The City Council took no action Tuesday on a home loan modification request from former City Manager Scott Ochoa after two council members expressed reservations about any loan assistance being perceived by the public as "special treatment."
Ochoa in 2004 to purchase a home on Madeline Drive when he was hired as city manager under the condition that the loan be repaid within 12 months of when his employment ends.
Ochoa left Monrovia for the , so he has until December of 2012 to pay back the loan. But since he's upside down on this mortgage--he bought it for $775,000 and has secured a sales price for $739,000, according to a letter he sent the city--Ochoa asked the city to modify the terms of the loan. The house is currently in escrow.
Under the terms he proposed Tuesday, the city would release its lien on the home so he could sell it, paying $200,000 immediately to the city before paying off the additional $75,000 balance within 90 days. The loan would be secured by a separate property his family owns in Crestline under the scenario.
Ochoa appeared before the council Tuesday and asked the city to restructure the deal so he can sell the home and move forward with buying a property in Glendale.
"The housing market is extraordinarily tight right now, especially in Glendale, and that’s not your problem, that’s mine," Ochoa told the council Tuesday. "But at this point what we’re asking to do is allow this to be expedited so that we can conclude our business much more quickly than we can under the original terms of the deal."
Monrovia Mayor Mary Ann Lutz suggested that the city assent to the modification because it would result in Ochoa paying back the loan well before the December deadline.
"To me that makes sense for this city to have this money as soon and as quickly as possible," Lutz said. "We’re not being asked to cut a deal, we’re being asked if they can pay a big chunk of it up front."
Lutz suggested Ochoa pay a 6.25 percent market interest rate on a $75,000 loan instead of the 5 percent included in the original deal. But council members Tom Adams and Joe Garcia objected and said they were uncomfortable with any appearance of "special treatment" the modification might cause.
"I’m not sure that Monrovia is ready for us to alter the terms of that," Adams said. "I just think that there’s an awful lot of feeling, that has nothing to do with the economy of it and has everything to do with the politics of it, that would indicate that this may not be the best thing to do—to alter the terms of the loan—and just move forward under the terms that were agreed to."
"I think in this environment this is perceived to be some sort of special treatment, whether it is or not," Adams added.
"My concern becomes: are we setting precedent, in essence, for other members of the community who are in the same situation, who are hurting on their mortgage and are upside down, wanting to come to the city for a similar type of a solution?," Garcia said. "Economically it seems like a very easy fix. I just don’t know that I feel very comfortable at this point moving forward."
Since the council could not come to a consensus, City Manager Laurie Lile said she would talk to Ochoa to see if there are any other options he and the city can explore. She will report back on the matter at the next scheduled city council meeting.
If the city takes no action, Ochoa will have to procure a $75,000 loan from a private lender in order to sell his house and pay back the $275,000 to the city. That was a step he was reluctant to take because it could affect the interest rate on the home he is buying in Glendale, he said.