Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Raymond Hodges, Director of Housing
Subject: Loan Forgiveness - CDBG and HOME Loan
RECOMMENDATION:
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Adopt a resolution authorizing and directing the director of the Department of Housing, or designee(s), to forgive a Community Development Block Grant and HOME Investment Partnerships Program loan to the Mental Health Association of San Mateo County relating to property located at 37 Clinton St. in Redwood City in an original principal amount of $225,000, as amended to $332,250, including all accrued interest, and to take all actions and execute all documents and amendments as necessary and advisable, in consultation with the County Attorney, to effectuate the loan forgiveness and the release and reconveyance of security instruments issued in connection therewith.
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BACKGROUND:
On November 11, 1994, the County issued a Community Development Block Grant (CDBG) and HOME Investment Partnerships Program (HOME) loan to the Mental Health Association of San Mateo County (MHA) to finance the purchase and rehabilitation of a four-plex property at 37 Clinton Street in Redwood City. The CDBG and HOME loan was made pursuant to a Promissory Note secured by a Deed of Trust recorded against the property.
The CDBG and HOME loan was issued in the original principal amount of $225,000, and accrued interest at 3%. Under the Promissory Note, the term of the original loan was 30 years, and MHA’s monthly payment obligation was deferred to November 1, 2009. By 2010, $107,500 in interest had accrued on the original loan. At that time, the Promissory Note was amended to roll the accrued interest into the principal for a new amended loan balance of $332,250. Under the Amended Promissory Note, effective July 1, 2010, the term of the loan was 40 years, the loan continued to accrue interest at 3% interest, and MHA was required to make monthly payments of $1,199.42. The CDBG and HOME loan currently has an outstanding balance of approximately $250,000.
The facility has been operated by Caminar as housing for transition age young adults with serious mental illness. In October 2024, Caminar informed MHA that they would no longer be the operator of the facility and MHA took over operations on January 2, 2025.
DISCUSSION:
Under the circumstances and in service of the public interest, DOH staff recommend that the Board authorize forgiveness of the CDBG and HOME loan. The purchase and improvements financed by the CDBG and HOME loan were completed decades ago. Upon taking over operations of the facility, MHA’s review of the facility showed the need to address deferred maintenance concerns and also showed that facility residents pay rents that are too low to support continued repayment of the outstanding loan without undue hardship to MHA.
Moreover, given MHA’s long history providing services to residents in San Mateo County with mental health issues, the public benefit of continued operation of the facility, and the financial constraints present in supporting the clientele who are typically very low-income, loan forgiveness would serve the public interest. Accordingly, staff recommend that the Board authorize the Director of the Department of Housing, or designee(s), to forgive the CDBG and HOME loan, including all accrued interest, and release all rights to the property currently secured by the Deed of Trust.
The County Attorney has reviewed the proposed resolution as to form.
EQUITY IMPACT:
Forgiveness of this loan will support continued work addressing the needs of formerly homeless individuals, individuals with serious mental illness, and transition age young adults.
FISCAL IMPACT:
Forgiveness of this CDBG and HOME loan would have no fiscal impact on the County’s General Fund. The property was originally purchased and rehabilitation work on the home was completed using CDBG and HOME funds. Repayments that have been or will be received are CDBG and HOME program income returnable to those federal programs. There is no net County cost associated with the proposed loan forgiveness.