Redmond City Council on July 15 declined a motion to allow the city to subordinate existing Neighborhood Stabilization Program (NSP) liens so homeowners could use HELOCs or other financing to fund home repairs.

The city’s housing program analyst, Linda Klein, summarized the NSP background: the program ran between 2012 and February 2017, provided down-payment assistance between $15,000 and $30,000 in Redmond and La Pine, and placed zero-interest liens that return to the city’s Community Development Block Grant (CDBG) fund when properties are sold. Klein said, “About 27 loans were made … we have 11 outstanding at this point.”

Council discussion focused on lender risk, homeowner equity and enforceability. One councilor said going into third lien position “is always risky in case of a default” and recommended a cap tying all liens to a maximum combined loan-to-value limit so homeowners retain an equity cushion. Another councilor said the city would “lack enforcement ability” once it occupied a subordinated position and that a HELOC could be spent on non-repair items once issued. Klein said there had been limited recent demand: “I’ve only had 2 in the last 6 months.”

A motion on the floor would have allowed the community development director to approve subordination of NSP lien positions on a case-by-case basis with an overall cap tied to loan-to-value (the motion text stated a maximum cumulative loan-to-value of 85%). The motion failed. Council discussion after the vote indicated at least two members voted no and one member said they abstained; the council did not adopt the proposed subordination policy at this meeting.

Why it matters: the decision preserves the city’s current lien priority and the CDBG stewardship position, but it leaves two recent homeowners without the requested route to access equity for repairs. Council members said they were open to returning to the topic with more precise safeguards to ensure CDBG dollars remain recoverable for future low-income housing projects.

Next steps: Councilmembers discussed revisiting a revised motion at a future meeting that would clarify loan-to-value caps and documentation of intended repair use; no formal direction to staff to return the item with new language was adopted at this meeting.