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HomeMy WebLinkAboutReso 91-218 - Approve Amendment to the Rehab Loan Policy adopted by City Council Reso 75-86 RESOLUTION NO. 91-218 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING APPROVING AN AMENDMENT TO THE REHABILITATION LOAN POLICY ADOPTED BY CITY COUNCIL RESOLUTION NO. 75-86. WHEREAS. the City of Redding has adopted a Rehabilitation Loan Policy by City Council Resolution No. 75-86 and amended it by Resolution Nos. 76-36, 77-135, 77-189, 78-223, 78-235, 78-240, 79-46, 79-106, 79-115, 79-243, 80- 96, 80-240, 83-52, 84-79, 84-233, 85-32, 86-134, 88-19, 89-272, 90-251; 90-292; 91-177; and WHEREAS, the City Council deems it to be in the best interest of the citizens of the City of Redding that the Rehabilitation Loan Policy be further amended as set forth in Exhibit "A" 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 the amendments to the Rehabilitation Loan Policy attached hereto as Exhibit "A" 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 21st day of May 1991, and was duly adopted at said meeting by the following vote: AYES: COUNCIL MEMBERS: Arness, Fulton, I-loss and Buffum NOES: COUNCIL MEMBERS: None ABSENT: COUNCIL MEMBERS: Dahl ABSTAIN: COUNCIL MEMBERS: None I AXCY/'WVFUM, yor Cly o edding ATTEST: ETHEL A. NICHOLS, City Clerk FORM APPROVED: RA DALL A. HA S City Attorney DM/RLP2.AMN I EXHIBIT "A" SECTION 1 - INTRODUCTION The City of Redding has been allocated funds to develop and implement a Dommun- ity Development Program pursuant to the Housing and Community Development Act of 1974. The number one priority set by the Citizens Committee was the estab- lishment of a home rehabilitation program. The following program has been designed to provide: (1) low-interest loans to low- and moderate-income homeowners; (2) loans to investor-owners who agree to participate in the Rental Rehabilitation Program; and (3) loans to non-profit corporations for transitional or permanent housing facilities. Loans of up to $32,000 for homeowners, $8,500 to investor/owners participating in the Rental Rehab Program, and $10,000 per unit to non-profit corporations are available to i correct housing deficiencies. The program will promote housing opportunities for low- and moderate-income families by means of loans which will be provided to homeowners who would not otherwise be eligible for conventional home repair loans. Special consideration will be given to families on fixed incomes, particularly the elderly and disabled. The program will offer four types of loans: A. Amortized Loan: A low-interest loan amortized monthly over a period not to exceed 10 years for homeowners; and a Market rate loan amortized monthly over a period not to exceed 10 years for Investor-Owners partici- pating in the Rental Rehab Program. B. Construction Loan: A loan having a term that is the lesser of the actual term of rehabilitation plus 60 days or 1 year for investor/owners partici- pating in the Rental Rehabilitation Program. C. Partial Deferred Payment Loan: Loans which are amortized in an amount not to exceed 25% of family income, and deferred for the balance of the amount necessary to rehabilitate the property, but in no event shall the borrower be permitted to defer more than 90% of the total loan. D. Deferred Payment Loan for Elderly and/or Disabled: A low-interest loan requiring no monthly payments. These loans will be repaid only when property title is transferred. E. Deferred Payment Loan - Non-Profit Corporations: lA low-interest loan carrying a term not-to-exceed 20 years and repaid according to the following schedule: i ' 1. Year 0 - 5, interest and principal deferred; 2. Year 6 - 10, annual payment of accrued interest required; and 3. Year 11 - 20, remaining balance and any accrued interest amortized for 10 years. Monthly payments of principal and interest required. As loans are repaid, the money will be returned to the loan account, creating a revolving pool of money available for future applicants. With judicious qual- ifying of applicants and careful monitoring of outstanding loans, the original fund will be replenished continually and more families will benefit from the original account. i It is hoped this program will be a useful tool in helping to maintain and up- grade the housing stock within the City of Redding, particularly in helping to stabilize and enhance other neighborhoods. It is also hoped the program will be liberal enough in scope and terms to help families and individuals of low income, yet conservative enough to insure the security of the investment and be acceptable to a broad cross-section of the community. I - 1 - 0 0 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. OWNER OCCUPANT shall mean an individual or family who occupies and owns or is buying a unit of residential property. REHABILITATION COST shall mean the total cost of repairs and improvements and other costs for rehabilitation to be incurred by the applicant that are includ- able 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 II, SECTION 8 shall mean that portion of the Housing and Community Development Act of 1974 which states that housing assistance payments may be made for new and substantially rehabilitated housing. In this policy handbook, Section 8 Income Guidelines are used. TRANSITIONAL HOUSING FACILITY shall mean residential units which are occupied for a specified length of time under a written contract while independent living skills are learned. UTILITIES shall mean gas, electricity, water, sewage disposal and refuse collection. VERY LOW INCOME shall mean those incomes which do not exceed 50 percent of the median income as established by the Department of Housing and Urban Develop- ment. I 1 - 5 - I SECTION 3 - GENERAL ELIGIBILITY REQUIREMENTS A. Location. Rehabilitation loans will be made only in neighborhoods desig- nated by the City Council, to correct code violations and to make general improvements in the dwelling unit as defined in the Housing Rehabilitation Standards. B. Owner Occupant/Investor Owner. 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. J 2. Investor Owner. 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 identi- fied in Items C & D do not apply to investor-owner applicants. Investor-owners are not eligible for Deferred Payment Loans or Water and Sewer loans. Investment properties shall have a positive cash flow. In addition to the above requirements, individual programs require the following: a. Moderate Rehab - the owner(s) of such unit(s) must agree to participate in the Section 8 Moderate Rehabilitation Program and abide by all contracts and program regulations. b. Rental Rehabilitation Program - the owner(s) of such unit(s) must agree to participate in the Rental Rehabilitation Program and abide by all contracts and program regulations. 3. Non-Profit Corporation. The applicant must be 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 who owns or is buying a residential unit/s for the purpose of establishing either a transitional housing facility or permanent housing to be occupied by lower-income households. Income eligibility guidelines as described in Section 3C&D do not apply to the non-profit corporation applicants. C. Income/Housing Expenses. The applicant must meet both of the following conditions: 1. Family adjusted gross income must be less than the following amounts:l 1 person $16,450 2 persons 18,800 3 persons 21,150 4 persons 23,500 5 persons 24,950 6 persons 26,450 7 persons 27,950 8 or more 29,400 NOTE: 1 - Income guidelines of Section 8, Title 2 of the Housing Act of 1974 as most recently published by the Department of Housing and Community Development. - 6 - i • • 1 . D. Water and Sewer Loans 1. Purpose. The purpose of a water and sewer loan is to pay the water and sewer hook-up in those cases whether or not the family 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: 1. A maximum loan term of 15 years for those applicants meeting the eligibility requirements for amortized loans defined in Section 4A. Installments shall be due monthly. or 2. A loan term that will be due and payable upon transfer of title to the property securing the loan for those applicants meeting the eligibility requirements for deferred payment loans defined in Section 4C. 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. In consideration of the minimal amount of the loan for water and sewer connection, it will not be necessary to secure termite inspection reports, appraisals, credit reports, a title search and title insurance, or evidence of insurance. It will be required that staff document owner equity in the property and verify mortgage balances on the property. E. Deferred Payment Loans - Non-Profit Corporations 1. Purpose. The purpose of a Deferred Payment Loan to a Non-Profit Corporation is to assist with the cost of the rehabilitation of residential units to be occupied at an affordable rate by lower- income households on a transitional or permanent basis. 2. Eligibility. In order to qualify for a Deferred Payment Loan, the applicant must be a non-profit corporation who owns or is buying residential units for the purpose of establishing a transitional housing facility or for renting as permanent residential units. All residents of the transitional housing facility units or permanent residential units assisted under this program must meet HUD lower- income requirements, as stated in Section 3C1 of this Policy. j The rents charged plus any required utility payments must not exceed i30% of the resident household gross monthly income. 3. Amount. The amount of a Deferred Payment Loan - Non-profits shall not exceed the lessor of: (1) the actual (and approved) cost of repairs and improvements; or (2) $10,000 per assisted unit. The maximum number of assisted units per project will be determined according to the following formula: I 13 - Projects of 1 - 6 units: 100% of the units Projects of 7 - 20 units: 50% of the units Projects of 21 + units: 25% of the units 4. Terms and Conditions. a. The full amount of Deferred Payment Loan under this section shall be secured by a note and a deed of trust recorded on the property. b. The loan shall be for a term not-to-exceed 20 years and shall bear interest at the rate of three (3) percent simple interest per year. Repayment of loans under this section shall be according to the following schedule: (1) Year 0 - 5, principal and interest payments are deferred; (2) Year 6 - 10, annual payment of accrued interest required; and (3) Year 11 - 20, remaining loan balance plus accrued interest, if any, will be amortized. Monthly payments of principal plus interest required. C. The entire amount of the loan may be repaid early without any penalties. d. The entire amount of a Deferred Payment 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 policy of title insurance issued to the City at the time of loan closing securing the City for the full amount of the loan. 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 Deferred Payment 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% equity unencumbered. I - 14 - SECTION 9 - GENERAL CONDITIONS Civil Rights. Comply with all HUD requirements with respect to Title VI of the Civil Rights Act of 1964, as amended, to not discriminate upon . . . "the basis of race, color, creed, sex or national origin in sale, lease, rental, use or occupancy of the subject property." Equal Employment Opportunity. Must comply with Executive Order 11246 and HUD equal opportunity requirements. 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 by the City or its designee of the property, the rehabilitation work and all contract, materials, equipment, payrolls and conditions of employment pertaining to the work. 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 any penalties. Maximum Term - Deferred Payment 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 any penalties. i 20 - SECTION 11 - ELIGIBLE AREAS A. The following areas is are eligible for City of Redding Housing Rehabilitation Loans: Homeowner & Non-Profit Corporations: Residential Zoned Areas within City Limits of the City of Redding. Investor/Owner - Rental Rehab: Residential Zoned Areas within Rental Rehab Boundary Area as adopted by the Redding City Council on November 5, 1984. - 23 -