As Summit County government pulls itself further into the housing business, it is being forced to find additional solutions for how to protect the tax dollars used to construct these workforce units and ensure they remain affordable.
That was part of the conversation among the Board of County Commissioners and its staff Tuesday morning at the County Courthouse in Breckenridge. The discussion surrounding an individual case of a requested loan refinance on a deed-restricted property in the Snake River Village Townhomes in Keystone quickly turned to how to handle the situation the next time one cropped up.
“This is one ask, but we’re setting some precedent here,” said Nicole Bleriot, acting executive director of the Summit Combined Housing Authority. “We’re setting some policy for future expectations.”
A deed-restricted property is one that comes with a set of rules attached specifying how the unit can be used and how much it can be resold for over time. Depending on the limits of the development, it can also set requirements such as the tenant being a full-time employee, and how quickly the property’s value can appreciate.
These controls are included to guarantee the housing will remain attainable for locals for the foreseeable future, and available in a semi-confined market each time the current owner sells. This particular refinance petition stands to expose the county because more and more loan providers — in this case commercial bank Wells Fargo — require a supplemental provision that puts new mortgage in the first position should the home eventually go to foreclosure. From that point, a potential resale means the deed restriction would be dropped and could be sold to the highest bidder on the open market, which is precisely what the county hopes to prevent to safeguard its investment.
County senior planner Kate Berg estimated that there are approximately 33 of these units between the Monarch Townhomes and throughout the Snake River Basin. While other properties would grant the county the first right to reclaim the unit if an owner stopped paying their mortgage, these would not under this supplemental agreement.
To offset the risk with the handful of others, however, the county brought in Breckenridge senior planner Laurie Best to explain how the town has been handling such scenarios. Best, a 16-year veteran of the department, confirmed that these added agreements do indeed put the deed restriction at risk. But it’s been the current town council’s position to grant these home loans so the buyer sees improved terms. That means needing to maintain a reserve fund to step in and recover the property during a public trustee foreclosure sale to preserve the deed restriction when necessary.
“You want to preserve our deed restriction,” Best told the commissioners, “particularly when we have public investment in it and have worked hard to create those units at those price points. We get concerned when the lender can get the property back and sell it on the market unrestricted.”
She noted that during her tenure the town of Breckenridge has never lost a deed restriction. That’s in part because foreclosures on these types of properties are rare. She recalled no more than a handful — maybe 10 — since 2000 in town boundaries.
Best estimated there are 100 units dispersed in Breckenridge that don’t address foreclosures in the deed restriction. Newer properties in developments like the Wellington Neighborhood often necessitate the supplemental arrangement with a bank so the buyer can qualify. The town almost always obliges on a case-by-case basis after looking over the terms of the loan, but also keeps an eye out for times it may have to buy back the property to keep it deed-restricted.
The county made no official decision on the Snake River Village property on Tuesday, but took Best’s advice to move forward in reviewing these issues on a case-by-case basis. Bleriot also suggested a list of expanded criteria that would assist in making the safest decision on whether to permit supplemental paperwork to a buyer or owner on a refinance. Those may include close inspection of the debt-to-income ratio on the loan, its interest rate, or the loan-to-value ratio on a refinance. Certifying that it is providing housing to a local employee — as remains a primary intent of deed restrictions — is another.
“The key piece to this is making sure of a legitimate and valid use of the property ongoing if there’s going to be some benefit to whomever that owner is,” said county manager Scott Vargo, “that it remain in the inventory of workforce housing. That’s the big deal.”
And rather than coming up with some blanket rule or applying the prospective standards universally, Commissioner Thomas Davidson affirmed the need to review each circumstance individually to do right by the specific property, and the citizens who helped build them.
“In terms of protecting the taxpayer investment and the housing product that we’re putting our funds into,” said Davidson, “we really kind of need to do it this way. I realize that’s that more time intensive and labor intensive and all the rest, but my opinion is we’ve got a pretty significant dollar investment in each and every property. So the time we would have to spend on it is worth what we’re protecting.”