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Home My WebLink AboutReso 96-083 - Approving revision of the Loan terms for the Home Rental Program through Amendment to the Rehab Loan Policy Adopted by City Council Reso 75-86 . � , • . • • RESOLUTION N0. Q�P -83 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING APPROVING REVISION OF THE LOAN TERMS FOR THE HOME RENTAL PROGRAM THROUGH AMENDMENT TO THE REHABILITATION LOAN POLICY ADOPTED BY CITY COUNCIL RESOLUTION NO. 75-86. WHEREAS, the City of Redding has previously adopted a Rehabilitation Loan Policy by City Council action; and WHEREAS, the City Council deems it to be in the best interest of the citizens of the City of Redding to revise the loan terms for the HOME Rental Program as set forth in Exhibit "A," the Rehabilitatron Loan 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 this amendment to the Rehabilitation Loan Policy attached hereto as Exhibit "A" is 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 7th day of Mav" 1996, and was duly adopted at said meeting by the following vote: AYES: COUNCIL MEMBERS: P• Anderson, R. Anderson, Kehoe, Murray and McGeorge NOES: COUNCIL MEMBERS: None ABSENT: COUNCIL MEMBERS: None ABSTAIN: COUNCIL MEMBERS: None G . DAVID L. OR ayor City of edding ATTEST: CONNIE STROHMAYER, City er FORM APPROVED: _ �� :-L/ �'fz r�C � �f W. LEONARD WINGATE, it Attorney a:reso96.hrp v\ �� "U . . ' • • / CITY OF REDDING REHABILITATION POLICY Page 1 SECT/ON � - /NTRODUCT/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 (HRPI; and, (31 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 anr3 20 years for lancilo�ds. 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 balance 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. . ..... ... - .. . ... .... ... .. .. . _ �� .� � �� . . � • CITY OF REDDING REHABILITATION POLICY Page 8 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 or when 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 (under the 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 #�ee zero percent {3�} ;(0%)' simple interest. The interest rate is determined by needs of project and/or term of affordability of units. c. A rehabilitation loan shall 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 obtain 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-investor with financing on the acquisition or rehabilitation of rental property for low-income tenants. : . s • ' CITY OF REDDING REHABILITATION POLICY Page 9 � 2. E/igibi/ity. 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 demonstrate 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. Abi/ity 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 are as follows: Studios 531,624 1-Bedroom 536,250 2-Bedroom $44,081 3-Bedroom $57,025 4-Bedroom + 562,596 5. Loan-to-Value Ratio: a. The loan-to-value ratio of a project having less than 12 units shall not exceed 90 percent. b. The loan-to-value ratio for projects having more than 12 units cannot exceed 80 percent of the completed 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: 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%) simple interest; the minimum rate shall be �ee zero percent {3�} (0%). (Interest rates are determined by the needs of the project and/or term of affordability of the units.) b. The term of the loan shall be no more than #1#�eeFr twenty {�5} (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 foan closing. e. The borrower shall maintain current payments on property taxes and fire