Supervisors agree to place subordination request for six CDBG-funded lots on consent; county counsel cleared legal risk

Linn County staff and the East Central Iowa Council of Governments' grant administrator described a proposed subordination agreement for mortgage liens on six lots in the Dallas Farm Pocket Park, part of a Community Development Block Grant (CDBG) project.

Charlie Nichols, planning and development, explained that the developer received approximately $900,000 in grant funds to construct six dwellings whose sale prices are limited to $175,000 under the grant program. Nichols said the bank providing conventional financing requested that the county sign a subordination agreement so the bank would have first priority on those lots in the event of a default while the county's covenants and restrictions remain in place.

Paula Mitchell, grant administrator with the East Central Iowa Council of Governments, told supervisors the mortgage is intended as a security instrument to enforce affordability; if a buyer or developer sold a unit outside program limits, the county could initiate default proceedings and covenants and restrictions filed against the properties provide county recourse. "The mortgages intended to be a security instrument to enforce affordability," Mitchell said, adding the county would review closings and income-qualify buyers before releases occur.

Supervisors pressed staff on the scope of county exposure and whether the subordination would apply to future parcels. Staff and Mitchell said the subordination is narrowly limited to the six lots funded by the CDBG award and is not a blanket subordination for other Dallas Farm properties. Supervisors agreed to put the subordination agreement on the consent agenda for the Wednesday meeting. The county's attorneys reviewed the request and advised they were comfortable with the proposed subordination, according to staff.