Yes. The City puts itself at greater risk if the homeowner is allowed to remove the equity from the home through a home equity loan. The City remains in what is known as a "second position" behind the mortgage. This means that should you default or sell the home, the mortgage gets paid first then the City receives it's funds with any remaining funds going to the homeowner.
Lenders have asked the City to take "third position" behind the home equity loan. This is prohibited and cannot be approved.
Many applicants have taken out home equity loans as they have gained equity and used a portion of the funds to repay the City, which would release the restrictions on the property. The City then reinvests the funds into our program allowing us the opportunity to assist another applicant.