Loveland, Co - Since the mortgage lending business began crumbling this year, mortgage lenders have been tightening the reins on loans. And some of those restrictions are forcing changes on the municipal level like one the Loveland City Council will examine at its regular meeting Tuesday night. Many reputable mortgage lenders for lower-income and first-time home buyers are making it a condition of loan approval that deed restrictions on affordable homes be dropped in the event of a foreclosure.
Deed restrictions require resale of an affordable home to be to other affordable-home qualifying buyers. If the home is sold at market prices, deed restrictions require some money go back to the city, which gave incentives to allow the affordable home to be built.
In a foreclosure, the lender would have to resell the home and lenders do not want these restrictions, said Darcy McClure, director of Loveland’s Human Services Department.
On Tuesday the Loveland City Council will look at an amendment to the city’s ordinances allowing, in the case of a foreclosure, the waiver of these restrictions.
“So we’re taking this to council and asking them to correct a glitch in the system,” McClure said. “If we the city do not allow this out, or allow this waiver, in the event of foreclosure, then essentially we’re prohibiting buyers from accessing stable loan products.”
The issue came up with a project by Aspen Homes. Buyers were unable to secure the good kind of loans because of these restrictions. “And really the only programs that were then available were the alternative programs, you know, the ones causing the problems in the mortgage industry right now,” said Jammie Sabin, president of Aspen Homes. “That’s not leading to stability, and that’s actually leading to foreclosures. ... We’re trying to take as sustainable approach as possible to building, and that’s a part of that.”
Source: Reporter-Herald