HomeMy WebLinkAboutResolutions - 2012.03.07 - 20021MISCELLANEOUS RESOLUTION 1112048 March 7, 2012
BY: FINANCE COMMITTEE, TOM MIDDLETON, CHAIRPERSON
IN RE: BOARD OF COMMISSIONERS — AMENDMENT TO GENERAL APPROPRIATIONS ACT SECTION 26 —
DEBT FORGIVENESS
TO THE OAKLAND COUNTY BOARD OF COMMISSIONERS
Chairperson, Ladies and Gentlemen:
WHEREAS Section 26 of the proposed FY 2012 General Appropriations Act says in part "A
member of the Board of Commissioners, the County Executive, any elected official, the Fiscal Officer,
any other administrative officer or employee of Oakland County shall not...(3) forgive a debt or write off
an accounts receivable without appropriate authorization of the Board of Commissioners..."; and
WHEREAS Section 26 of the proposed FY 2012 General Appropriations Act also allows for certain
administrative write offs of accounts receivable; specifically, Inmate Prisoner Billings under $2,500, in
order to expedite receipt of monies owed the County; and
WHEREAS the Community and Home Improvement Division provides loans to qualified Oakland
County residents for home improvements. These loans can take the position of a primary or junior
mortgage lien depending upon individual home owner circumstances. Current Oakland County policy
requires full repayment of these loans; and
WHEREAS due to the mortgage crisis and the downturn in the economy, many of the homes for
which the County is a lien holder are in foreclosure or going through the foreclosure process. Should
such a home complete the foreclosure process, the lien is extinguished and the County receives nothing
from the settlement process forcing the County to write off the entire loan; and
WHEREAS the County has been approached by various home owners, realtors, mortgage
servicers and others connected with the housing and financial market to consider accepting less than
the amount owed the County for a home improvement loan. Such a policy change would permit for a
"short sale" on a property allowing the County to stipulate a settlement process and receive partial
repayment of the County loan rather than forcing a home owner into foreclosure and writing off the
entire County loan; and
WHEREAS the Community and Home Improvement Division has proposed the attached policy
guidelines for accepting less than the full amount owed on an Oakland County loan for home
improvement; and
WHEREAS this proposed policy has been reviewed and approved by the Community and Home
Improvement Citizens Advisory Council.
NOW THEREFORE BE IT RESOLVED that the Oakland County Board of Commissioners approves
the attached "Policy for Accepting Less than What is Owed to Satisfy Mortgage Debt (Short Sale Policy)"
and authorizes that the FY 2012 General Appropriations Act be amended, under Section 26, to include
the provisions of this policy.
Chairperson, on behalf of the Finance Committee, I move adoption of the foregoing resolution.
FINANCE COMMITTEE
Motion carried on a roll call vote with Long and Runestad voting no and Greimel absent.
AKLAND COUNTY COMMUNITY & HOME irvIPROVEMENT DIVISION
HOME IMPROVEMENT LOAN PROGRAM
POLICY FOR ACCEPTING LESS THAN WHAT IS OWED TO SATISFY MORTGAGE
DEBT (SHORT SALE POLICY)
History and Purpose
The Oakland County Community & Home Improvement Division (OCCHID) has
provided home improvement loans to residents of the Community Development Block
Grant (CDBG) participating communities for over 30 years. Most of the funds for this
loan program come from federal grants and the remainder comes from a required grant
match provided by the Oakland County Board of Commissioners. There are three types
of loans. The first is an installment loan with a three percent interest rate. The second
is a deferred loan with a zero percent interest rate. The third is a combination of the
two. These loans are secured with a mortgage lien on the property. Typically, these are
second mortgages and take a subordinate position to the first mortgage. The first
mortgage is held by the mortgage company and takes primary lien position. The
OCCHID mortgage is due when the dwelling is no longer the principal residence of the
borrower or the co-borrower. In the event that the borrower wishes to refinance the
loan, it has been the policy of the OCCH1D to subordinate the lien to the new mortgage
provided it is for better terms and there is no cash out to the homeowner.
Due to the downturn in the economy between 2006 to the present, many, if not all,
home values in Oakland County have depreciated causing the homeowner to owe more
on the residence than the appraised or market value, As a junior lien holder, the
OCCHID has been requested by home owners, realtors, mortgage brokers, relatives,
etc., to take less than the full amount owed on the loan in order for the home to sell at
current market values.
The .current OCCHID policy requires full payment of what is owed on the loan, In
addition, Oakland County fiscal policies currently prohibit forgiveness of a debt owed to
the County (General Appropriations Act, paragraph 26), unless approved by the Board
of Commissioners. In many instances, these properties go into foreclosure or continue
through the foreclosure process. The OCCH1D receives nothing and all subordinate
liens are extinguished once the foreclosure process is complete. Upon completion of
the foreclosure process, 000H1D takes the foreclosed properties to the Board of
Commissioners periodically and requests authorization to write off the debt.
OCCH1D is requesting that the General Appropriations Act be amended and the
OCCHID Policy be changed to allow, in certain cases, for the acceptance of less than
what is owed for the home improvement loan. This would allow a short sale. A short
sale is the sale of real estate for less than the amount owed including all mortgages,
liens and property taxes. If a negotiated settlement can be reached with all lien holders,
the County would receive a portion of the proceeds of the sale in partial repayment of
the loan rather than forcing the homeowner into foreclosure and writing off the entire
1
3
loan amount. In addition, a negotiated short sale has less impact on the homeowner's
credit score and ability to move forward with other housing options.
This policy would not affect the junior liens held in conjunction with the HOME
Investment Partnership Act program through the Community Housing Development
Organizations (CHDO's), the American Dream Down Payment Initiative (ADDI), and the
Neighborhood Stabilization Programs (NSP1 and NSP3) as these homebuyer programs
have an affordability clause that prohibits this without a payback to the U.S. Department
of Housing and Urban Development (HUD).
Policy
OCCHID will consider an offer for less than the balance owed on an Oakland County
home improvement loan in a proposed sale of the property, unless prohibited by
Federal regulations. Consideration will be made for, but not limited to, the following
reasons:
1. The borrower and/or co-borrower are in imminent default of their mortgage and a
loan modification has been denied by the first position lien holder.
2. The borrower and/or co-borrower had a foreclosure sale and are in the
redemption period.
3. Other hardship approved by the OCCHID Manager, Chief of Operations of the
Division, and Supervisor of Administrative Services, Home Improvement
Program.
The requestor cannot list the property with or sell it to anyone that they are related to or
have a close personal or business relationship. If the requestor has a real estate
license, he or she cannot earn a commission by listing their own property. The
requestor shall not have any agreements to receive a portion of the commission or the
sales price after closing. Any buyer of their property must agree to not sell the home
within 90 calendar days of the date it is sold by the requestor. The requestor shall not
have any expectation that they will be able to buy or rent their house back after the
closing.
The dwelling must continue to be owner occupied. The purchaser must sign an affidavit
that they shall use the premises as their principal residence and not as an investment or
business property.
Documentation required will include, but not limited to:
1. A copy of the hardship packet submitted to the primary mortgage company
including a hardship letter, verification of income, and a financial worksheet, in
accordance with industry standards
2. A copy of the listing agreement
3. A copy of the purchase agreement
4
4. A copy of an appraisal completed by a licensed appraiser within the last three
months. A Broker Priced Opinion or Market Analysis completed by a Realtor will
not meet this requirement.
Prior to approval, the seller will be required to meet with an Oakland County Housing
Counselor to explore other options they may have, that they fully understand their rights
and responsibilities, to ensure there is no undue influence on the parties, and that the
homeowner has alternative housing options available. The Oakland County Housing
Counselor will advise the Manager and Chief of Operations on the results of the
counseling session.
Settlement Amount
5. Upon completion of the above mentioned requirements and the approval of the
OCCHID Manager and Chief of Operations and the Supervisor of Administrative
Services, Home Improvement Program, or their designee(s), the County will:
• accept a minimum of $3,000, or the balance of the sale proceeds, whichever
is greater, before the Sheriff's sale or during the first half of the redemption
period.
• a minimum of $1,500, or the balance of the sale proceeds, whichever is
greater, will be accepted if there is less than 50 percent of the redemption
period remaining.
A decision to accept less than what is owed will be made within 10 business days. The
Division will prepare a discharge of lien, The discharge will be recorded upon
verification of completion of the sale and receipt of the funds.
THE OAKLAND COUNTY COMMUNITY & HOME IMPROVEMENT DIVISION
RESERVES THE RIGHT TO REFUSE OR DENY ANY OR ALL OFFERS OR
REQUESTS.
Li
5
OAKLAND COUNTY
CORPORATION COUNSEL
MEMO
PRIVILEGED AND CONFIDENTIAL
ATTORNEY CLIENT COMMUNICATION
To: Gordon Lambert
From: Jody S. Hall, Assistant Corporation Counsel
Date: January 13, 2012
Re: Oakland County Community and Home Improvement Division, Short Sale Policy
File #: 2011-0691
In August 2011, you requested that Corporation Counsel review the Short Sale Policy
("Policy") drafted by the Oakland County Community and Home Improvement Division
('OCCHID"). My comments regarding the Policy are attached in a separate document.
After reviewing the Policy, it is my opinion that it does not violate the Uniform Budgeting
and Accounting Act, Public Act 2 of 1968, MCL 141, et seq., ("Budgeting Act") nor does it
constitute a gift in violation of the Michigan Constitution, specifically Article 9 § 18.
Uniform Budgeting and Accounting Act. The Budgeting Act provides that "[a] member
of the legislative body, the chief administrative officer, an administrative officer, or an
employee of a local unit shall not authorize or participate in the expenditure of funds
except as authorized by the general appropriations act." MCL 141.439. The term
"expenditure" as used in the Budgeting Act includes debt forgiveness. It is my opinion that
if the Policy and its loan forgiveness provisions are approved as part of the 'general
appropriations act/budget for the County each fiscal year, then the Policy and loan
forgiveness would not violate the Budgeting Act.
Gift The Michigan Constitution provides that "[t]he credit of the state shall not be granted
to, nor in aid of any person, association or corporation, public or private, except as
authorized in this constitution." Const 1963, art 9 § 18. This constitutional provision applies
to political subdivisions of the state. In re Request for Advisory Opinion on Constitutionality
of 1986 PA 281, 430 Mich 93, 119 (1988). The case law interpreting this constitutional
provision is neither ample nor precise. However, it is clear that a political subdivision or a
County cannot give anything away without consideration, i.e., gift Detroit Museum of Art v
Engel, 187 Mich 432 (1915); Kaplan v City of Huntington Woods, 357 Mich 612 (1959).
On the other hand, when a political subdivision or a County transfers something of value in
6
Short Sale Policy Memorandum
January 13, 2012
Page 2 of 2
return for value the constitutional provision is not offended. Jackson Broadcasting
Television Corp v State Board of Agriculture, 369 Mich 481, 498 (1960); Hays v
Kalamazoo, 316 Mich 443 (1947). The question that must be addressed in this instance is
whether the County's forgiveness of a portion of an OCCHID home improvement loan
would constitute a transfer of value by the County without value/consideration in return.
In this situation, it is my opinion that the County would be receiving value/consideration
when forgiving a portion of the OCCHID loan for the following reasons: (1) the County
would have received no repayment of the loan and now is it receiving a portion through
forgiveness; and (2) by allowing partial forgiveness of the loan, the County is avoiding
foreclosure of a home through a short sale, thus, helping stabilize housing prices
surrounding the home in question; and (3) pursuant to the Community Development Block
Grant Program, the County could have given, to certain individuals, the home
improvement loan money rather than loan it—instead the County has created a loan
program. See OAG, 1977-1978, No 5402 (December 13, 1978) (the provisions of Const
1963, art 9 § 18 are not violated by appropriating funds for the preservation of an historical
landmark as authorized by statute). The County is authorized by the Budgeting Act to
forgive loans.
The determination of whether there is adequate consideration for partial forgiveness of the
OCCHID home improvement loan would lie with the Board of Commissioners. In an
opinion, the Attorney General stated that it is a "matter of judgment and the exercise of
sound discretion that lies with Branch County Board of Commissioners as to whether the
restoration and preservation of a 19th century theater located in the City of Coldwater, ...
will result in a degree of public benefit so as to constitute adequate consideration for the
expenditure of County funds." See Id.
Rene contact mie ,with any questions or if I can be of further assistance.
PRIVILEGED AND CONFIDENTIAL
ATTORNEY CLIENT COMMUNICATION
7
I HETI APROVE,T,U FOREG RESOLUTION
Resolution #12048 March 7, 2012
Moved by Middleton supported by Woodward the resolution be adopted.
AYES: Crawford, Dwyer, Gershenson, Gingell, Hatchett, Hoffman, Jackson, Matis, McGillivray,
Middleton, Nash, Nuccio, Potts, Quarles, Taub, Weipert, Woodward, Zack, Covey. (19)
NAYS: Gosselin, Long, Runestad, Scott, Bosnic. (5)
A sufficient majority having voted in favor, the resolution was adopted.
STATE OF MICHIGAN)
COUNTY OF OAKLAND)
I, Bill Bullard Jr., Clerk of the County of Oakland, do hereby certify that the foregoing resolution is a true
and accurate copy of a resolution adopted by the Oakland County Board of Commissioners on March 7,
2012, with the original record thereof now remaining in my office.
In Testimony Whereof, I have hereunto set my hand and affixed the seal of the County of Oakland at
Pontiac, Michigan this 7t1 day of March, 2012.
(24,
Bill Bullard Jr., Oakland County