Policies

GUIDELINES FOR SUBORDINATION REQUESTS FOR
Housing Rehabilitation Loans

The City of Hutchinson has authorized the Hutchinson Housing & Redevelopment Authority to process City Housing Loan Subordination Requests.

The HRA Board appoints HRA Loan Committee members and authorizes the Loan Committee to recommend to the HRA Board to approve or deny subordination requests according to the following guidelines and process:

REHABILITATION LOAN SUBORDINATION GUIDELINES

1. NO CASH OUT
   Requests should be for refinancing of current home mortgage for a lower interest rate and/or for continuation of home improvements. No “wrapping in” of other debt to the new first mortgage is allowed. Closing Cost can be included in the loan but cannot exceed 3.5% excluding HRA fees & prepaids/escrow payments.
2. Loan to Value Ratio
   A combined loan to value ratio of all mortgages may not exceed 100%.
   Value is to be established from either a professional appraisal (less than 1 year old) or current Estimated Market Value (EMV) established by the County. (50% of the value of the proposed improvements may be added to the appraisal or EMV.)
3. Home Repairs or Improvements
   Written estimates/bids for proposed home repairs or improvements must be submitted to justify the loan amount with the subordination request form. Extent of the improvements to the property should not be beyond the realm of “essential” or “reasonable” to expect government to supplement the financial package. Proposed financing for “luxury” improvements such as hot tubs or pools, etc. are not eligible.

LOAN SUBORDINATION REQUEST PROCESS

All requests will need to be submitted by the 2nd Tuesday of the month for the HRA staff to request additional information if needed and to present the request to the loan review committee. Any request submitted after the 2nd Tuesday might need to be postponed until the following month.

1. Cover letter explaining the reason for the request, a copy of the Loan Estimate, a completed and signed Subordination Request Form and if applicable Written estimates or bids for home improvements received by HRA staff with the subordination fee payable to the Hutchinson HRA.
2. Request reviewed by staff for completeness of information.
3. Request presented to Loan Review Committee for recommendation.
4. If request is recommended for approval by loan review committee, the request will be presented to the HRA Board.
5. Loan Subordination Agreement will be drawn up after HRA Board Approval.
6. The City Administrator or designee will execute the Loan Subordination Agreement for City of Hutchinson Housing Rehabilitation Loans.

Lenders should allow ten working days from the submission of all required documentation for the processing of subordination requests. All refinancing and subordination requests are subject to final approval by the Hutchinson HRA.

GUIDELINES FOR SUBORDINATION REQUESTS FOR
Hutchinson Home Purchase Opportunity Program Loans

SCDP Housing Affordability Gap Loan and HRA Entry Cost Loan Subordinations will be submitted and reviewed by the Hutchinson Housing & Redevelopment Authority who shall demonstrate careful documentation to support their decision. Since these are revolving loan programs to assist people in getting into homeownership, at the time the first mortgage is paid off, the loan will be due and payable to revolve to another homebuyer. Therefore, subordination will be allowed only under the following limited conditions:

1. Subordination will be considered only to refinance the first mortgage for a lower interest rate.
2. There will be no subordination to a new second mortgage.
3. No increase in first mortgage, except refinance fees cannot exceed 3.5% excluding HRA fees & prepaids/escrow payments.
4. No cash out.
5. Payments must be current status.
6. Property taxes must be current.
7. Proposed loan to value ration may not exceed 100%.

LOAN SUBORDINATION REQUEST PROCESS

All requests will need to be submitted by the 2nd Tuesday of the month for the HRA staff to request additional information if needed and to present the request to the loan review committee. Any request submitted after the 2nd Tuesday might need to be postponed until the following month.

1. Cover letter explaining the reason for the request, a copy of the Loan Estimate and completed and signed Subordination Request Form received by HRA staff with a subordination fee payable to the Hutchinson HRA. See HRA Fee Schedule for the current fee.
2. Request reviewed by staff – request must be received no later than the 2nd Tuesday of the month to be considered that month.
3. Request presented to HRA Loan Review Committee for recommendation.
4. Recommendation presented to HRA Board at Board meeting (Board meets third Tuesday of every month).
5. If request approved, Loan Subordination Agreement will be drawn up.
6. The City Administrator will execute the Loan Subordination Agreement for the SCDP Housing Affordability Gap Loan.