Background and Analysis:
1) As part of the Irwindale Housing Authority Substantial Rehabilitation Housing Improvement Loan Program ("Program"), the Irwindale Housing Authority ("Authority") received a written request from Marco P. Romero and Magdalena R Romero ("Owner") for the Authority to subordinate its loan ("Authority Loan") made to Owner, secured by a deed of trust recorded with the Recorder's Office ("Authority Deed of Trust"), in connection with a proposed refinance of Owner's existing mortgage and HERO loan (together, "Previous Loans") for the property located at 16169 Progress Lane ("Property") without taking any cash out. The original loan amount for the Previous Loans was $213,251, and the new loan ("New Loan") would be for the amount of $204,896.57 (including closing costs). 2) Any subordination of the Authority Loan to the New Loan for the proposed refinance will require the Authority lien to be ranked behind the New Loan for purposes of collecting repayment from a debtor, and this would be effectuated via a subordination agreement. The priority of debts is significant when the property owner defaults on payments or declares bankruptcy, as the Authority's debt will be collected when and if the first lien has been fully satisfied in the event of foreclosure and liquidation and only if there are monies left over. Therefore, when an affordable homeowner seeks to refinance its existing loan obtained from a private lender and asks the Authority to subordinate its loan to that new loan, the Authority, if it agrees to subordinate, will be assuming the risk of not being repaid either partly or in full.
It should be noted, however, that Authority agreement to subordinate to the New Loan essentially places the Authority in the same lien priority position as the status quo and will therefore, not place Authority in any worse priority position. 1 Any approval of the requested subordination would comply with the global Subordination Policy ("Policy") adopted by the Board on December 8, 2021, including the requirement that all debt on the property must not exceed 80% of the property value (Attachment 2). Moreover, the Policy states that for the Home Improvement Program only, "if the property owner has sufficient equity in the property to provide a total loan-to-value ratio on the property that is less than 60%, so long as the above-referenced requirements are met, serious consideration is to be given in favor of approving a request for subordination to a new loan that will allow the owner to access his/her equity in an amount that will maintain the 60% loan-to-value ratio." Here, the loan-to-value ratio would be no greater than 43%. 3) Approval of this request would permit the Owner to close escrow on the New Loan before the rate lock-in expires.
1 California is a race notice state which means as a general rule, under California's race notice recording statute, a bona fide purchaser for value without notice who first records wins a priority dispute. Civ. Code§ 1214. Because the Authority Deed of Trust was recorded before the deed of trust that will be recorded to secure payment of the New Loan, the lender of the New Loan is requesting subordination of the Authority Deed of trust to the New Loan.
Fiscal Impact:
None because the Authority will be maintaining the status quo with respect to its lien position.
Attachment:
1. Subordination Agreement
2. Subordination Policy adopted December 8, 2021
RECORDING REQUESTED BY:
WHEN RECORDED MAIL TO:
IRWINDALE HOUSING AUTHORITY
5050 N IRWINDALE AVENUE
IRWINDALE, CA 91706
ESCROW NO:
TITLE ORDER NO:
Attachment 1
SPACE ABOVE THIS LINE FOR RECORDER'S USE
This document is exempt from payment of a recording fee pursuant to Government Code Section 6103 APN: 8417-031-016
16169 Progress Lane
Irwindale, CA 91706
SUBORDINATION AGREEMENT
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY
BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT.
THIS AGREEMENT, is made February __ , 2022, by MARCO P. ROMERO and MAGDALENA R. ROMERO, owners of the land hereinafter described and hereinafter referred to as "Owner," and IRWINDALE HOUSING AUTHORITY, a public body and housing successor to the IRWINDALE REDEVELOPMENT AGENCY, present owner and holder of the Affordable Housing Agreement, Option to Purchase and Declaration of Covenants Running with Land ("Affordable Housing Agreement") dated August 19, 2004, and Deed of Trust with Assignment of Rents and Rider to Deed of Trust with Assignment of Rents ("Agency Deed of Trust"), dated August 19, 2004, hereinafter referred to as "Beneficiary";
WITNESSETH
THAT WHEREAS, Owner did execute the Agency Deed ofTrust in favor of the IRWINDALE REDEVELOPMENT AGENCY to First American Title Insurance Company, Trustee, which Agency Deed of Trust was recorded on October 4, 2004 as document no. 04-2542780, and Owner did execute the Affordable Housing Agreement in favor of IRWINDALE REDEVELOPMENT AGENCY, which Affordable Housing Agreement was recorded on October 4, 2004 as document no. 04-2542781, Official Records of said county covering:
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOT 16 OF TRACT NO. 29197, IN THE CITY OF IRWINDALE, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON A MAP IN BOOK 729, PAGES 61 AND 62 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
WHEREAS, Owner has executed, or is about to execute, a Deed of Trust and note not to exceed the sum of TWO HUNDRED FOUR THOUSAND EIGHT HUNDRED NINETY SIX DOLLARS AND FIFTY SEVEN CENTS ($204,896.57), in favor of:
CMG FINANCIAL
hereinafter referred to as "Lender," payable with interest and upon the terms and conditions described therein, which deed of trust ("Lender Deed of Trust") is to be recorded concurrently herewith; and WHEREAS, it is a condition precedent to obtaining said loan that said Lender Deed of Trust shall unconditionally be and remain at all times a lien or charge upon the land hereinbefore described, prior and superior to the lien or charge of the Agency Deed of Trust; and
WHEREAS, Lender is willing to make said loan provided the Lender Deed of Trust securing the same is a lien or charge upon the above described property prior and superior to the lien or charge of the Agency Deed of Trust and Affordable Housing Agreement first above mentioned and provided that Beneficiary will specifically and unconditionally subordinate 01005.0013/762903.1
the lien or charge of the Agency Deed of Trust and Affordable Housing Agreement first above mentioned to the lien or charge of the Lender Deed of Trust in favor of Lender; and WHEREAS, it is to the mutual benefit of the parties hereto that Lender make such loan to Owner; and Beneficiary is willing that the Lender Deed of Trust securing the same shall, when recorded, constitute a lien or charge upon said land which is unconditionally prior and superior to the lien or charge of the Agency Deed of Trust and Affordable Housing Agreement first above mentioned.
NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which consideration is hereby acknowledged, and in order to induce Lender to make the loan above referred to, it is hereby declared, understood and agreed as follows:
(1) That said Lender Deed of Trust securing said note in favor of Lender, and any renewals or extensions thereof, shall unconditionally be and remain at all times a lien or charge on the property therein described, prior and superior to the lien or charge of the Agency Deed of Trust and Affordable Housing Agreement above mentioned.
(2) That Lender would not make its loan above described without this subordination agreement. (3) That this agreement shall be the whole and only agreement with regard to the subordination of the lien or charge of the Agency Deed of Trust and Affordable Housing Agreement first above mentioned to the lien or charge of the Lender Deed of Trust in favor of Lender above referred to and shall supersede and cancel, but only insofar as would affect the priority between the deeds of trust hereinbefore specifically described, any prior agreement as to such subordination including, but not limited, those provisions, if any, contained in the Agency Deed of Trust and Affordable Housing Agreement first above mentioned, which provide for the subordination of the lien or charge thereof to another deed or deeds of trust or to another mortgage or mortgages.
Beneficiary declares, agrees and acknowledges that:
(A)
(B)
NOTICE:
It intentionally and unconditionally waives, relinquishes and subordinates the lien or charge of the Agency Deed of Trust and Affordable Housing Agreement first above mentioned in favor of the lien or charge upon said land of the Lender Deed of Trust in favor of Lender above referred to and understands that in reliance upon, and in consideration of, this waiver, relinquishment and subordination, specific loans and advances are being and will be made and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment and subordination; and An endorsement has been placed upon the note secured by the Agency Deed of Trust and Affordable Housing Agreement first above mentioned that said Agency Deed of Trust and Affordable Housing Agreement have by this instrument been subordinated to the lien or charge of the Lender Deed of Trust in favor of Lender above referred to.
THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON
OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN, A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND. 01005.0013/762903.1
IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS SUBORDINATION AGREEMENT, THE PARTIES CONSULT WITH THEIR ATTORNEYS WITH RESPECT THERETO.
"BENEFICIARY"
IRWINDALE HOUSING AUTHORITY, a public body,
as Housing Successor to the Irwindale Redevelopment Agency William K. Tam, Executive Director
ATTEST:
Laura M. Nieto, Authority Secretary
APPROVED AS TO FORM:
ALESHIRE & WYNDER, LLP
Adrian Guerra, Authority Counsel
"OWNER"
MARCO P. ROMERO
Marco P. Romero
MAGDALENA R. ROMERO
Magdalena R. Romero
01005.0013/762903.1
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
STATE OF CALIFORNIA )
) §
County of _____________ )
On , before me, a Notary Public,
personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacities, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct
WITNESS my hand and official seal.
Signature of Notary
(Affix seal here)
01005.0013/762903.1
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
STATE OF CALIFORNIA )
)§
County of _____________ )
On , before me, a Notary Public,
personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacities, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct
WITNESS my hand and official seal.
Signature of Notary
(Affix seal here)
01005.0013/762903.1
ATTACHMENT 2
SUBORDINATION POLICY
Effective December 8, 2021
Purpose and Applicability:
This Subordination Policy ("Policy") is intended to standardize the manner in which subordination requests are submitted and approved by the Irwindale Housing Authority ("Authority") for all Authority housing programs. The Authority Board shall approve or deny all subordination requests.
Effects of Subordination:
Subordination occurs where one creditor voluntarily agrees to become ranked behind another creditor in priority for purposes of collecting repayment from a debtor, and it is effectuated via a subordination agreement. The priority of debts is significant when a debtor defaults on payments or declares bankruptcy, as the party subordinating its debt will only collect on a debt owed when and if the obligation to the primary (or first lien) lender has been fully satisfied in the event of foreclosure and liquidation and only then to the extent there are monies left over. Therefore, when an affordable housing property owner seeks a refinance of its existing loan obtained from a private lender or seeks to take out a second mortgage, or alternatively, when a new affordable housing property owner acquires an affordable housing unit and takes out a new loan from a private lender, and the Authority is asked to subordinate its loan to any of these new loans, the Authority, if it agrees to subordinate, will be assuming the risk of not being repaid either partly or in full.
Requirements for Approving Subordinations:
Loans given by the Authority to an affordable housing property owner secured by a trust deed shall not be subordinated to any loan due to refinancing or for any other reason, except that the Authority may consider subordinating its position when all of the following requirements are satisfied:
• For refinances, approval of the subordination reauest will result in borrower's monthly financial housing obligations being decreased. For example, the refinance must involve a lower interest rate or a conversion from an adjustable or short-term fixed rate loan to a fully-fixed rate loan, resulting in a lower monthly mortgage payment;
• A fair market appraisal of the property is obtained by the lender except as expressly provided elsewhere in this Policy. The cost of the appraisal will be paid by the property owner;
Subordination Policy 12.8.21
• When an appraisal is required, a copy of the appraisal mut be submitted to the Authority for its review;
• All debt on the property must not exceed 80% of the property value; • The property owner does not receive cash out of the new loan unless the owner can prove that the cash will be used only to cure an emergency situation pertaining to the condition of the property or 'Nill be used for medical reasons, which is verified by the Authority. The cash out of the refinancing may not be used to consolidate existing household or credit card bills; and
• The property owner must provide Authority staff all the applicable documentation listed in the Subordination Requirements Checklist attached as Exhibit "A" to this Policy.
For the Home Improvement Program Only:
• If the property owner has sufficient equity in the property to provide a total loan-tovalue ratio on the property that is less than 60%, so long as the above-referenced requirements are met, serious consideration is to be given in favor of approving a request for_ subordination to a new loan that will allow the owner to access his/her equity in an amount that will maintain the 60% loan-to-value ratio.
Cashing out on a refinance means borrower receiving a new loan in an amount exceeding the pay-off balance due under the current balance of the loan being refinanced plus customary and reasonable loan closing costs and expenses such as lender points and fees, title, escrow and recording charges. Any cash out prohibition or limitation in connection with any subordination to refinancing helps ensure sufficient equity is maintained in the home in the event of foreclosure of the new loan where the Authority is left to seek repayment of its loan only once the prior lien is satisfied.
Additionally, there are times when an appraisal may not be needed. For example, for certain Fannie Mae loans, Fannie Mae does not require appraisals and instead relies on comparable sales data in connection with refinance approvals.
Subordination Policy 12.8.21
EXHIBIT "A"
SUBORDINATION REQUIREMENTS CHECKLIST
0 1. Signed Authorization to Disclose Information.
0 2. Evidence of VALID home owner's insurance, showing the Irwindale Housing Authority as additional insured must be provided.
0 3. The request to Subordinate must be in writing from the property owner. The written request is to include:
i. Name of the property owner(s)
11. Property address
iii. Current 1st Trust Deed terms (including but not limited to name of mortgage company, interest rate, payment history of property owner, total amount owed, etc ... )
iv. A statement indicating that all debt on the property does not exceed 80% of the appraised value, prior to Refinancing.
v. Household Information: Annual Income, #of people in household, bedroom count for property.
vi. A statement indicating the purpose/reason for cash-out, if applicable. 0 4. New Loan - Uniform Residential Loan Application
0 5. New Loan - Uniform Underwriting and Transmittal Summary 0 6. New Loan - Loan Estimate
0 7. New Loan - Closing Disclosure
0 8. Demand for Payoff on all loans (other than Irwindale Community Redevelopment Agency/Irwindale Housing Authority Loan) on property. 0 9. Existing Loans - Promissory Note
0 10. Existing Loans - Demand for Payoff
0 11.A current appraisal report (dated within 30 days of the written request) is REQUIRED. The cost of the appraisal report will be the sole responsibility of the property owner.
D 12. Title Commitment
0 13. Cash out Requests: The property ovmer must have sufficient equity in the Subordination Policy 12.8.21
property to provide a total loan to value ratio on the property that is less than 60% (including all outstanding loans against the property, outstanding balance of Authority Loan and proposed nei.v loan).
Cash-out Requests require Irwindale Housing Authority Board Approval. The Board meets the 2nd and 4th Wednesday of every month. In order for the request to be placed on the Board agenda all of the required items listed above must be submitted, reviewed and approved by staff 10 days prior to the scheduled meeting. Failure to meet this deadline will delay the Board's consideration of this matter.
D 13. The Authority will consider on a case-by-case basis, requests for additional cash-out beyond that described above only if the owner can prove that the cash will be used only to cure an emergency situation pertaining to the condition of the property or '.Viii be used for medical reasons, which is verified by the Agency. The cash out of the refinancing may not be used to consolidate existing household or credit card bills.
D 14. If the requirements under paragraphs 1 though 12 9 above are met, the Authority may allow the property owner to refinance, with no cash out. If the requirements under paragraphs 1 through 13 4G are met, the Authority may allow the property owner to refinance and take cash out.
Information should be addressed to the
following: Irwindale Housing Authority
Attn: Housing Department 5050 N
Irwindale Avenue Irwindale, CA 91706
Or e-mail to [email protected] or [email protected] Questions: Call Jesus Hernandez (626) 430-2208 or Marilyn Simpson (626) 430- 2209
Subordination Policy 12.8.21
DCity Council
DSuccessor Agency
0 Housing Authority
DReclamation Authority
DJoint Powers Authority
Date: January 26, 2022
Cityo/
IRWINDALE
AGENDA REPORT
To:
From:
Honorable Chair and Members of the Housing Authority
William K. Tam, Executive Director
Issue: Las Casitas Senior Affordable Housing Apartment Complex City Manager's Recommendation:
HA Item 2A
Discuss and provide direction regarding the IHA's purchasing the lease agreement for Las Casitas Senior Affordable Housing Apartment Complex located at 5164 Ayon Street.
Administrative Action:
Submitted by:
Marilyn Simpson, Community Development Director
(626) 430-2209
Reviewed by:
Adrian R. Guerra, Authority Counsel
Jeanette Duran, Interim Finance Director I City
Treasurer
Approved by:
William K. Tam, Executive Director
Background and Analysis:
Electronically Approved
As requested by the Irwindale Housing Authority Board at the meeting of January 12, 2022, this matter has been placed on the agenda for the Housing Board to discuss and provide direction regarding purchasing the lease agreement for Las Casitas Senior Affordable Apartment Complex.
Las Casitas is a senior affordable housing apartment complex located at 5164 Ayon Street. The land is owned by Irwindale Housing Authority (IHA). Per the Disposition and Development Agreement for the site, the Northridge Group, Inc. owns the building lease and was responsible for the construction of the apartment complex. Phase 1 completed
in 1996 consisting of 16 units (including the manager's unit) and Phase 2 completed in 2012 consisting of 10 units.
The Northridge Group, Inc. (NGI) currently serves as the landlord for Las Casitas in accordance with a 2011 Disposition Development Agreement (ODA). As landlord and property manager, Northridge is responsible for managing, operating, and maintaining the apartment complex. This includes processing and executing lease agreements with the tenants. The term of the DDA is for a 55 year term beginning July 1, 2012 and ending on July 1, 2067.
As directed by the Irwindale Housing Authority Board at its meeting on December 8, 2021, staff met with Northridge Group, Inc. on December 22, 2021 to discuss potential acquisition. Northridge Group, Inc. agreed to sell the project to IHA with the following terms and conditions:
A) Final sale price at $898,500
B) A 60-90 days escrow process
C) !HA to retain qualified property inspection firm to inspect all units prior to closing of escrow, and any issues identified by this inspection will be addressed by NGI D) After closing of escrow, NGI will provide property management assistance to IHA staff for 2-3 months period at no cost to IHA
E) IHA to retain onsite manager to manage apartment after closing of escrow F) NGI will transfer all tenants security deposits and any remaining set aside funds/reserves to IHA
At its meeting on January 12, 2022, IHA reviewed the offer from NGI in closed session and provided direction to staff regarding proposed terms and price. On January 14, 2022, NGI submitted its formal written offer to sell to IHA, and a copy of this letter is attached for IHA's review.
If the !HA has decided to purchase the lease agreement for Las Casitas Senior Affordable Apartment Complex from NGI, the existing property management structure to manage, operate and maintain the apartment complex will need to be modified. It's anticipated that additional staffing needs will be necessary in the Community Development and Finance Departments. In addition, there will be a need to have an on-call building contractors to maintain the apartments and property.
The estimated budget increases in the Community Development Department is $150,000, and $168,000 in the Finance Department. The cost to have on-call building contractors to maintain the apartments and property will be determined at a future date.
Attachments:
1. NGI Written Offer, dated January 14, 2022
Page2
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JANUARY 14, 2022
MR. WILLIAM TAM
EXECUTIVE DIRECTOR
Attachment 1
(q01) 1/166-00S:O
FMI 1101) 1/166-1/!S:Q
IRWINDALE HOUSING AUTHORITY
CITY OF IRWINDALE
5050 NORTH IRWINDALE
IRWINDALE, CA 91706
RE: LAS CAS/TAS SENIOR COMPLEX
Dear Mr. Tam:
Pursuant to our discussions this morning, please find listed below the deal points for purchase of Las Casitas Senior Complex from The Northridge Group, Inc.
BUYER:
SELLER:
PROPERTY:
SALES PRICE:
DEPOSIT:
Irwindale Housing Authority
The Northridge Group, Inc.
Las Casitas Senior Housing Complex
5164 Ayon Avenue
Irwindale, CA 91706
Consisting of Twenty-six (26) Senior Housing Units, one Clubhouse and all improvements, fixtures, machinery and equipment thereon.
Eight Hundred Ninety Eight Thousand Five Hundred Dollars ($898,500.00).
Within seven (7) days of approval to purchase, by the Irwindale Housing Authority, Buyer agrees to open Escrow with a good faith deposit of Ten Thousand Dollars ($10,000.00). Deposit to be applied to Sales Price at close of escrow. Said Deposit shall be fully refundable to Buyer upon demand by Buyer any time during the escrow period thereby canceling the escrow.
MR. WILLIAM TAM
EXECUTIVE DIRECTOR
IRWINDALE HOUSING AUTHORITY
CITY OF IRWINDALE
Pagel
January 14, 2022
ESCROW/TITLE/FEES:
Escrow and Title Company to be determined by Buyer and approved by Seller.
Buyer and Seller shall each pay their respective attorneys fees. All other closing costs to be split between Buyer and Seller as is customary in the greater Los Angeles metropolitan area.
CLOSE OF ESCROW:
PRORATIONS:
Escrow to close within forty-five (45) days from the opening date.
Any rents, property taxes, insurance, repairs and operational expenses shall be prorated as of the close of escrow.
INSPECTION REPORT:
During the escrow period the Buyer will obtain a Buyer's Inspection Report. All corrections shall be limited to Code issues only. Said Inspection Report shall be approved by Seller. Buyer to pay for said Inspection Report.
ONSITE MANAGER:
OVERSITE:
Upon Close of Escrow Irwindale Housing Authority to provide and employ a Resident Manager.
Upon Close of Escrow Seller agrees to provide oversite and training for 60 to 90 days from close of escrow the Buyer's Resident Manager at no cost to the Buyer.
SECURITY DEPOSITS & RESERVES:
Upon close of escrow Seller agrees to transfer all Tenant Security Deposits and Replacement Reserves Account to Buyer.
REAL ESTATE BROKERAGE:
It is hereby acknowledged, by all parties, that Mary Jo Jahn, President ofThe Northridge Group, Inc. is a Real Estate Broker, however, Buyer and Seller agree this is a principal-to-principal transaction and there are no brokage fees/commissions involved.
MR. WILLIAM TAM
EXECUTIVE DIRECTOR
IRWINDALE HOUSING AUTHORITY
CITY OF IRWINDALE
Page3
January 14, 2022
EXCHANGE:
If requested by Seller, Buyer agrees to cooperate with Seller on a 1031 Exchange or Charitable Trust at no cost to Buyer.
William, I believe this pretty well outlines our discussion, and we look forward to working with you and/or your designee to bring this transaction to a conclusion. Please foel free to contact my office with any stions or clarifications.
PRESIDENT
WEJ/mjj