All homes in the program have a covenant that puts restrictions on the home. Visit the Home Restrictions webpage to learn more.
For Lenders - The Boulder Regional Affordable Homeownership Program
The city's homeownership program is designed to work with standard mortgage financing. Dozens of lenders have purchased, refinanced and made home equity loans on permanently affordable homes in Boulder. However, there are a few differences that are highlighted below.
Deed Restriction (Permanently Affordable Homeownership Covenant)
Foreclosure
The program restrictions end if there is a foreclosure sale. At the same time the covenant converts to a deed of trust. The value of this is the sale price minus the affordable price. As a result, the owner will get nothing from the sale. The lender will get the money they are owed.
Loan Requirements
The program has guidelines for loans to reduce the risk of default and foreclosure. The guidelines apply to people buying or refinancing a home in the Boulder Regional Affordable Homeownership Program. Learn more on the Loan Requirements webpage.
Program Loan ($10 Deed of Trust)
The program has a deed of trust on every property. This is usually only for $10. This is in place to protect the home in the program. The program wants to stop people from taking out a loan for more than they can sell the home for (being upside down on the mortgage). Also, during a sale the program wants to make sure the home is sold to an eligible person and at the affordable price. The program deed of trust makes sure the program learns of a refinance or sale – even if the owner forgets to tell the program. The program can then make sure the guidelines are followed.
Having a deed of trust on a home gives the holder rights in a foreclosure process. The oldest deed of trust has the most rights (the one recorded the longest time ago). Most of the time the original loan is the oldest deed of trust. The program deed of trust is usually second after this. Any new loan would then be third. Most lenders do not want to be low (third) on the list. They want the first and second deeds released so they can be first. For a refinance, the program will not release its deed of trust. However, the program will “subordinate” its deed of trust to the new loan (assuming the new loan meets the program requirements). This accomplishes the same outcome. It puts the new loan deed of trust ahead of the program's.
For a sale, the program will prepare a release of this deed of trust once the seller has met all covenant requirements, including inspection and maintenance requirements, and the program has verified that the buyer meets all eligibility requirements. This release will be sent to the title company prior to closing.
Home Appraisal
Homes in the program should be valued at market rate for appraisals. If there is a foreclosure the covenant restrictions end. This includes the resale price limits. The home could sell for a market rate price. It would then no longer be part of the program.
Learn more about Fannie Mae appraisal guidelines for deed restricted properties on the Fannie Mae website.