Agenda Item C. Village Manager s Office Review _CLP_ Tammie Grossman, Director of Community and Economic Development

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1 Date January 21, 2014 Agenda Item C Submitted By Village Manager s Office Review _CLP_ Tammie Grossman, Director of Community and Economic Development Agenda Item Title A Resolution Authorizing Subordination of Lien and Amendment of Marketing Services Agreement MSA 1212-G and Accompanying Installment Note Synopsis The grant recipient/owner is restructuring the ownership of the property, moving it from direct ownership to a limited liability corporation, which will also be owned by the grant recipient/owner. The grant recipient/owner is also refinancing the property and requesting subordination of the Multi-family Housing Incentives Program grant to a new first mortgage. The Village s interest remains secure. Recommendation Approval. Fiscal Impact There is no impact on the General Fund. Staff time to prepare the subordination and assignment are the only cost to the Village. This is a normal function of portfolio management. Background The Housing and CDBG Programs Division of the Community and Economic Development Department administers the Multi-Family Housing Incentives Program (a/k/a DAP), which was established by Ordinance in The Multi-Family Housing Incentives Program is a program of grants and loans for owners of multi-family buildings with four or more units. The purpose of the program is to allow owners to upgrade the physical condition of multifamily buildings, and to expand the housing choices of renters to encourage diversity. To accomplish these purposes, the Village awards eligible property owners a grant and/or loan, and in return, the owners enter into a Marketing Services Agreement which requires the owner to market the building s rental units with the Oak Park Housing Center. The Village records Multi-Family Housing Incentives grants as a forgivable mortgage lien against the property, with the purchase mortgage having priority over the Village s lien. When the grant term expires the mortgage is released. We record the grant as a mortgage so that we have an enforcement mechanism should the owner not comply with the Marketing Services Agreement. If an owner does not fully cooperate with the

2 Marketing Services Agreement, one option would be to cancel the grant and seek reimbursement. During the grant term, a building owner may seek to refinance their purchase mortgage. When a property is refinanced, the original purchase loan is paid off and the mortgage lien released. Ordinarily, this would mean that the next lien recorded against the property, the Village s lien, would take first priority. However, lenders will not refinance a principal mortgage unless their new mortgage lien has first priority against the title. In this situation, the lender and the property owner request that the Village agree to subordinate its lien so that it remains in second place against the title. On June 18, 2012, the Village awarded the owner of Harrison Street a Multi- Family Incentives Program grant in the amount of $6,000 and the Marketing Service Agreement MSA 1212-G, which expires on June 18, The owner is transferring ownership of the property to a limited liability corporation and refinancing the first mortgage. The new mortgage will be for $475,922 at 5.00% for fifteen years. Cash out of equity will be used to repay other obligations and to improve this property. The owner is requesting that the Village assign Marketing Services Agreement MSA 1212-G and the Note securing the grant to Small Pond Management,LLC, amend the Mortgage to reflect Small Pond Management, LLC as the owner, and subordinate its forgivable loan mortgage to the new mortgage. The property is valued at $1,240,000. The new first mortgage of $475,922 and the Village mortgage of $12,000 equal total debt of $487,922, leaving 60.65% equity in the property. Alternatives If the Village does not approve this Assignment and Subordination of Lien, either the owner would be unable to obtain their new financing, or the owner would have to repay the grant funds which would normally be forgiven after three years of successful program participation. Previous Board Action None. Citizen Advisory Commission Action None. Anticipated Future Actions/Commitments None. Intergovernmental Cooperation Opportunities N/A. Performance Management (MAP) Alignment This action aligns with the Housing and CDBG Programs Division Governance Priority #1: Multi-family and Single Family Grant and Loan Programs.

3 Attachments Resolution-MSA 1212-G Assignment and Subordination of Lien Exhibit A-Subordination of Lien Exhibit B-Assignment of MSA 1212-G and Note Exhibit C-Amendment to Mortgage Exhibit I-Note Exhibit II-Mortgage Exhibit III-Marketing Services Agreement MSA 1212-G

4 RESOLUTION A RESOLUTION AUTHORIZING SUBORDINATION OF LIEN AND AMENDMENT OF MARKETING SERVICES AGREEMENT MSA 1212-G AND ACCOMPANYING INSTALLMENT NOTE Related To Property Located At Harrison Street Whereas, the Village of Oak Park s Multi-family Housing Incentives Program authorizes the Village to make matching grants to owners of multi-family apartment buildings for the purposes of rehabilitating the property. In return, grant recipients are required to enter into a Marketing Services Agreement which requires that the units are marketed through the Oak Park Regional Housing Center to encourage racial diversity among residents; and Whereas, grants are supported by a Note and a forgivable Mortgage which is recorded against the property to ensure that the terms of the Marketing Services Agreement are followed; and Whereas, pursuant to the foregoing program, the Village awarded a grant in the amount of $6,000 to R.D. Hunting and Deborah Fausch as owners of a 6 unit multifamily building located at Harrison Street; and Whereas, the Mortgage supporting that grant was recorded against the property with the Cook County Recorder of Deeds as Document # ; and Whereas, R.D. Hunting and Deborah Fausch entered into Marketing Services Agreement MSA 1212-G with the Village, which will expire on June 18, 2015; and Whereas, to secure the Village s grant and the terms therof, R.D. Hunting and Deborah Fausch entered into a Note for $6,000 dated June 18, 2012, which Installment Note may only be assigned with the approval of the Village of Oak Park Board of Trustees; and Whereas, R.D. Hunting and Deborah Fausch desire to transfer title to the property securing that mortgage to Small Pond Management, LLC; and Whereas, the Village s mortgage was a second mortgage against the property; and Whereas, Small Pond Management, LLC has applied for and been conditionally been approved for a mortgage to refinance the property by Bank

5 Financial F.S.B. ISAOA, a national banking association, conditioned on their mortgage being the first lien on the property; and Whereas, it is in the best interests of the Village to: 1) enter into a Subordination of Lien for the purpose of allowing Small Pond Management, LLC to obtain a mortgage to refinance the property provided they continue to rehabilitate it in accordance with the terms of the original grant, Note and Marketing Services Agreement, and 2) to enter into an Assignment of Marketing Services Agreement MSA 1212-G and the accompanying Note. NOW THEREFORE, BE IT RESOLVED by the President and Board of Trustees of the Village of Oak Park, Cook County, State of Illinois ( Village ), in the exercise of their home rule powers, as follows: SECTION 1: That the Village Manager is authorized and directed to execute a Subordination of Lien for the purposes set forth in the Findings. Said Subordination shall conform substantially to the Subordination attached hereto as Exhibit A. SECTION 2: That the Note securing the grant for $6,000 be assigned to Small Pond Management, LLC as the new owner of the property who will be bound by all its terms. SECTION 3: That the Mortgage securing the Note for $6,000 be amended to reflect Small Pond Management, LLC as the new owner of the property who will be bound by all its terms. SECTION 4: That Marketing Services Agreement MSA 1212-G be assigned to Small Pond Management, LLC as the new owner of the property who will be bound by all its terms. 2

6 SECTION 5: That the Village Manager is authorized and directed to enter into an assignment of Marketing Services Agreement MSA 1212-G and Accompanying Installment Note between Small Pond Management, LLC and the Village of Oak Park. Said Assignment shall conform substantially to the document attached hereto as Exhibit B. THIS RESOLUTION shall be in full force and effect from and after its adoption and approval as provided by law. ADOPTED this 21st day of January, 2014 pursuant to a roll call vote as follows: President Abu-Taleb Trustee Barber Trustee Brewer Trustee Johnson Trustee Lueck Trustee Salzman Trustee Tucker Aye Nay Absent Abstain APPROVED this 21st day of January, Anan Abu-Taleb, Village President Attest: Teresa Powell, Village Clerk 3

7 PIN: Subordination of Lien WHEREAS, R.D Hunting and Deborah, by Mortgage dated June 18, 2012, recorded in Office of the Cook County, Illinois Recorder of Deeds on July 12, 2012 as document number , conveyed to the Village of Oak Park, the following legally described premises: THE WEST 41 FEET OF THE EAST 81 FEET OF LOTS 7, 8, AND 9 (TAKEN AS TRACT) IN HENRY C. WILSON S RESUBDIVISION OF LOTS 31 TO 41, INCLUSIVE, AND LOT 90 AND THE VACATED ALLEY RUNNING EAST AND WEST ABUTTING SAID ORIGINAL LOTS 31 TO 41 AND LOT 90 OF WILLIAM F. OLSON AND COMPANY S FIRST ADDITION TO RIDGELAND, IN THE NORTHWEST ¼ OF SECTION 17, TOWNSHIP 39 NORTH, RANGE 13, EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS. Permanent Real Estate Index Number: Common Address: Harrison Street, Oak Park, Illinois to secure an Installment Note for Six Thousand and No/100 Dollars ($6,000.00) with interest payable as therein provided, and WHEREAS, Small Pond Management, LLC, by Mortgage, dated, 2014 and recorded in the Office of the Cook County Recorder of Deeds as Document Number, conveyed to Bank Financial F.S.B. ISAOA a national banking association Mortgage, as Mortgagee, the same above described premises to secure an Installment Note for Four Hundred Seventy Five Thousand Nine Hundred Twenty-two and no/100 Dollars ($475,922.00) with interest, payable as therein provided; and WHEREAS, the Installment Note secured by the Village of Oak Park s earlier recorded Mortgage, described above, is held by the Village of Oak Park, an Illinois Municipal Corporation, as sole owner and not as agent for collection, pledge or in trust for any person, firm or corporation; and WHEREAS, the Village of Oak Park wishes to subordinate its Mortgage lien to the Bank Financial F.S.B. ISAOA,, a national banking association Mortgage lien recorded as Document No. on in the Office of the Cook County Recorder of Deeds. NOW THEREFORE, in consideration of the premises and of the sum of One Dollar ($1.00) to it in hand paid, the Village of Oak Park covenants and agrees with Bank Financial F.S.B. ISAOA,, a national banking association that the Village of Oak Park s above described Mortgage lien and the Installment Note which it secures shall be and remain at all times a second lien upon the above described premises subject to the above described Bank Financial F.S.B. ISAOA,, a national banking association Mortgage lien of $475, for all advances made or to be made on the note secured by the Bank Financial F.S.B. ISAOA,, a national banking association Mortgage and for all other purposes specified therein. WITNESS, the Village of Oak Park has caused this Subordination to be signed by its duly authorized officer and attested by a Notary Public this 21st day of January, VILLAGE OF OAK PARK ATTEST: BY: Teresa Powell, Village Clerk TITLE: Village Manager I, the undersigned, a Notary Public in Cook County, Illinois, do hereby certify that Cara Pavlicek, Village Manager for the Village of Oak Park, personally known to me to be the same person whose name appears above, appeared before me this day in person and acknowledged that he signed, sealed and delivered this document as a free and voluntary act for the uses and purposes set forth herein, on behalf of the Village of Oak Park, being first duly authorized thereon to. Given my hand and Notarial Seal (Date) (Notary Public) Deliver to: Recorder's Office Box No. 321 EXHIBIT A

8 ASSIGNMENT OF MARKETING SERVICES AGREEMENT MSA 1212-G AND THE ACCOMPANYING NOTE Small Pond Management, LLC, 144 W Harrison Street, Oak Park, IL 60304, as owner of Harrison Street, agrees to assume all rights, responsibilities and benefits of Marketing Services Agreement (MSA) 1212-G entered into by and between the Village of Oak Park and R.D. Hunting and Deborah Fausch dated June 18, 2012, attached hereto as Exhibit III, and the accompanying Note MSA 1212-G entered into between the Village of Oak Park and R.D. Hunting and Deborah Fausch dated June 18, 2012, attached hereto as Exhibit I, and The Village of Oak Park, 123 Madison St. Oak Park, IL agrees to assign all rights, responsibilities and benefits of the above described agreements to Small Pond Management, LLC. VILLAGE OF OAK PARK Subscribed to and Sworn Before me By: on the day of, 2014 Cara Pavlicek Village Manager Notary Public Small Pond Management, LLC Subscribed to and Sworn Before me on the day of, 2014 Notary Public EXHIBIT B

9 EXHIBIT B

10 AMENDMENT TO MORTGAGE Recorded as Document No O PIN: THIS Amendment to Mortgage is made this 21st day of January, 2014, by R.D. Hunting and Deborah Fausch, herein referred to as "Mortgagor," and The Village of Oak Park, a municipal corporation herein referred to as "Mortgagee," witnesseth: AMENDMENT TO MORTGAGE Whereas, on June 18, 2012, R.D. Hunting and Deborah Fausch, Mortgagors, and the Village of Oak Park, an Illinois Municipal Corporation, Mortgagee, entered into a Mortgage which was recorded on July 12, 2012 in the Office of the Cook County Recorder of Deeds as Document No ( the Original Mortgage ); and Whereas, the Original Mortgage was entered into and recorded to secure Mortgagor s debt to Mortgagee, created by a Note signed by Mortgagor on June 18, 2013 in the amount of $6,000.00; and Whereas, Mortgagor has transferred title of the subject property to Small Pond Management, LLC; and Whereas, the Mortgagor and Mortgagee have assigned the Note to Small Pond Management, LLC. Now Therefore, the Mortgagor and the Mortgagee agree to amend the Original Mortgage to also reflect the transfer of title to the property to Small Pond Management, LLC. To Wit: I. The second paragraph of the Original Mortgage is amended to state: THIS MORTGAGE is made this 18th day of June, 2012 between Small Pond Management, LLC, herein referred to as "Mortgagor," and The Village of Oak Park, an Illinois municipal corporation, herein referred to as "Mortgagee. II. The remainder of the mortgage terms shall stay the same as in the Original Mortgage. 1

11 Legal Description of the premises: THE WEST 41 FEET OF THE EAST 81 FEET OF LOTS 7, 8, AND 9 (TAKEN AS TRACT) IN HENRY C. WILSON S RESUBDIVISION OF LOTS 31 TO 41, INCLUSIVE, AND LOT 90 AND THE VACATED ALLEY RUNNING EAST AND WEST ABUTTING SAID ORIGINAL LOTS 31 TO 41 AND LOT 90 OF WILLIAM F. OLSON AND COMPANY S FIRST ADDITION TO RIDGELAND, IN THE NORTHWEST ¼ OF SECTION 17, TOWNSHIP 39 NORTH, RANGE 13, EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS. Permanent Real Estate Index Number(s): Address(es) of Real Estate: The name of a record owner is: Harrison Street Oak Park, Illinois Small Pond Management, LLC Small Pond Management, LLC By: R.D. Hunting Dated:, 20 By: Deborah Fausch Dated:, 20 VILLAGE OF OAK PARK By: Cara Pavlicek Village Manager Dated:, 20 (Seal) (Seal) State of Illinois, County of Cook ss., I, the undersigned, a Notary Public in and for said County in the State aforesaid, DO HEREBY CERTIFY that Personally known to me to be the same persons whose name R.D. Hunting and Deborah Fausch subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that they signed, sealed and delivered the said instrument as their free and voluntary act, for the uses and purposes therein set forth, including the release and waiver of the right of homestead. Given under my hand and official seal, this day of, 20 Commission expires 20. Notary Public 2

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