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HomeMy WebLinkAboutR-98-0588J-98-566 05/15/98 RESOLUTION NO. 9 8 - A RESOLUTION, WITH ATTACHMENT, APPROVIN CITY OF MIAMI'S HOUSING LOAN COL ION PROCEDURES AND POLICIES IN CONNECTION H T CITY'S HOUSING LOAN PORTFOLIO CONSISTING - INTEREST LOANS WHICH HAVE BE R D THROUGH THE CITY' S CDBG-FUNDE AND MULTI -FAMILY REHABILITATI0 AN PR RENTAL REHABILITATION GRAN OGRAM, ME INVESTMENT PARTNERSHIP G AND ATE HOUSING INITIATIVES PAR S P ; AUTHORIZING AND DIRECTING T Y Y TO COORDINATE A LOAN CE WITH THE DEPARTMENT F VELOPMENT WHICH WILL INCL ND CERTIFIED LETTERS TO ALL DELINQUENT DE S TO AGGRESSIVELY PURSUE ALL L TI TIONS AGAINST ALL LOAN ACCO S WHICH A DEFAULT IN EXCESS OF 120 DAYS; THORIZ DIRECTING THE CITY ATTORNEY PROVIDE CITY COMMISSION WITH QU TS OF ALL DEPARTMENT OF CO NT DELINQUENT LOANS &D,LN;4ATTORNEY ' S OFFICE. dated March 26, 's District Office of the Inspector General ("OIG'), cited several relative to the City's housing loan portfolio; and WHEREAS, in an effort to address the OIG's concerns with respect to the collection practice regarding the defaulted loans in the City's loan portfolio, it is necessary that the City establish a loan collection procedure; and WHEREAS, it is recommended by the Economic Development and Committee that the City Attorney's Office coordinate a collection procedure of Community Development which will include sending certified WHEREAS, it is further recommended that the debtors which are in default in excess of 120 days, assets, by initiating foreclosure actions, enforcing the a&nenIqqWts, pursuing personal guarantees, and through the engagement WHEREAS, it is recommended'I%Lhe M&mic Development and Transportation Committee that the City AttoAry provide the Commission with quarterly reports of all Department of Community DelLopment delin'ent loans referred to the City Attorney's Office; OF MIAMI, VED BY THE COMMISSION OF THE CITY and findings contained in the Preamble to this Resolution are reference thereto and incorporated herein as if fully set forth in this Section. City Commission hereby adopts the attached Housing Loan Collection which delineates the roles and responsibilities of the Department of Development and the City Attorney's Office, in carrying out the loan collection with respect to the City's housing loan portfolio. 2 98- 588 Section 3. The City Attorney is hereby authorized and directed to coordinate the collection procedure with the Department of Community Development, which will include sending certified letters to all delinquent debtors. Section 4. The City Attorney is further authorized and directed to pro City Commission with quarterly status reports of all Department of delinquent loans referred to the City Attorney's Office. Section 5. This Resolution shall become effective immedi,a PASSED AND ADOPTED this 9th in atcordance with Miami phis legislation by becomes effective with regarding sgjgjWut I WALTER J. FOEMAN, CITY CLERK'S OFFI-C DEVELOPMENT , DIRECTOR LAITY DEVELOPMENT ILL MtIY yor e8 no nd6cI a e approve-1 of provided, said iegi<, at c 7 the date of Commissicn ,.. n oeman, City Clerk 3 98- 588 PREPARED AND APPROVED BY: - - zk,, LIND L Y SON ASSISTANT CITY ATTORNEY ri CITY OF MIAMI INCO16 9BATED Department of Community Development/Housing Division Housing Loans Collection Procedures and Policies 98- 588 DEPARTMENT OF COMMUNITY DEVELOPMENT/HOUSING DIVISION HOUSING LOAN(S) COLLECTION PROCEDURES AND POLICIES In response to the shortcomings and deficiencies which were identified by the District Inspector General for Audit in the audit report, dated March 26, 1998, the Department of Community Development will be charged with the sole responsibility of performing the collection activities associated with the management of various housing loans which have been provided through the CDBG-funded Single -Family and Multi -Family Rehabilitation Loan Programs, HOME Program, State Housing Initiatives Partnership Program (SHIP) and any other housing programs which are administered by the Department. As part of the City's Corrective Action Plan and the Departmental Reorganization Plan, an in-house Finance Unit will be charged with the day-to-day responsibility of collections and oversight of the City's housing loan portfolio. This course of action will eliminate the lack of communications and misunderstandings which may have occurred in the past, relative to the roles of other City departments, namely, the Finance and Law departments. The Department of Community Development, through its Finance Unit will be responsible for receiving all loan payments submitted by the borrowers and the initial booking of the payments received from each borrower. Through the implementation of a mortgage tracking system, the Finance Unit will be able to determine whether a borrower is current, 30 days, 60 days and 12b _ days past due on his/her loan. Appropriate late notices will be forwarded to the borrower, along with follow-up telephone calls to the borrower(s) to bring the loan current and/or to establish the problem area associated with the delinquent account. After a loan is in default for ninety (90) days, the Department of Community Development will be responsible for notifying the City Attorney's Office to send certified delinquency letters to all borrowers who are delinquent on their loan account. If the borrower contacts the Department of Community Development and/or the City Attorney's Office, and is desirous of correcting the delinquency, no further legal action will be pursued by the City. After a loan is in default for 120 days, the Department of Community Development in conjunction with the City Attorney's Office will continue through appropriate written correspondences and telephone calls, attempt to notify the borrower(s) to bring his/her delinquent loan account current or enter into a stipulation of settlement agreement with the City Attorney's Office. If there is no response from the borrower(s), the Department of Community Development will be responsible for referring the matter to the City's Attorney's Office for foreclosure action. Any multi -family loan(s) that is delinquent in excess of 120 days, and the borrower(s) has responded to the appropriate notices forwarded by the Department of Community Development and/or City Attorney's Office and requires a restructuring of the loan or stipulation of settlement 98- 588 agreement, will require that the Department of Community Development submit said request to the City's Housing Loan Committee for approval/disapproval. Such action will also require approval from the Miami City Commission and U.S. HUD. Once approval has been received from the City Commission and U.S. HUD, all loan restructuring plans must also receive final approval from the State Oversight Review Board. The Department of Community Development will be responsible for performing the appropriate project analysis to determine whether foreclosure is the proper remedy. This project analysis will take certain factors into consideration which include: 1. The assessed value of the property. 2. The amount of superior lien holders (i.e., mortgages, tax certificates). 3. The condition of the property and liability associated with same. 4. The cost of maintaining the property. 5. The marketability of the property. 6. The loss in tax revenue once the property becomes exempt. Should the Department of Community Development decide that foreclosure is economically feasible, a Foreclosure Referral will be executed and forwarded to the Office of Asset Management and the City Manager's Office for approval/disapproval. Once approval has been secured from the City Manager's Office, the completed foreclosure referral form will be forwarded to the City Attorney's Office for legal action against the borrower(s). In the event that the Department of Community Development makes a determination that it is not economically feasible to foreclose and take title to the property, the Department of Community Development will refer the case to the City Attorney's Office for other legal remedies which may include a suit on the promissory note and/or personal guarantees. In addition, in those instances whereby the. City has utilized every available legal remedy to address a defaulted loan account, the City plans to utilize the services of a private debt collection agency to pursue all funds which remain outstanding. The Department of Community Development will be responsible for working with the City Attorney's Office in tracking the status of the foreclosure case from the filing of the complaint, summary judgment, foreclosure sale, temporary management of the property(ies) by a private management firm, and disposition to a new property owner. A new position, Default/Loan Workout Specialist will be assigned the responsibilities of monitoring default loans, make recommendations with regard to payment stipulations and loan workout agreements. In addition to the foreclosure actions, the City Attorney's Office will be charged with pursuing all legal remedies to cure loan defaults, to safeguard the City's assets and to recover losses by the City. These remedies shall include collecting rents through the assignment of rent agreements, and pursuing personal guarantees to recover losses. Moreover, through the utilization of the City's newly established Housing Loan Recovery Fund, the City will make every attempt to satisfy any superior lien holders which may be ahead of the City's loan, in order to safeguard the City's asset when possible. 2 98 - 588 The City Attorney's Office will be responsible for the preparation of a quarterly status report on the status of all legal actions against all borrower(s) for dissemination to the appropriate Department, in addition to providing a quarterly status report to the City Commission regarding the status of each foreclosure case. <shared-miscvh>hlcppolicies CITY OF MIAMI, FLORIDA INTER -OFFICE MEMORANDUM 2 71* TO : The Honorable Mayor, Joe Carollo and DATE May 11, 1998 FILE Members of the City Commission SUBJECT : Resolution Establishing the City's Housing Loan Collection Policies --- FROM 0 H. Warshaw REFERENCES and Procedures City Manager ENCLOSURES: City Commission Agenda Item May 26, 1998 RECOMMENDATION: It is respectfully recommended that the City Commission adopt the attached resolution, establishing the City's Housing Loan Collection Procedures and Policies. The attached document delineates the roles and responsibilities of the Department of Community Development and the Law Department in carrying out the overall loan collection process to substantially safeguard the City's housing loan portfolio. BACKGROUND: In March of 1998, the U.S. Department of Housing and Urban Development's District Office of the Inspector General, in its audit report dated March 26, 1998, cited weaknesses in the City's loan collection procedures, and recommended a strategy to aggressively pursue legal actions against all delinquent loan accounts in the City's housing loan portfolio. As a part of the City's corrective action plan relative to this finding, the City Administration is recommending the adoption of the attached Housing Loan Collection Procedures and Policies. The attached plan delineates the roles and responsibilities of the Department of Community Development and the Law Department, in carrying out the overall loan collection process, to include aggressively pursuing all delinquent debtors through legal actions to safeguard the City's assets. JGP/CMC/GCW/JBH:vh c: Gwendolyn C. Warren, Director <shared-memosvh>mayorcc5 8 0