covenants restrict the sales prices of the units so that they are affordable to low and moderate-income homebuyers. The Covenant is subordinate to any institutional lender’s first mortgage lien. The units are permanently restricted except in the case of foreclosures. If a homeowner defaults on his/her mortgage, then the lender has a right to foreclose on the unit and the covenant is terminated. Following is an excerpt from the Covenant on Stone School Townhomes:
14. Partial Subordination of Covenant - Termination of Covenant Upon Foreclosure Sale
The provisions of this Covenant shall be subordinate only to the lien of a first mortgage to secure a loan to purchase the Property made by an Institutional Lender. The first Mortgage shall be deemed a Specified Mortgage and the holder of such mortgage shall be known as the Specified Mortgagee. The City shall have the right to review and approve any mortgage affecting the Property. This Covenant shall not impair the rights of such Institutional Lender, or such lender’s assignee or successor in interest, to exercise its remedies under the first mortgage in the event of default by Owner; these remedies include the right to foreclose or exercise a power of sale or to accept a deed or assignment in lieu of foreclosure. For any individual unit, with respect to the first mortgage, upon the occurrence of a foreclosure sale, or acceptance of a deed in lieu of foreclosure, this Covenant shall be forever terminated. The mortgagee in such case, or any buyer at the foreclosure sale, will obtain title to the Real Estate free and ...
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