Finance & Legal minutes: 2014-11-10

Special Notes:

CH Loan communications and proposal

Agenda:

CH Loan communications and proposal
Reserve study
Recording garage ownership
Winter F&L Jobs update
Banking: next steps
Accounts receivable
File cabinet
New Member Packet update
Transparency of financial information for members: tabled
Prioritizing our to-do list: tabled

Minutes:

Present: Debbi, Becky G., Keith, Mary King, Amy

1. CH Loan communications & proposal

NOTE: Subsequent to these minutes we were reminded that the "CH loans"
should be termed "CH assessments." Great Oak cannot legally make loans.

Thirteen units have CH loans outstanding. Mary and Debbi wrote a letter to
these households sent it by e-mail. Mary will also print the letter and
either hand deliver or snail-mail the hard copies for those who do not read
e-mail regularly. The letter informs the loan holders that their loans
will come due on June 30, 2015. If a household continues to pay on schedule
until then, they will have a balance of $2,786 at that time. The letter
invited recipients to talk with Mary further about the situation, to
problem-solve together. Two households have scheduled meetings with her.

A third household said that they would pay off their loan in two payments.
A fourth plans to pay in full as soon as possible, and a fifth will also
try to pay in full. Currently, our bookkeeping structure does not allow
people to pay off the loans early. Becky will ask our CPA to modify the
books to make it possible to pay off the loans early or to pay extra each
month to pay the loans down faster. We discussed this a few weeks ago but
the CPA did not have time to do it then.

Mary reported that there are some issues that need to be discussed. There
is some confusion or misunderstanding on the part of some households that
have loans. The loans were never documented or signed. Some people who
purchased their units after the loans were created either did not know or
understand the situation when they purchased, and they have no paperwork
that documents these loans.

Given this history, we feel that, ethically, GO should find a way to allow
people who are not in a position to pay off their loans to continue to pay
in small installments. Many of these households have solid track records of
paying their monthly installments regularly and on time. It doesn't seem
right to put them in a difficult position now.

Since our goal is to get the loans paid off, we talked about ways to help
households pay their loans faster in addition to changing the bookkeeping
structure to allow early and extra payments. The most recent
re-amortization was for 3 years at 8% interest. The interest rate is high
because the loans are unsecured; 8% is not unreasonable when compared with
unsecured commercial loans. But continuing the current structure means
people who pay the basic monthly amount won't be able to pay off their
loans off until 2024. The total amount of interest paid by then would be
significant. This doesn't seem right to us either.

Brainstorming, we thought that we could incentivize people to pay off their
debt by reducing the interest rate if they pay on time. We looked at
lowering the interest rate to 3% to match our investment plan for the
current Reserve Study.

Currently households are paying $36.28/month. If we increase this by about
$14/month and lower the interest to 3%, for a total monthly payment of
about $50/month, households would be able to pay off the loan in full in 5
years. Or if they choose to increase to about $81/month, they could pay it
off in 3 years.

Mary will draft a proposal to this effect and Debbi will show it to one or
two of our financially savvy neighbors for feedback. We hope to bring it
forward the first time at the December 15 meeting.

We talked about the fact that these would still be unsecured loans, and
that we need to protect the financial interests of the community. We
talked about putting a lien on all the households that extend their loans,
but didn't think it was fair to jeopardize the credit rating of households
that have been paying faithfully all along.

One idea was to say that we will refinance the loan lien-free for any
household that is completely debt-free to the community at the time the new
loan is established (this time in writing). This would provide an
incentive for any households that are currently behind to catch up by June
30.

A second idea was to establish in the loan language such that if the
household falls behind on their total debt to Great Oak by more than $1000,
including association fees, reserve fund contribution, CH loan fee, truck
or guest room charges, etc., we will place a lien on their unit. This is
the same policy that already exists for late payment of association fees.
This keeps things simple and consistent.

We noted that if units are under water financially, a lien may not have any
value anyway if the unit is foreclosed or sold as a short-sale. And by not
placing liens from the get-go, we honor the households that have been
paying faithfully and on time.

We also noted that we should start referring to the "loans" as a special
assessment. Great Oak is not and cannot legally be a lender.


2. Reserve Study

Paul Conahan will work on the Reserve Study in the coming weeks and months,
sending us a completed study in the New Year. Mary King has agreed to take
a Winter work season special projects job to help the community understand
the new study, and will work on a proposal for a plan for paying for it.

Mary would like to have help with the technical side of this work: someone
who understands the spreadsheets and is able to manipulate them to try out
different scenarios. A detail-oriented number cruncher. Keith and Mary
will meet to look into this as Keith has spreadsheet skills and would like
to know more about what is needed. We may need to research the history of
the current spreadsheets.

3. Recording garage ownership

Syndallas has information and will come to a future meeting.


4. Winter F&L Jobs update

Becky Hoort will join as a new counted member. Amy will serve as convener
again. Mary King's special project job is described in #2 above.


3. Banking: next steps

Becky G., Kathy B., and Amy will find a time to go to Old National Bank to
sign paperwork removing Len and Susan's check-writing access to our
accounts. When this is done, Becky will need to regularly download and
e-mail the monthly bank statements to Susan. This is not ideal but we
would have to pay the bank to do this.

4. Accounts receivable

Debbi reviewed the status of the various households with accounts
receivable.

She was able to contact the second household whose arrears exceed $1000 to
say that we plan to place a lien. The household asked for a week to try to
pay down their debt to get under $1000.

5. File cabinet

We found some hardware online that can be affixed to a non-locking cabinet
to make it lockable. Keith will take a look at it. He will also go to U-M
Property Disposition to look for a used lockable 4-drawer cabinet.

6. New Member Packet update

Amy read over the F&L section of the New Member Packet from Membership and
thought it looked fine. Becky and Debbi asked that we add a statement
urging households to read their monthly statements before paying them as
they may include charges above and beyond the regular fee, e.g. truck
fees, guest room, etc. A number of people have had small amounts owed,
resulting in late fees, and a lot of back-and-forth communications causing
frustration all around. This could be avoided if people just looked at
their statements and paid the correct amount.

7. Transparency of financial information for members: tabled

8. Prioritizing our to-do list: tabled

9. Next meeting: Monday, Nov. 24 at 7 pm