Like a lot of people these days, Josh Ledebur struggles to pay his mortgage. What makes this schoolteacher's story unexpected is that he's participating in a city affordable-housing program.
Ledebur is asking the city to change terms of his affordable-housing agreement that make it appear he owes much more on his Burbank home than it's worth and are keeping him from refinancing at a lower interest rate.
The city's redevelopment agency is reluctant, however, to make a precedent of changing done deals in response to market trends — though that is one option before the City Council, which doubles as the Redevelopment Agency.
But one thing's for certain: Timing is everything.
Just as the bottom was about to fall out of the housing market, the city and the fellows formerly known as Countrywide Financial Corp. struck a bargain in August 2008 for Ledebur and 14 others like him to purchase an affordable-rate, one-bedroom condo at the swanky new Burbank Collection development next to the AMC movie megaplex.
The agreement valued the new home at $390,000 and called on Ledebur to take a $163,500 mortgage, with the city making up the $226,500 difference with a "silent" second mortgage — "silent" meaning "on paper only," as the loan requires no payments and no money ever changes hands among the city, the bank or the developer.
Along with a future-sales covenant keeping these units within the city's affordable housing stock, the silent second mortgage is designed to prevent a buyer from flipping property at market rates down the road.
But the market-rate condos at Burbank Collection, which were still being finished when Ledebur moved in, generally sold for around $300,000, despite granite countertops and other extra luxury features not provided in the affordable units.
And now the silent second is also preventing affordable-housing buyers from refinancing their mortgages at today's much-lower interest rates, though personal budgets are getting leaner, building association fees are going up and the City Council is raising utility rates.
Basically, these affordable housing buyers are in the same boat as others who bought homes before the market crashed and now find themselves "underwater," as in owing more on them then they're worth.
Due to admitted miscommunications by city officials that portions of the silent second would be forgiven annually, Ledebur's been told he can opt to reverse the deal and give up the property.
But Ledebur says he loves living in Burbank and wouldn't want to leave. He just doesn't understand why the city can't at least temporarily lower the amount of a loan no one's ever going to pay.
"Every time the market changed, we'd want to go in and change it again," said Burbank Assistant Community Development Director Ruth Davidson-Guerra.
Technically, the council could adjust the amount, "but then it would have to be readjusted when the market goes back up. At this point in time we're saying let's ride this out with everybody else," she added.
But to frame the conflict entirely as one of homeowner vs. city isn't telling the whole story.
Doesn't anyone remember the banks were the bad guys who helped get us into this whole financial meltdown in the first place?
Deputy Housing and Redevelopment Manager Jack Lynch said the city has asked Bank of America (which controls former Countrywide loans) to reconsider holding so-called silent second mortgages against affordable housing buyers wanting to refinance, but so far the bank hasn't budged.
Let's see what happens if council members go to bat for their affordable-housing program and publicly call on BofA to take another look.