City, RALF look to keep deed restrictions

Groups want to preserve affordable housing

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— The City Council said it would help the Regional Affordable Living Foundation ensure deed restrictions remain with affordable housing.

If a foreclosure occurred on a house designated as affordable, the council said it wanted the chance to step in and purchase the house to keep the deed restrictions in place. The council agreed the city's and RALF's names would be listed on the loan so when homeowners stopped making payments, they could be notified.

RALF Executive Director Rob Dick said when homeowners are in default of a loan, 45 days to six months go by before that home is sold. During that time, the city or RALF could step in and buy the property at the mortgage rate and keep the deed restrictions in place.

But if RALF or the city did not purchase the property, the lender could sell it and lift the deed restrictions.

"It makes me more comfortable to be able to step in and be able to purchase a foreclosed unit," Councilwoman Arianthe Stettner said. "We may only be holding it temporarily until a city employee or another appropriate person steps in and buys the property."

City staff had questioned if RALF's West End Village project met the affordable housing requirements laid out in the West of Steamboat Springs Area Plan, which requires one-third of all units be affordable. Even though 50 percent of the West End Village units are affordable, the homeowners could not find lenders willing to keep deed restrictions in place in the case of foreclosures.

Under the deed restrictions, the West End Village units can be purchased only by those who make 120 percent or less of the area median income, live and work in Routt County and have assets of $200,000 or less.

With those restrictions, second mortgage lenders, like Fannie Mae, are not willing to give 30-year loans.

With the city's agreement, lenders can still foreclose on homes and take away the deed restrictions. But before they do that, the city or RALF will be notified the home is in default and have the option to purchase it.

With more than 200 households applying for West End Village's 44 units, if one homeowner could not pay the mortgage, there is a list of people who could, Dick said.

"We have a whole bunch of people wanting this house. There are another 100 people behind you that want that house," Dick said.

If the price of housing drops drastically, Dick said, there would be difficulty in finding a buyer. But if no one is willing to buy it, the lender would sell it and the deed restrictions would go away.

"That is the exact point in time the lender is most concerned," Dick said. "In bad times, they want to sell the house and they don't want to be burdened by affordable housing. And why should they?"

The council also agreed to lend RALF $125,000, with Routt County contributing another $125,000. The $250,000 will go toward financing five duplexes and is expected to be paid back in two years. The city had already budgeted the money in previous years' budgets.

Stettner suggested that when the amount is paid back, it continue as a revolving loan for affordable housing.

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