The Crested Butte News Serving the Gunnison Valley since 1999
Spate of foreclosures raises questions about future of program
The town of Mt. Crested Butte is taking a closer look at its affordable housing program as an increasing number of deed-restricted units are falling through the cracks onto the free market or aren’t affordable any longer, causing some residents and even members of the town’s council and staff to question if, in the current housing market, the program is working the way it was intended to.
In the last year and a half, the town has lost several of its “affordable” units to foreclosure and been fielding requests to lift the deed restrictions on other properties in its affordable housing pool. Last spring, a woman begged the council in dramatic fashion to lift a deed restriction on her Pitchfork home to avoid being forced to foreclose on her son.
For many of the owners of deed-restricted properties, the real estate market has fallen so far as to make their homes unattractive to people who can buy property on the free market for the same price as a property with deed restrictions. For a few of those, the deed restrictions have led, if indirectly, to foreclosure proceedings.
And to avoid being saddled with a deed-restricted property, banks and lenders typically require that the town lift any restrictions on foreclosed properties, which has trimmed several units from the town’s housing inventory. Still, the town has been reluctant to lift deed restrictions for fear of setting a precedent that at least a few owners of deed-restricted properties would want to follow.
The biggest challenge for the town recently has been justifying the existence of uncapped, deed-restricted units, or those that can be sold for any amount of money, but still have to go to someone who meets the requirements for owning a deed-restricted property, like full-time residency and earning a majority of income in the county.
But almost immediately after those uncapped units went on the market in 2000, they were being flipped for profit, town manager Joe Fitzpatrick said.
In referring to the case involving the mother and son, Fitzpatrick told the council, “The purpose of these units is to make them affordable. That unit on the second or third sale was up to $460,000 or some unbelievable amount of money.”
“That’s certainly not an affordable housing unit for somebody living here and working a service-level job. It just doesn’t happen.”
At a May 21 meeting, the council heard almost a year had passed before the town was contacted after one of its deed-restricted units had gone through foreclosure and was about to be resold.
Local real estate agent Heather Woodward told the council at a meeting June 4 that her client was under contract to buy that property before she even found out it was deed restricted.
As a result, Woodward said, her clients wouldn’t qualify for a loan and had to go back on the hunt for a free-market home. She, like those who had requested before her, wanted the town to lift the deed restriction on the property her client had under contract.
In making her request, Woodward told the council the town bore some responsibility in allowing the owner of a deed-restricted unit in Pitchfork to fall into foreclosure.
“The reason I’m asking for this one to be lifted is the nature of how this played out. It went into foreclosure, the owner didn’t understand the deed restriction, the title company doesn’t understand the deed restriction. You’re dealing with a [Fannie Mae]-owned property. Do you really think they’re going to contact you,” Woodward said. “If the homeowner is in distress, I think it should be the job of the town, if you’re putting the deed restriction on the property, that you reach out to that homeowner.”
Most of the town’s deed-restricted units come with a price cap that restricts the amount of money a seller could make on a deed-restricted unit to 3 percent a year and an adjustment to reflect the Consumer Price Index.
Woodward told the council that banks and title companies wouldn’t understand, or even notice, the town’s deed restrictions when processing the sale or purchase of a property.
“The bank is never going to go after you and ask if you want that property. It is the responsibility of the bank and homeowner to understand what the deed restriction is, but most people don’t know,” Woodward said.
In fact, the town was asked by a bank last spring if it wanted to buy a foreclosed property, and the council rejected the offer, citing a lack of demand for affordable housing.
Mayor William Buck empathized with Woodward, but added that by asking for the council to lift one deed restriction in Pitchfork, she was essentially asking the town to lift deed restrictions for anyone who asked. And he took issue with Woodward’s claim that it was the town’s responsibility to track the owners of deed-restricted properties.
“When you talk about responsibility, Heather, you know as well as anybody, there’s a title company, you’ve got the bank, the buyers, the sellers, you’ve got the listing agent and the selling agent. Everybody’s got responsibility,” he said. “So the town’s responsibility is passed over to the title company. The town sets the program. This is not an elusive type of restriction.”
Town attorney Kathleen Fogo defended the deed restriction and pointed out that, for a title company, finding and understanding a deed restriction shouldn’t be a problem.
“If [the bank] had gotten a foreclosure guarantee on this property, the deed restriction would have shown up, the town of Mt. Crested Butte would have shown up as the entity entitled to notice and that would have taken care of the notice aspect,” she said. “The deed restriction is in pretty plain language and says, ‘If you’re a homeowner in default, you need to contact the town.’ It’s not that hard. And by the time it gets to foreclosure it’s really too late.”
Buck added, “This discussion is not lost on the council and we’ve all had these discussions before. I, for one, am sympathetic. But there is a process we’re required to adhere to—we’re working within that process.”
To address that process, the council has scheduled a work session with Gunnison Valley Regional Housing Authority director Karl Fulmer for June 18. At a previous meeting Fulmer indicated that it would be extremely difficult, if not impossible, to change deed restrictions that are already in place, but hoped that future deed restrictions could be made more effective.
At the work session, the council will discuss whether it wants to remove the deed restrictions on all of the uncapped units and if it makes sense to implement a similar deed restriction in the future.
