San Jose approves bailout of underwater loans to former police auditor Tuesday, August 4, 2009 By John Woolfolk, San Jose Mercury News San Jose leaders Tuesday vowed changes in a city program that provides low-cost loans to top officials before approving a deal in which the city and its taxpayers will be soaked by the former police auditor's underwater mortgage. Mayor Chuck Reed and City Manager Debra Figone said they would seek changes to the executive home loan program, which is designed as a recruitment perk. Those changes include requiring officials taking advantage of the program to put 10 percent or so of their own money down on the property they plan to buy; limiting the proportion of the debt the city would take on; and having the City Council sign off on final terms of such loans. The proposed changes came after the council voted 9-2, with Pete Constant and Nora Campos opposed, to approve a deal in which the city would forgive its $250,000 low-cost loan to former Police Auditor Barbara Attard and pay off the $94,000 debt on her first mortgage in exchange for the deed to a downtown condominium she borrowed the money to buy. Attard paid $350,000 for the condo in the Ryland Mews complex at 435 N. Second St. in 2005, with none of her own money down and interest on the city loan at just 2.86 percent. After several high-profile clashes between Attard and the police chief, the council declined to renew her contract last year. City officials said Attard's condo has been appraised this year at as little as $250,000, substantially less than she owes on it. But city lawyers said the city bears the risk on the loan. Constant said the city must evaluate the need for such loans, noting that Attard had also kept a house in San Francisco. Seven other city officials have loans under the program. Contact John Woolfolk at jwoolfolk@mercurynews.com or (408) 975-9346.