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06. Foreclosure on Second MortgageIt0i ��Ilvllf Incorporated 1892 Planning, Economic & Community Development Department P.O. Box 1997 Kalispell, MT 59903-1997 MEMORANDUM M DATE: August 4, 1994 TO: Larry allagher, Director of PECDD Glen Neier, City Attorney 248 Third Avenue East (406) 752- 7491 (406) 755-8017 (office fax) (406) 752-6639 (City Hall fax) OM: Susan Moyer, Housing Manager Planning, Economic and Community Development SUBJECT: Michael F. and Shelia F. Jenson -- Mortgage Foreclosure I have managed to locate and communicate with the Jensons and they have agreed to come in on August 12th to sign a Quitclaim Deed on the property. BarclaysAmerican/Mortgage Corporation has provided us with a payoff amount of $48,910.04 if they receive our check no later than August 15th. If the City Council concurs with paying off the first mortgage in order to protect our second, we will process a voucher immediately so that a check can be mailed the day the Quitclaim Deed is signed and we won't incur further interest and penalties. Once we have legal access to the property, we will make arrangements for the structure to be professionally cleaned, the repairs done and then made available to Farmers Home Administration for purchase by a qualified family on their waiting list. Glen, for your information I am enclosing copies of all the paperwork involved in the Bensons' purchase and financing of the property as well as previous correspondence with Barclays/Mortgage Corporation. Lot 12 of Block 188 of Kalispell Townsite Company's Addition Number One (1) to Kalispell, Montana, according to a map or plat thereof, records of the County Clerk and Recorder of Flathead County, Montana. yy�, fiCHn k 6W." r.:)VSING OPPORTUNITY e I 0 H IS Incorporated 1892 Planning, Economic & Community Development Department P.O. Box 1997 Kalispell, MT 59903-1997 DATE: July 22, 1994 248 Third Avenue East (406) 752- 7491 (406) 755-8017 (office fax) (406) 752-6639 (City Hall fax) TO: �.pa11�gher� Director of Planning, Economic and -'Nmmunity Development Glen Neier, City Attorney OM: Susan Moyer, Housing Manager Planning, Economic and Community Development SUBJECT: Foreclosure on the Jensen Property 705 Seventh Avenue West, Kalispell, MT There is a first mortgage on the above subject property which, as of July 7, 1994, had a payoff of $45,862.92. The City holds a second mortgage in the amount of $29,940.66. As of this date the Jensens have entered their fourth month of delinquency with BarclaysAmerican/Mortgage Corporation and the fifth month of delinquency with the City. In addition to the mortgage payoffs, the following debts have been incurred todate against the property due to the default status: Attorney Fees $610.00 Property Inspection Fee $19.90 Escrow Shortfall $13.28 The anticipated payoff todate would be somewhere in the range of $47,000; however, the interest continues to accumulate at $11.47 per day. Unfortunately, the Jensens left the structure in deplorable condition. Staff does not have legal access to inspect the property and can only make a general determination through the windows. It is a guesstimate that it will take between $3,500 and $5,000 to repair, replace and clean before the property would be in condition for resale. When the severe delinquency was discovered the lst of June, department staff quickly attempted to work with two separate eligible and qualified borrowers to assume the Jensen's first mortgage and restructure the second mortgage to an affordable, assumable point for qualified LMI buyers. The repair/replacement costs on top of penalties and interest, and 4 to 5 months of back payments precluded these aforementioned potential buyers from being in a position to assume the first mortgage. OPPORTUNITY The investment the City will have in the Jensen property should be fully recoverable -- even with the clean up and repair/replacement items. The Jensen property is 1-1/2 blocks away from the Diane Hall. The City purchased the Hall property at the fair market appraisal of $75,000. The Hall house has the same number of bedrooms and bath, and the lot had the identical square footage. The Jensen property is on a corner lot and has approximately 411 square feet more of living area than the Hall house. BarclaysAmerican/Mortgage Corporation filed a "Motion for Relief' with the Butte Bankruptcy Court on July 1st of this year. If granted, the first mortgage will be excluded from re -affirmation in the bankruptcy procedures, and they will be able to initiate foreclosure procedures. From that time until the property is actually sold on the courthouse steps there is nothing the City can do to protect our investment unless we purchase or assume the Jensens interest beforehand. If the property actually is placed for sale on the courthouse steps, the City could possible be present with a check for the amount of the first mortgage and still loose out to someone who submits a higher bid. Glen and I spoke this morning about the best way to proceed. He feels we should continue to seek contact with the Jensens in a friendly manner. It would be preferable to have them provide us with a Quitclaim Deed and we proceed from there to pay off the first mortgage. The Jensens receive Social Security Disability payments; and, while S/S will not release a mailing address directly to us, they will forward a letter from us to the Jensens at the time of the next S/S payment. Staff delivered a letter today in which it was explained how it would be to their benefit to work with the City on resolving the foreclosure issue and asking them to call for an appointment to go over this. Staff contacted Farmers Home Administration to inquire if this structure would be a suitable candidate for any of the eligible low income buyers who are on their waiting list. Once we have a key and can gain access to the property, FmHA can make a determination whether the structure meets the square footage requirements for the particular family size it can accommodate and that it is structurally sound and suitable. FmHA can inform families on their waiting list the property is available and can the provide the low interest financing affordable to their client. The City then would be paid off on both the first and second mortgage amounts.