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Council directs staff to follow primary lender in 1708 Bluffs Drive foreclosure/reinstatement case
Summary
Faced with a borrower in default on a city second mortgage, council authorized staff to coordinate with the primary lender’s reinstatement decision; if the primary lender declines reinstatement, staff was directed to initiate foreclosure or pursue city reinstatement only after staff underwriting.
The council reviewed a staff report on 1708 Bluffs Drive, where a borrower holds a city second mortgage and the property is in default. Staff said the primary lender delayed a scheduled sale from Dec. 24 to Feb. 4 while it reviews the borrower’s reinstatement application. The city holds a $100,000 second loan in the mortgage stack and may face significant costs if it elects to foreclose.
Housing staff told council they had received borrower financial information late in the week and that the borrower recently obtained new employment; staff requested authority to evaluate reinstatement feasibility and to act consistent with the primary lender’s decision. Staff outlined two options: (1) allow the primary mortgage lender to lead reinstatement (city would not independently reinstate unless staff determined financial viability), or (2) city‑led reinstatement by paying arrears and adding costs to the city loan.
Council members weighed the financial risk of adding reinstatement costs to the city loan against the expense and uncertainty of foreclosure. Several members favored "piggybacking" on the primary lender’s review and allowing that lender to lead the decision, with staff empowered to reinstate only if underwriting indicated the borrower could sustain payments. The council approved that approach and directed staff to report back if the primary lender declines reinstatement so the city can determine next steps, including foreclosure.
