October 11, 2008

Soft Second Liability

I have mentioned this many times but here goes. The City has lent out lots of monies in the forms of what are called "soft" seconds. They are "soft" in the sense the underlying home-owner, low to mod income owner, does not have to actual make payments on the mortgage.

Here is how it works a CDC sells a house for $200,000 and the home-owner gets a real mortgage for say $170,000 that they make payments on. The City of Worcester kicks in the other $30,000 through their HOME funds from HUD, which the home-owner does not pay back. In the end the CDC walks away with $200,000, the home-owner typically puts down little or no cash and the second of Worcester has liability for the $30,000.

What liability? Well, if a person who is not low-mod income takes ownership during the affordability period, typically 15 years but I have seen longer, the City of Worcester (not the CDC) owes $30,000 to HUD. There are already alot of these soft second mortgages that have violated the affordability period that they City of Worcester now has to pay back. I hope someone inquiries into this and ask for a report detailing what we owe.

1 comment:

Jahn said...

I am hoping this subprime mess puts an end to these soft seconds as well as to low income housing production, esp. in Worc.

Council should declare a moratorium on this stuff otherwise we're going to be overrrun with poor people........if we arent already..........and too often poor people = more crime= more knives = more guns = more social services needed.....and if some sociologists who reside in Weston or Southboro want to called a "poorist" for making the above statemnt....be my guest.....thats fine with me.....i am only citing what the statistics reveal

Also keep in mind the city will advertise an RFP for building low income housing and the RFP will state, for example, that $10,000 of home funds are available to the builder if the builder wants to avail themselves of the Homes funds...and then after housing is built the builder somehow ends up getting. for example, $15-20,000(per the deeds on file at the courthouse)in Home funds, when the original bid called for only $10,000....at least that's what the deeds at the courthouse are showing for some Home funds "deals". IMO the RFP s/b re-bid if the Home Funds clause in the RFP is increased significatnly or for that matter at all as it's clearly a change in the RFD terms & conditions and IMO it's significant change. Also IMO Nick K. and/or Holden-Mag s/b investigating this crap.........it aint right........and if what the deeds on file are showing is correct, then some heads should roll