The $0 Lien That Almost Blocked Everything

What Is This Thing?

When the city approved my 5 ADUs, two documents got recorded on my property's title:

1. An Affordable Housing Agreement -- a promise that one unit will be rented at a lower price
2. A Deed of Trust from the San Diego Housing Commission (SDHC) -- a lien that enforces that promise

Here's the strange part. The deed of trust has a $0 balance. I don't owe anyone money. There's no loan. There's no payment. It exists only as a way for the city to enforce the affordable housing rule.

But on a title report, it shows up as a lien. And every lender requires all liens to be cleared or moved behind their new mortgage. This process is called subordination -- getting SDHC to agree that the new lender's mortgage comes first.

The First Try

On January 23, 2026, our escrow company asked SDHC to subordinate the lien for MVI (my first lender).

By February 3, I was contacting SDHC directly. I reached Irma Betancourt and Merli Mejia, who had handled the original agreement.

Things were moving. The paperwork was almost done. Then on February 24, 2026, it collapsed -- when Mike Duong at MVI admitted the loan had never been funded:

"we have not yet funded the loan so there is no Fund Control account set up."

SDHC was literally waiting for signatures. The agreement was ready to go. And it fell apart because the money behind it never materialized.

Starting Over

When we switched to Arixa Capital, the whole subordination had to start over. New lender name. New paperwork. New waiting.

This put the subordination on the critical path. That means it was the one thing that could delay everything else. A process that was 90% done got killed and had to be redone from scratch.

Explaining It to the New Lender

I wrote a simple explanation for Arixa's team:

• What the SDHC deed of trust is (a rule, not a loan)
• Why it exists (to enforce the affordable housing agreement)
• How it affects the title ($0 balance, no foreclosure risk)
• What's needed (SDHC has to sign a subordination agreement)
• Who to contact and how long it takes

John at Arixa hadn't seen this exact situation before. But his team had done similar deals. The write-up gave them what they needed.

Advice for Other Builders

If you're using San Diego's ADU Bonus Program:

1. Start the subordination early -- as soon as you have a lender interested
2. Talk to SDHC yourself -- don't just rely on the escrow company
3. Have an explanation ready -- lenders need to understand this quickly
4. If you switch lenders, try to keep the process alive -- restarting wastes weeks