Broward County Commission Regular Meeting
Director's Name: Leonard Vialpando
Department: Resilient Environment Division: Housing Finance Division
Information
Requested Action
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MOTION TO APPROVE Subordination Agreement related to the multi-family affordable housing project by H.O.M.E.S., Inc., (“Nonprofit”) in substantially the form of Exhibit 1; authorize the County Administrator to approve and execute the Subordination Agreement and make any required modification to the Subordination Agreement, provided such modifications do not impose any additional material financial risk on the County, and are subject to review and approval as to the legal sufficiency by the Office of the County Attorney; and to authorize the County Administrator or such other person designated by the County Administrator in writing, to execute customary required closing documents for such refinancing, and take the necessary administrative and budgetary actions. (Commission District 4)
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Why Action is Necessary
Board action is required to approve subordination agreements where the senior mortgage is a balloon mortgage.
What Action Accomplishes
Provides Broward County (“County”) consent to a subordination agreement that will allow Nonprofit to refinance the first mortgage on the subject property.
Goal Related Icon(s)
☒County Commission
☐Go Green
☐MAP Broward
Previous Action Taken
None taken.
Summary Explanation/Background
THE RESILIENT ENVIRONMENT DEPARTMENT AND HOUSING FINANCE DIVISION RECOMMEND APPROVAL OF THE ABOVE MOTION.
This item supports the Board’s value of “Customer Focus: delivering customer-centric solutions” and the Board’s goal of “Accountable Government: consistently delivering responsive, efficient, inclusive, and equitable quality services.”
Broward County supplied Nonprofit with HOME Investment Partnerships (“HOME”) funding for the affordable housing project (Exhibit 2-location map) that provides three rental units affordable to households with income levels at or below 80% area median income (AMI). The funding is secured by a HOME Program Mortgage dated September 1, 2015, in the amount of $269,940, recorded in Instrument No.113212283 of the Official Records of Broward County, Florida.
Nonprofit has secured a loan commitment from a new lender to pay off the existing first mortgage loan which has reached the end of its term. The proposed new loan is at current market rates with a five-year balloon and no cash out to the Nonprofit. The proposed new loan meets the requirements under Broward County Administrative Code 27.209, which allows the County Administrator to execute subordination agreements pertaining to multi-family housing projects, with the exception that the proposed new loan is a balloon mortgage.
County’s consent to the Subordination Agreement is required for the Nonprofit to refinance the existing first mortgage that has reached the end of its term. Failure to take this action and approve a subordination to the balloon mortgage leaves the Nonprofit with two possible alternatives: 1). refinance the combined first mortgage loan and the County second mortgage (however, this option is fiscally not feasible because the units are rent and income restricted, and property operations will not generate sufficient cash flow to service the combined mortgage debt); or 2). sell the property and pay off the first mortgage loan and the County second mortgage (however, a sale would result in the loss of the affordable rental units).
Source of Additional Information
Ralph Stone, Director, Housing Finance Division, 954-357-5320.
Fiscal Impact
Fiscal Impact/Cost Summary
No fiscal impact.