An unusual case in which the city of Menlo Park paid mortgage installments and homeowners association fees on a below-market-rate condominium unit for over two years ended with the city's finally obtaining the property through a court ruling on Dec. 1.
While the city occasionally has to step in to modify loans or resell properties when below-market-rate homeowners fall into default, this is the first time in the city's history that it was forced to resort to the legal system to obtain the title to a home, according to city attorney Bill McClure.
Through the below-market-rate housing program, land developers either build or pay for the construction of below-market-rate units, which are then sold to people on a waiting list who meet income requirements.
The payments the city made on the home came through that fund, rather than the city's general operating fund, according to Mr. McClure.
Ning Docena bought a condominium in the Menlo Square development near the train station in February 2004. The city first learned that she had defaulted on a loan in September 2007, according to a complaint filed in San Mateo County Superior Court.
While the city paid off loans, it also worked to prevent a handful of lenders, as well as the homeowners association, from foreclosing on the property and trying to sell it. The city eventually asked the court to declare that Menlo Park had first right of refusal to buy the property, a request that the court granted.
The city covers mortgage payments when a below-market-rate homeowner defaults in order to keep the unit in the below-market-rate program, with a set resale value, according to Mr. McClure.
Now that the city owns the unit, it will offer to sell it to another applicant for below-market-rate housing.
Throughout the process, Ms. Docena did not respond to any of the city's letters or notices, according to Mr. McClure. He said he believes she is still living in the unit.
The Almanac was unable to contact her.
"It's very unfortunate," Mr. McClure said. "Generally we try to work with property owners to get them engaged and involved, and to provide assistance."
"This is not the first time the city has covered mortgage payments," he continued. "There have been situations where the city has stepped in, provided financial assistance, cured default, and worked out something with the homeowner -- a loan-modification agreement, to allow somebody to stay in their home."
Mr. McClure said he hadn't worked out the total cost to the city in payments and legal fees, though the court found that, by the time it signed the property over to the city, Ms. Docena's equity had been wiped out. Court documents reveal that the city made a $10,607 payment to one lender in December 2007, and a $7,464 payment in August 2008.
Mr. McClure said he doesn't think the case signals a need for the city to rework its below-market-rate housing policy.
"This is the first time we've ever had to do this," he said. "You don't necessarily change a whole system because of one circumstance."