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On December 11, 1995, county staff sent a letter to the Marotta's and their attorney inquiring as to their intentions regarding purchase of the house. In that correspondence, staff requested that the Marotta's indicate how they intend to repay their SHIP loan. That letter, however, was returned because the Marotta's, have moved and left no forwarding address. While their attorney, who has contact with the Marotta's, was copied on the letter, the deadline for reply has since passed without any response. Given the circumstances, it appears that the Marotta's intend to default on their first mortgage and allow the property to go into foreclosure. For that reason, the Board of County Commissioners .must now make a decision regarding the county's subordinate mortgage and promissory note. ANALYSIS According to the county's Local Housing Assistance Plan, each SHIP loan recipient must repay his SHIP loan at the time the -SHIP financed house is sold or transfered to another person. This is consistent with the objective of the county's affordable housing trust fund which was established as a revolving loan program. As such, all SHIP loan payments go back to the housing trust fund and are used for additional loans. For that reason, the county must try to recapture as much of these funds as possible in cases of foreclosure. ALTERNATIVES Regarding the Marotta's loan, the -Board now has the following options: • The first option is to allow the bank to foreclose the loan and have the court clerk sell the unit in a foreclosure auction. In this case, the bank, as the first mortgage holder, will claim their money and their foreclosure costs, with the county receiving any remaining funds up to the amount of its loan. Most likely, the foreclosure auction will not generate sufficient money to repay the county loan. Consequently, this option is unlikely to yield any money to the county. If that occurs, the county could still sue the Marotta's on their promissory note. Their SHIP application showed zero assets, although a, wage garnishment may be possible if the county prevailed in such a suit. • The second option is to allow the builder to assume both the bank and county mortgage, finish the unit, put it on the market, sell the unit, and then reimburse the bank and the county. The builder, however, cannot qualify as an eligible very low or low income applicant or sponsor, and it is unlikely -the county's advance for closing costs ($3,124.83) could be recovered in a resale. This option would be contrary to the county's Local Housing Assistance Plan guidelines and procedures for assumption of mortgages only by eligible persons or sponsors. Although it is possible that the county could recover $6,613.00 of its SHIP loan with this option, the closing cost portion of the loan would probably have to be written off. 25 JANUARY 9, 1996 BOOK 97 ulu 1