HomeMy WebLinkAboutReso 99-003 - Authorizing Implementation of Amendments to the Housing Rehabilitation Loan Program & Emergency Repair Program Policy �'.
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R�SOLUTION NO.�i��
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
AUTHORIZING IMPLENIENTATION OF AMENDMENTS TO THE HOUSING
REHABILITATION LOAN PROGRAM AND THE EMERGENCY REPAIR
PROGRAM POLICY
WHEREAS, the City of Redding has previously adopted a Rehabilitation Loan Policy and
Emergency Repair 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
Reddin�that the aforementioned policies be further amended as set forth in Attachment"B,"the Emergency
Repair Program Policy and Attachment "C", the Housing Rehabilitation Loan Program Policy attached
hereto; and
WHEREAS,it has been determined that this matter is categorically exempt from the provisions of
CEQA.
NOW, THEREFORE; BE IT RESOLVED that these amendments to the Emergency Repair
Program Policy attached hereto as Attachment "B" and Housing Rehnbilitation Loan Program Policy
attached hereto as Attachment "C" 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 Sth day of January,�1999; and,was duly adopted at said
meeting by the following vote:
AYES: COLTNCIL MEMBERS: Cibula, Kight, McGeorge and Anderson
NOES: COIJNCIL MEMBERS: None
ABSENT: COUNCIL,MEMBERS: None
ABSTAIN: COLTNCIL MEMBERS: None
ayor, Robert C. Anderson
City of Redding
ATTEST:
CONNIE STR HMAYER, � C rk
APPROVED AS TO FORM: � �
.�Lz •, /�...2 `, ��,,�,
. LEONARD WINC�AT , Cit Attorne �
Y Y C:�'�ty Working Files\Staff Reports\policy99.res
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CITY OF REDDING
EMERGENCY REPAIR PROGRAM
POLICY
Prepared by:
Development Services Department
Housing Rehabilitation
Adopted by Resolution No. 96-94
Effective May 7, 1996
ATTACHMENT "B"
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EMERGENCY REPAIR PROGRAM (ERP)
TABLE OF CONTENTS
SECTION PAGE
1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. DESCRIPTION OF LOAN PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. GENERAL ELIGIBILITY REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . : . 4
5. DESCRIPTION OF LOAN PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .:. . . 6
6. ELIGIBLE REPAIRS . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 7
7. INELIGIBLE REPAIRS . . . . . . . . . . . . . . . . . . . . . . . : . . . . . . . : . . . . . . . . . . . . . . . . 8 ,
8. PROCEDURES
FinancialProcess . . . . . . . . . . . . . . . . . . . . . . : . . . . : . . . . . . . : . . ... . . . . ... . 9
Rehabilitation Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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City of Redding Emergency Repair Program (ERP) Page 1
SECT/ON 1 - INTRODUCT/ON
As the community continues to grow, it is important to recognize the increase 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 either not feasible or cost-effective.
The Emergency Repair Program(ERP)has beeri 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. This program offers an unsecured 3 percent interest loan.up to , ,
a maximum of$2,500.00, to eligible households on a one-time basis to eliminate basic health and � � �
safety problems, and/or make necessary handicapped aecessibility improvements: � ,
Low-income, eligible tenants of rental units needing handicapped accessibility improvements :
only also may apply for assistance under the::•Emergency Repair Program.. ,Tenant-based .�; .. .. �
improvements may be only accomplished with matching private dollars and approval from the �
respective landlord.
In those cases where it is determined that an emergency or serious health and/or safety hazard exists,
the City reserves the right to consider a previous borrower's further request for assistance. The
funding for this program will be provided by the federal Community Development Block Grant 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. Most importantly, it is recognized that some loans will
not be repaid; however,this is offset by the realization that prior to the inception of the program,some
monies always have been available through grants not meant to be repaid.
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.
SECTION 2- DEFINIT/ONS
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
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City of Redding Emergency Repair Program (ERP) Page 2
exclusions.
ASSETS shall mean the entire property of all sorts belonging to an applicant.
BORROWER shali mean the recipient of a loan.
CDBG shall mean the Community Development Block Grant Program as setforth in the Housing and
Community Development Act of 1974.
CITY shall mean the City of Redding, California, Development Services Department.
CITY COUNCIL shall mean the City Council of the City of Redding.
CODE VIOLATIONS shall mean infractions against the applicable codes contained in the Housing
Rehabilitation Standards.
DEFERRED PAYMENT LOAN shall mean a loan which is not liquidated on an installment basis.
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 asdetailed in.Chapter 10 of the.current.. �� , � �
Uniform Housing Code. - ,
EQUITY shall mean the value of a property in ezcess of claims�or liens against it. . . . �
' FAMILY shall mean all individuals who reside in a dwellin' unit related b blood,marria e,or kinshi �
J Y J p�.. . , ;.
FAMILY INCOME shall mean adjusted gross income of all family members.
GENERAL PROPERTY IMPROVEMENTS shall mean improvements other than code violations,
incipient code violations, and required items which are eligible for rehabilitation loan funds.
HOUSEHOLD shall mean all individuals who reside in or have an ownership interest in a dwelling unit
regardless of family ties.
HOUSEHOLD INCOME shall mean adjusted gross income of all household members.
�,,,.�s. .� � . � . .. . : , i �.r y'� �'% .��i°���1'�':" . .; �r �`"�`� � ::�k� .,
HOUSING MANAGER shall rimean that person responsible�for administerinqeall proqrams anci actiuities
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witfiin�the�'"scope of�the�City.,of Redding Housing fAuthority�and�,City�o�f,�Redding�Housing�Division,;
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 shall mean the ratio of adjusted gross income to housing expenses.
INTEREST shall mean a charge for borrowed money repaid along with the amount of the loan.
LIEN shall mean a form of encumbrance which usually makes property secure over the time of
payment of a debt or discharge of an obligation. Example: judgments, taxes, mortgages, deeds of
trust.
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City of Redding Emergency Repair Program (ERP) Page 3
LOAN COMMITTEE shall mean a committee consisting of three members of the City Staff,derived
from the following positions: the City Manager, the Assistant City Manager, the City Attorney, the
Development Services Director and the Director of Finance. The Loan Committee shall be charged
with approving or disapproving loan applications consistent with the policies of the Emergency Repair
Program.
LOW INCOME shall mean those incomes which do not exceed 80 percent of the Redding area-wide
median income as established bythe latest published guidelines from the United States Department
of Housing and Urban Development (HUD).
VERY-LOW INCOME shall mean those incomes which do not exceed 50 percent of the Redding area-
wide median income, as established by the latest published guidelines from the United States
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, connected to utilities, with or without a permanent foundation.
MONTHLY HOUSING EXPENSES shall mean those.amounts expended for mortgage payments or
rent, hazard insurance,.real estate taxes, maintenance and utilities.
- MORTGAGE shall mean an instrument recognized bylaw by:which property is hypothecated to secure -: ,.
the paymenf of a debt or obligation; procedure for foreclosure in event of default; is established by �
statute.
` OWNER-OCCUPANT shall mean an individual or farnily>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.
REHABILITATION COST shall mean the total cost of repairs and improvements and other costs for
rehabilitation to be incurred by the applicant that are eligible for inclusion in a rehabilitation loan.
UTILITIES shall mean gas, electricity, water, sewage disposal and refuse collection.
SECTION 3- DESCRIPTION OF LOAN PROGRAM
The Emergency Repair Program (ERP) Loan shall consist of two types of loans:
A Deferred-Payment Loan for Elderly and Disabled: A loan for eligible homeowners and
tenants 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, 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, or at the end of 15 years if the borrower is able to repay.
SECT/ON 4 - GENERAL EL/GIB/LITY REQU/REMENTS
A. Location: Rehabilitation loans wi�l be made only in neighborhoods within Redding city limits,and
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City of Redding Emergency Repair Program (ERP) Page 4
which are designated as Residential on the Redding General Plan.
B. Borrowers: To be eligible for a rehabilitation loan,the applicant must be an owner-occupant of
the home to be repaired; or, a tenant needing only handicapped accessibility improvements.
C. Income/Housing Expenses: The applicant must meet both of the following conditions:
1. Household adjusted annual gross income must be less than the following amounts(NOTE:
These income guidelines are from the Section 8,Title 2 of the Housing Act of 1974,as most
recently published by the Department of Housing and Community Development):
1 person $19,500
2 persons $22,500
3 persons $25,050
4 persons $27,850
5 persons $30,050
6 persons $32,300
7 persons $34,500
8 or more $36,750
;2. , The ratio of.housing expense to adjusted gr.oss income:shall be not more than 25 percent-,
except for those applicants that qualify for defer.red=payment loans,for the elderly.,or `�
disabled. ,
� , �•�.D.: . Determination of Adjusted Gross lncome: In.calculating adjusted gross'�income, all of the � `�
income of the.applicant or applicants in cash or in kind shall be:considered; except for�:the ;; .: -
following specific exceptions:
1. Social Security monthly educational benefits to the children of an individual entitled to
disability or old age insurance benefits provided that the child is:
a. Unmarried.
b. Under age 18.
c. A full-time student under age 22.
2. Annual amounts paid for child support, provided that:
a. The child support is required by court order.
b. The required child support payments must be paid and received regularly.
3. Foster care payments.
4. Relocation payments made pursuant to Title I I of the Federal Uniform Relocation and Real
Property Assistance Policies Act of 1970.
5. Payments under the G.I. Bill.
6. $300 for each dependent child.
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City of Redding Emergency Repair Program (ERP) Page 5
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 premium.
4. Service charges.
5. Hazard insurance.
6. Real estate 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: : _ ,
' " ` H. Assets: ln order to qualify#or 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.
1. Administrat�ue Authorityof:Hous�g Man,ager The�t�using Ma�nager�s�all be�ha qed�with
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approuin�q or;disappro�inq funding requests af or b"elow$1,Q,000 through the Emergency Repair
Program(ERP),the HOME Rental Proqram(HRP),and Homeowner,Loan Program which are in;
cornpliance with�all applicable criteria listed;in this�document.,
SECTION 5- DESCRIPTION OF LOAN 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 and tenants, 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.
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. For tenant-based loans,
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City of Redding Emergency Repair Program (ERP) Page 6
repayment shall become due and payable when the property is no longer the principal place
of residence. 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. For owner-occupied loans, 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. Prior to execution of a tenant-based loan, the prospective borrower shall secure
authorization from the property owner regarding implementation of the specified
improvement(s).
d. An Emergency Repair Program Loan sha�l bear inter.est at the rate of three percent(3%)
interest per year.
� , e. Loan amountsshall 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. ,
. ... :_ ,. , . . ,. .
. . .
C. 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.
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.
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. For owner-occupied loans, 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.
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City of Redding Emergency Repair Program (ERP) Page 7
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.
SECTION 6- EL/G/BLE 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 elecfric wire with no.other'firm.support;�missing or cracked
cover plates on switches or outlets;exposed fuse box connections;overloacied circuits evidenced
by frequenfly"blown"fuses. Any rubber or plastic-coated electrical.wi"ring:(romex) in a room or °
on the exterior thaf is accessible to possible physicaF abuse or wear. � _
6. Security. This may include 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.
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.
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City of Redding Emergency Repair Program (ERP) Page 8
SECT/ON 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 back 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"cou'.rf : .
- Ualance'or cornice board _
5. Other "luxury" items.
SECTION 8- PROCEDURES
FINANCIAL PROCESS
Process Procedures
Initial Contact: Advise applicant of general objectives and benefits of the
program.
Get 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.
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City of Redding Emergency Repair Program (ERP) Page 9
- 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 Rehab Inspector (SEE REHAB
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 No.
Request Contract and Bid: Request contract and bid from home owner. (Owner to have
solicited bid from contractor of his/her choice.) (SEE REHAB
PROCEDURES SECTION)
City Loan Committee Review
and Approval: Submit loan package and photo of home to Housing Rehab
Supervisor for review and approval by City Housing Loan
Committee.
- Rehab Finance Specialist will prepare Rehab Loan Narrative
for Loan Committee.
Assemble Loan Documents: Assemble and prepare loan documents. This includes the
following:
- Statement of Understanding
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City of Redding Emergency Repair Program (ERP) � Page 10
- Promissory Note
- Loan Disclosure Statement
- Memo to Finance Department
- Terms and Conditions
Loan Settlement: Arrange appointment for all signatory parties to sign loan
documents and review construction procedures.
- Review all loan documents with applicant.
- 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 rehab
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, 405 Redcliff Drive, Redding, California . _ .
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City of Redding Emergency Repair Program (ERP) Page 11
96002, (916)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 REHAB PROCEDURES SECTION)
Construction Contract: The construction contract is the responsibility of the contractor
and shall be provided and explained to the home owner prior
to Loan Committee.
Completion of Construction: (SEE REHAB PROCEDURES SECTION)
Disbursement of Funds: Upon acceptance of the completed work by the home owner,
City staff may release the check for the approved loan amount
to the contractor.
Notice of Completion: It shall be the responsibility of the home owner to complete and
record a notice of cornpletion 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: On those cehab.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
Rehab Finance 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.
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City of Redding Emergency Repair Program (ERP) Page 12
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 Rehab
Finance Specialist.
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
Contractors List if requested.
Note: Applicant is responsible for securing bid from Iicensed
. 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 Approyal Rrocess: Put rehab file in order while awaiting approval by the Loan., : .
Committee. Complete HISTORIC AND ARCHITEGTURAL�
ASSESSMENT FORM. ' . .
Loan Settlement: Upon signing the loan 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: Borrower/contractor responsibility.
Final approval by the City of
Redding Building Division: Borrower/contractor responsibility.
Final Approval by the
Housing Division: Borrower shall contact the Housing Division for final approval.
C:\My Working Files\REHAB\POLICY.ERP.wpd
• •
CITY OF REDDING
HOUSING REHABILITATION LOAN POLICY
Prepared by
Development Services Department
Housing Rehabilitation
Adopted by Resolution No. 75-86
Effective September 2, 1975
Amended March 1997
ATTACHMENT "C"
• •
CITY OF REDDING REHABILITATION LOAN POLICY
TABLE OF CONTENTS
Page
SECTION 1 - INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2 - DEFINITION OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3 - GENERAL ELIGIBILITY REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A. Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
B. Owner-OccupanUOwner-Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
C. Income/Housing Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
D. Determination of Adjusted Gross Income . . . . . . . . . . . : . . . . . . . . . . . . . . 5
E. Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
F. Housing Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
G. Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
H. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
I. Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
J. Assurance of Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
K. Water and Sewer Connection . . . . . . . . . . . . . . . : . . . . . . . . . . . . . . . . . . . 7
.
L Adm�istrat�e�Authority of Housing�Mana er, � : y�� �:. ': �t '�: .� 7
. _ . .,._.e� � >,J ��. ..... > . ...
SECTION 4 - DESCRIPTION OF LOAN PROGRAMS . . . . . . . . . : : : '. . : . . . . . . . . .�. . . . . . . 7
: A. Amortized Loans . . . . . . . . . . . . . . . . . . . . . . . : .._ . . . . : ; . . : . . . . . . . . . . 7
B. Amortized HOME Rental Program (HRP) for:Owner-Jnvestor Loan : : . . . . 8
C. Partially-Deferred Payment Loans . . . . . . : .
. . .... . . . ... .. . . . . ... . . . . 1.0,
D. Fully-Deferred Payment Loans for Elderly and Disabled . . . . ... . . . . . . 10
E: Water and Sewer Loans . . . . . . . . . . . . . . . . � � ' . . . . 11
. ....... . ... . . . . . . . . . ..
F. Rehabilitation Loans for Non-Profit Corporations �:.. . .:. . . . .•. .:. . . . . . . . 12`
SECTION 5 - ELIGIBLE COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . : . . . . : . . . . . . . . . . . . . 14
A. Code and Rehabilitation Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 14
B. Limited Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
C. Cost-Effective Energy Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
D. Historic Preservation Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
E. Rehabilitation Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
F. Building Permits and Related Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
G. Certain Related Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
H. Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6 - INELIGIBLE COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 7 - PROCESSING A LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 8 - COMPLETING A HOME REHABILITATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 9 - GENERAL CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 10 - SPECIAL PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 11 - ELIGIBLE AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 12 - DEFAULT, FORECLOSURE AND PROPERTY DISPOSITION POLICY . . . . 19
SECTION 13 - CONTRACTOR PERFORMANCE STANDARDS . . . . . . . . . . . . . . . . . . . . . . 21
- I -
• �
CITY OF REDDING REHABILITATION LOAN POLICY Page 1
SECTION 1 - INTRODUCT/ON
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 Board was the establishment of
a housing rehabilitation program.
The City's housing rehabilitation program provides: (1)low-interest loans to low-and moderate-income
homeowners; (2) loans to investor/owners who agree to participate in the HOME Rental Program
(HRP);and, (3)loans to non-profit corporations for transitional or permanent housing facilities. The
program promotes housing opportunities for low-and moderate-income families by means of loans
which are provided to homeowners who would not otherwise be eligible for conventional home repair
loans. Special consideration is given to families on fixed incomes,particularly the elderly and disabled.
The program offers five types of loans:
Amortized Loan: A low-interest loan amortized monthly over a period not to exceed 15 years
for homeowners and 20 years for landlords.
Construction Loan: A loan having a term that is the actual term of rehabilitation plus 60 days, _
or one year.for investor/owners participating in the HOME Rental Program (HRP),whichever is
less.
Partially-Deferred Payment Loan: Loans which are.amortized in an amount not to exceed 25
percent of family income,and deferred for the balanee of the amount necessary to rehabilitate the
property,.but in no event shall a borrower be permitted to.defer more than 90 percent of the total .
�.
loan. _
Deferred Payment Loan for Elderly and/or Disabled: " A low-interest loan requiring no
monthly payments. These loans shall be repaid only when property title is transferred.
Rehabilitation Loan for Non-Profit Corporations: A low-interest loan carrying a term not to
exceed 15 years and repaid based upon the subject property's capacity to service the debt.
As loans are repaid, the money is returned to the loan account, creating a revolving pool of funds
available for future applicants. With judicious qualifying of applicants and careful monitoring of
outstanding loans, the original fund is continually replenished and more families benefit from the
original account.
It is anticipated this program will remain a useful tool in helping to maintain and upgrade the housing
stock within the City of Redding;and in particular,help stabilize and enhance various neighborhoods.
It is intended the program be liberal enough in scope and terms to help families and individuals of low
income,yet conservative enough to ensure the security of the investment and thus be acceptable to
a broad cross-section of the community.
It should be recognized that it may be necessary to make adjustments to the program as working
experience dictates. Above all,the program endeavors to create and maintain a workable program
of housing rehabilitation.
SECTION 2- DEFIN/T/ON OF TERMS
The following definitions shall apply to this document unless another meaning is clearly apparent from
the context:
• •
CITY OF REDDING REHABILITATION LOAN POLICY Page 2
ADJUSTED GROSS ANNUAL INCOME shall mean the applicant's gross income less allowable
exclusions. "
AMORTIZED LOAN shall mean a loan liquidated on an installment basis.
ASSETS shall mean the entire property of ali sorts belonging to an applicant.
BORROW ER shall mean the recipient of a rehabilitation loan.
THE "CITY" shali mean the City of Redding, California, Department of Planning and Community
Development.
CITY COUNCIL shall mean the City Council of the City of Redding.
CODE VIOLATIONS shali mean infractions against the appiicable codes contained in the Housing
Rehabilitation Standards.
CONSTRUCTION LOAN shall mean a loan which bears interest, has no monthly payment, and is
liquidated within 60 days following the end of the construction period.
CREDIT shall mean financial or commercial trustworthiness,as determined by the applicant's previous .
performance regarding the payment of debts. �
DEED QF TRUST shall mean a deed given by borrower to trustee to be held pending fulfillment of an,• .
obligation;.which is ordinar.ily repayment of a loan ta a beneficiary.� . • ., .
DEFERRED PAYMENT LOAN shall mean a loan.wfiich,is not'liquidated on�an installment basis::
DESIGNATED NEIGHBORHOODS shall mean those neighborhoods designated for rehabilitation
assistance by the City Council of the City of Redding.
DISABLED shall mean incapacitated by illness or injurythat substantially limits activity,according to
criteria established by the Social Security Administration.
EMERGENCY REPAI RS 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 an assessed value
used to provide staff with analysis information for the debUequity structure. This may also include the
value established by use of a recognized appraisal guide or, when applicable, the written unofficial
opinion of a professional appraiser.
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 who are related by blood, marriage,
or kinship.
GENERAL PROPERTY IMPROVEMENTS shall mean improvements other than code violations and
incipient code violations which are eligible for rehabilitation loan money.
HOME INVESTMENT PARTNERSHIPS ACT of the National Affordable Housing Act of 1990 shall
• i
CITY OF REDDING REHABILITATION LOAN POLICY Page 3
mean the federal legislation which provides funding for the current program activities in the City of
Redding including tenant-based rental subsidies, assistance to first-time home buyers, property
acquisition,newconstruction,reconstruction,moderate orsubstantial rehabilitation,site improvements,
demolition,relocation and other reasonable and necessary expenses related to the development of
affordable housing.
HOUSEHOLD shall mean all individuals who reside in or have an ownership interest in a dwelling unit
regardless of family ties.
HOUSEHOLD INCOME shall mean adjusted gross income of all members 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 enabling
legislation which provides funding for the current program of housing and community development in
the City of Redding.
HOUSI NG LOAN COMMITTEE shall mean a committee consisting of three members of the City Staff,
derived from the following positions: the City Manager,the Assistant City Manager,the City Attorney,
the Directorof Planning and Community Development and the Director of Finance. The Housing Loan
Committee shall be charged with approving or disapproving loan applications consistent with the
policies of the City of Redding. �
�z ..,,,. ; �aa>. <, ,��,,;._-- ;, :. �.� , : �.,�r� . ,.,:, - ;, ,
� :., z: ffi:•: �� '��si ' Y s:
HOUSING:MANAGER shall rnean th�at person responsible�"for adrninisterinq all proqrams and activities ,�������`� : � �
� .
within_the scope.of the�Cit of, Redding;,Housin Authorit _ and Cit of Reddin Housin Division ` �
� N�. Y ;_� ,�9 .� Y ���. Y.° �.. .�9 ,� a J ��,� .
INCIPI ENT CODE VIOLATIONS shall mean a condition or element:of a structure which will deteriorate ::`:
into an actual violation within a year or two of inspection.
INCOME/HOUSING EXPENSES shall mean the ratio of adjusted gross income to housing expenses.
INTEREST shall mean a charge for borrowed money, repaid with the amount of the loan.
INVESTOR/OW NER shall mean an individual(or individuals)or family who owns or is buying a unit(s)
for the purpose of renting as residential property.
LAND CONTRACT shafl mean a contract ordinarily used in connection with the sale of property in
cases where the seller does not wish to convey title until all or a certain part of the purchase price is
paid by the buyer; often used when property is sold on a small down payment.
LI EN shall mean a form of encumbrance which usually secures property for the payment of a debt or
discharge of an obligation. Example: judgments, taxes, mortgages, deeds of trust.
LOW INCOME shall mean those incomes which do not exceed 80 percent of the median income as
established by the Department of Housing and Urban Development
MONTHLY HOUSING EXPENSES shall mean those expenses allowable as legitimate housing
expenses.
MORTGAGE shall mean an instrument recognized by law by which property is hypothecated to secure
the payment of a debt or obligation;the procedure forforeclosure in event of default is established by
statute.
• •
CITY OF REDDING REHABILITATION LOAN POLICY Page 4
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) of the Internal Revenue Code.
OW NER-OCCUPANT shall mean an individual or family who occupies and owns or is buying a unit
of residential property.
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 and improvements and other costs for
rehabilitation incurred by the applicant that are eligible for inclusion in a rehabilitation loan.
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.
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 I I,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 a.re used. . . .,
' TRA'NSITIONALHOUSINGFACILITYshallmeanresidentialunitswhich�areoccupiedfor:aspecified - �
length of time under a written contract while independent living skills are learned: -E�'
UTILITIES shall mean gas, electricity, water, sewage disposal and refuse collection.
VERY LOW INCOME shall mean those incomes which do not exceed 50 percent of the median
income as established by the Department of Housing and Urban Development.
SECT/ON 3- GENERAL ELIG/B/LITY REQU/REMENTS
A. Location: Rehabilitation loans will be made only in neighborhoods designated by the City
Council, to correct code violations, and to make general improvements to a dwelling unit as
defined in the Housing Rehabilitation Standards.
B. Owner-OccupanUOwner-Investor: To be eligible for a rehabilitation loan,the applicant must
be included in one of the following categories:
1. Owner-Occupant. The applicant must be an individual(or individuals)or family who owns
or is buying a home. Persons buying homes under land contracts are excluded from the loan
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.
2. Owner-Investor. The applicant must be an individual (or individuals)or family who owns
or is buying a unit(s) for the purpose of renting as residential property. Income eligibility
requirements as identified in Paragraphs C&D of this section do not apply to investor/owner
applicants. Investor/owners are not eligible for Water and Sewer Loans. Investment
properties shall have a positive cash flow.
• .
CITY OF REDDING REHABILITATION LOAN POLICY Page 5
In addition to the above requirements,participants in the HOME Rental Program(HRP)must
agree to abide by all contracts and program regulations relating to the Section 8 Housing
Assistance Program.
C. Income/Housing Expenses: The applicant must meet both of the following conditions:
1. Household adjusted annual gross income must be less than the following amounts(NOTE:
These income guidelines are from the Section 8,Title 2 of the Housing Act of 1974,as most
recently published by the Department of Housing and Community Development):
1 person $19,500
2 persons $22,500
3 persons $25,050
4 persons $27,850
5 persons $30,050
6 persons $32,300
7 persons $34,500
8 or more $36,750
2. The ratio of housing expense to adjusted gross income shall be not more than 25 percent,
except for applicants that otherwise qualify for deferred or partially-deferred payment loans.
D. Determination of Adjusted Gross lncome: In'calculating adjusted grossincome; all of the '
°• ` ' income of�the applicant or applicants in cash or.in kind shall be �considered; except for:the � , '
- following specific exceptions: .
1. "Social Security monthly•educational benefits to the children of;an individual entitled to •' � .
disability or old age insurance benefits provided that the child'is: . < - .
a. Unmarried.
b. Under age 18.
c. A full-time student under age 22.
2. Annual amounts paid for child support, provided that:
a. The child support is required by court order.
b. The required child support payments must be paid and received regularly.
3. Foster care payments.
4. Relocation payments made pursuant to Title I I of the Federal Uniform Relocation and Real
Property Assistance Policies Act of 1970.
5. Payments under the G.I. Bill.
6. $300 for each dependent child.
E. Use: A rehabilitation loan shall be used to correct code violations and to make general
improvements to the dwelling unit as defined in the Housing Rehabilitation Standards and Section
5 of this policy.
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CITY OF REDDING REHABILITATION LOAN POLICY Page 6
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. Mortgage insurance premium.
3. Service charges.
4. Hazard insurance.
5. Real estate taxes and special assessments.
6. Maintenance and repairs.
7. 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.
H. Equity: At the time the loan is approved, the property may be encurnbered not more than a
maximum of 90 percent of its established value including any value added by the rehabilitation
. . loan. , . - .
� I. Assets: In order to qualify for a rehabilitation loan,the applicant mustbe unable to accomplish
rehabilitation through conventional financing or use of his or her own assets as determined by the
` - Housing Loan Comrnittee" • � �
J. Assurance of Completion: In some cases,the rehabilitation costs may exceed the amount of
a rehabilitation loan. In such instances a rehabilitation loan will not be made unless the applicant
can provide whatever additional amount is needed to assure completion of the work so that the
property will at least meet minimum city codes on the portions which are to be rehabilitated. If the
owner is to provide funds in addition to the rehabilitation loan amount to complete the total
rehabilitation,satisfactory evidence of such funds must be presented to the City of Redding before
the loan can be approved.
K. Water and Sewer Connection: In those cases where water and sewer services are available,
the structure must be connected to those services or a part of the proceeds of the loan must be
used to connect to these services.
� ' � � �� 't� •�.� �°•�, � ��:�� � �;
L�: Administrat�ve�Authority o�f�Hou�s�ing=Manager The Housinq�Manaqer sFiall be charged with
approvinq or,disapprovinq fundinq requests at;or below$10;000 throuq�h the Emerqency Fi�epair
Proqr�arn(�ER�)��the H��ME Rental Proqram(HRP);�a��Homeowner Loan Prograrn which�are�in'
��� � ...,,_ � ,.;. r , � ��.� ����- . ..,. .
compliance with;all applicable criteria listed in this'document.
SECTION 4 - DESCRIPT/ON OF LOAN PROGRAMS
All loans made pursuant to any of the programs described in this section 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. When a loan is made for which a mobile home is security,the security instrument,and any
required supporting documents, must be filed and recorded with the appropriate state agencies.
i i
CITY OF REDDING REHABILITATION LOAN POLICY Page 7
A. Amortized Loans:
1. Purpose. The purpose of an Amortized Rehabilitation Loan is to pay the costs of
rehabilitation in those cases where the applicant's income is adequate to meet the increased
monthly housing expense of a rehabilitation loan payment.
2. Eligibility. In order to qualify for an Amortized Rehabilitation Loan,the applicant must meet
all general eligibility requirements.
3. Ability to Repay. The applicanYs debt payments should not exceed 40 percent of the
applicant's gross income.
4. Amount. The amount of an Amortized Rehabilitation Loan shall not exceed the lesser of:
a. The actual (and approved) cost of repairs and improvements.
b. Those amounts detailed under Section 221(d)(3)of the National Housing Act as follows.
Amounts are based on bedroom size:
Studios $31,624 -
1-Bedroom $36,250
2-Bedroom $44,081 - ..
3-6edroom $57,025
' 4=Bedroom +$62;596 -
� c: Projects requiring substantial rehabilitation(including reconstruction)through the HOME � .
Investment Partnerships Program may not ezceed those arnounts detailed under : , .
Section 221(d)(3) of the National Housing Act.
d. These limits also apply to the Partially-Deferred Payment Loans and Deferred Payment
Loans for Elderfy and/or Disabled.
5. Repayment:
a. Homeowner: A rehabilitation loan shall be repaid. The borrower shall not be required
to make monthly loan payments,however,if housing expenses,including rehabilitation
loan payments, are in excess of 30 percent of family income.
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 first occurs.
b. Investor/Owner: A rehabilitation loan shall become due and payable at the end of the
loan term orwhen the HOME Rental Program(HRP)Contract is terminated. The loan
may be assumed provided that the applicable contract remains in effect.
6. Terms and Conditions:
a. Homeowner: A rehabilitation loan shall be amortized for not more than 15 years and
shall bear interest at five percent (5%) simple interest.
b. Investor/Owner- HOME Rental Program (underthe HOME Investment Partnerships
Program): A rehabilitation loan shall be amortized for not more than 20 years and shall
bear interest at a maximum of five percent(5%) and a minimum of zero percent(0%)
r i
CITY OF REDDING REHABILITATION LOAN POLICY Page 8
interest. The interest rate is determined by needs of project and/orterm of affordability
of units.
c. A rehabilitation loan sha�l be secured by a note and a deed of trust recorded against the
property.
d. There shall be a title insurance policy on the property issued to the City for the full
amount of the loan at the time of loan closing.
e. The borrower shall maintain current payments on property taxes and fire insurance. The
minimum amount of fire insurance must cover all trust deeds on the property. The City
shall monitor annual verification of paid taxes and effective fire insurance.
f. Installments shall be paid monthly.
g. The loan may be repaid in whole or in part at any time without penalty.
B. Amortized HOME Rental Program (HRP) Owner.-Investor Loans: ,
1. Purpose. The purpose of a Home Rental Program (HRP) Loan, a portion of the HOME
Investment Partnerships Program,is to assist the participating owner-investorwith financing _
on the acquisition or rehabilitation of rental property for.low-income tenants. � .
2. Eligibility. In order to qualify for an HRP Program 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 dernonstrate the ability and financial capacity to secure; .
manage,and maintain the property upon completion of the>rehabilitation: A minimum of ten :
percent (10%) in cash of the cost of rehabilitation-work must also be provided by the ..
borrower.
3. Ability to Repay. The applicant must demonstrate the property's ability to generate and
maintain a positive cash flow. Evidence of a good credit rating by the applicant is also
required.
4. Amount. The maximum amount for HOME-assisted units, as per HOME Program
Regulations, Section 221(d)(3) is as follows:
Studios $53,454
1-Bedroom $61,274
2-Bedroom $74,509
3-Bedroom $96,386
4-Bedroom + $105,806
5. Loan-to-Value Ratio:
a. The loan-to-value ratio of a rental project having less than 12 units shall not exceed 90
percent of the post-rehabilitation value.
b. The loan-to-value ratio for rental projects having more than 12 units cannot exceed 80
percent of the post-rehabilitation value.
6. Repayment. Loans shall be repaid in one of three repayment plans depending upon the
needs of the project. The three repayment plans are:
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CITY OF REDDING REHABILITATION LOAN POLICY Page 9
a. Principal and interest that are fully amortized;
b. Partial amortization of principal and interest or interest-only payments;
c. Principal and interest payments that are fully deferred in two-to five-year increments on
a case-by-case basis.
7. Terms and Conditions:
a. The maximum interest rate shall be five percent(5%) interest;the minimum rate shall
be zero percent(0%). (Interest rates are determined bythe needs of the project and/or
term of affordability of the units.)
b. The term of the loan shall be no more than twenty (20) years.
c. The loan shall be secured by a note and a deed of trust on the property.
d. There shall be a title insurance policy on the property issued to the City for the full
amount of the loan at the time of loan closing.
e. The borrower shall maintain current payments on property taxes and fire insurance. The ;
minimum amount of fire insurance must cover all trust deeds on the property.
f. The borrower shall meet all HOME program conditions;including, but not limited to
. � affordability and occupancy, �
f
�:;. � , :. � � .; ����,.,�.
8. P.ublic Ass�stance and Public Benefit:The HLC is autharized to�approve project fundinq � � , �..
request5 which include qreater pubhc assistancein exchanqe�for an increasetl�pubhc benefit� • . � ,�
�� ,. ��. ��, �, ��- �,.. � . : �;:- � �, �: � •
Increased pablic assistance may�include(1)a v�iaiver of�the owner's:prolect��cash contribution` � �
n� �, � ��
n exchanqe for the existence of appr`op"riate�owner equity in the property,h(2)extensian of
the loan�term �p to+f�o��y�ears (3)def,�erral of�paym�ts up��o�fiftee�n years��An increased
public benefit�,may include (1)g qreater affordabilitygapenods than tlian those mimmums
specifie�d in HOME proqram requlations��`(2) lower rent levels for H�����ME-eliqible uni�s than
those minimums�specified in HOME�pro�qram�requlations and(3)increase�d�quality and/or
�, ������ �., � ���° .� .� � , ..� �� ,����. �,.
aproposal whieh complements other City"prior:ities. A#inancial analysis for each prospectiue'
� �� � x , �.�
pro�ectsshall be required to demonstrate the need for qreater public assistance Specific
written�fintlinqs sh�`all;be mcorporated;into the�casefile to�document both�the�subsidy�and
� �_ ,�, , ; �k � �b �� �����`��. ��,y�r%
benefit(s) of the propo�sed pro�ect���. The purpose of.this p�oli.,cyy�is to�offer:the�HLC qreater
flexibility and�r�sponsi�eness to unique housing opportunitiesFthat become ayailablexwitliin;
the Reci�ding�comm"unity: .
C. Partially-Deferred Payment Loans:
1. 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 30 percent
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
90 percent of such loan.
2. 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.
3. Repayment. A Partially-Deferred Payment loan shall be repaid. The entire loan shall
CITY OF REDDING REHABI�ATION LOAN POLICY � Pa e 10
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).
4. 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.
5. Terms and Conditions:
a. Both the amortized portion and the deferred portion of a Partialiy-Deferred Payment
Loan shall become due and payable under the conditions set forth under Repayment
above (Paragraph C in this section).
b. A Partially-Deferred Payment Loan shall be secured by a note and a deed of trust on the
property. ,
c. There shall be a title insurance policy on the property issued to the City for the full
amount of the loan at the time of loan closing.
d. The borrower shaii maintain current payments on property taxes and fire insurance. The
minimum amount of fire insurance must cover all trust deeds on the property. The City
- shall obtain annual verification of paid taxes and effective fire insurance. �
e. The loan shall bear interest at a minimum of three percent (3%) simple interest. „
D. Fully-Deferred Payment Loans For Elderly and/or Disabled: • '
- -1: Purpose. The purpose of a Deferred Payment Rehabilitation Loan for;the Elderly and/or �
' Disabled is to pay the costs of rehabilitation without increasing current;montlily housing � .
expenses of those families on fixed incomes, particularly the elderly and disabled.
2. Eligibility. To qualify for a Deferred Payment Loan for the Elderly and/or Disabled, the
applicant must meet all of the general eligibility requirements, except his or her monthly
housing expense need not exceed 30 percent of gross income,and the applicant must meet
one of the following requirements:
a. Be at least 60 years of age.
b. Be disabled according to the criteria established by the Social Security Administration.
3. Amount. The amount of a Deferred Payment Loan shall not exceed:
a. The actual (and approved) cost of all necessary repairs, eligible improvements, and
allowable loan costs.
b. Those maximum amounts detailed under Section 221(d)(3)of the National Housing Act.
4. Repayment. The 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).
5. Terms and Conditions:
a. The entire amount of a Deferred Payment Loan for the Elderly and/or Disabled shall be
secured by a note and a deed of trust on the property.
CITY OF REDDING REHABI•ATION LOAN POLICY • Pa e 11
b. There shall be a title insurance policy on the property issued to the City for the full
amount of the loan at the time of loan closing.
c. The borrower shall maintain current payments on property taxes and fire insurance. The
minimum amount of fire insurance must cover ali trust deeds on the property. The City
shall monitor annual verification of paid taxes and effective fire insurance.
d. This loan shall bear interest at a minimum of three percent (3%) simple interest.
e. Interest-only payments may be required on specific loans,as determined by the Housing
Loan Committee.
E. Water and Sewer Loans:
1. Purpose. The purpose of a Water and Sewer Loan is to pay the water and sewer hook-up,
whether or not the applicant is applying for a rehabilitation loan.
2. Eligibility. In order to qualify for a Water and Sewer Loan, the applicant must meet all
general eligibility requirements.
3. Amount. The amount of a Water and Sewer Loan shall not exceed the actual (and'
approved) cost of installation. - ,
4. Terms and Conditions: . �
a. Repayment. The term of repayment of the Water and Sewer Loan:shall be: .
t �(1) A rimaximum loan term not to exceed 15 years for those applicants.meeting the
� eligibility requirements for Amortized Loans defined in Section 4A of this policy: "
Installments shall be due monthly and shall bear interest at a minimum of five
percent (5%) simple interest per annum; 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 beara minimum interest rate of three percent(3%)simple interest perannum.
(3) The 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).
b. A Water and Sewer Loan shall be secured by a note and a deed of trust on the property
in the amount of the loan.
c. The loan may be prepaid in whole or in part at any time without prepayment penalty.
Because of the minimal amount of the loan for water and sewer connection, it may not be
necessary to secure structural pest control reports, appraisals, a title search and title
insurance, or evidence of insurance. It shall be required that staff document the owner's
equity in the property and verify mortgage balances on the property.
F. Deferred Payment Rehabilitation Loans for Non-Profit Corporations:
1. Purpose. The purpose of a Rehabilitation Loan to a Non-Profit Corporation is to assist with
CITY OF REDDING REHABILITATION LOAN POLICY � Pa e 12
the cost of the rehabilitation of residential units to be occupied at an affordabie rate by lower-
income households on a transitional or permanent basis.
2. Eligibility. In order to qualify for a Rehabilitation Loan, the applicant must be a non-profit
corporation which owns or is buying residentiai 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 underthis program
must meet HUD lower-income requirements, as stated in Section 3C1 of this policy.
The rents charged plus any required utility payments must not exceed 30 percent of the
gross monthly income of the resident household .
3. 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, whichever is less.
The current maximum amounts for rental units are as follows:
Studios $53,454
1-Bedroom $61,274
2-Bedroom $74,509
3-Bedroom $96,386
4-Bedroom + $105,806 .
, The maximum number of assisted units per project will be determined according to,pcoject :
need and availability of funds.
,.
' 4. Loan-fo-Value Ratio: ' . ', `
a: The loan-to-value ratio of a rental project having less than 12 units shall not exceed 90
percent of the post-rehab value.
b. The loan-to-value ratio of a rental project having more than 12 units shall not exceed
80 percent of the post-rehab value.
5. Terms and Conditions:
a. The full amount of a Rehabilitation Loan under this section shall be evidenced by a
promissory note and secured by a deed of trust describing the property and recorded
with the Shasta County Recorder.
b. The loan shall be for a term not to exceed fifteen (15)years and shall bear interest at
the rate of a minimum of three percent(3%) interest per year, and a maximum of five
percent(5%) interest per year. The interest rate shall be determined by the needs of
the project and/or term of affordability of the units.
Repayment of the loan by the non-profit agency shall be based upon a revenue analysis
(including a cash flow analysis)prepared by a certified public accountant 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:
(1) Principal and interest payments deferred;
(2) Annual payment of accrued interest required;
CITY OF REDDING REHABI•ATION LOAN POLICY • Pa e 13
(3) Remaining loan balance plus accrued interest,if any,to be amortized, with monthly
payments of principal plus interest required;
(4) Payment of residual receipts or surplus cash remaining after payment of all
reasonable expenses necessary to operate and maintain the project in habitabie
condition, including debt service, taxes, fire insurance, and reasonabie reserves.
c. The entire amount of the loan may be repaid early without penalty.
d. 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.
e. There shall be a title insurance policy on the property issued to the City for the full
amount of the loan at the time of loan closing.
f. The borrower shall maintain current payments on all liens, property taxes, and fire
insurance on the property. The minimum amount of fire insurance must cover all trust
deeds on the property. The borrower shall provide annual verification of paid taxes and
fire insurance coverage.
g. 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 principal balances on all trust deeds
superior to the City loan,to cover the full amount of the�City loan with 10 percent equity
unencumbered.
SECT/ON 5- EL1GlBLE 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.
Rehabilitation activities for those units to be leased under the Section 8 Moderate Rehabilitation
Program shall be in accordance with Property Rehabilitation Standards subject to limitations of
the Section 8 Moderate Rehabilitation Program Regulations and Section 6 of this policy. It shall
correct hazards to health and safety,halt deterioration of the structure,and correct incipient code
violations. After rehabilitation,the property shall,as a minimum,be a safe and habitable dwelling.
B. Limited Assistance. In special cases where it is not feasible to perform afl 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 more repairs than necessary to meet HQS 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. Forall 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
CITY OF REDDING REHABILITATION LOAN POLICY • Pa e 14
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
improvements to properties. After the property has been rehabilitated to conform with the Property
Rehabilitation Standards,additional loan money not to exceed 40 percent of the total loan may be
used for the following General Property Improvements:
1. Facilities for the handicapped as necessary. These include ramps, railings, supports,
locksets and doors,and larger door openings as appropriate for the safety and convenience
of such persons.
2. Drain tiling to public streets, alleys, or storm sewers.
3. Landscaping of a similar quality and quantity to the rest of the neighborhood, in order to
improve visual quality.
4. A room addition built,altered,or improved in special cases where the absence of such poses
a serious hardship for the family. _ � . ,
5. Minor: remodeling in order to make a dwelling more functionaf or attractive. • .
6. An adequate cooling system for each dwelling to an extent deemed appr,opriate by the City.
7. Insect screens for windows and screen doors. ::., - �
8. The repair/replacement or new installation of free-standing stove appliances, garbage
disposals, refrigerators,and dishwashers, provided compliance with HUD regulations are
met.
9. Window coverings, excluding drapes.
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. Appraisals.
2. Preliminary title reports.
3. Filing and recording fees.
4. Title insurance.
5. Hazard insurance.
6. Unpaid property taxes.
CITY OF REDDING REHABILITATION LOAN POLICY • Pa e 15
7. Structural pest control report.
8. Other fees as may be required.
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
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 when lending HOME program funds 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.
SECTION 6-INEL/GIBLE COSTS
The following costs are not eligible costs for a rehabilitation loan:
A. New construction, 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. , Acquisitio.n of land, excluding HOME Rental Program loans: . ,. .
D. Furchase, installation or repair of furnishings or trade fixtures: � ; ;� .
E. Small appliances.
F. Refinancing the existing debt on property on CDBG loans only.
SECTION 7- PROCESS/NG 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 staff Housing Loan Committee approval or denial.
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 turned down. The applicant
may correct or exhibit a valid explanation of these disqualifications and resubmit the application.
Upon resubmission, the application will be re-evaluated by the staff and the Housing Loan
Committee.
CITY OF REDDING REHABILITATION LOAN POLICY • Pa e 16
SECT/ON 8- COMPLET/NG 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. Prepare all documents necessary to close the loan.
B. Arrange for disbursal of loan money.
C. Determine method of rehabilitation(i.e.,self-help,owner-assigned,owner-contractor or open City
bid) and prepare contracts.
D. Oversee work in progress and provide regular inspections of work.
E. Upon completion,file Notice of Completion,make final payments to contractors and suppliers for
rehabilitation work.
F. After expiration of 35 days, make final payments to contractors and suppliers for rehabilitation
work.
G. Monitor payment procedures.
H: .� Upon repayment of loan amount,execute documents required to eancel the promissory note and
reconvey the deed of trust,and deliver them to the borrower(s)or appropriate agent for recording :: �
. � of the reconveyance.
$ECTION 9-GENERAL CONDIT/ONS - ' ' � �:
Civil Rights: Comply with all HUD requirements with respect to Title Vl 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.
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 will be approved.
Disbursement of Funds: Rehabilitation loan funds shall be disbursed in a manner defined by the
City.
Completion of Work: Assure that rehabilitation work will be carried out promptly and efficiently,
through written contract let with prior concurrence of the City.
Inspection: Inspection of the property,the rehabilitation work and all contract materials,equipment,
payrolls and conditions of employment pertaining to the work by the City or its agent.
Loan Security: The applicant must agree to provide security for a loan in the form of a deed of trust
and promissory note in favor of the City of Redding. A second deed of trust is acceptable if sufficient
equity exists above the principal balance on the first trust deed.
Maximum Term: The maximum terms for a rehabilitation loan shall be fifteen years. Loans may be
repaid in full at any time without penalty.
CITY OF REDDING REHABI•ATION LOAN POLICY � Pa e 17
Maximum Term - Rehabilitation Loans to Non-Profit Corporations: The maximum terms for
a rehabilitation loan to a non-profit agency shall be twenty years. Loans may be repaid in full at any
time without penalty.
Conflict of Interest: The general rule is that no person who is an employee, agent, consultant,
officer, or elected (or appointed) official who exercise or have exercised any functions or
responsibilities with respect to City Housing program activities,or who are 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.
Loan Subordinations: 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, plus reasonable costs related to the financing; if the equity position of the 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 home indicates that there is sufficient equity to pay off the City loan
when refinancing a superior loan,and if the borrower's subsequent housing 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 - ; .
'� ' cliange'in ci'rcumstances which necessitate certain financial acljustments': The Housing Loan ~:° ° a �
Committee may take appropriate action under these circumstances subject to protection of the City's
interest.
� ` SECTION 10- SPECIAL PROGRAMS
A. Loans to Eliminate Serious Health and Safety Hazards: The Housing Loan Committee may
approve loans in areas other than the designated neighborhood strategy areas in those cases
where it is determined that a serious health or safety hazard exists.
B. Relocation Grants and Advisory Services: Relocation grants and advisory services shall be
provided to individuals or families 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.
C. Emergency Deferred Loans: 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
loan program. Eligible costs under this program include loan processing fees and code items.
General property improvements are not eligible.
CITY OF REDDING REHABI•ATION LOAN POLICY � Pa e 18
SECTION 11 - ELIG/BLE AREAS
To be eligible for a City of Redding Housing Rehabilitation Loan,a project must be within Redding city
limits in areas that are zoned residential.
SECTION 12- DEFAULT, FORECLOSURE AND PROPERTY DISPOS/TION POL/CY
A. DEFAULT. If a borrower breaches or 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
breach or violation within a period of not less than 30 days from such notice. If the breach or
violation is not cured to the satisfaction of the department 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 Housing Loan Committee approval,as may be
available under the relevant program agreement and the law. Possible alternatives include .
. . the following:
� Short Sale. W hen 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 amountby
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 subjeet to any junior lierr. '
holder of record similarly discounting its promissory note.
Loan Assumption. This alternative offers an opportunity to place a program-eligible family
in a qualified propertyto 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 judgements exist. It must be
determined also if the first lender has a "due upon sale" clause in their Deed of Trust.
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 for 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 Housing Loan Committee
approval and in accordance with the laws governing such transactions.
CITY OF REDDING REHABILITATION LOAN POLICY • Pa e 19
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 if 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 City Attorney. 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 Housing .Loan Gommittee
, 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 a#fordable
housing_resource, or to transfer ownership to a local;: non-profit;housing:organization with
restrictions that would achieve an affordable housing objective. �
1. If staff and the Housing Loan Committee concur that it is not advisable to utilize the property
as an affordable housing resource, the following procedures shall be initiated to sell the
acquired property.
A notice indicating the City's intent to sell the property shall be mailed to all non-profit
corporations on the Housing Division's mailing list. The notice shall include the terms and
conditions of the sale, including the rent restrictions,and shall indicate a date and place for
the submittal of sealed bids. Concurrently,a public notice shall be published indicating the
City's intent to sell the property. Terms and conditions may vary, dependent upon the
specific circumstances surrounding a particular property. All property shall be offered for
sale on an "as is" basis as permitted by state law. Staff may accept an offer to purchase,
subject to approval of the Housing Loan Committee,or it may reject all bids if deemed in the
best interest of the City to do so.
2. In the event no bid or no acceptable bid is received after a public notice has been published
for fourteen (14) days, staff shall list the property for sale with a licensed, residential real
estate broker in the immediate vicinity of the property. The listing shall require the broker to
list the property with the multiple listing service.
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. Staff's decision to bid or not to bid shall be based upon the
CITY OF REDDING REHABILITATION LOAN POLICY � Pa e 20
feasibility of recouping the City's loss through acquisition and resale of the mobile home and
upon 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.
SECT/ON 13 - CONTRACTOR PERFORMANCE STANDARDS
A. 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 Housing Rehabilitation
Specialist; . ..
5. Documented poor working relationship with a single horneowner or a pattern with multiple
� owners, as determined by the Housing Rehabilitation.Speeialist; -
6. Fail'ure,to respond to an invitation to bid on at.least one owner7occupied project within a one-
. year period; � � . .
7. Documented poor working relationship with any one of the Housing Rehabilitation
Specialists, as determined by the Housing Division Manager; �
8. Failure to pay application or renewal fees which may be required by the City;
9. Lapse of insurance and/or contractor's license;
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 Housing Rehabilitation Specialist becomes aware of projects or circumstances with
a homeowner,contractor and/or the work itself which fit the criteria for corrective action,the
Housing Rehabilitation 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 Housing Rehabilitation Specialist, a
recommendation for formal corrective action shall be proposed to the Housing Manager.
CITY OF REDDING REHABILITATION LOAN POLICY � Pa e 21
2. The Housing Manager shall meet with the contractor and the Housing Rehabilitation
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 Development Services Directorwithin fifteen(15)
days receipt of the action.The Development Services Director shall investigate the appeal
and render a decision in writing within thirty (30) days from receipt. The decision of the
Development Services Director 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 riot approved by the City Housing Division, the contractor has the right to appeal the
action. Any appeal must be forwarded to the Development Services Director within fifteen
(15) days receipt of the action. The Development Services Director shall investigate the e.
appeal and render a decision in writing within thirty(30)days from receipt.The decision of .
the Development Services Director shall be final: . -
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