W’bago house has issues
The Minnesota Valley Action Council (MVAC) is working with Wells Fargo Home Mortgage to obtain and split approximately $12,000 with Faribault County and the city of Winnebago as part of a deed in lieu of foreclosure.
The deed is for a property at 247 First Ave. NW in Winnebago a property with an estimated 2017 market value of $37,900 that would enter the foreclosure process unless liens against the property are removed by the city, county and MVAC.
Judd Schultz, representing MVAC, visited Winnebago’s City Council on Aug. 8 and the County Board on Aug. 16 to recommend the release of those liens. And the result could be a financial benefit for all parties involved.
“Due to a traumatic brain injury, the homeowner has limited income and his home is in foreclosure,”?Schultz said, of the Winnebago homeowner. “Essentially, the mortgage company is willing to split money between lien holders if the liens are released.” Both the city and county have voted to do just that.
The homeowner, meanwhile, would have no foreclosure on his credit report if the proposed deed is finalized.
“We were the agency that helped rehab the home at one point,”?Schultz said, “and the homeowner asked us to help. It’s a small, rural area, and this is what we do help people.”
Helping the homeowner avoid foreclosure would also ensure MVAC, not to mention Winnebago and the county, is compensated for releasing liens on the property.
Around $12,000, a total Schultz estimated came from Wells Fargo’s investigation of the property’s value and presumed equity, would be available for distribution in exchange for the release of liens. And although initial plans were for the $12,000 to be divided equally among MVAC, the city and the county, Schultz said each loan holder will likely now receive a portion dependent on how old each of its liens are.
“They have this process with the $12,000,”?he said, of Wells Fargo, “that they will split it up amongst the five liens two from us and two from the city and one from the county. So the oldest liens get more money than the new ones.”
Regardless, Schultz said both Winnebago and Faribault County should expect to get some money back.
By his estimate, the city had invested about $29,000 in the property $4,000 from its Revolving Loan Fund and another $25,000 through a Small Cities Development fund. The county, Schultz added, had about $9,000 invested.
In MVAC’s case, the program’s own liens against the property total about $25,000 one for $5,000 that Schultz said came “a long time ago,”?and another for roughly $20,000. MVAC?funds most recently came in 2007 through the program’s Housing Preservation Grant.
In communicating with both Winnebago and the county about the release of the liens, Schultz said he encountered some hurdles with the proposed sharing of mortgage funds.
“At one point, the bank indicated there was a conflict of interest for MVAC?to seek the release of the liens since we have some on the property,”?he said. “But we’re not trying to unduly gain from this, and they’re the ones who offered the deed in lieu of foreclosure. If I?was saying we’d take $10,000 of the $12,000 being offered, I?could see there being a conflict.”
That is not what MVAC?is proposing, however, and as he continues to discuss the matter with Wells Fargo, Schultz said everyone is aiming for the same end result a wiping away of the liens, fair compensation for each of them and a less damaging punishment for a homeowner who can no longer afford his property.
“The deed in lieu still has some negative context for the homeowner,”?he said, “but it certainly helps.”
Schultz said additional communication will be needed to update the city and county on how much they will, in fact, receive in exchange for releasing their liens.
And, ultimately, letters of acceptance for those dollar amounts will be needed to make the entire process official.