Lino Seniors On Large Lots Pursue Reverse Mortgages
P&Z Recommends Denial Of Zoning Change
LINO LAKES - The Lino Lakes City Council has been pursuing a proposed revision to the city's Zoning Ordinance to help residents obtain reverse mortgages.
However, at its Nov. 14 meeting, the Planning & Zoning Commission recommended against adoption of the ordinance change, which was scheduled for a first reading at last Monday's council meeting.
The proposed revision would allow homeowners who live on large, unsewered lots to seek bank financing, including reverse mortgages, that some homeowners have said would not otherwise be available to them because of the size of their parcel.
The ordinance change would be good news for longtime Lino Lakes residents John and Martha DeHaven, who first approached the council in September about lending practices they say make it difficult to obtain mortgages.
The DeHavens, who are retired and own a home on a 15-acre parcel, say that they were told by numerous banking representatives that their lot was too big to qualify for a reverse mortgage.
The couple lives in the city's Stage II growth area where lots must be at least 10 acres in size, and where city sewers probably won't extend any time soon.
Like many couples, the DeHavens, who are in their 70s, reached a point in their lives when they considered selling their home. But Martha DeHaven told the council that they have planted "thousands of trees" on their property and that the prospect of leaving it all behind is not an acceptable alternative.
For many retired couples in their 60s and 70s, the question is the same: how can they afford rising medical expenses - and increases in the costs of life's basic necessities, like food, gasoline, and heat? Many have turned to a reverse mortgage.
A reverse mortgage loan allows homeowners to receive a loan against the equity in their home and obtain cash or credit to meet mounting expenses without liquidating other assets.
As a financing tool, the reverse mortgage has been around for decades, but it is gaining in popularity, especially among older homeowners.
According to the U.S. Department of Housing and Urban Development, more than 76,000 seniors obtained a reverse mortgage through HUD in 2006, compared to just 6,637 people in 2000.
To meet this demand, almost a dozen large banks and mortgage lenders have recently entered the reverse-mortgage market, according to an article in The San Francisco Business Times last week.
But the DeHavens say that the banks they talked to refuse to hold large lots as collateral, preferring, instead, to finance a home on one to three acres maximum. Without a revision to the city's zoning ordinance that would allow them to carve off the parcel of land on which their house sits, the DeHavens say they can't get a reverse mortgage.
At a workshop held Sept. 5, council members told the DeHavens that in making ordinance changes that accommodate homeowners with financial concerns, the law requires that equal protection be afforded to all.
"We can't make a decision based on your financial condition," advised Mayor John Bergeson, "but we can make decisions that are good for seniors in general."
But staff expressed reservations.
"The city attorney has trouble understanding why it would be a good idea to change city policy to accommodate a financial institution," Community Development Director Mike Grochala told council members at the workshop.
"It's not a subdivision," countered Martha DeHaven. "It's a legal description for a lien on our property. Nobody's coming in here with a grader."
The proposed change to the ordinance would allow a subdivision, at least on paper, for single-family homes built after July 13, 1992, pending verification from the lending institution that the new lot is needed to provide security to a third-party lending institution for owner financing.
Grochala told the council that the proposed ordinance now includes all types of mortgages, following an opinion by City Attorney William Hawkins that it would be inadvisable for the city to limit the scope to reverse mortgages alone.
"It's not a simple fix," Grochala said.
The ordinance would require that the smaller parcel be legally rejoined with the balance of the property prior to any future sale of the home.
In the event the lender foreclosed on the smaller lot with the house, however, that recombination requirement would not apply.
Whether the tweaks made to the ordinance are satisfactory to council members since they first discussed the issue in September remains to be seen.
But John DeHaven sees the ordinance as a step in the right direction.
"A reverse mortgage is a good thing for seniors," he told the council, "but it's not good when you can't use it." The council was scheduled to hold the first reading of the ordinance on Nov. 26 after press time. If approved, the second reading will likely take place at the council's meeting of Dec. 10.