Marin Housing Authority suit alleges below-market program abuses

The Marin Housing Authority has sued a Marin City man for allegedly violating the terms of a below-market-rate home ownership program agreement.

Warren Duane Jackson twice obtained loans secured by deeds of trust for a house that his mother Shirley Hall purchased in 1997 with a subsidy by the U.S. Department of Housing and Urban Development, according to the lawsuit in Marin Superior Court.

The loans violated the terms of the agreement that Hall signed when she bought the home through the county’s below-market-rate homeownership program.

The program, which is administered by the housing authority, is designed to increase the availability of affordable housing options for low- to moderate-income households by offering condominiums and townhomes for sale at below-market prices.

According to a statement that Jackson submitted to the court, his mother paid $81,000 for the 1,234-square-foot townhouse at 45 Terrace Drive. People who purchase homes through the below-market program must sign a contract that places limits on what they can do with the properties.

Participants in the program are prevented from reselling the homes at market value even after the mortgage is fully paid. The prices are kept low so the homes can be purchased by new program participants. At no time can total encumbrances on the homes exceed 90% of the restricted resale price.

When the person holding title to a residence dies, it must be resold to the housing authority. Heirs receive the proceeds from the property sale.

That is not what happened with the Hall’s home, the lawsuit says. In 2015, Hall obtained a reverse mortgage on the property in the amount of $900,000. This violated the terms of her agreement with the housing authority.

Hall died in 2022. Jackson was named administrator of her estate and inherited the property deed. Shortly before Jackson took possession of the property, however, the reverse mortgage went into default. The amount owed was $372,762, and the property was noticed for sale.

Later that year, however, Jackson paid off the reverse mortgage after obtaining a $468,000 loan from CALCAP Lending LLC that was secured by a deed of trust on the house.

“The CALCAP Loan exceeded the amount of the reverse mortgage that was in default by more than $100,000,” the lawsuit says. It also alleges that Jackson secured the loan without telling the Marin Housing Authority.

The suit states that the housing agency first learned of the reverse mortgage, the default and the CALCAP loan by way of a preliminary title report in January 2023. At that point, the housing agency attempted to exercise its option to purchase the property as provided in Hall’s agreement.

The authority was still engaged in talks with Jackson and CALCAP to resolve the matter more than a year later when it discovered, via another preliminary title report, that Jackson had obtained a new loan secured by the property from Quontic Bank. This loan was for $560,000, which exceeded the amount of the CALCAP loan by about $92,000.

In addition, the suit states, “On March 20, 2024, the Authority discovered that Mr. Jackson had also listed the property for sale at market rate without notifying the Authority and in violation of the Agreement. Mr. Jackson continues to attempt to sell the property at market rate, in contravention of the restrictions on the title.”

Jackson has filed a cross-complaint against Marin County and the housing authority in which he faults the agency for not exercising its option to purchase the house sooner. The complaint says the county and the authority waited approximately 89 months between the issuance of the reverse mortgage and its move to purchase the property.

“The county and the Authority had a duty to monitor the status of the property and determine in a timely and reasonable manner if the option had been triggered,” the cross-complaint says.

According to the filing, Jackson’s mother obtained the reverse mortgage partially to maintain the property but also to pay necessary living expenses, “given that Ms. Hall had no other significant income or assets.” The complaint states that Jackson “is disabled and, as a result, is unemployed with few opportunities to purchase a comparable home in his community.”

Kevin Rose, Jackson’s attorney, said, “I think the crux of the case is whether it’s equitable for the county to be trying to take away someone’s home when they’re the very class of people the program is supposed to protect.”

Rose said the housing authority recently agreed to enter into mediation in an attempt to resolve the matter. He said the lender also will participate in the talks “because the county is arguing that they shouldn’t get repaid.”

The talks are set to begin on Feb. 24.

During the Great Recession, the owners of more than 15 homes in the below-market program experienced financial difficulties that required the housing authority to consider repurchasing the homes. In a number of cases, the owners took out second mortgages in violation of the program’s rules, then defaulted.

At the time, the Marin County redevelopment agency spent $390,000 in an 18-month court battle with the banking giant HSBC to maintain possession of one Sausalito condominium.