City Turned a Blind Eye

Bank buys apartments at public auction

WILMINGTON — Three apartment buildings containing more than 200 units available only to low-income residents were purchased at a public auction Friday morning by the bank that foreclosed on them. June 17, 2016

What wasn't mentioned in the Wilmington News Journal article is the following information..

In January of 1982 city council passed an ordinance loaning $469,600 from the city controlled Urban Development Action Grant (UDAG) fund. (That fund has since become a city revolving loan fund that provides bridge loans to small start up and existing businesses.) The loan, with a second mortgage, was made to the developers of the senior living apartments on Prairie Ave.

The sale was the result of the current owners of the property defaulting on the first mortgage held by the local bank.

It remains unclear to me why a facility with guaranteed government rental payments and, at one time, a long waiting list for new tenants should default. Poor management is a strong possible explanation.

There has been no information on the effect of the sale's results on the city's recovery of the loan balance. Legal advice indicates that the new owner is obligated to repay the loan balance. Let us hope that legal action will not be required. In the past the city has been reluctant t take action under the false assumption that eviction of tenants would result.

Very quietly, in the past, the city fathers and mothers have refused to face this situation. The first indication of trouble arose in 1993 and 1995 when entire annual payments were skipped and by April of 2004 all payments had ceased. This left a current balance with interest of around $100,000 owed to the city fund.

Published by Paul Hunter