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Janesville CDA approves option to convert several homeowner installment loans to deferred-payments at sale
Summary
The Janesville Community Development Authority voted to allow staff to offer conversion of existing homeowner installment loans to deferred-payable-until-sale liens to reduce monthly administrative burden and align prior loans with current program practice. The option affects about six borrowers and is voluntary.
The Janesville Community Development Authority voted to allow staff to convert existing homeowner installment loans that require monthly payments into deferred loans payable at the time of sale, a staff member told board members. The change was approved by voice vote after a motion and second; no roll-call tally was provided and the motion carried.
The change is intended to reduce administrative burden and make older loans consistent with the CDA’s current home-improvement program, which already records loans as deferred until sale. "What you have, in front of you tonight is a request from staff...allow us to convert those over to, deferred until time of sale," Kelly, a CDA staff member, told the authority. Kelly said the conversion would be optional and staff would notify eligible borrowers.
Why it matters: converting installment loans to deferred liens can eliminate monthly payment obligations for borrowers, lower the visible mortgage balance on a property at a point in time, and reduce staff time spent manually tracking payments. Kelly said the change affects about six individuals and that loans are grant-funded through a mix of CDBG and HOME funds.
Under the proposal staff would satisfy the original mortgage and re-record a new mortgage for the remaining balance. Kelly provided a hypothetical: "if they had a $25,000 mortgage, and they paid off $10,000 we'd satisfy that 25, and then we would just take out the mortgage on the 15 or 15,000. So it will show less, debt against their house as well." Kelly added the option is not mandatory: "Anyone can make payments at any time if they want to, but they wouldn't have the requirement to do so."
A CDA member asked whether the city had experienced cases where a home's value fell and the city could not recoup loaned funds at sale; Kelly said the CDA has had foreclosures over the years but she was not aware of a case where the CDA did not ultimately receive funds back at sale. Kelly said staff generally confirm there is sufficient equity in a home before approving a project.
The motion to approve the change did not require a public hearing. A CDA member moved to approve the change and another member seconded; members voted by voice and the chair announced the motion carried. Kelly said staff would contact eligible borrowers "tomorrow or the next day."
