HomeMy WebLinkAboutReso 2002-104 - Housing Loan Policies ' 1 o
RESOLUTION NO. t 40 2-
A
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
AUTHORIZING IMPLEMENTATION OF AMENDMENTS TO THE HOUSING
LOAN POLICIES
WHEREAS,the City of Redding has previously adopted a Housing Rehabilitation Loan Policy and
Emergency Repair Program Policy by City Council action; and
WHEREAS,the City Council deems it to be in the best interest of the citizens of the City of Redding
that the aforementioned policies be further amended as set forth in the revised Housing Rehabilitation Loan
Policy and Emergency Repair Program Policy attached hereto; and
WHEREAS,it has been determined that this matter is categorically exempt from the provisions of
California Environmental Quality Act(CEQA).
NOW,THEREFORE,BE IT RESOLVED that these amendments to the aforementioned policies
attached hereto are hereby approved and adopted.
I HEREBY CERTIFY that the foregoing resolution was introduced and read at a regular meeting
of the City Council of the City of Redding on the 2nd day of July 2002,and was duly adopted at said meeting
by the following vote:
AYES: COUNCIL MEMBERS: Pohlmeyer, Stegall and Kight
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: Cibula and McGeorge
ABSTAIN: COUNCIL MEMBERS: None
PAT KIGHT, or
City of Redding
ATTEST:
;/
CONNIE ST' •HMAYE,Ci y Clerk
APPROVED AS TO FORM:
DAVID E. RANBER-7ssistant City to 'ey H:\CC Reports\policy02.res.wpd
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6 .
CITY OF REDDING
HOUSING REHABILITATION LOAN POLICY
Prepared by
Office of the City Manager
Housing Division
Adopted by Resolution No. 75-86
Effective September 2, 1975
Amended October 16, 2001
CITY OF REDDING HOUSING REHABILITATION LOAN POLICY
TABLE OF CONTENTS
Page
SECTION 1 - INTRODUCTION 1
SECTION 2 - DEFINITION OF TERMS 2
SECTION 3 - GENERAL ELIGIBILITY REQUIREMENTS 7
A. Location 7
B. Eligible Uses 7
C. Equity 7
D. Assurance of Completion 7
E. Eligible Borrowers 7
OWNER-OCCUPANT(HOMEOWNER) 7
Determination of Adjusted Gross Income 7
Income, Housing Expense, and Long-Term Debt 8
Housing Expense Ratio 9
Homeowner Credit 9
Homeowner Assets 9
OWNER-INVESTOR 9
Positive Cash Flow 9
Credit 9
Monitoring Requirements 9
SECTION 4 - DESCRIPTION OF HOMEOWNER LOANS 9
A. Amortized Homeowner Loans 9
B. Partially Deferred-Payment Loans for Homeowners 10
C. Deferred-Payment Loans for Elderly and/or Disabled Homeowners 11
D. Emergency Deferred Loans for Homeowners 12
E. Water and Sewer Loans for Homeowners 12
SECTION 5 - DESCRIPTION OF AMORTIZED OWNER-INVESTOR LOANS 13
A. HOME Rental Program (HRP) 13
B. Deferred-Payment Rehabilitation Loans for Non-Profit Corporations 14
SECTION 6 - ELIGIBLE COSTS 16
A. Code and Rehabilitation Requirements 16
B. Limited Assistance 16
C. Cost-Effective Energy Standards 16
D. Historic Preservation Standards 16
E. Rehabilitation Objectives 16
F. Building Permits and Related Fees 17
G. Certain Related Costs 17
H. Refinancing 18
I. New Construction In Lieu of Rehabilitation 18
J. Lead-Based Paint Abatement 18
SECTION 7 - INELIGIBLE COSTS 19
SECTION 8 - PROCESSING A LOAN 19
SECTION 9 - COMPLETING A HOME REHABILITATION 19
SECTION 10 - LOAN SECURITY 20
SECTION 11 - GENERAL CONDITIONS 21
SECTION 12 - RELOCATION ASSISTANCE AND ADVISORY SERVICES 22
SECTION 13 - DEFAULT, FORECLOSURE AND PROPERTY DISPOSITION POLICY . 22
SECTION 14 - CONTRACTOR PERFORMANCE STANDARDS 24
SECTION 1 - INTRODUCTION
Under the Housing and Community Development Act of 1974, the City of Redding was allocated
funds to develop and implement a community development program. In 1975, the number one
priority set by the Citizens Committee of the Community Development Advisory Committee was
the establishment of a housing rehabilitation program. That priority remains the cornerstone of
the City's affordable housing efforts, particularly as it relates to neighborhood revitalization. As
a mission statement, the Housing Division's efforts are meant to provide decent, safe, and
affordable housing and a suitable living environment while also addressing:
• Fair housing
• Assistance for lower-income families
• Neighborhood renewal
• Individual and community empowerment
• Homelessness
• Economic opportunities and job creation
• Citizen encouragement and public trust
Primary funding for housing and community development activities comes from the Federal
Department of Housing and Urban Development (HUD). As an entitlement community under the
Community Development Block Grant and Home Investment Partnerships Programs, Redding is
charged with developing its own programs and funding priorities, with an emphasis on activities
which benefit low-and moderate-income persons. It is HUD's focus to provide resources to local
communities in order to facilitate housing and economic opportunities for individuals who may be
unable to obtain favorable assistance through conventional means, Additional funding is provided
by the Redding Redevelopment Agency's Housing Set-Aside Fund.
The City has several housing programs which assist low- and moderate-income homeowners,
owner-investors of rental property, low-income tenants, and non-profit corporations that provide
transitional or permanent housing facilities. The programs are summarized below:
Homeowner Rehabilitation Loan Program: Low-interest, fully amortized or deferred-payment,
secured loans are provided to eligible low- and moderate-income homeowners to upgrade
residential property. Repairs may include roofing, pest control work, plumbing, electrical, flooring,
painting, and some types of general property improvements. Energy conservation work, like
weatherstripping and insulation, is also encouraged.
HOME Rental Program(HRP): This program offers long-term, low-interest, secured loans to non
profit agencies and owner-investors of rental properties to upgrade units occupied by low-income
tenants. The purpose of the program is to increase and preserve the supply of decent, safe, and
affordable rental housing while revitalizing neighborhoods within the community.
Emergency Repair Program(ERP):This program offers unsecured loans up to$2,500 foreligible
low-income homeowners to eliminate critical health and safety problems. Assistance is also
available to owner-investors of rental properties to complete handicapped accessibility
improvements for disabled tenants. The purpose of this program is to furnish home repair
assistance when provision of a homeowner rehabilitation loan is not feasible. (Note: this program
is more fully described in a separate document).
Senior Minor Repair Grant Program: The purpose of this program is to help senior citizens to
address small but important home repairs at no cost to them. It links qualified tradesmen with
needy homeowners to correct minor health and safety problems, such as cracked sidewalks,
broken windows, leaky plumbing fixtures, and electrical hazards.
City of Redding Housing Rehabilitation Loan Policy 1
Water and Sewer Loans: This program is available to those low-income homeowners who are
primarily interested in paying for water and/or sewer hook-up to their property, whether or not the
applicant is applying for a rehabilitation loan. Streamlined loan processing is offered to
accommodate these small loans.
Acquisition/Rehabilitation Loan Program:The Redding Redevelopment Agency provides long-
term, low-interest loans to owner-investors for the acquisition and/or rehabilitation of rental
properties occupied by low-income tenants. Loan amounts may not exceed forty-nine percent
(49%) of the total project cost and must assure rent affordability for the remaining term of the
specific project area. (Note: This program is more fully described in a separate document.)
The housing programs offer several repayment methods based on the applicant's ability to pay
or proposed project cash flow. The loans may be amortized, deferred-payment, interest-only
payment, partially-deferred, residual receipts, or short-term construction loans.
As loans are repaid, the money is returned to a revolving fund available for future applicants.
Using judicious underwriting and carefully monitoring outstanding loans, the fund is continually
replenished and additional families benefit from the original account. It is anticipated these
programs will remain a useful tool in helping to maintain and upgrade the housing stock within the
City of Redding, and will help stabilize and enhance various neighborhoods in particular. It is the
City's intent to promote rehabilitation work that provides maximum economic life to the project
whenever feasible. The programs are designed to be liberal enough in scope and terms to help
families and individuals of low income, be consistent with HUD guidelines, yet conservative
enough to ensure the security of taxpayer dollars and uphold the public's trust.
This document offers guidance for staff to ensure that housing assistance is delivered in a fair and
uniform manner and to provide consistency in the daily operations of the program. Above all, the
programs endeavor to create and maintain a workable strategy for the promotion of decent, safe,
and affordable housing. Periodically, this Policy will be updated to address changes in local
market conditions and community priorities.
SECTION 2 - DEFINITION OF TERMS
The following definitions shall apply to this document unless another meaning is clearly apparent
from the context:
ADJUSTED GROSS ANNUAL INCOME shall mean gross income from all sources less allowable
exclusions.
AGENCY shall mean the Redding Redevelopment Agency.
AMORTIZED LOAN shall mean a loan retired on an installment basis.
APPLICANT shall mean the person, or business entity or non-profit entity requesting assistance
through any of the Housing Programs.
APPRAISAL shall mean an estimate or opinion of the real or market value of a property made by
a qualified person and/or the price the owner could reasonably expect to receive from the sale of
the property. Real estate may be appraised based on the current or highest and best use of the
property. The value may be based on cash or the specific terms of the financing.
APPRECIATION shall mean an increase in the value of the property.
City of Redding Housing Rehabilitation Loan Policy 2
ASSETS shall mean the entire property of all sorts belonging to an applicant.
ASSUMPTION shall mean the transfer of a mortgage, deed of trust, promissory note, and/or
agreement from an original mortgagee to a subsequent mortgagee.
BALLOON PAYMENT shall mean the one-time payment in full of the unpaid portion of a loan, at
a specified time, which occurs before the full amortization of the loan.
BORROWER shall mean the recipient of loan assistance through any of the Housing Programs.
BUILDING PERMIT shall mean a document issued by the City's Building Department allowing
completion of specific types of construction work.
CASH FLOW shall mean the Net Operating Income (income minus expenditures) minus the
Replacement Reserve for a rental property.
THE "CITY" shall mean the City of Redding, California, Office of the City Manager, Housing
Division.
CITY COUNCIL shall mean the City Council of the City of Redding.
CODE VIOLATIONS shall mean infractions against the applicable codes contained in the Property
Rehabilitation Standards. This includes the Housing Code, City of Redding ordinances, and the
various uniform building codes adopted by the City.
COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) PROGRAM was created by Congress
in 1974 to permit local government to devise flexible and constructive approaches to prevent
and/or correct physical, economic, and social deterioration. The program is directed toward
neighborhood revitalization, creation of housing opportunities, economic development, and the
provision of improved community facilities and services. At least seventy percent (70%) of all
CDBG expenditures must be used for activities that benefit low-and moderate-income persons.
CONSTRUCTION LOAN shall mean a loan which bears interest, has no monthly payment, and
is retired within 60 days following the end of the construction period or one year,whichever is less.
CREDIT shall mean financial or commercial trustworthiness, as indicated by the applicant's debt
repayment history.
DEBT SERVICE COVERAGE shall mean the ratio of cash flow to mortgage payments, including
principal and interest, for a rental property as determined by a pro forma worksheet.
DEED OF TRUST shall mean a legal document in which title to property is transferred to a third
party trustee as security for an obligation owed by the trustor(borrower)to the beneficiary(lender).
DEFERRED PAYMENT LOAN shall mean a loan which is not retired on an installment basis.
DEPENDANT shall mean a member of the family (except foster children and foster adults) who
is not the family head or spouse, but is under 18 years of age, or is a person with a disability, or
is a full-time student (as defined by the U.S. Department of Housing and Urban Development).
City of Redding Housing Rehabilitation Loan Policy 3
DISABLED shall mean incapacitated by illness or injury that substantially limits activity, according
to criteria established by the Social Security Administration or the U.S. Department of Housing and
Urban Development.
DUE ON SALE CLAUSE shall mean an acceleration clause granting the lender the right to
demand full payment of the loan upon sale or transfer of the property.
EMERGENCY REPAIRS shall address those conditions which pose a serious and immediate
health and/or safety threat to the inhabitants of a dwelling. These conditions shall include either
hazardous wiring or plumbing, mechanical, structural, or sanitation problems as detailed in
Chapter 10 of the current Uniform Housing Code.
ESTABLISHED VALUE shall refer to either the appraised value of a property or the assessed
value. It may also include the value established by use of a recognized appraisal guide or, when
applicable, the written unofficial opinion of a professional appraiser or real estate broker.
EQUITY shall mean the value of a property in excess of claims or liens against it.
EXTREMELY-LOW INCOME shall mean an income that does not exceed thirty percent (30%) of
the area's median income as established by the U.S. Department of Housing and Urban
Development.
FAMILY shall mean all individuals who reside in a dwelling unit who are related by blood, marriage,
or kinship.
GENERAL PLAN shall mean that approved document which designates the desired land use of
all parcels of land in the city.
GENERAL PROPERTY IMPROVEMENTS(GPI's)shall mean improvements otherthan code viola-
tions and incipient code violations which are eligible for program assistance.
HOME INVESTMENT PARTNERSHIPS PROGRAM (HOME)was created by the 1990 Cranston-
Gonzalez National Affordable Housing Act and provides funds to participating jurisdictions to
increase the supply and affordability of housing and home ownership for low-income families.
HOME (which is not an acronym) may support tenant-based rental subsidies, assistance to first-
time homebuyers, property acquisition, new construction, reconstruction, moderate or substantial
rehabilitation, site improvements, demolition, relocation, and other reasonable and necessary
expenses related to the development of affordable housing. Participating jurisdictions must
furnish the prescribed local match for housing activities funded by HOME.
HOUSEHOLD shall mean all individuals who reside in a dwelling unit regardless of family ties.
HOUSEHOLD INCOME shall mean adjusted gross income of all persons residing in a dwelling
unit, whether or not they are related by family ties.
HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1974 shall mean the Federal legislation
which provides funding for the current program of housing and community development in the City
of Redding.
HOUSING EXPENSES shall mean the total of principal and interest payments on all mortgages,
hazard insurance premium payments, mortgage insurance premium payments required by the
lender, property taxes, and special assessments.
City of Redding Housing Rehabilitation Loan Policy 4
HOUSING LOAN COMMITTEE (HLC)shall mean a committee consisting of three members of the
City of Redding staff derived from the following positions: the Assistant City Manager, the Deputy
City Manager or his designee, the City Attorney or his designee, the Development Services
Director or his designee, and the Finance Officer or his designee. The Housing Loan Committee
shall be charged with approving or denying loan applications consistent with the policies of the
City of Redding or the Redding Redevelopment Agency.
HOUSING PROGRAM SUPERVISOR shall mean that person responsible for administering all of
the programs and activities within the scope of either the City of Redding's Housing Authority or
the City of Redding's Housing and Community Development Section.
INCIPIENT CODE VIOLATION shall mean a condition or element of a structure which is likely to
deteriorate into an actual violation within a year or two of inspection. The condition is usually a
result of a product, part or material nearing the end of its life cycle.
HOUSING EXPENSE RATIO shall mean the ratio of the total adjusted gross income of all
household members to housing expenses.
INSPECTION shall mean a visual survey of a property by a person qualified to perform the
inspection.
INTEREST shall mean a charge for borrowed money that is repaid with the amount of the loan.
LAND CONTRACT shall mean a contract used in connection with the sale of property in cases
where the seller does not wish to convey title until all or a portion of the purchase price is paid by
the buyer; often used when property is sold with a small down payment.
LEGAL NON-CONFORMING refers to the status of a parcel of land which conformed with zoning
or planning codes at one time, but does not conform to the current zoning or planning codes.
LIEN shall mean an encumbrance which uses property to secure payment of a debt or discharge
of an obligation. Example: judgments, taxes, mortgages, deeds of trust.
LONG-TERM DEBT shall mean the sum of (1) housing expenses and (2) monthly recurring
obligations on installment loans and charge accounts extending beyond ten months.
LONG-TERM DEBT RATIO shall mean the ratio of long-term debt obligations to adjusted gross
income.
LOW INCOME shall mean an income that does not exceed eighty percent (80%) of the area's
median income as established by the U.S. Department of Housing and Urban Development.
LOW-INCOME HOUSING TAX CREDIT(LIHTC) shall mean the program established by the Tax
Reform Act of 1986 which authorizes a Federal tax incentive for the construction or rehabilitation
of rental housing units occupied by low-income households. State housing credit agencies award
the limited annual supply of tax credits to developers of projects picked in application cycles. The
LIHTC provides the owner with a tax credit to offset Federal income tax for a ten-year period. The
size of the tax credit is based on the construction or rehabilitation costs for the low-income units.
MODERATE INCOME shall mean an income that does not exceed one hundred twenty percent
(120%)of the area's median income as established by the U.S. Department of Housing and Urban
Development.
City of Redding Housing Rehabilitation Loan Policy 5
MORTGAGE shall mean an instrument recognized by law by which property is pledged as security
without having to give up possession to it for securing the payment of a debt or obligation.
NON-PROFIT CORPORATION shall mean a non-profit public benefit corporation organized under
the Non-Profit Public Benefit Corporation Law for charitable purposes within the meaning of
Section 501(c)(3) or (4) of the Internal Revenue Code.
OPERATING EXPENSES shall mean those monthly or annual uncontrollable expenses incurred
in the operation of a rental property.
OWNER-INVESTOR shall mean an individual or business entity who owns or is buying a property
for the purpose of renting it for residential use.
OWNER-OCCUPANT shall mean an individual or family who occupies and owns, or is buying, a
unit of residential property, and will occupy such residence.
PROPERTY REHABILITATION STANDARDS shall mean that document of the same title,
identifying City codes applicable to residential rehabilitation, and other environmental deficiencies
to be corrected during the rehabilitation process not identified in City codes.
REHABILITATION COST shall mean the total cost of repairs, improvements, and other costs for
rehabilitation of the property incurred by the applicant that are eligible for inclusion in a
rehabilitation loan.
REPLACEMENT RESERVE shall mean an amount set aside each month for replacement at a
future date of long-lived systems (roof, HVAC, etc.), at a rental property.
SECTION 8 MODERATE REHABILITATION PROGRAM shall mean that program which is
designed to provide a rent subsidy for an eligible tenant residing in a unit which has been
rehabilitated according to Section 8 Moderate Rehabilitation Guidelines.
TARGET AREA - shall mean a geographical area of the city designated by the City Council or
Redding Redevelopment Agency to receive assistance to alleviate blight, high crime rates, and/or
other undesirable conditions.
TITLE I, COMMUNITY DEVELOPMENT shall mean that portion of the Housing and Community
Development Act of 1974 which provides for general improvements in the community and
particularly for home rehabilitation.
TITLE II, SECTION 8 shall mean that portion of the Housing and Community Development Act of
1974 which states that housing assistance payments may be made for new and substantially
rehabilitated housing. In this Policy, Section 8 Income Guidelines are used.
TRANSITIONAL HOUSING FACILITY shall mean residential units which are occupied for a
specified length of time under a written contract while independent living skills are learned.
UTILITIES shall mean gas, electricity, water, sewage disposal, and refuse collection.
VERY-LOW INCOME shall mean those incomes which do not exceed fifty percent (50%) of the
area's median income as established by the U.S.Department of Housing and Urban Development.
ZONING shall mean a designation assigned to a parcel of land which specifies the allowable use
and the type and density of structures on the parcel.
City of Redding Housing Rehabilitation Loan Policy 6
SECTION 3 - GENERAL ELIGIBILITY REQUIREMENTS
A. Location: Rehabilitation loans shall be made only for projects within the city limits of Redding
in residentially-zoned areas (or locations approved by way of a use permit).
B. Eligible Uses: A rehabilitation loan shall be used to correct code violations and to make
general improvements to the dwelling unit as defined in the Property Rehabilitation Standards
and Section 5 of this Policy.
C. Equity: At the time the loan is approved, the property may be encumbered by not more than
a maximum of ninety percent(90%)of its established value, including any value added by the
rehabilitation loan, unless otherwise approved by the Housing Loan Committee.
D. Assurance of Completion: In some cases, rehabilitation costs may exceed the eligible loan
amount. In such instances, no loan will be awarded unless the applicant can provide the
additional amount needed to complete the work to meet minimum City codes on the portion(s)
to be rehabilitated. The owner shall provide the City satisfactory evidence of such additional
funds before the loan is approved.
E. Eligible Borrowers: To be eligible for a rehabilitation loan, the applicant must be an owner-
occupant or an owner-investor.
OWNER-OCCUPANT (HOMEOWNER): The applicant must own or be in the process of
buying a residential property. Persons buying homes under land contracts are excluded from
participation in the housing rehabilitation program,except in those special cases where a land
contract is held by the State of California Department of Veteran Affairs. One or more of the
applicants must reside in such home.
Determination of Adjusted Gross Income: In calculating adjusted gross income, all of
the income of the household (including all adults residing in the unit), whether received
in cash or in kind shall be considered, except for the following specific exclusions which
are consistent with the Section 8 Rental Assistance Program:
1. Earned income from a minor child under the age of 18.
2. Any amount above $480 of annual earned income for a full-time student who is 18
years of age or older (excluding the head of household and spouse).
3. Foster care payments.
4. One-time, lump-sum additions to family assets such as inheritances, insurance
payments (including payments under health and accident insurance and worker's
compensation), capital gains, and settlement for personal or property losses.
5. Casual, sporadic, or irregular donations from friends or family.
6. Amounts that are specifically for, or in reimbursement of, the cost of medical
expenses that do not result in new income to the applicant.
7. Annual amounts paid for alimony or child support that are received only sporadically,
provided that the applicant certifies:
• the payments are not received regularly; and
• all reasonable legal actions have been taken to collect such payments.
City of Redding Housing Rehabilitation Loan Policy 7
8. Amounts of educational scholarships paid directly to the student or the educational
institution.
9. Payments under the G.I. Bill
10. Relocation payments made pursuant to Title II of the Federal Uniform Relocation
and Real Property Assistance Policies Act of 1970.
11. Special pay to a family member serving in the Armed Forces who is exposed to
hostile fire.
12. Reparation payments paid by a foreign government pursuant to claims filed under
the laws of that government by persons who were persecuted during the Nazi era.
13. Adoption assistance payments in excess of $480 per adopted child.
14. Deferred periodic amounts from supplemental security income and social security
benefits that are received in a lump sum amount or in prospective monthly amounts.
15. Amounts received by the family in the form of refunds or rebates under State or local
law for property taxes paid on the dwelling unit.
16. Amounts paid by a State agency to a family with a member who has a
developmental disability and is living at home to offset the cost of services and
equipment needed to keep the developmentally disabled family member at home.
Income, Housing Expense, and Long-Term Debt: The homeowner applicant must
meet all three of the following conditions:
1. Household adjusted annual gross income shall be at or below the eighty percent
(80%) area-wide median income level as detailed in the guidelines most recently
published by the U.S. Department of Housing and Community Development for the
Redding area:
2. The applicant's ratio of monthly housing expense to adjusted gross monthly income
shall not be more than twenty-eight percent (28%), except as otherwise approved
by the Housing Loan Committee.
3. The applicant's ratio of monthly long-term debt obligations to adjusted gross monthly
income shall not exceed thirty-eight percent(38%)unless otherwise approved by the
Housing Loan Committee.
Housing Expense Ratio: To determine the ratio set forth immediately above, the
following expenses shall be included in calculating housing expense for homeowner
loans:
1. Mortgage payments, including principal and interest.
2. Mortgage insurance premiums.
3. Service charges.
4. Hazard insurance premiums.
5. Property taxes and special assessments.
City of Redding Housing Rehabilitation Loan Policy 8
Homeowner Credit: A rehabilitation loan will be approved only if the applicants credit
record does not show substantial disregard for former or existing obligations. Analysis
of the borrower's credit record may include consideration of special circumstances such
as health trauma, divorce, burial obligations, etc.
Homeowner Assets: In order to qualify for a rehabilitation loan, the applicant must be
unable to accomplish rehabilitation through conventional financing or use of his or her
own assets as determined by the Housing Loan Committee. The evaluation of an
applicant's assets and ability to secure conventional financing shall also take into
consideration reasonableness of private loan terms and personal circumstances, in
keeping with HUD's objective to accommodate persons of low-income with special
needs. Calculation of asset income shall be consistent with HUD's May 1994 Manual,
Technical Guide for Determining Income and Allowances for the HOME Program.
OWNER-INVESTOR: The applicant must be an individual (or individuals) who owns or is
buying a property for the purpose of renting it as residential property. Investor/owners are not
eligible for Water and Sewer Loans.
Positive Cash Flow: Investment properties shall have a positive cash flow, with a
minimum debt coverage ratio of 1.15.
Credit: The HRP Loan applicant's credit record must not show substantial disregard for
former or existing obligations.
Monitoring Requirements: In addition to the above requirements, applicants to the
HOME Rental Program (HRP) must agree to abide by all applicable program regulations
relating to affordability periods and annual certification as applicable to rent levels,tenant
income, and tenant leases.
SECTION 4 -DESCRIPTION OF HOMEOWNER LOANS
A. AMORTIZED HOMEOWNER LOANS
Purpose: The purpose of an Amortized Rehabilitation Loan is to assist the homeowner
whose income is sufficient to meet the increased monthly housing expense of a rehabilitation
loan payment on their principal place of residence.
Eligibility: In order to qualify for an Amortized Rehabilitation Loan, the applicant must meet
all General Eligibility Requirements.
Amount: The amount of an Amortized Rehabilitation Loan shall not exceed the lesser of:
• The actual (and approved) cost of repairs and improvements; or
• Those per unit subsidy limit amounts as detailed under Section 221(d)(3)of the National
Housing Act as most recently published by HUD. Amounts are based on bedroom size.
(Published Year 2001)
0 Bedroom (Studio) $73,632
1 Bedroom $84,404
2 Bedroom $102,635
3 Bedroom $132,744
4 Bedroom $145,745
City of Redding Housing Rehabilitation Loan Policy 9
Repayment: Amortized Loans for homeowners shall be repaid by fully amortized monthly
payments of principal and interest. The Housing Loan Committee shall have the authority to
temporarily suspend monthly payments when a borrower can verify that household income
cannot support the payment. In cases of extreme hardship, the loan may be placed into
either partially or permanently deferred status if the Committee so approves.
The loan shall become due and payable upon sale of the property, transfer of title, upon the
death of the borrower(s), when the property is no longer the principal residence of the
borrower(s), or at the end of the loan term, whichever occurs first.
Terms and Conditions:
1. An Amortized Rehabilitation Loan shall be amortized up to 15 years at five percent(5%)
simple interest. Loan amortization up to 30 years may be approved by the Housing Loan
Committee when the loan amount exceeds fifty percent (50%) of the property value.
B. PARTIALLY DEFERRED-PAYMENT LOANS FOR HOMEOWNERS
Certification: An applicant for an Amortized Loan may have a portion of his or her monthly
loan payment deferred. If housing expenses, including the loan payments, exceed twenty-
eight percent (28%) of gross income, the amount of the loan which causes this excess shall
be considered a Deferred Payment Loan, but in no event shall the borrower be permitted to
defer more than ninety percent (90%) of such a loan. Also, refer to Emergency Deferred
Loans in this section.
Purpose: The purpose of a Partially-Deferred Payment Loan is to make possible the
rehabilitation of the property and improvements to the neighborhood in those situations where
the applicant cannot qualify for an Amortized Loan.
Repayment: A Partially-Deferred Payment loan shall be repaid by partial amortization of
principal and interest, or interest-only payments. The entire loan shall become due and
payable upon sale of the property, transfer of title, upon the death of borrower(s), or when the
property is no longer the principal residence of the borrower(s).
Conversion: When the borrower's circumstance is substantially changed, or at the
borrower's option, the loan may be converted to a straight Amortized Loan.
Terms and Conditions:
1. The deferred portion of the loan shall bear interest at a minimum of three percent (3%)
simple interest per year, and the amortized portion at five percent (5%) simple interest.
2. Both the amortized portion and the deferred portion of a Partially-Deferred Payment Loan
shall become due and payable upon sale of the property,transfer of title, upon the death
of the borrower(s), or when the property is no longer the principal residence of the
borrower(s).
C. DEFERRED-PAYMENT LOANS FOR ELDERLY AND/OR DISABLED HOMEOWNERS
Purpose: The purpose of a Deferred Payment Rehabilitation Loan for Elderly and/or
Disabled Homeowners is to pay the costs of rehabilitation without increasing current monthly
housing expenses of those families on fixed incomes.
City of Redding Housing Rehabilitation Loan Policy 10
Eligibility: To qualify for a Deferred Payment Loan for the Elderly and/or Disabled, the
applicant must meet all of the General Eligibility Requirements, and the applicant must meet
one of the following requirements:
• Be at least 60 years of age.
• Be disabled according to the criteria established by the Social Security Administration or
the U.S. Department of Housing and Urban Development.
Amount: The amount of a Deferred Payment Loan shall not exceed:
• The actual (and approved) cost of all necessary repairs, eligible improvements, and
allowable loan costs; and,
• Those maximum amounts detailed under Section 221(d)(3) of the National Housing Act
as most recently published by HUD.
(Published Year 2002)
0 Bedroom (Studio) $73,632
1 Bedroom $84,404
2 Bedroom $102,635
3 Bedroom $132,744
4 Bedroom $145,745
Repayment: The loan shall become due and payable upon sale of the property, transfer of
title, upon the death of the borrower(s), or when the property is no longer the principal
residence of the borrower(s).
Terms and Conditions:
1. This loan shall bear interest at a minimum of three percent (3%) simple interest.
2. Interest-only payments may be required on specific loans, as determined by the Housing
Loan Committee.
D. EMERGENCY DEFERRED LOANS FOR HOMEOWNERS
Purpose: Emergency Deferred loans may be available to those persons who are unable to
make a monthly loan payment and who do not meet the criteria of the Deferred Payment
Loan. Principal and interest payments for these loans may be fully deferred for two-to five-
year increments on a case-by-case basis, as determined by the Housing Loan Committee.
Conversion: When the borrower's circumstance is substantially changed, or at the
borrower's option, the loan may be converted to a straight Amortized Loan.
Eligible costs under this program include loan processing fees and code items. General
property improvements are not eligible.
City of Redding Housing Rehabilitation Loan Policy 11
E. WATER AND SEWER LOANS FOR HOMEOWNERS:
Purpose: The purpose of a Water and Sewer Loan is to pay for City water and sewer hook-
up, whether or not the applicant is applying for a rehabilitation loan.
Eligibility: In order to qualify for a Water and Sewer Loan, the applicant must meet all
General Eligibility Requirements.
Amount: The amount of a Water and Sewer Loan shall not exceed the actual (and
approved) cost of installation.
Terms, Conditions and Repayment of a Water and Sewer Loan:
1. The maximum loan term shall not exceed 15 years for those applicants meeting the
eligibility requirements for Amortized Loans defined in Section 4 of this Policy.
Installments shall be due monthly and shall bear interest at a minimum of five percent
(5%) simple interest per year; or
2. For those applicants meeting the eligibility requirements of Deferred-Payment Loans
defined in Section 4C of this Policy, no monthly payments are required, but the loan shall
bear a minimum interest rate of three percent (3%) simple interest per year.
3. The loan shall become due and payable upon sale of the property, transfer of title, upon
the death of the borrower(s), or when the property is no longer the principal residence
of the borrower(s).
Because of the limited scope of the work associated with
water and sewer connections, it shall not be necessary to secure structural pest control
reports, appraisals, a title search and title insurance,or evidence of insurance. At a minimum,
staff shall document the owner's equity in the property and verify mortgage balances on the
property.
SECTION 5-DESCRIPTION OF AMORTIZED OWNER-INVESTOR LOANS:
A. HOME RENTAL PROGRAM (HRP)
Purpose: The purpose of a Home Rental Program (HRP) Loan is to assist the participating
owner-investor with financing the acquisition and/or rehabilitation of rental property occupied
by low-income tenants.
Eligibility: In order to qualify for an HRP Loan, the applicant must be in the process of
acquiring a property in need of rehabilitation or have site control of the property in need of
rehabilitation;and must demonstrate the ability and financial capacity to secure, manage, and
maintain the property upon completion of the rehabilitation. A minimum of ten percent(10%)
of the cost of rehabilitation work must be provided by the applicant.
Ability to Repay: The applicant must demonstrate the property's ability to generate and
maintain a positive cash flow.
City of Redding Housing Rehabilitation Loan Policy 12
Amount: The maximum funding amount for HOME-assisted rental units shall be consistent
with the current HOME Program Regulations, as cited in Section 221(d)(3) of the National
Housing Act.
(Published Year 2002)
0 Bedroom (Studio) $73,632
1 Bedroom $84,404
2 Bedroom $102,635
3 Bedroom $132,744
4 Bedroom $145,745
Loan-to-Value Ratio:
• The loan-to-value ratio of a rental project having fewer than 12 units shall not exceed
ninety percent (90%) based on the post-rehabilitation value, unless otherwise approved
by the Housing Loan Committee.
• The loan-to-value ratio for rental projects having more than 12 units shall not exceed
eighty percent(80%), based on the post-rehabilitation value, unless otherwise approved
by the Housing Loan Committee.
Repayment: HRP Loans shall be repaid in one of three repayment plans depending upon
the needs of the project. The three repayment plans are:
1. Fully amortized principal and interest;
2. Partial amortization of principal and interest, or interest-only payments;
3. Principal and interest payments that are fully deferred for two-to five-year increments on
a case-by-case basis.
A financial analysis consistent with HUD's September 1994 Manual Financing Rental Housing
Under the HOME Program shall be completed to determine the appropriate method of
repayment to be selected.
Terms and Conditions for HRP Loans:
1. The maximum interest rate shall be five percent (5%) simple interest; the minimum rate
shall be zero percent (0%). (Interest rates are determined by the needs of the project
and/or term of affordability of the units.)
2. The term of the loan shall be no more than thirty(30)years for private for-profit landlords,
and forty (40) years for non-profit corporations.
3. The borrower shall meet all HOME program conditions including, but not limited to,
affordability and occupancy.
Loan Assumption: HRP Owner-Investor Loans may be assumed by a new owner(s)
conditioned upon the Housing Loan Committee's determination that the new applicant meets
the General Eligibility Requirements and accepts all obligations associated with the loan.
City of Redding Housing Rehabilitation Loan Policy 13
Public Assistance and Public Benefit: The Housing Loan Committee is authorized to
approve project funding requests which include greater public assistance in exchange for an
increased public benefit.
Increased public assistance may include (1)a waiver of all or a portion of the owner's project
cash contribution to the project; (2) extension of the loan term up to forty (40) years; (3)
deferral of payments up to fifteen (15) years; or (4) waiver of the loan-to-value ratio
requirement.
An increased public benefit may include(1)greater affordability periods than those minimums
specified in HOME program regulations; (2) lower rent levels for HOME-eligible units than
those minimums specified in HOME program regulations; and (3) increased quality and/or a
proposal which complements other City priorities.
A financial analysis for each prospective project shall be required to demonstrate the need
for greater public assistance. Specific written findings shall be incorporated into the case file
to document both the subsidy and benefit(s) of the proposed project. The purpose of this
Policy is to offerthe Housing Loan Committee greater flexibility and responsiveness to unique
housing opportunities that become available within the Redding community.
B. DEFERRED-PAYMENT REHABILITATION LOANS FOR NON-PROFIT CORPORATIONS:
Purpose: The purpose of a Rehabilitation Loan to a Non-Profit Corporation is to assist with
the cost of the rehabilitation of residential units to be occupied at an affordable rate by lower-
income households on a transitional or permanent basis.
Eligibility: In order to qualify for a Rehabilitation Loan, the applicant must be a registered,
State of California non-profit corporation which owns or is buying residential units for the
purpose of establishing a transitional housing facility or for renting as permanent residential
units. All residents of the transitional housing facility units or permanent residential units
assisted under this program must meet HUD lower-income requirements, as stated in Section
3, of this Policy under Income, Housing Expense and Long-Term Debt, Number 1.
Rents: It is intended that the rents charged plus any required utility payments shall not
exceed thirty percent(30%)of the gross monthly income of the resident household . This rent
affordability may be accomplished through enforcement of a rent limitation agreement using
area-wide rent levels associated with the HOME Program or on an individual tenant
certification basis.
Amount: Loan amounts for non-profits shall not exceed: (1)the actual (and approved) cost
of repairs and improvements; or (2) those maximum amounts detailed under Section
221(d)(3)of the National Housing Act as most recently published by HUD, whichever is less.
(Published Year 2002)
0 Bedroom (Studio) $73,632
1 Bedroom $84,404
2 Bedroom $102,635
3 Bedroom $132,744
4 Bedroom $145,745
The maximum number of assisted units per project will be determined according to project
need and availability of funds.
City of Redding Housing Rehabilitation Loan Policy 14
Loan-to-Value Ratio:
• The loan-to-value ratio of a rental project having fewer than 12 units shall not exceed
ninety percent (90%), based on the post-rehabilitation value.
• The loan-to-value ratio of a rental project having 12 or more units shall not exceed eighty
percent (80%), based on the post-rehabilitation value.
Terms and Conditions for Non-Profit Corporation Loans:
1. The loan shall be for a term not to exceed forty (40) years and shall bear simple interest
at the rate of a minimum of zero percent (0%) per year, and a maximum of five percent
(5%) per year. The interest rate shall be determined by the needs of the project and/or
term of affordability of the units.
2. Repayment of the loan by the non-profit corporation shall be based upon a revenue
analysis (including a cash flow analysis) for the purpose of establishing a payment
schedule. Upon validation and approval of the revenue analysis by the City, terms of the
loan shall be established, and may include the following:
a. Both principal and interest payments deferred;
b. Annual payment of accrued interest required;
c. Remaining loan balance plus accrued interest, if any, to be amortized, with monthly
payments of principal plus interest required;
d. Payment of residual receipts or surplus cash remaining after payment of all
reasonable expenses necessary to operate and maintain the project in habitable
condition, including debt service, taxes, fire insurance, and replacement reserves.
Preparation of a revenue analysis by a certified public accountant may be required
by the City to confirm the non-profit's ability to make residual receipts payments.
3. The entire amount of a Rehabilitation Loan under this section shall become due and
payable if the borrower sells the property, transfers title, or changes the use of the
property.
4. The deed of trust securing the rehabilitation loan under this section shall be recorded in
the first or primary position on the subject property. A subordinate position is acceptable
only if sufficient equity exists above the balances owed on all trust deeds superior to the
City loan to cover the full amount of the City loan with ten percent (10%) equity
unencumbered.
SECTION 6 - ELIGIBLE COSTS
A. Code and Rehabilitation Requirements: A rehabilitation loan shall be made to cover the
cost of rehabilitation necessary to make the dwelling conform to Property Rehabilitation
Standards detailed in the City of Redding's Housing Division Policy and Procedures Manual.
The loan shall correct hazards to health and safety, halt deterioration of the structure, and
correct incipient code violations. After rehabilitation, the property shall, at a minimum, be a
safe and habitable dwelling consistent with the Uniform Housing Code.
City of Redding Housing Rehabilitation Loan Policy 15
B. Limited Assistance: In special cases where it is not feasible to perform all necessary repairs
due to financial limitations of the applicant or overall cost of recommended repairs, the
minimum repairs required shall include those repairs necessary to bring the structure into
conformance with HUD Section 8 Housing Quality Standards (HQS). In no case shall a
limited assistance loan include General Property Improvements (GPI's) unless approved by
the Housing Loan Committee.
C. Cost Effective Energy Standards: All properties being rehabilitated must meet Cost
Effective Energy Standards (as set forth in 24 CFR Part 39). The Cost Effective Energy
Standards set forth energy conservation and efficiency standards which must be met, as long
as the modifications are financially feasible and do not require work on elements that would
not ordinarily become exposed during the rehabilitation. The cost associated with meeting
these standards may be included in a rehabilitation loan.
D. Historic Preservation Standards: For all properties being rehabilitated, it shall be
ascertained whether or not the property is on the State Historic Places Register, National
Register of Historic Places, or eligible for inclusion on the National Register of Historic Places.
If so, the rehabilitation must be done in accordance with the standards set by the State of
California or U.S. Secretary of the Interior, as applicable. The rehabilitation costs associated
with meeting these standards may be included in the rehabilitation loan.
E. Rehabilitation Objectives: In addition to compliance with code and rehabilitation requirements
set forth in the Property Rehabilitation Standards of the City of Redding, certain objectives are
encouraged. Objectives are not mandatory provisions, but have been included as desirable
General Property Improvements(GPI)to properties. General Property Improvements are eligible
loan costs so long as all required improvements are completed,and the GPI's are reasonable and
customary for the area and are not considered luxorious. After the property has been
rehabilitated to conform with the Property Rehabilitation Standards, additional loan money not to
exceed forty percent (40%) of the total loan may be used for the following General Property
Improvements:
1. Drain tiling to public streets, alleys, or storm sewers.
2. Landscaping of a similar quality and quantity to the rest of the neighborhood, in order to
improve visual quality.
3. A room addition built, altered, or improved in special cases where the absence of such poses
a serious hardship for the family.
4. Minor remodeling in order to make a dwelling more functional or attractive.
5. The repair/replacement or new installation of free-standing stove appliances, garbage
disposals, refrigerators, and dishwashers, provided compliance with HUD regulations are
met.
6. Window coverings, excluding drapery.
7. Upgrading of built-in appliances and fixtures from a medium grade to a higher grade.
8. Upgrading of carpet and linoleum.
9. Kitchen or bathroom remodeling
City of Redding Housing Rehabilitation Loan Policy 16
10. Patios and patio covers.
11. Installation of ceramic tile counters, floors, or shower stalls(except when replacing in-kind).
F. Building Permits and Related Fees: Funds may be provided in the rehabilitation loan to cover
costs of building permits and related fees if these are not included in the contractor's fees.
G. Certain Related Costs: A rehabilitation loan may include funds to cover certain costs and
charges relating to processing the loan application and closing. Accordingly, a rehabilitation loan
may provide for the cost of the following:
1. Appraisal.
2. Preliminary title reports.
3. Filing and recording fees.
4. Title insurance.
5. Hazard insurance.
6. Unpaid property taxes.
7. Structural pest control report.
8. Property tax monitoring services.
9. Architectural or design services.
Other fees/costs may be necessary to meet General Eligibility Requirements. Outstanding
judgments, liens, or property assessments are eligible costs only if the applicant's circumstances
demonstrate a significant need and are consistent with program objectives as determined by the
Housing Loan Committee.
The City will advance funds as necessary for an appraisal and the preliminary title report prior to
final approval of the loan application. When the loan is approved,the City shall be reimbursed for
these advanced funds from the proceeds of the loan at the time of the loan closing. If the loan is
not approved or the application is withdrawn, advances shall be paid by the City.
H. Refinancing: A rehabilitation loan may include the refinancing of secured, existing debt on a
single-family, owner-occupied unit to rehabilitate the unit, if overall housing costs of the borrower
will be reduced to achieve affordability. In order to promote rehabilitation of the property and
assure the City's security interest, refinancing may be incorporated into the funding process.
A rehabilitation loan may also include the refinancing of secured, existing debt on multi-family
projects if refinancing is necessary to permit or continue affordability under 24 CFR Part 92.252.
Regardless of the amount of public funds invested, the minimum affordability period shall be 15
years. The following guidelines describe the conditions under which the City will consider
refinancing existing debt:
1. Demonstrate that rehabilitation is the primary eligible activity and that a minimum of sixty
(60%)percent in rehabilitation costs be accomplished as part of the project, unless otherwise
approved by the Housing Loan Committee;
2. Provide a review of management practices to demonstrate that disinvestment in the property
has not occurred, that the long term needs of the project can be met and that the feasibility
of serving the targeted population over an extended affordability period can be shown;
City of Redding Housing Rehabilitation Loan Policy 17
3. State whether the new investment is being made to maintain current affordable units, create
additional affordable units, or both;
4. Investment of CDBG or HOME funds for refinancing purposes shall be available city-wide
with priority given to neighborhoods designated for revitalization; and
5. HOME funds cannot be used to refinance multifamily loans made or insured by any Federal
program, including CDBG.
At this time only CDBG or HOME program income are eligible resources for refinancing of single-
family and multi-family projects.
I. New Construction In Lieu of Rehabilitation: Consistent with program regulations and upon
Housing Loan Committee approval, HOME funds may be used for the new construction of
affordable rental or owner-occupied housing as part of the effort to meet the stated goals and
objectives of the Housing Division.
J. Lead-Based Paint Abatement: Consistent with program regulations and upon Housing Loan
Committee approval, HOME or CDBG funds may be used for lead-based paint evaluation and
reduction costs. The form of assistance may include interest-bearing loans, non-interest-bearing
loans,interest subsidies,deferred-payment loans,grants,orother forms of assistance determined
to be appropriate for the purposes of the program.
In cases where the use of grant funds are deemed necessary by the HLC, staff will monitor
projects to ensure that the following guidelines are met:
a. Grant expenditures shall only cover increased costs attributable to lead-based hazard
evaluation and reduction activities;
b. The amount of grant funds available shall be limited to $7,500 of the total rehabilitation
project cost, unless otherwise approved by the HLC; and
c. Allocation of grant funds for lead-based hazard evaluation and reduction activities does not
increase the value of the home.
SECTION 7-INELIGIBLE COSTS
The following costs are not eligible costs for a rehabilitation loan:
A. Expansion of the structure or the finishing of unfinished spaces, unless otherwise stated in this
text.
B. Materials, fixtures, equipment, or landscaping of a type and quality which exceeds adequate
service, or that is not customarily used for properties of the same general type.
C. Acquisition of land, excluding HOME Rental Program loans.
D. Purchase, installation, or repair of furnishings or trade fixtures.
E. Small appliances.
City of Redding Housing Rehabilitation Loan Policy 18
SECTION 8-PROCESSING A LOAN
The following offers a brief outline of the steps necessary to process a loan. It is not intended to detail
all the mechanics of the process:
A. Interview applicant and determine basic eligibility.
B. Perform on-site inspection of property.
C. Prepare work write-up and cost estimate based on property inspection.
D. Obtain credit check, verifications, and appraisal (if needed).
E. Obtain Housing Loan Committee or Deputy City Manager approval or denial, as appropriate.
F. Prepare all applicable loan documents,perform loan closing,and arrange for disbursement of loan
proceeds.
G. The loan applicant will be informed in writing if a loan application is denied The applicant may
correct or exhibit a valid explanation of these disqualifications and resubmit the application. Upon
re-submission,the application will be re-evaluated by the staff and the Housing Loan Committee.
SECTION 9-COMPLETING A HOME REHABILITATION
Once a loan has been processed and approved, the following activities will take place. Again, this is
not intended to detail the process of completing a home rehabilitation, but is only a summary of the
steps to be taken.
A. Incorporate method of rehabilitation(i.e.,self-help,owner-assigned,owner-contractor,or open City
bid) into preparation of contracts.
B. Prepare all documents necessary to close the loan.
C. Arrange for disbursal of loan money.
D. Oversee work in progress and provide regular inspections of work.
E. Monitor disbursement of payments.
F. Upon completion, file Notice of Completion, make final payments to contractors and suppliers for
rehabilitation work.
G. After expiration of 35 days, make final payments to contractors and suppliers for rehabilitation
work.
H. Upon repayment of loan amount,execute documents required to cancel the promissory note and
reconvey the deed of trust, and deliver them to the borrower(s)or appropriate agent for recording
of the reconveyance.
City of Redding Housing Rehabilitation Loan Policy 19
SECTION 10-LOAN SECURITY
Loan Security: With the exception of Emergency Repair Program Loans, all loans made pursuant to
any of the programs described in this Policy shall be evidenced by a written promissory note signed
by the borrower, payment of which is secured by a deed of trust in a form approved by the City,which
describes the real property and is recorded with the Shasta County Recorder. A subordinate deed of
trust is acceptable if sufficient equity exists above the principal balances on any superior trust deeds
to fully secure the loan amount.
A title insurance policy on the property shall be issued to the City for the full amount of the loan at the
time of loan closing.
Borrowers shall maintain current payments on all mortgage liens, property taxes, and hazard
insurance. The minimum amount of hazard insurance must cover all trust deeds on the property. The
City shall monitor annual verification of paid taxes and effective fire insurance. The borrower is to
provide verification of both paid property taxes and effective insurance premiums upon the City's
request.
No Prepayment Penalty: The entire amount of any rehabilitation loan may be repaid early without
penalty.
Loan Assumption: Except for default activity specified under Section 13 of this Policy, loans to owner-
occupants are not assumable; however,the Housing Loan Committee shall have authority to consider
and approve such loan assumption once per loan, when an applicant is a member of the original
household and can demonstrate a compelling justification for the action. Assumption shall be
considered only when the loan risk factor remains consistent with prudent lending practices,and when
the applicant:
1. Already has or can easily gain title to the property;
2. Meets program eligibility criteria;
3. Has the ability to be a responsible homeowner;
4. Is able to pay costs of assumption; and
5. Requests assumption of the loan.
Loan Subordination: Subordination of a City Rehabilitation Loan may be approved by the Housing
Loan Committee if the new first mortgage does not exceed the balance remaining on the original first
mortgage, including the costs related to the refinancing; if the equity position of the City loan is not
decreased; and if the borrower is not receiving cash out of the transaction. The monthly financial
savings must be a substantial amount in order to justify approval.
•-
If the current market value of the property indicates that there is sufficient equity to pay off the City loan
when refinancing a superior loan, and if the borrower's subsequent housing (or operating)expense is
not increased beyond program guidelines, then the subordination request shall be denied.
Special consideration may be given to families experiencing undue hardship or that have had a drastic
change in circumstances which necessitate certain financial adjustments. The Housing Loan
Committee may take appropriate action under these circumstances subject to protection of the City's
interest.
Based on the individual circumstances of any request(for either single-family or multi-family projects),
the Housing Loan Committee has the discretion to deviate from policy in approving or denying the
subordination keeping in mind that the action is consistent with traditional lending industry standards
and protects the City's public investment.
City of Redding Housing Rehabilitation Loan Policy 20
Reporting to Credit Agency: At the close of loan execution, staff shall submit all pertinent loan
information to a credit reporting agency and request that the loan be listed on the borrower's credit
record as an outstanding mortgage loan. Upon debt settlement,staff shall submit to the credit agency
all pertinent debt settlement information. In the event the City loan is lost through a foreclosure action,
staff shall instruct the credit agency to list the loss as a charged off mortgage loan account on the
borrower's credit report.
SECTION 11 - GENERAL CONDITIONS
Civil Rights: Comply with all HUD requirements with respect to Title VI of the Civil Rights Act of 1964,
as amended,to not discriminate upon". . .the basis of race,color, creed,sex or national origin in sale,
lease, rental, use or occupancy of the subject property."
Equal Employment Opportunity: Must comply with Executive Order 11246 and HUD equal
opportunity requirements.
Conflict of Interest: No person who is an employee, agent, consultant, officer, or elected (or
appointed) official who exercises or has exercised any function or responsibility with respect to City
Housing program activities, or who is in a position to participate in a decision-making process or gain
inside information with regard to such activities, may obtain a personal or financial interest or benefit
from a City Housing activity,or have an interest in any contract,subcontract,or agreement with respect
thereto, or the proceeds thereunder, either for themselves or those with whom they have family or
business ties, during their tenure or for one year thereafter.
Use of Proceeds: Loan proceeds shall be used only to pay for costs of services and materials
necessary to carry out the rehabilitation work for which the loan was approved.
Disbursement of Funds: Rehabilitation loan funds shall be disbursed in a mannerdefined by the City.
Completion of Work: Rehabilitation work will be carried out promptly and efficiently through written
contract let with prior concurrence of the City.
Inspection: The City or its agent shall inspect the property, the rehabilitation work, and all contract
materials, equipment, payroll and conditions of employment pertaining to the work.
Water and Sewer Connection: In those cases where water and sewer services are available, and
the structure is not connected to those services, a part of the proceeds of the loan must be used to
connect to these services.
Administrative Authority of Deputy City Manager: The Deputy City Manager, or his designee shall
be charged with approving or disapproving funding requests at or below $10,000 through the
Homeowner Loan Program which are otherwise in compliance with all applicable criteria listed in this
document.
Cumulative Loan Limits: No single for-profit borrower may obtain a loan or additional loans which in
combination exceed ten percent(10%)of the total assets(loan portfolio and resources on hand)of the
Housing Loan Program unless otherwise deemed appropriate by the Housing Loan Committee based
on community benefit, and/or special circumstances of the proposed project.
City of Redding Housing Rehabilitation Loan Policy 21
SECTION 12-RELOCATION ASSISTANCE AND ADVISORY SERVICES
Relocation assistance and advisory services shall be provided to individuals orfamilies who must move
from their dwelling during the course of rehabilitation under the City of Redding Loan Program or the
HOME Investment Partnerships Program. These services shall consist of:
1. Actual moving and storage costs.
2. Actual rent and deposits for temporary replacement housing.
3. Relocation advisory service.
All requests for relocation payments shall be reviewed and approved or denied by the Housing Loan
Committee at the time the rehabilitation loan or grant is considered by the Committee. Rental projects
must be in compliance with regulations of the HOME Investment Partnerships Program.
SECTION 13-DEFAULT, FORECLOSURE AND PROPERTY DISPOSITION POLICY
A. DEFAULT: If a borrower violates any provision of(1)the loan agreement, (2)the promissory note,
(3) the deed of trust, (4) any other agreement pertaining to the loan, or (5) applicable program
regulations, the City shall give written notice to the borrower to cure the violation within a period
of not less than 30 days from such notice. If the violation is not cured to the satisfaction of the City
within the specified time period, the City, at its option, may declare a default under the relevant
document and seek legal remedies for the default which include the following:
1. The City may accelerate all amounts due under the prescribed loan, including outstanding
principal and interest, and demand immediate repayment. Upon a failure to repay such
accelerated amount in full, the City may proceed with foreclosure in accordance with the
provision of the deed of trust;
2. The City may seek such other remedies, with the Housing Loan Committee's approval, as
may be available under the relevant program regulations and the law. Possible alternatives
include the following:
Short Sale: When the market value of the property is less than the total indebtedness, the
City may consider a short sale. This action involves reduction of the loan payoff amount by
the City to facilitate the sale and avoid acquisition of an inventory property. Any discount by
the City of its promissory note in order to facilitate a sale may be subject to any junior lien
holder of record similarly discounting its promissory note.
Loan Assumption: This alternative offers an opportunity to place a program-eligible family
in a qualified property to avoid foreclosure. The borrower(s) can maintain their credit rating
and the City's loan remains secure.
Deed-in-Lieu of Foreclosure: This action is available when the City is in first position and
allows the borrower to deed the property to the lender to avoid foreclosure. Although first
lenders do not usually accept a Deed-in-lieu of Foreclosure if a second Deed of Trust exists,
a second lender could accept a Deed-in-lieu of Foreclosure. A title search must be
completed on the property to determine if any junior liens or judgments exist. It must be
determined also if the first lender has a "due upon sale" clause in their Deed of Trust.
City of Redding Housing Rehabilitation Loan Policy 22
Discount Note Sale: This action offers the lender a method for selling a note on the open
market to recover a portion of their original investment.
B. FORECLOSURE: The purpose of this Policy is to state the City's position regarding protection
of housing rehabilitation loan investments in relation to delinquencies, default, foreclosure
proceedings by a senior lienholder and ultimate disposition of properties acquired through a
trustee's sale.
1. Staff shall monitor all loan terms, conditions and agreements for compliance with rent
restrictions, program funding requirements, occupancy monitoring, and other mandated
criteria. If loans are not in compliance, they are in a technical default and staff is authorized
to initiate foreclosure proceedings against the property with the Housing Loan Committee's
approval and in accordance with the laws governing such transactions.
2. Staff is directed to aggressively pursue collection proceedings on any loans which become
delinquent. Staff is further directed to counsel and/or renegotiate loan terms with the
borrower(s), based on family hardship or drastic changes in circumstances which necessitate
certain financial adjustments. If the borrower is unsuccessful at meeting the obligations
associated with the newly-renegotiated repayment terms and the delinquent loan is not
brought current, staff is authorized to initiate foreclosure proceedings against the property in
accordance with the laws governing such transactions. If such default is not cured within the
statutory time, staff shall schedule a trustee's sale.
3. If a default is not cured and the City is faced with an investment loss, the trustee's sale may
proceed. A public auction shall be held with an opening bid established by staff after
consultation with the Housing Loan Committee. The property shall be sold to the highest
bidder. If there are no bids, ownership of the property will pass to the City.
4. If a senior lienholder files a Notice of Default on a property with a subordinate City loan, staff
may consider reinstating the senior lien to forestall a foreclosure action by the senior
lienholder. This action shall only be initiated when it is determined to be in the City's best
interest and upon Housing Loan Committee approval. In such cases, the City may
subsequently record a Notice of Default against the property on its behalf, and pursue
foreclosure. If staff determines it is in the City's best interest to let the senior lienholder's
foreclosure proceed, staff shall then determine whether the City should bid at the trustee's
sale to protect the City's investment or let the trustee's sale proceed without City participation.
Staff shall bid at the trustee's sale only upon the Housing Loan Committee's direction and
approval of a pre-established amount.
C. PROPERTY DISPOSITION: When a property is acquired as authorized above, staff shall
consider if it is advisable to transfer the property to Housing Authority ownership as an affordable
housing resource, or to transfer ownership to a local, non-profit housing organization with
restrictions that would achieve an affordable housing objective.
If staff determines that it is not practical to utilize the property as an affordable housing resource,
the following procedures shall be initiated to sell the acquired property.
1. As deemed appropriate by the Housing Loan Committee, an appraisal by a qualified
professional appraiser will be ordered. The property will be aggressively marketed for sale
as soon as possible using any combination of the following methods:
• Interested parties who have previously contacted or worked with the City regarding
acquisitions will be notified.
City of Redding Housing Rehabilitation Loan Policy 23
• A "For Sale by City of Redding " sign will be placed on the property.
• An advertisement for sale will be placed in the local newspaper.
• The property will be listed on the Internet or with the local Multiple Listing Service, or
both.
2. All property shall be offered for sale on an "as is" basis as permitted by State law. Staff may
accept an offer to purchase or it may reject all bids, subject to approval of the Housing Loan
Committee.
3. If a senior lienholder files a Notice of Default on a mobile home which has a subordinate City
Housing loan, or if a mobile home park owner places a lien against a mobile home
encumbered by a City Housing loan, staff shall analyze the potential loss to the City and
determine whether to bid or not to bid at the senior lienholder's trustee's sale or the mobile
home park owner's auction. Staffs decision to bid or not to bid shall be based upon the
feasibility of recouping the City's loss through acquisition and resale of the mobile home and
upon the Housing Loan Committee's approval. In the event of the death of a mobile home
loan borrower or any other circumstance that jeopardizes the City's loan, staff may discount
the City loan or forgive the loan in its entirety, based on the value of the mobile home and the
specific circumstances.
SECTION 14-CONTRACTOR PERFORMANCE STANDARDS
A. STANDARDS OF PERFORMANCE:
A Housing Division contractor may be subject to corrective action up to and including removal from
the Contractor List and prohibition from participation in City programs for any one or a combination
of the following:
1. Failure to attend meetings or training required by the Housing Division;
2. Failure to follow General and Supplemental Specifications;
3. Failure to follow generally acceptable construction work site safety practices;
4. Poor workmanship on any single project,as determined by the assigned Housing Specialist;
5. Documented poor working relationship with a single homeowner or a pattern with multiple
owners, as determined by the assigned Housing Specialist;
6. Failure to respond to an invitation to bid on at least one owner/occupied project within a one-
year period;
7. Documented poor working relationship with any one of the Housing Specialists as
determined by the Housing Program Supervisor;
8. Failure to pay application or renewal fees which may be required by the City;
9. Lapse of insurance and/or contractor's license;
City of Redding Housing Rehabilitation Loan Policy 24
10. Physical or verbal threats made to clients or staff;
11. Failure to make timely payments to sub-contractors and/or material suppliers, resulting in
liens against an owner's property.
B. CORRECTIVE ACTION PROCESS:
1. As the assigned Housing Specialist becomes aware of projects or circumstances with a
homeowner, contractor and/or the work itself which fit the criteria for corrective action, the
assigned Housing Specialist shall document the file and alert the contractor both verbally and
in writing of the specific nature of the issue. The contractor shall be given the opportunity to
correct the issue without prejudice. If the issue is not appropriately resolved within the time
frame established by the assigned Housing Specialist, a recommendation for formal
corrective action shall be proposed to the Housing Program Supervisor.
2. The Housing Program Supervisor shall meet with the contractor and the assigned Housing
Specialist to review the issue(s) and the proposed course of action. The contractor will be
notified in writing of the decision and of the appeal process. Possible corrective action may
include, but is not limited to: probationary status; limited participation in the program;
suspension for a limited period of time; and, removal from the Contractor List and
participation in the program for one year. All corrective action is intended to provide the
contractor with the opportunity to correct deficiencies and re-establish good standing with the
program.
3. Written appeals must be forwarded to the Deputy City Manager, or his designee within
fifteen (15) days receipt of the action. The Deputy City Manager, or his designee shall
investigate the appeal and render a decision in writing within thirty (30) days from receipt.
The decision of the Deputy City Manager, or his designee shall be final.
4. A contractor barred from participating in the program may reapply to the program after a one-
year period from the date of final decision. Reinstatement is not automatic. If reinstatement
is not approved by the City Housing Division,the contractor has the right to appeal the action.
Any appeal must be forwarded to the Deputy City Manager,or his designee within fifteen(15)
days receipt of the action. The Deputy City Manager, or his designee shall investigate the
appeal and render a decision in writing within thirty (30) days from receipt. The decision of
the Deputy City Manager, or his designee shall be final.
H:1HCD\Policies&Procedures\LoanPolicy.2001
City of Redding Housing Rehabilitation Loan Policy 25
CITY CLERK
CITY OF REDDING
EMERGENCY REPAIR PROGRAM
POLICY
Prepared by:
Office of the City Manager
Housing Division
Adopted by Resolution No. 96-94
Effective May 7, 1996
Amended October 3, 2000
EMERGENCY REPAIR PROGRAM (ERP)
TABLE OF CONTENTS
SECTION PAGE
1 . INTRODUCTION 1
2. DEFINITIONS 2
3. OVERVIEW OF LOAN/GRANT PROGRAM 4
4. GENERAL ELIGIBILITY REQUIREMENTS 4
5. DESCRIPTION OF LOAN PROGRAMS 6
6. ELIGIBLE REPAIRS 8
7. INELIGIBLE REPAIRS 9
8. PROCEDURES
Financial Process 10
Rehabilitation Process 12
SECTION 1 - INTRODUCTION
As the community continues to grow, it is important to recognize the increased use of mobile
homes as principal residences for low-income households. There are over 2,241 mobile homes
in the City of Redding (1990 census). Of these, 75% to 85% are older, and half are occupied
by very-low-income persons, many of whom are elderly. Most of the older units fail to meet
minimum health and safety standards. Conventional loans for financing necessary repairs of
mobile homes are cost-prohibitive for individuals or households having low or fixed incomes.
Local housing programs have proven unable to provide adequate financial assistance for mobile
home repair needs because of difficulties in securing notes against the property, or insufficient
equity. Because mobile homes are a part of the permanent housing stock and those occupying
them are among the most needy, they should be included in the overall effort to provide
decent, affordable housing.
Equally important, are the low-income homeowners who reside in conventional housing which
requires completion of immediate health and/or safety repairs, or handicapped accessibility
improvements. These are eligible individuals and families whose needs are not being met
because provision of a conventional loan is neither not feasible nor cost-effective.
The Emergency Repair Program (ERP) has been designed to provide affordable loans to low-
income owners of both mobile homes and conventional homes in the City of Redding, who are
otherwise unable to obtain funding resources. It has also been developed to specifically assist
disabled tenants to improve their rental units to meet their physical needs. The loan portion
of the program offers to eligible households an unsecured three percent interest (3%) loan, up
to a maximum of $2,500.00, on a one-time basis to eliminate basic health and safety
problems, and/or make necessary handicapped accessibility improvements.
Low-income, eligible tenants of rental units that need handicapped accessibility improvements,
only, also may apply for assistance under the Emergency Repair Program. Tenant-based
improvements may only be accomplished with approval from the respective landlord who
would receive grant monies up to $2,500 for the modification work in exchange for executing
a five-year participation agreement. The grant is offered as an incentive to install handicapped
accessibility improvements for the original tenant applicant, and then be available to future
disabled tenants for at least the remaining five years.
In those cases where it is determined that an emergency or serious health and/or safety hazard
exists, the City reserves the right to deviate from general eligibility requirements, or consider
accepting a previous borrower's further request for assistance. The funding for this program
will be provided by the Federal Community Development Block Grant (CDBG) Program.
This program is meant as a vehicle to serve a specific at-risk population, largely comprised of
the elderly and disabled, who need repairs to eliminate basic health and safety problems. It
seeks to improve and streamline the City's involvement with minor emergency repairs by
minimizing the investment risk and providing a preferable administrative cost-to-benefit ratio
for the smaller repair loan without excess title work and loan monitoring. It is recognized that
some loans will not be repaid; however, this is offset by the realization that from inception of
the City's community development housing programs, there have always been some funds
provided for rehabilitation/repair that were in the form of grants.
The City of Redding shall utilize Housing Rehabilitation staff to manage and carry out day-to-
day functions of the loan program. It should be recognized that it may be necessary to make
adjustments to the program as experience dictates.
City of Redding Emergency Repair (ERP) Program Policy Page 1
SECTION 2 - DEFINITIONS
The following definitions shall apply to this document unless another meaning is clearly
apparent from the context:
ADJUSTED GROSS ANNUAL INCOME shall mean the applicant's gross income less allowable
exclusions.
APPLICANT shall mean the person requesting assistance through any of the Housing Programs.
ASSETS shall mean the entire property of all sorts belonging to an applicant.
BORROWER shall mean the recipient of a loan assistance through any of the Housing
Programs.
BUILDING PERMIT shall mean a document issued by the City's Building Department allowing
completion of specific types of construction work.
CDBG shall mean the Community Development Block Grant Program as set forth in the
Housing and Community Development Act of 1974.
CITY shall mean the City of Redding, California, Office of the City Manager, Housing Division.
CITY COUNCIL shall mean the City Council of the City of Redding.
CODE VIOLATIONS shall mean infractions against the applicable codes contained in the
Property Rehabilitation Standards. This includes the Housing Code, City of Redding
ordinances, and the various uniform building codes adopted by the City.
DEFERRED PAYMENT LOAN shall mean a loan which is not retired on an installment basis.
DEPENDANT shall mean a member of the family (except foster children and foster adults) who
is not the family head or spouse, but is under 18 years of age, or is a person with a disability,
or is a full-time student (as defined by the U.S. Department of Housing and Urban
Development).
DISABLED shall mean incapacitated by illness or injury that substantially limits activity,
according to criteria established by the Social Security Administration or the U.S. Department
of Housing and Urban Development.
EMERGENCY REPAIRS shall address those conditions which pose a serious and immediate
health and/or safety threat to the inhabitants of a dwelling. These conditions shall include
either hazardous wiring, plumbing, mechanical, structural or sanitation problems as detailed
in Chapter 10 of the current Uniform Housing Code.
EQUITY shall mean the value of a property in excess of claims or liens against it.
FAMILY shall mean all individuals who reside in a dwelling unit related by blood, marriage, or
kinship.
City of Redding Emergency Repair (ERP) Program Policy Page 2
GENERAL PROPERTY IMPROVEMENTS (GPI's) shall mean improvements other than code
violations, incipient code violations, and required items which are eligible for program
assistance.
HOUSEHOLD shall mean all individuals who reside in a dwelling unit regardless of family ties.
HOUSEHOLD INCOME shall mean adjusted gross income of all persons residing in a dwelling
unit, whether or not they are related by family ties.
HOUSING EXPENSES shall mean the total of principal and interest payments on all mortgages,
hazard insurance premium payments, mortgage insurance premium payments required by the
lender, property taxes, and special assessments.
HOUSING LOAN COMMITTEE (HLC) shall mean a committee consisting of three members of
the City of Redding staff, derived from the following positions: the Assistant City Manager,
the Deputy City Manager or his designee, the City Attorney or his designee, the Development
Services Director or his designee and the Finance Officer or his designee. The Housing Loan
Committee shall be charged with approving or denying loan or grant applications consistent
with the policies of the City of Redding or the Redding Redevelopment Agency.
HOUSING QUALITY STANDARDS shall mean those HUD regulations set forth in the HUD
Section 8 Rental Assistance Program which details a basic level of acceptable housing.
INCOME/HOUSING EXPENSES RATIO shall mean the ratio of the total adjusted gross income
of all household members to housing expenses.
INTEREST shall mean a charge for borrowed money that is repaid along with the amount of
the loan.
LIEN shall mean an encumbrance which uses property to secure payment of a debt or
discharge of an obligation. Example: judgments, taxes, mortgages, deeds of trust.
LOW INCOME shall mean an incomes that does not exceed eighty percent (80%) of the
Redding area-wide median income as established by the latest published guidelines from the
U. S. Department of Housing and Urban Development (HUD).
MOBILE HOME shall mean a transportable dwelling that is not self-contained, and that is used
as a permanent residence, is connected to utilities, with or without a permanent foundation.
MORTGAGE shall mean an instrument recognized by law by which property is hypothecated
to secure the payment of a debt or obligation; procedure for foreclosure in event of default,
is established by statute.
OWNER-OCCUPANT shall mean an individual or family who occupies and owns, or who is
buying a unit of residential property and will occupy such residence.
PROMISSORY NOTE shall mean a written promise to pay or repay a specified sum of money
at a stated time or on demand.
City of Redding Emergency Repair (ERP) Program Policy Page 3
REHABILITATION COST shall mean the total cost of repairs and improvements, and other
costs for rehabilitation of the property to be incurred by the applicant, that are eligible for
inclusion in a rehabilitation loan or grant.
UTILITIES shall mean gas, electricity, water, sewage disposal and refuse collection.
VERY-LOW INCOME shall mean those incomes which do not exceed fifty percent (50%) of the
Redding area-wide median income, as established by the latest published guidelines from the
U.S. Department of Housing and Urban Development (HUD).
SECTION 3 - OVERVIEW OF LOAN/GRANT PROGRAM
The Emergency Repair Program (ERP) shall consist of three types of assistance:
A Deferred-Payment Loan for Elderly and Disabled: A loan for eligible homeowners over
60 years of age or disabled, that requires no monthly payments and is due only upon sale
of the home, transfer of title, rental of the home, when the borrower no longer maintains
the home as the principal place of residence, or when the borrower is able to repay.
A 15-Year Deferred Payment Loan: A loan for eligible borrowers, as established in Section
4 of this document, that requires no monthly repayment, but one that is due upon sale
of the home, transfer of title, rental of the home, when the borrower no longer maintains
the home as the principal place of residence, or at the end of 15 years if the borrower is
able to repay.
Grant Assistance to Owners of Rental Housing Units: This grant is intended to assist
disabled tenants in improving their rental unit to meet the physical needs of both the
current occupant and future occupants.
SECTION 4 - GENERAL ELIGIBILITY REQUIREMENTS
A. Location: Rehabilitation loans or grants will be made only in neighborhoods within
Redding city limits, and which are designated as Residential on the Redding General Plan.
B. Borrowers/Grantees: To be eligible for a rehabilitation loan or grant, the applicant must
be an owner-occupant of the home to be repaired, or a landlord whose tenant needs only
handicapped accessibility improvements.
C. Income/Housing Expenses: The applicant, or targeted tenant must meet both of the
following conditions:
1 . Household adjusted annual gross income shall be at or below the eighty percent
(80%) area-wide median income level as detailed in the guidelines most recently
published by the U. S. Department of Housing and Community Development.
2. The applicant's ratio of monthly housing expense to adjusted gross monthly income
shall be not more than twenty-eight percent (28%), except for those applicants that
qualify for deferred-payment loans for the elderly/disabled, or tenants receiving grant
assistance for handicapped accessibility improvements.
City of Redding Emergency Repair (ERP) Program Policy Page 4
D. Determination of Adjusted Gross Income: In calculating adjusted gross income, all of the
income of the household (including all adults residing in the unit), whether received in
cash or in kind shall be considered, except for the following specific exclusions which are
consistent with the Section 8 Rental Assistance Program:
1 . Earned income from a minor child under the age of 18.
2. Any amount above $480 of annual earned income for a full-time student who is 18
years of age or older.
3. Foster care payments.
4. One-time, lump-sum additions to family assets such as inheritances, insurance
payments (including payments under health and accident insurance and worker's
compensation), capital gains, and settlement for personal or property losses.
5. Casual, sporadic, or irregular donations from friends or family.
6. Amounts that are specifically for, or in reimbursement of, the cost of medical
expenses that do not result in new income to the applicant.
7. Annual amounts paid for alimony or child support that are received only sporadically,
provided that the applicant certifies:
a. the payments are not received regularly; and
b. all reasonable legal actions have been taken to collect such payments.
8. Amounts of educational scholarships paid directly to the student or the educational
institution.
9. Payments under the G.I. Bill
10. Relocation payments made pursuant to Title II of the Federal Uniform Relocation and
Real Property Assistance Policies Act of 1970.
E. Use: An Emergency Repair Program rehabilitation loan shall be used only for repairs
related to health and/or safety, or necessary handicapped accessibility improvements.
F. Housing Expense: To determine the ratio set forth in Paragraph C2 in this section, the
following expenses shall be included in housing expense:
1 . Mortgage payments, including principal and interest.
2. Rent, where applicable (including mobile home space rent).
3. Mortgage insurance premiums.
4. Service charges.
5. Hazard insurance premiums.
6. Property taxes and special assessments.
7. Maintenance and repairs.
8. Utilities.
G. Credit: A rehabilitation loan will be approved only if the applicant's credit record does not
show substantial disregard for former or existing obligations. Analysis of the borrower's
credit record may include consideration of special circumstances such as health trauma,
divorce, burial obligations, etc.
City of Redding Emergency Repair (ERP) Program Policy Page 5
I. Assets: In order to qualify for a rehabilitation loan, the applicant must be unable to
accomplish rehabilitation through conventional financing or use of his or her own assets
as determined by the Housing Loan Committee. Evaluation of assets shall focus on the
borrower's specific circumstances including both present and future medical/physical
needs, earning capacity and family conditions.
SECTION 5 - DESCRIPTION OF LOAN/GRANT PROGRAMS
A. DEFERRED-PAYMENT EMERGENCY REPAIR PROGRAM (ERP) LOAN
1. Purpose. The purpose of a deferred-payment Emergency Repair Program (ERP) Loan
is to pay the costs of minimum health and/or safety housing repairs for eligible, low-
income homeowners, particularly the elderly or disabled, without increasing current
monthly housing expenses.
2. Amount. The amount of an Emergency Repair Program Loan shall not exceed the
actual and approved cost of all necessary repairs up to a maximum of $2,500.00.
However, the City Housing Division is authorized to expend up to $4,000 for serious
and compelling reasons with Housing Loan Committee approval. No funds will be
paid for improvements that are made prior to approval of an application for such
grant funding.
3. Repayment. If not repaid earlier, the loan shall become due and payable upon sale
or transfer of the property, the death of the owner(s), or when the property is no
longer the owner(s)'s principal place of residence, whichever first occurs. All interest
earnings shall become forgiven upon repayment of the full principal loan balance
when received on time. Interest earnings shall not be forgiven on delinquent loans
which do not meet City payoff demand conditions.
4. Terms and Conditions:
a. The entire amount of an Emergency Repair Program Loan shall be conveyed by
a statement of understanding and an unsecured promissory note.
b. The borrower shall have hazard insurance at the time of signing loan documents,
and will agree to maintain it. The borrower shall provide evidence that property
taxes are current; or for mobile homes, that registration is current.
c. An Emergency Repair Program Loan shall bear interest at the rate of three
percent (3%) interest per year.
d. Loan amounts shall be used towards the cost of rehabilitation of the home as it
relates to handicapped accessibility improvements and Housing Quality
Standards (HQS) detailed in Section 4 of this document.
B. 15-YEAR EMERGENCY REPAIR PROGRAM (ERP) LOAN
1. Purpose. The purpose of an Emergency Repair Program (ERP) Loan is to pay the
costs of minimum health and/or safety housing repairs for those homeowners whose
income is so low as to prohibit a monthly payment.
City of Redding Emergency Repair (ERP) Program Policy Page 6
2. Amount. The amount of an Emergency Repair Program Loan shall not exceed the
actual and approved cost of all necessary repairs up to a maximum of $2,500.00.
However, the City Housing Division is authorized to expend up to $4,000 for serious
and compelling reasons with Housing Loan Committee approval. No funds will be
paid for improvements that are made prior to approval of an application for such
grant funding.
3. Repayment. If not repaid earlier, the loan shall become due and payable upon sale
or transfer of the property, the death of the owner(s), when the property is no longer
the owner(s)'s principal place of residence, or at the end of 15 years, whichever first
occurs. All interest earnings shall become forgiven upon repayment of the full
principal loan balance when received on time. Interest earnings shall not be forgiven
on delinquent loans which do not meet City payoff demand conditions.
4. Terms and Conditions:
a. The entire amount of an Emergency Repair Program Loan shall be conveyed by
a statement of understanding and an unsecured promissory note.
b. The borrower shall have hazard insurance at the time of signing loan documents,
and will agree to maintain it. The borrower shall provide evidence that property
taxes are current; or for mobile homes, that registration is current.
c. An Emergency Repair Program Loan shall bear interest at the rate of three
percent (3%) interest per year.
d. Loan amounts shall be used towards the cost of rehabilitation of the home as it
relates to handicapped accessibility improvements and Housing Quality
Standards (HQS) detailed in Section 6.
C. GRANT ASSISTANCE TO OWNERS OF RENTAL HOUSING UNITS:
1. Purpose. The purpose is to establish a procedure and policy for the allocation of
grants to owners of rental housing units to assist eligible disabled tenants meet their
physical needs, as well as providing handicapped accessibility improvements to
subsequent disabled occupants.
2. Amount. The maximum amount to be expended for modification of each rental
housing unit shall be $2,500. However, the City Housing Division is authorized to
expend up to $4,000 for serious and compelling reasons with Housing Loan
Committee approval. No funds will be paid for improvements that are made prior to
approval of an application for such grant funding. No funds will be paid for
improvements of a substandard unit until the owner brings the property up to the
standards of the Uniform Housing Code.
3. Terms and Conditions:
a. The tenant must have a permanent disability that justifies the proposed
improvements.
City of Redding Emergency Repair (ERP) Program Policy Page 7
b. The owner (or authorized agent) of the property must make a good faith and
diligent effort to rent the unit to persons with a disability for a minimum of five
years. In the event the initial tenant vacates the premises and the owner does
not attempt to market the unit to a person with a disability, he/she shall be
ineligible for future assistance through the program.
c. The initial tenant with a disability must meet applicable General Eligibility
Requirements as detailed in Section 4 of this document..
d. Grant amounts shall be used towards the cost of rehabilitation of the home as
it relates to handicapped accessibility improvements and Housing Quality
Standards (HQS) detailed in Section 6 of this document.
SECTION 6 - ELIGIBLE REPAIRS
The following repairs are eligible costs for a rehabilitation loan under the Emergency Repair
Program.
1. Leaky Roofs.
2. Damaged or Deteriorated Windows.
3. Plumbing.
4. Peeling Paint on Exterior and Interior Surfaces.
5. Electrical Hazards. Examples of electrical hazards include: Broken or frayed electrical
wiring; bare wires not covered by rubber or plastic insulation; loose or improper wire
connections to outlets; light fixtures hanging from electric wire with no other firm support;
missing or cracked cover plates on switches or outlets; exposed fuse box connections;
overloaded circuits evidenced by frequently "blown" fuses. Any rubber-coated or plastic-
coated electrical wiring (romex) in a room or on the exterior that is subject to possible
physical abuse or wear.
6. Security. This may include installation of operable locks or security devices on exterior
windows and doors.
7. Defective Stove, Range, or Refrigerator.
8. Water Heater in Need of Temperature-Pressure Relief (Pop-Off) Valve and Discharge Line.
9. Damaged or Deteriorated Flooring.
10. Weatherization/Energy Conservation. This may include improvements to exterior doors,
air conditioning and cooler-vent openings, walls, floors and ceilings, to ensure weather-
tight conditions. Any cracks, holes, gaps, or openings that allow air or moisture
infiltration into a living space may be addressed.
City of Redding Emergency Repair (ERP) Program Policy Page 8
11. Unsafe Handrails, Stairs and Porches.
12. Substandard Heating/Cooling.
13. Adaptable Housing Repairs. Adaptable housing repairs (such as grab bars, modified
counters, doorways, ramps, fixtures and facilities) may be eligible modifications for
handicapped or disabled home occupants.
14. Lead-Based Paint Abatement: Consistent with program regulations and upon Housing
Loan Committee approval, HOME or CDBG funds may be used for lead-based paint
evaluation and reduction costs. The form of assistance may include interest-bearing
loans, non-interest-bearing loans, interest subsidies, deferred-payment loans, grants, or
other forms of assistance determined to be appropriate for the purposes of the program.
In cases where the use of grant funds are deemed necessary by the HLC, staff will
monitor projects to ensure that the following guidelines are met:
a. Grant expenditures shall only cover increased costs attributable to lead-based hazard
evaluation and reduction activities;
b. The amount of grant funds available shall be limited to $7,500 of the total
rehabilitation project cost, unless otherwise approved by the HLC; and
c. Allocation of grant funds for lead-based hazard evaluation and reduction activities
does not increase the value of the home.
SECTION 7 - INELIGIBLE REPAIRS
The following repairs are not eligible costs for rehabilitation work under the Emergency Repair
Program.
1 . New construction, substantial reconstruction, expansion of the structure, or the finishing
of unfinished spaces unless otherwise stated in this policy.
2. Materials, fixtures, equipment or landscaping of a type and quality which exceeds
adequate service or that is not customarily used for properties of the same general type.
3. Refinancing the existing debt on property or delinquent property taxes.
4. A rehabilitation loan shall not be used to finance or obtain any of the following items:
- Barbecue pit
- Bathhouse
- Burglar alarm
- Fire extinguisher
- Greenhouse
- Hot tub/spa
- Kennel
- Photo mural
- Swimming pool
- Television antenna
- Tennis court
- Valance or cornice board
5. Other "luxury" items.
City of Redding Emergency Repair (ERP) Program Policy Page 9
•
SECTION 8 - PROCEDURES
FINANCIAL PROCESS
Process Procedures
Initial Contact: Advise applicant of general objectives and benefits of
the program.
Obtain information from applicant (Use Initial
Telephone Survey, Form No. ERP.1).
- Live in city limits?
- Live in residential zoning?
- Owner-occupied?
- Applicant's income.
- Any assets that would disqualify applicant?
- Elderly or disabled? If yes, applicant may need
adaptable housing products or aids.
- Who is owner of record?
Application: Assist owner in completing all necessary forms.
- City of Redding ERP Loan Application, Form No.
ERP.2.
- Copy of current mobile home registration.
- Copy of most recent property tax statement.
- Medical verification of need (as required).
- Verification of SSI-SDI.
Request Initial Inspection Deficiency
List With Cost Estimate: Request inspection by assigned Housing Specialist
(SEE Rehabilitation Procedures Section) when all
verifications return and all applicant forms are
completed.
Assemble Loan File: Assemble loan file and evaluate for completeness.
- Completed applications.
- Current mobile home registration.
- Credit report.
- Property tax statement.
- Income verification of SSI-SSP (or other).
- Deficiency List and Cost Estimate.
- Assign project loan number
Request Contract and Bid: Request contract and bid from homeowner or landlord.
(Owner to have solicited bid from contractor of his/her
choice.) (SEE Rehabilitation Process Section)
City of Redding Emergency Repair (ERP) Program Policy Page 10
Housing Loan Committee Review
and Approval: Submit loan package and photo of home to Housing
Program Supervisor for review and approval by the
Deputy City Manager, or the Housing Loan Committee
when applicable.
- Assigned Housing Specialist will prepare Loan
Narrative for the Deputy City Manager or the
Housing Loan Committee.
Assemble Loan Documents: Assemble and prepare loan documents. This includes
the following:
- Statement of Understanding
- Promissory Note
- Loan Disclosure Statement
- Memo to Finance Department
- Terms and Conditions
Loan/Grant Settlement: Arrange appointment for all signatory parties to sign
loan/grant documents and review construction
procedures.
- Review all loan/grant documents with
applicant(s).
- Obtain signatures of applicant(s) for all
appropriate forms with notarization as required.
- Provide applicant with copy of all documents.
- Indicate to applicant that funding is secured for
the rehabilitation work and that he/she may now
sign an agreement with the contractor and
commence work.
- Indicate to applicant that it is the responsibility of
the contractor to facilitate and complete the
permit process with the State HCD Office
(Housing and Community Development, Codes
and Standards, Registration and Titling, 2986
Bechelli Lane, Suite 201 , Redding, California
96002, (530) 224-4815) or City of Redding
Building Division, as necessary.
Memo to Finance: (SEE Appendix for Instructions for Memo to Finance
Department)
Work Underway: (SEE Rehabilitation Procedures Section)
Construction Contract: The construction contract is the responsibility of the
contractor and shall be provided and explained to the
homeowner or landlord prior to submission to the
Deputy City Manager or the Housing Loan Committee.
City of Redding Emergency Repair (ERP) Program Policy Page 11
, •
Completion of Construction: (SEE Rehabilitation Procedures Section)
Disbursement of Funds: Upon acceptance of the completed work by the
homeowner or landlord, City staff may release the
check for the approved loan amount to the contractor.
Notice of Completion: It shall be the responsibility of the homeowner or
landlord to complete and record a notice of completion
with the Shasta County Recorder if he/she desires to
obtain verification of material supplier or subcontractor
payments by the general contractor.
Final Approval by the State
HCD Office When Applicable: On those rehabilitation projects requiring a permit with
the State Housing and Community Development
Department, it is the responsibility of the contractor to
obtain final approval for the completed work.
Completing the File: Upon disbursal of all funds, the Housing Staff shall
complete all necessary documents to close out the
file.
Final Letter to Borrower: Send letter with statement of disposition of funds,
notifying applicant of completion date and call-back
procedures.
REHABILITATION PROCESS
Process Procedures
Receive Request for Initial
Inspection: Upon receiving a request for property inspection from
the assigned Housing Specialist, set up owner file:
- Attach file checklist.
- Obtain copy of Assessor's Parcel Map (confirm
location of property within city limits).
Arrange Appointment for Initial
Inspection: Make appointment with owner to inspect property.
Initial Inspection: Explain Emergency Repair Program and process.
Conduct inspection of property utilizing Section 8
Dwelling Unit Inspection Report to record deficiencies.
Deficiency List and Cost Estimate: Finish deficiency list and cost estimate for applicant
complete with letter of explanation.
- Give copy of deficiency list and cost estimate to
assigned Housing Specialist.
City of Redding Emergency Repair (ERP) Program Policy Page 12
- Send letter of explanation to applicant.
Review Deficiency List with Owner: Review repair items and any significant problems
concerning the project.
- Review bid process with applicant and present
him/her with Contractor's List if requested.
- Note: Applicant is responsible for securing bid
from licensed contractor to perform the work.
Applicant is also responsible for communicating
the Emergency Repair Program process to the
contractor (explanation sheet will be provided).
Loan/Grant Approval Process: Put rehabilitation file in order while awaiting approval
by the Loan Committee. Complete Historic and
Architectural Assessment Form.
Loan/Grant Settlement: Upon signing the loan/grant documents, the applicant
is now ready to sign the construction contract with
the contractor. Work may now commence.
Work Underway: Borrower/contractor responsibility.
Completion of Construction: Borrower/contractor responsibility.
Final Approval by the State HCD
Office When Applicable: Borrower/contractor responsibility.
Final approval by the City of Redding
Building Division: Borrower/contractor responsibility.
Final Inspection by the
Housing Division: Borrower shall contact the Housing Division for final
inspection.
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City of Redding Emergency Repair (ERP) Program Policy Page 13