HomeMy WebLinkAboutReso 2004-065 - Housing Loan Policy
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RESOLUTION NO. 2004-65
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
AUTHORIZING IMPLEMENTATION OF AMENDMENTS TO THE HOUSING
LOAN POLICY
WHEREAS, the City of Redding has previously adopted a Housing 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 that the aforementioned policy be further amended as set forth in the revised Housing Rehabilitation
Loan Policy on file in the City Clerk's Office; and
WHEREAS, it has been determined that this matter is categorically exempt from the provisions of
California Environmental Quality Act (CEQA).
NOW, THEREFORE, BE IT RESOLVED that these amendments to the aforementioned policies
attached hereto are hereby approved and adopted.
I HEREBY CERTIFY that the foregoing resolution was introduced and read at a regular meeting
of the City Council of the City of Redding on the 4th day of May 2004, and was duly adopted at said meeting
by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
COUNCIL MEMBERS: Cibula, Kight, Mathena, Stegall and Pohlmeyer
COUNCIL MEMBERS: None
COUNCIL MEMBERS: None
COUNCIL MEMBERS: None
, Mayor
ATTEST:
"
LL.uJ~0
CONNIE STROHMA YE ~y Clerk
APPROVED AS TO FORM:
~ J, ;:(Lt~
BRAD L. FULLER, City Attorney
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'C1rl a:ERK
CITY OF REDDING
HOUSING REHABILITATION LOAN POLICY
Prepared by
Office of the City Manager
Housing Division
Adopted by Resolution No. 75-86
Effective September 2, 1975
Amended October 16, 2001
Amended July 2,2002
Amended May 4. 2004
SECTION 1 -
SECTION 2 -
SECTION 3 -
SECTION 4 -
SECTION 5 -
SECTION 6 -
SECTION 7 -
SECTION 8 -
SECTION 9 -
SECTION 10 -
SECTION 11 -
SECTION 12 -
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CITY OF REDDING HOUSING REHABILITATION LOAN POLICY
TABLE OF CONTENTS
Page
INTRODUCTION ................................................. 1
DEFINITION OF TERMS ........................................... 2
GENERAL ELIGIBILITY REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
A. Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
B. Eligible Uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
C. Equity ....................................................... 7
D. Assurance of Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
E. Eligible Borrowers ............................................. 7
OWNER-OCCUPANT (HOMEOWNER) . . . . . . . . . . . . . . . . . . . . . . . . . 7
Determination of Adjusted Gross Income. . . . . . . . . . . . . . . . . . . . . 7
Income, Housing Expense, and Long-Term Debt. . . . . . . . . . . . . . . 8
Housing Expense Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Homeowner Credit . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 9
Homeowner Assets ...................................... 9
OWNER-INVESTOR ........................................ 9
Positive Cash Flow ...................................... 9
Credit ................................................. 9
Monitoring Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
DESCRIPTION OF HOMEOWNER LOANS .... . . . . . . . . . . . . . . . . . . . . . . . . 9
A. Amortized Homeowner Loans .................................... 9
B. Partially Deferred-Payment Loans for Homeowners . . . . . . . . . . . . . . . . . . 10
C. Deferred-Payment Loans for Elderly and/or Disabled Homeowners ..... 11
D. Emergency Deferred Loans for Homeowners . . . . . . . . . . . . . . . . . . . . .. 12
E. Water and Sewer Loans for Homeowners. . . . . . . . . . . . . . . . . . . . . . . . . . 12
DESCRIPTION OF AMORTIZED OWNER-INVESTOR LOANS ..........13
A. HOME Rental Program (HRP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. Deferred-Payment Rehabilitation Loans for Non-Profit Corporations. . . . . 14
ELIGIBLE COSTS ............................................... 16
A. Code and Rehabilitation Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
B. Limited Assistance ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
C. Cost-Effective Energy Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
D. Historic Preservation Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
E. Rehabilitation Objectives ....................................... 16
F. Building Permits and Related Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
G. Certain Related Costs ......................................... 17
H. Refinancing.................................................. 18
I. New Construction In Lieu of Rehabilitation ......................... 18
J. Lead-Based Paint Abatement ................................... 18
INELIGIBLE COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PROCESSING A LOAN " . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
COMPLETING A HOME REHABILITATION..... ........ .. . .. ......... 19
LOAN SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
GENERAL CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
RELOCATION ASSISTANCE AND ADVISORY SERVICES ............. 22
SECTION 13 - DEFAULT, FORECLOSURE AND PROPERTY DISPOSITION POLICY.. 22
SECTION 14 - CONTRACTOR PERFORMANCE STANDARDS... .. ..... ....... ...24
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SECTION 1 -INTRODUCTION
Under the Housing and Community Development Act of 1974, the City of Redding was allocated funds
to develop and implement a community development program. In 1975, the number one priority set
by the Citizens Committee of the Community Development Advisory Committee was the establishment
of a housing rehabilitation program. That priority remains the cornerstone of the City's affordable
housing efforts, particularly as it relates to neighborhood revitalization. As a mission statement, the
Housing Division's efforts are meant to provide decent, safe, and affordable housing and a suitable
living environment while also addressing:
. Fair housing
. Assistance for lower-income families
. Neighborhood renewal
. Individual and community empowerment
. Homelessness
. Economic opportunities and job creation
. Citizen encouragement and public trust
Primary funding for housing and community development activities comes from the Federal
Department of Housing and Urban Development (HUD). As an entitlement community under the
Community Development Block Grant and Home Investment Partnerships Programs, Redding is
charged with developing its own programs and funding priorities, with an emphasis on activities which
benefit low- and moderate-income persons. It is HUD's focus to provide resources to local
communities in order to facilitate housing and economic opportunities for individuals who may be
unable to obtain favorable assistance through conventional means, Additional funding is provided by
the Redding Redevelopment Agency's Housing Set-Aside Fund.
The City has several housin'g programs which assist low- and moderate-income homeowners, owner-
investors of rental property, low-income tenants, and non-profit corporations that provide transitional
or permanent housing facilities. The programs are summarized below:
Homeowner Rehabilitation Loan Program: Low-interest, fully amortized or deferred-payment,
secured loans are provided to eligible low- and moderate-income homeowners to upgrade residential
property. Repairs may include roofing, pest control work, plumbing, electrical, flooring, painting, and
some types of general property improvements. Energy conservation work, like weatherstripping and
insulation, is also encouraged.
HOME Rental Program (HRP): This program offers long-term, low-interest, secured loans to non profit
agencies and owner-investors of rental properties to upgrade units occupied by low-income tenants.
The purpose of the program is to increase and preserve the supply of decent, safe, and affordable
rental housing while revitalizing neighborhoods within the community.
Emergency Repair Program (ERP): This program offers unsecured loans up to $2,500 for' eligible
low-income homeowners to eliminate critical health and safety problems. Assistance is also available
to owner-investors of rental properties to complete handicapped accessibility improvements for
disabled tenants. The purpose of this program is to furnish home repair assistance when provision of
a homeowner rehabilitation loan is not feasible. (Note: this program is more fully described in a
separate document).
Senior Minor Repair Grant Program: The purpose of this program is to help senior citizens to
address small but important home repairs at no cost to them. It links qualified tradesmen with needy
homeowners to correct minor health and safety problems, such as cracked sidewalks, broken windows,
leaky plumbing fixtures, and electrical hazards.
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Water and Sewer Loans: This program is available to those low-income homeowners who are
primarily interested in paying for water and/or sewer hook-up to their property, whether or not the
applicant is applying for a rehabilitation loan. Streamlined loan processing is offered to accommodate
these small loans.
Acquisition/Rehabilitation Loan Program: The Redding Redevelopment Agency provides long-term,
low-interest loans to owner-investors for the acquisition and/or rehabilitation of rental properties
occupied by low-income tenants. Loan amounts may not exceed forty-nine percent (49%) of the total
project cost and must assure rent affordability for the remaining term of the specific project area.
(Note: This program is more fully described in a separate document.)
The housing programs offer several repayment methods based on the applicant's ability to payor
proposed project cash flow. The loans may be amortized, deferred-payment, interest-only payment,
partially-deferred, residual receipts, or short-term construction loans.
As loans are repaid, the money is returned to a revolving fund available for future applicants. Using
judicious underwriting and carefully monitoring outstanding loans, the fund is continually replenished
and additional families benefit from the original account. It is anticipated these programs will remain
a useful tool in helping to maintain and upgrade the housing stock within the City of Redding, and will
help stabilize and enhance various neighborhoods in particular. It is the City's intent to promote
rehabilitation work that provides maximum economic life to the project whenever feasible. The
programs are designed to be liberal enough in scope and terms to help families and individuals of low
income, be consistent with HUD guidelines, yet conservative ~nough to ensure the security of taxpayer
dollars and uphold the public's trust.
This document offers guidance for staff to ensure that housing assistance is delivered in a fair and
uniform manner and to provide consistency in the daily operations of the program. Above all, the
programs endeavor to create and maintain a workable strategy for the promotion of decent, safe, and
affordable housing. Periodically, this Policy will be updated to address changes in local market
conditions and community priorities.
SECTION 2 - DEFINITION OF TERMS
The following definitions shall apply to this document unless another meaning is clearly apparent from
the context:
ADJUSTED GROSS ANNUAL INCOME shall mean gross income from all sources less allowable
exclusions.
AGENCY shall mean the Redding Redevelopment Agency.
AMORTIZED LOAN shall mean a loan retired on an installment basis.
APPLICANT shall mean the person, or business entity or non-profit entity requesting assistance
through any of the Housing Programs.
APPRAISAL shall mean an estimate or opinion of the real or market value of a property made by a
qualified person and/or the price the owner could reasonably expect to receive from the sale of the
property. Real estate may be appraised based on the current or highest and best use of the property.
The value may be based on cash or the specific terms of the financing.
APPRECIATION shall mean an increase in the value of the property.
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ASSETS shall mean the entire property of all sorts belonging to an applicant.
ASSUMPTION shall mean the transfer of a mortgage, deed of trust, promissory note, and/or
agreement from an original mortgagee to a subsequent mortgagee.
BALLOON PAYMENT shall mean the one-time payment in full of the unpaid portion of a loan, at a
specified time, which occurs before the full amortization of the loan.
BORROWER shall mean the recipient of loan assistance through any of the Housing Programs.
BUILDING PERMIT shall mean a document issued by the City's Building Department allowing
completion of specific types of construction work.
CASH. FLOW shall mean the Net Operating Income (income minus expenditures) minus the
Replacement Reserve for a rental property.
THE "CITY" shall mean the City of Redding, California, Office of the City Manager, Housing Division.
CITY COUNCIL shall mean the City Council of the City of Redding.
CODE VIOLATIONS shall mean infractions against the applicable codes contained in the Property
Rehabilitation Standards. This includes the Housing Code, City of Redding ordinances, and the
various uniform building codes adopted by the City.
COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) PROGRAM was created by Congress in
1974 to permit local government to devise flexible and constructive approaches to prevent and/or
correct physical, economic, and social deterioration. The program is directed toward neighborhood
revitalization, creation of housing opportunities, economic development, and the provision of improved
community facilities and services. At least seventy percent (70%) of all CDBG expenditures must be
used for activities that benefit low- and moderate-income persons.
CONSTRUCTION LOAN shall mean a loan which bears interest, has no monthly payment, and is
retired within 60 days following the end of the construction period or one year, whichever is less.
CREDIT shall mean financial or commercial trustworthiness, as indicated by the applicant's debt
repayment history.
DEBT SERVICE COVERAGE shall mean the ratio of cash flow to mortgage payments, including
principal and interest, for a rental property as determined by a pro forma worksheet.
DEED OF TRUST shall mean a legal document in which-title to property is transferred to a third party
trustee as security for an obligation owed by the trustor (borrower) to the beneficiary (lender).
DEFERRED PAYMENT LOAN shall mean a loan which is not retired on an installment basis.
DEPENDANT shall mean a member of the family (except foster children and foster adults) who is not
the family head or spouse, but. is under 18 years of age, or is a person with a disability, or is a full-time
student (as defined by the U.S. Department of Housing and Urban Development).
DISABLED shall mean incapacitated by illness or injury that substantially limits activity, according to
criteria established by the Social Security Administration or the U.S. Department of Housing and Urban
Development.
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DUE ON SALE CLAUSE shall mean an acceleration clause granting the lender the right to demand
full payment of the loan upon sale or transfer of the property.
EMERGENCY REPAIRS shall address those conditions which pose a serious and immediate health
and/or safety threat to the inhabitants of a dwelling. These conditions shall include either hazardous
wiring or plumbing, mechanical, structural, or sanitation problems as detailed in Chapter 10 of the
current Uniform Housing Code.
ESTABLISHED VALUE shall refer to either the appraised value of a property or the assessed value.
It may also include the value established by use of a recognized appraisal guide or, when applicable,
the written unofficial opinion of a professional appraiser or real estate broker.
EQUITY shall mean the value of a property in excess of claims or liens against it.
EXTREMELY-LOW INCOME shall mean an income that does not exceed thirty percent (30%) of the
area's median income as established by the U.S. Department of Housing and Urban Development.
FAMILY shall mean all individuals who reside in a dwelling unit who are related by blood, marriage, or
kinship.
GENERAL PLAN shall mean that approved document which designates the desired land use of all
parcels of land in the city.
GENERAL PROPERTY IMPROVEMENTS (GPI's) shall mean improvements other than code violations
and incipient code violations which are eligible for program assistance.
HOME INVESTMENT PARTNERSHIPS PROGRAM (HOME) was created by the 1990 Cranston-
Gonzalez National Affordable Housing Act and provides funds to participating jurisdictions to increase
the supply and affordability of housing and home ownership for low-income families. HOME (which .
is not an acronym) may support tenant-based rental subsidies, assistance to first-time homebuyers,
property acquisition, new construction, reconstruction, moderate or substantial rehabilitation, site
improvements, demolition, relocation, and other reasonable and necessary expenses related to the
development of affordable housing. Participating jurisdictions must furnish the prescribed local match
for housing activities funded by HOME.
HOUSEHOLD shall mean all individuals who reside in a dwelling unit regardless of family ties.
HOUSEHOLD INCOME shall mean adjusted gross income of all persons residing in a dwelling unit,
whether or not they are related by family ties.
HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1974 shall mean the Federal legislation which
Rrovides" funding for the current program of housing and community development in the City of
Redding.
HOUSING EXPENSES shall mean the total of principal and interest payments on all mortgages,
hazard insurance premium payments, mortgage insurance premium payments required by the lender,
property taxes, and special assessments.
HOUSING LOAN COMMITTEE (HLC) shall mean a committee consisting ofthree members ofthe City
of Redding staff derived from the following positions: the Assistant City Manager, the Deputy City
Manager or his designee, the City Attorney or his designee, the Development Services Director or his
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designee, and the Finance Officer or his designee. The Housing Loan Committee shall be charged
with approving or denying loan applications consistent with the policies of the City of Redding or the
Redding Redevelopment Agency.
HOUSING PROGRAM SUPERVISOR shall mean that person responsible for administering all of the
programs and activities within the scope of either the City of Redding's Housing Authority or the City
of Redding's Housing and Community Development Section.
INCIPIENT CODE VIOLATION shall mean a condition or element of a structure which is likely to
deteriorate into an actual violation within a year or two of inspection. The condition is usually a result
of a product, part or material nearing the end of its life cycle.
HOUSING EXPENSE RATIO shall mean the ratio of the total adjusted gross income of all household
members to housing exp~mses.
INSPECTION shall mean a visual survey of a property by a person qualified to perform the inspection.
INTEREST shall mean a charge for borrowed money that is repaid with the amount of the loan.
LAND CONTRACT shall mean a contract used in connection with the sale of property in cases where
the seller does not wish to convey title until all or a portion of the purchase price is paid by the buyer;
often used when property is sold with a small down payment.
LEGAL NON-CONFORMING refers to the status of a parcel of land which conformed with zoning or
planning codes at one time, but does not conform to the current zoning or planning codes.
LIEN shall mean an encumbrance which uses property to secure payment of a debt or discharge of
an obligation. Example: judgments, taxes, mortgages, deeds of trust.
LONG-TERM DEBT shall mean the sum of (1) housing expenses and (2) monthly recurring obligations
on installment loans and charge accounts extending beyond ten months.
LONG-TERM DEBT RATIO shall mean the ratio of long-term debt obligations to adjusted gross
income.
LOW INCOME shall mean an income that does not exceed eighty percent (80%) of the area's median
income as established by the U.S. Department of Housing and Urban Development.
. LOW-INCOME HOUSING TAX CREDIT (L1HTC) shall mean the program established by the Tax
Reform Act of 1986 which authorizes a Federal tax incentive for the construction or rehabilitation of
rental housing units occupied by low-income households. State housing credit agencies award the
limited annual supply of t~xcredits to developers of projects picked in application cycles. .,The L1HTC
provides the owner with a tax credit to offset Federal income tax for a ten-year period. The size of the
tax credit is based on the construction or rehabilitation costs for the low-income units.
MODERATE INCOME shall mean an income that does not exceed one hundred twenty percent (120%)
of the area's median income as established by the U.S. Department of Housing and Urban
Development.
MORTGAGE shall mean an instrument recognized by law by which property is pledged as security
without having to give up possession to it for securing the payment of a debt or obligation.
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NON-PROFIT CORPORATION shall mean a non-profit public benefit corporation organized under the
Non-Profit Public Benefit Corporation Law for charitable purposes within the meaning of Section
501 (c)(3) or (4) of the Internal Revenue Code.
OPERATING EXPENSES shall mean those monthly or annual uncontrollable expenses incurred in the
operation of a rental property.
OWNER-INVESTOR shall mean an individual or business entity who owns or is buying a property for
the purpose of renting it for residential use.
OWNER-OCCUPANT shall mean an individual or family who occupies and owns, or is buying, a unit
of residential property, and will occupy such residence.
PROPERTY REHABILITATION STANDARDS shall mean that document of the same title, identifying
City codes applicable to residential rehabilitation, and other environmental deficiencies to be corrected
during the rehabilitation process not identified in City codes.
REHABILITATION COST shall mean the total cost of repairs, improvements, and other costs for
rehabilitation of the property incurred by the applicant that are eligible for inclusion in a rehabilitation
loan.
REPLACEMENT RESERVE shall mean an amount set aside each month for replacement at a future
date of long-lived systems (roof, HVAC, etc.), at a rental property.
SECTION 8 MODERATE REHABILITATION PROGRAM shall mean that program which is designed
to provide a rent subsidy for an eligible tenant residing in a unit which has been rehabilitated according
to Section 8 Moderate Rehabilitation Guidelines.
TARGET AREA - shall mean a geographical area of the city designated by the City Councilor Redding
Redevelopment Agency to receive assistance to alleviate blight, high crime rates, and/or other
undesirable conditions.
TITLE I, COMMUNITY DEVELOPMENT shall mean that portion of the Housing and Community
Development Act of 1974 which provides for general improvements in the community and particularly
for home rehabilitation.
TITLE II, SECTION 8 shall mean that portion of the Housing and Community Development Act of 1974
which states that housing assistance payments may be made for new and substantially rehabilitated
housing. In this Policy, Section 8 Income Guidelines are used.
TRANSITIONAL HOUSING FACllJTY shall mean residential units which are occupied for a specified
length of time under a written contract while independent living skills are learned.
UTILITIES shall mean gas, electricity, water, sewage disposal, and refuse collection.
VERY-LOW INCOME shall mean those incomes which do not exceed fifty percent (50%) of the area's
median income as established by the U.S. Department of Housing and Urban Development.
ZONING shall mean a designation assigned to a parcel of land which specifies the allowable use and
the type and density of structures on the parcel.
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SECTION 3 - GENERAL ELIGIBILITY REQUIREMENTS
A. Location: Rehabilitation loans shall be made only for projects within the city limits of Redding in
residentially-zoned areas (or locations approved by way of a use permit).
B. Eligible Uses: A rehabilitation loan shall be used to correct code violations and to make general
improvements to the dwelling unit as defined in the Property Rehabilitation Standards and Section
5 of this Policy.
C. Equity: At the time the loan is approved, the property may be encumbered by not more than a
maximum of ninety percent (90%) of its established value, including any value added by the
rehabilitation loan, unless otherwise approved by the Housing Loan Committee.
D. Assurance of Completion: In some cases, rehabilitation costs may exceed the eligible loan
amount. In such instances, no loan will be awarded unless the applicant can provide the additional
amount needed to complete the work to meet minimum City codes on the portion(s) to be
rehabilitated. The owner shall provide the City satisfactory evidence of such additional funds
before the loan is approved.
E. Eligible Borrowers: To be eligible for a rehabilitation loan, the applicant must be an owner-
occupant or an owner-investor.
OWNER-OCCUPANT (HOMIEOWNER): The applicant must own or be in the process of buying
a residential property. Persons buying homes under land contracts are excluded from participation
in the housing rehabilitation program, except in those special cases where a land contract is held
by the State of California Department of Veteran Affairs. One or more of the applicants must
reside in such home.
Determination of Adjusted Gross Income: In calculating adjusted gross income, all of the
income of the household (including all adults residing in the unit), whether received in cash
or in kind shall be considered, except for the following specific exclusions which are
consistent with the Section 8 Rental Assistance Program:
1. Earned income from a minor child under the age of 18.
2. Any amount above $480 of annual earned income for a full-time student who is 18 years
of age or older (excluding the head of household and spouse).
3. Foster care payments.
4. One-time, lump-sum additions to family assets such as inheritances, insurance payments
(including payments under health and accident insurance and worker's compensation),
capital gains, and settlement for personal or property losses.
5. Casual, sporadic, or irregular donations from friends or family.
6. Amounts that are specifically for, or in reimbursement of, the cost of medical expenses
that do not result in new income to the applicant.
7. Annual amounts paid for alimony or child support that are received only sporadically,
provided that the applicant certifies:
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. the payments are not received regularly; and
. all reasonable legal actions have been taken to collect such payments.
8. Amounts of educational scholarships paid directly to the student or the educational
institution.
9. Payments under the G.!. Bill
10. Relocation payments made pursuant to Title II of the Federal Uniform Relocation and
Real Property Assistance Policies Act of 1970.
11. Special pay to a family member serving in the Armed Forces who is exposed to hostile
fire.
12. Reparation payments paid by a foreign government pursuant to claims filed under the
laws of that government by persons who were persecuted during the Nazi era.
13. Adoption assistance payments in excess of $480 per adopted child.
14. Deferred periodic amounts from supplemental security income and social security
benefits that are received in a lump sum amount or in prospective monthly amounts.
15. Amounts received by the family in the form of refunds or rebates under State or local law
for property taxes paid on the dwelling unit.
16. Amounts paid by a State agency to a family with a member who has a developmental
disability and is living at home to offset the cost of services and equipment needed to
keep the developmentally disabled family member at home.
Income, Housing Expense, and Long-Term Debt: The homeowner applicant must meet
all three of the following conditions:
1. Household adjusted annual gross income shall be at or below the eighty percent (80%)
area-wide median income level as detailed in the guidelines most recently published by
the U.S. Department of Housing and Community Development for the Redding area:
2. The applicant's ratio of monthly housing expense to adjusted gross monthly income shall
not be more than twenty-eight percent (28%), except as otherwise approved by the
Housing Loan Committee.
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3. The applicant's ratio of monthly long-term debt obligations to adjusted gross monthly
income shall not exceed thirty-eight percent (38%) unless. otherwise approved by the .
Housing Loan Committee.
Housing Expense Ratio: To determine the ratio set forth immediately above, the following
expenses shall be included in calculating housing expense for homeowner loans:
1. Mortgage payments, including principal and interest.
2. Mortgage insurance premiums.
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3. Service charges.
4. Hazard insurance premiums.
5. Property taxes and special assessments.
Homeowner Credit: A rehabilitation loan will be approved only if the applicant's credit record
does not show substantial disregard for former or existing obligations. Analysis of the
borrower's credit record may include consideration of special circumstances such as health
trauma, divorce, burial obligations, etc.
Homeowner Assets: In order to qualify for a rehabilitation loan, the applicant must be
unable to accomplish rehabilitation through conventional financing or use of his or her own
assets as determined by the Housing Loan Committee. The evaluation of an applicant's
assets and ability to secure conventional financing shall also take into consideration
reasonableness of private loan terms and personal circumstances, in keeping with HUD's
objective to accommodate persons of low-income with special needs. Calculation of asset
income shall be consistent with HUD's May 1994 Manual, Technical Guide for Determining
Income and Allowances for the HOME Program.
OWNER-INVESTOR: The applicant must be an individual (or individuals) who owns or is buying
a property for the purpose of renting it as residential property. Investor/owners are not eligible for
Water and Sewer Loans.
Positive Cash Flow: Investment properties shall have a positive cash flow, with a minimum
debt coverage ratio of 1.15.
Credit: The HRP Loan applicant's credit record must not show substantial disregard for
former or existing obligations.
Monitoring Requirements: In addition to the above requirements, applicants to the HOME
Rental Program (HRP) must agree to abide by all applicable program regulations relating to
affordability periods and annual certification as applicable to rent levels, tenant income, and
tenant leases.
SECTION 4 - DESCRIPTION OF HOMEOWNER LOANS
A. AMORTIZED HOMEOWNER LOANS
Purpose: The purpose of an Amortized Rehabilitation Loan is to assist the homeowner whose
income is sufficient to meet the increased monthly housing expense of a rehabilitation loan
payment on their principal place of residence.
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Eligibility: In order to qualify for an Amortized Rehabilitation Loan, the applicant must meet all
General Eligibility Requirements.
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Amount: The amount of an Amortized Rehabilitation Loan shall not exceed the lesser of:
. The actual (and approved) cost of repairs and improvements; or
. Those per unit subsidy limit amounts as detailed under Section 221 (d)(3) of the National
Housing Act as most recently published by HUD. Amounts are based on bedroom size.
(Published Year 20043)
o Bedroom (Studio) $ 73,632 90.270
1 Bedroom $ 84,404 103.476
2 Bedroom $ 102,635 125.827
3 Bedroom $ 132,744 162.777
4 Bedroom $ 145,745 178.679
Repayment: Amortized Loans for oomeowners shall be repaid by fully amortized monthly
payments of principal and interest. The Housing Loan Committee shall have the authority to
temporarily suspend monthly payments when a borrower can verify that household income cannot
support the payment. In cases of extreme hardship, the loan may be placed into either partially
or permanently deferred status if the Committee so approves.
The loan shall become due and payable upon sale of the property, transfer of title, upon the death
of the borrower(s), when the property is no longer the principal residence of the borrower(s), or
at the end of the fixed loan term of fifteen (15) years (or 30 years if applicable below), whichever
occurs first.
Terms and Conditions:
1. An Amortized Rehabilitation Loan shall be amortized up to 15 years at five percent (5%)
simple interest. Loan amortization up to 30 years may be approved by the Housing Loan
Committee when the loan amount entire mortqaqe obligation of the borrower(s) exceeds fifty
percent (50%) of the property value.
B. PARTIALLY DEFERRED-PAYMENT LOANS FOR HOMEOWNERS
Certification: An applicant for an Amortized Loan may have a portion of his or her monthly loan
payment deferred. If housing expenses, including the loan payments, exceed twenty-eight percent
(28%) of gross income, the amount of the loan which causes this excess shall be considered a
Deferred Payment Loan, but in no event shall the borrower be permitted to defer more than ninety
percent (90%) of such a loan. Also, refer to Emergency Deferred Loans in this section.
Purpose: The purpose of a Partially-Deferred Payment Loan is to make possible the
rehabilitation of the property and improvements to the neighborhood in those situations where the
applicant cannot qualify for arfAmortized Loan. . .
Repayment: A Partially-Deferred Payment loan shall be repaid by partial amortization of principal
and interest, or interest-only payments. The entire loan shall become due and payable upon sale
of the property, transfer of title, upon the death of borrower(s), or when the property is no longer
the principal residence of the borrower(s).
Conversion: When the borrower's circumstance is substantially changed, or at the borrower's
option, the loan may be converted to a straight Amortized Loan.
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Terms and Conditions:
1. The deferred portion of the loan shall bear interest at a minimum of three percent (~~%) simple
interest per year, and the amortized portion at five percent (5%) simple interest.
2. Both the amortized portion and the deferred portion of a Partially-Deferred Payment Loan
shall become due and payable upon sale of the property, transfer of title, upon the death of
the borrower(s), or when the property is no longer the principal residence of the borrower(s).
C. DEFERRED-PAYMENT LOANS FOR ELDERLY AND/OR DISABLED HOMEOWNERS
Purpose: The purpose of a Deferred Payment Rehabilitation Loan for Elderly and/or Disabled
Homeowners is to pay the costs of rehabilitation without increasing current monthly housing
expenses of those families on fixed incomes.
Eligibility: To qualify for a Deferred Payment Loan for the Elderly and/or Disabled, the applicant
must meet all of the General Eligibility Requirements, and the applicant must meet one of the
following requirements:
. Be at least 60 years of age.
· Be disabled according to the criteria established by the Social Security Administration or the
U.S. Department of Housing and Urban Development.
Amount: The amount of a Deferred Payment Loan shall not exceed:
· The actual (and approved) cost of all necessary repairs, eligible improvements, and allowable
loan costs; and,
· Those maximum amounts detailed under Section 221(d)(3) of the National Housing Act as
most recently published by HUD.
(Published Year 20043)
o Bedroom (Studio) $ 73,632 90.270
1 Bedroom $ 84,404 103.476
2 Bedroom $ 102,635 125.827
3 Bedroom $ 132,744 162.777
4 Bedroom $ 145,745 178.679
Repayment: The loan shall become due and payable upon sale of the property, transfer of title,
upon the death of the borrower(s), Of when the property is no longer the principal residence of the
borrower(s) or at the end of the fixed loan term of forty (40) years. whichever occurs first.
Terms and Conditions:
1. This loan shall bear interest at a minimum of three percent (3%) simple interest.
2. Interest-only payments may be required on specific loans, as determined by the Housing
Loan Committee.
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D. EMERGENCY DEFERRED LOANS FOR HOMEOWNERS
Purpose: Emergency Deferred loans may be available to those persons who are unable to make
a monthly loan payment and who do not meet the criteria of the Deferred Payment Loan. Principal
and interest payments for these loans may be fully deferred for two- to five-year increments on
a case-by-case basis, as determined by the Housing Loan Committee.
Conversion: When the borrower's circumstance is substantially changed, or at the borrower's
option, the loan may be converted to a straight Amortized Loan.
Eligible costs under this program include loan processing fees and code items. General property
improvements are not eligible.
E. WATER AND SEWER LOANS FOR HOMEOWNERS:
Purpose: The purpose of a Water and Sewer Loan is to pay for City water and sewer hook-up,
whether or not the applicant is applying for a rehabilitation loan.
Eligibility: In order to qualify for a Water and Sewer Loan, the applicant must meet all General
Eligibility Requirements.
Amount: The amount of a Water and Sewer Loan shall not exceed the actual (and approved)
cost of installation.
Terms, Conditions and Repayment of a Water and Sewer Loan:
1. The maximum loan term shall not exceed 15 years for those applicants meeting the eligibility
requirements for Amortized Loans defined in Section 4 of this Policy. Installments shall be
due monthly and shall bear interest at a minimum of five percent (5%) simple interest per
year; or
2. For those applicants meeting the eligibility requirements of Deferred-Payment Loans defined
in Section 4C of this Policy, no monthly payments are required, but the loan shall bear a
minimum interest rate of three percent (3%) simple interest per year.
3. The loan shall become due and payable upon sale of the property, transfer of title, upon the
death of the borrower(s), or when the property is no longer the principal residence of the
borrower(s). '.- -..
Because of the limited scope of the work associated with water and sewer connections, it shall not
be necessary to secure structural pest control reports, appraisals, a title search and title insurance,
or evidence of insurance. At a minimum, staff shall document the ovmer'3 equity the borrower's
ownershio interest in the property throuah use of a Lot Book Guarantee and verify mortgage
balances on the property.
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SECTION 5 - DESCRIPTION OF AMORTIZED OWNER-INVESTOR LOANS:
A. HOME RENTAL PROGRAM (HRP)
Purpose: The purpose of a Home Rental Program (HRP) Loan is to assist the participating
owner-investor with financing the acquisition and/or rehabilitation of rental property occupied by
low-income tenants.
Eligibility: In order to qualify for an HRP Loan, the applicant must be in the process of acquiring
a property in need of rehabilitation or have site control of the property in need of rehabilitation; and
must demonstrate the ability and financial capacity to secure, manage, and maintain the property
upon completion of the rehabilitation. A minimum of ten percent (10%) of the cost of rehabilitation
work must be provided by the applicant.
Ability to Repay: The applicant must demonstrate the property's ability to generate and maintain
a positive cash flow.
Amount: The maximum funding amount for HOME-assisted rental units shall be consistent with
the current HOME Program Regulations, as cited in Section 221 (d)(3) ofthe National Housing Act.
(Published Year 20043)
o Bedroom (Studio) $ 73,632 90.270
1 Bedroom $ 84,404 103.476
2 Bedroom $ 102,635 125.827
3 Bedroom $ 132,744 162.777
4 Bedroom $ 145,745 178.679
Loan-to-Value Ratio:
· The loan-to-value ratio of a rental project having fewer than 12 units shall not exceed ninety
percent (90%) based on the post-rehabilitation value, unless otherwise approved by the
Housing Loan Committee.
· The loan-to-value ratio for rental projects having more than 12 units shall not exceed eighty
percent (80%), based on the post-rehabilitation value, unless otherwise approved by the
Housing Loan Committee. .
Repayment: HRP Loans shall be repaid in one of three repayment plans depending upon the
needs of the project. The three repayment plans are:
1. Fully amortized principal and interest;
2. Partial amortization of principal and interest, or interest-only payments;
3. Principal and interest payments that are fully deferred for two- to five-year increments on a
case-by-case basis.
A financial analysis consistent with HUD's September 1994 Manual Financing Rental Housing
Under the HOME Program shall be completed to determine the appropriate method of repayment
to be selected.
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Terms and Conditions for HRP Loans:
1. The maximum interest rate shall be five percent (5%) simple interest; the minimum rate shall
be zero percent (0%). (Interest rates are determined by the needs of the project and/or term
of affordability of the units.)
2. The term of the loan shall be no more than thirty (30) years for private for-profit landlords, and
forty (46) fifty-five (55) years for non-profit corporations.
3. The borrower shall meet all HOME program conditions including, but not limited to,
affordability and occupancy.
Loan Assumption: HRP Owner-Investor Loans may be assumed by a new owner(s) conditioned
upon the Housing Loan Committee's determination that the new applicant meets the General
Eligibility Requirements and accepts all obligations associated with the loan.
Public Assistance and Public Benefit: The Housing Loan Committee is authorized to approve
project funding requests which include greater public assistance in exchange for an increased
public benefit.
Increased public assistance may include (1) a waiver of all or a portion of the owner's project cash
contribution to the project; (2) extension of the loan term up to forty (40) years; (3) deferral of
payments up to fifteen (15) years; or (4) waiver of the loan-to-value ratio requirement.
An increased public benefit may include (1) greater affordability periods than those minimums
specified in HOME program regulations; (2) lower rent levels for HOME-eligible units than those
minimums specified in HOME program regulations; and (3) increased quality and/or a proposal
which complements other City priorities.
A financial analysis for each prospective project shall be required to demonstrate the need for
greater public assistance. Specific written findings shall be incorporated into the case file to
document both the subsidy and benefit(s) of the proposed project. The purpose of this Policy is
to offer the Housing Loan Committee greater flexibility and responsiveness to unique housing
opportunities that become available within the Redding community.
B. DEFERRED-PAYMENT REHABILITATION LOANS FOR NON-PROFIT CORPORATIONS:
Purpose: The purpose of a Rehabilitation Loan to a Non-Profit Corporation is to assist with the
cost of the rehabilitation of residential units to be occupied at an affordable rate by lower-income
households on a transitional or permanent basis.
Eligibility: In order to qualify for a Rehabilitation Loan, the applicant must be a registered, State
of California non-profit corporation which owns or is buying residential units for the purpose of
establishing a transitional housing facility or for renting as permanent residential units. All
residents of the transitional housing facility units or permanent residential units assisted under this
program must meet HUD lower-income requirements, as stated in Section 3, of this Policy under
Income, Housing Expense and Long- Term Debt, Number 1.
Rents: It is intended that the rents charged plus any required utility payments shall not exceed
thirty percent (30%) of the gross monthly income of the resident household. This rent affordability
may be accomplished through enforcement of a rent limitation agreement using area-wide rent
levels associated with the HOME Program or on an individual tenant certification basis.
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Amount: Loan amounts for non-profits shall not exceed: (1) the actual (and approved) cost of
repairs and improvements; or (2) those maximum amounts detailed under Section 221 (d)(3) of the
National Housing Act as most recently published by HUD, whichever is less.
(Published Year 2004-3)
o Bedroom (Studio) $ 73,632 90.270
1 Bedroom $ 84,404 103.476
2 Bedroom $ 102,635 125.827
3 Bedroom $ 132,744 162.777
4 Bedroom $ 145,745 178.679
The maximum number of assisted units per project will be determined according to project need
and availability of funds.
Loan-to-Value Ratio:
. The loan-to-value ratio of a rental project having fewer than 12 units shall not exceed ninety
percent (90%), based on the post-rehabilitation value.
. The loan-to-value ratio of a rental project having 12 or more units shall not exceed eighty
percent (80%), based on the post-rehabilitation value.
Terms and Conditions for NOIll-Profit Corporation Loans:
1. The loan shall be for a term not to exceed forty (40) fifty-five (55) years and shall bear simple
interest at the rate of a minimum of zero percent (0%) per year, and a maximum of five
percent (5%) per year. The interest rate shall be determined by the needs of the project
and/or term of affordability of the units.
2. Repayment of the loan by the non-profit corporation shall be based upon a revenue analysis
(including a cash flow analysis) for the purpose of establishing a payment schedule. Upon
validation and approval of the revenue analysis by the City, terms of the loan shall be
established, and may include the following:
a. Both principal and interest payments deferred;
b. Annual payment of accrued interest required;
c. Remaining loan balance plus accrued interest, if any, to be amortized, with monthly
payments of principal plus interest required;
d. Payment of residual receipts or surplus cash remaining after payment ()f all reasonable
expenses necessary to operate and maintain the project in habitable condition, including
debt service, taxes, fire insurance, and replacement reserves. Preparation of a revenue
analysis by a certified public accountant may be required by the City to confirm the non-
profit's ability to make residual receipts payments.
3. The entire amount of a Rehabilitation Loan under this section shall become due and payable
if the borrower sells the property, transfers title, or changes the use of the property.
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4. The deed of trust securing the rehabilitation loan under this section shall be recorded in the
first or primary position on the subject property. A subordinate position is acceptable only if
sufficient equity exists above the balances owed on all trust deeds superior to the City loan
to cover the full amount of the City loan with ten percent (10%) equity unencumbered.
SECTION 6 - ELIGIBLE COSTS
A. Code and Rehabilitation Requirements: A rehabilitation loan shall be made to cover the cost
of rehabilitation necessary to make the dwelling conform to Property Rehabilitation Standards
detailed in the City of Redding's Housing Division Policy and Procedures Manual. The loan shall
correct hazards to health and safety, halt deterioration of the structure, and correct incipient code
violations. After rehabilitation, the property shall, at a minimum, be a safe and habitable dwelling
consistent with the Uniform Housing Code.
B. Limited Assistance: In special cases where it is not feasible to perform all necessary repairs due
to financial limitations of the applicant or overall cost of recommended repairs, the minimum
repairs required shall include those repairs necessary to bring the structure into conformance with
HUD Section 8 Housing Quality Standards (HaS). In no case shall a limited assistance loan
include General Property Improvements (GPI's) unless approved by the Housing Loan Committee.
C. Cost Effective Energy Standards: All properties being rehabilitated must meet Cost Effective
Energy Standards (as set forth in 24 CFR Part 39). The Cost Effective Energy Standards set forth
energy conservation and efficiency standards which must be met, as long as the modifications are
financially feasible and do not require work on elements that would not ordinarily become exposed
during the rehabilitation. The cost associated with meeting these standards may be included in
a rehabilitation loan.
D. Historic Preservation Standards: For all properties being rehabilitated, it shall be ascertained
whether or not the property is on the State Historic Places Register, National Register of Historic
Places, or eligible for inclusion on the National Register of Historic Places. If so, the rehabilitation
must be done in accordance with the standards set by the State of California or U.S. Secretary
of the Interior, as applicable. The rehabilitation costs associated with meeting these standards
may be included in the rehabilitation loan.
E. Rehabilitation Objectives: In addition to compliance with code and rehabilitation requirements set
forth in the Property Rehabilitation Standards of the City of Redding, certain objectives are
encouraged. Objectives are not mandatory provisions, but have been included as desirable General
Property Improvements (GPI) to properties. General Property Improvements are eligible loan costs
.- so long as all required improvements are completed, and the GPl's are'ieasonable and customary
for the area and are not considered luxorious. After the property has been rehabilitated to conform
with the Property Rehabilitation Standards, additional loan money not to exceed forty percent (40%)
of the total loan may be used for the following General Property Improvements:
1. Drain tiling to public streets, alleys, or storm sewers.
2. Landscaping of a similar quality and quantity to the rest of the neighborhood, in order to improve
visual quality.
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3. A room addition built, altered, or improved in special cases where the absence of such poses
a serious hardship for the family.
4. Minor remodeling in order to make a dwelling more functional or attractive.
5. The repair/replacement or new installation of free-standing stove appliances, garbage disposals,
refrigerators, and dishwashers, provided compliance with HUD regulations .are met.
6. Window coverings, excluding drapery.
7. Upgrading of built-in appliances and fixtures from a medium grade to a higher grade.
8. Upgrading of carpet and linoleum.
9. Kitchen or bathroom remodeling
10. Patios and patio covers.
11. Installation of ceramic tile counters, floors, or shower stalls (except when replacing in-kind).
IF. Building Permits and Related Fees: Funds may be provided in the rehabilitation loan to cover
costs of building permits and related fees if these are not included in the contractor's fees.
G. Certain Related Costs: A rehabilitation loan may include funds to cover certain costs and charges
relating to processing the loan application and closing. Accordingly, a rehabilitation loan may provide
for the cost of the following:
1. Appraisal.
2. Preliminary title reports.
3. Filing and recording fees.
4. Title insurance.
5. Hazard insurance.
6. Unpaid property taxes.
7. Structural pest control report.
8. Property tax monitoring services.
9. Architectural or design services.
.1.Q,. Environmental reports.
Other fees/costs may be necessary to meet General Eligibility Requirements. Outstanding
judgments, liens, or property assessments are eligible costs only if the applicant's circumstances
demonstrate a. significant need and are consistent with program objectives as determined by the
Housing Loan Committee.
The City will advance funds as necessary for an appraisal and the preliminary title report prior to final
approval of the loan application. When the loan is approved, the City shall be reimbursed for these
advanced funds from the proceeds of the loan at the time of the loan closing. If the loan is not
approved or the application is withdrawn, advances shall be paid by the City.
H. Refinancing: A rehabilitation loan may include the refinancing of secured, existing debt on a single-
family, owner-occupied unit to rehabilitate the unit, if overall housing costs of the borrower will be
reduced to achieve affordability. In order to promote rehabilitation of the property and assure the
City's security interest, refinancing may be incorporated into the funding process.
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A rehabilitation loan may also include the refinancing of secured, existing debt on multi-family or
special needs (transitional/supportive housing) projects if refinancing is necessary to permit or
continue affordability under 24 CFR Part 92.252. Regardless of the amount of public funds invested,
the minimum affordability period shall be 15 years. The following guidelines describe the conditions
under which the City will consider refinancing existing debt:
1. Demonstrate that rehabilitation is the primary eligible activity and that a minimum of sixty (60%)
percent in rehabilitation costs be accomplished as part of the project, unless otherwise approved
by the Housing Loan Committee;
2. Provide a review of management practices to demonstrate that disinvestment in the property
has not occurred, that the long term needs of the project can be met and that the feasibility of
serving the targeted population over an extended affordability period can be shown;
3. State whether the new investment is being made to maintain current affordable units, create
additional affordable units, or both;
4. Investment of CDBG or HOME funds for refinancing purposes shall be available city-wide with
priority given to neighborhoods designated for revitalization; and
5. HOME funds cannot be used to refinance multifamily loans made or insured by any Federal
program, including CDBG.
At this time only CDBG or HOME program income funds are eligible resources for refinancing of
single-family, and multi-family or special needs housing projects.
I. New Construction In Lieu of Rehabilitation: Consistent with program regulations and upon
Housing Loan Committee approval, HOME funds may be used for the new construction of affordable
rental or owner-occupied housing as part of the effort to meet the stated goals and objectives of the
Housing Division.
J. Lead-Based Paint Abatement: Consistent with program regulations and upon Housing Loan
Committee approval, HOME or CDBG funds may be used for lead-based paint evaluation and
reduction costs. The form of assistance may include interest-bearing loans, non-interest-bearing
loans, interest subsidies, deferred-payment loans, grants, or other forms of assistance determined
to be appropriate for the purposes of the program.
In cases where the use of grant funds are deemed necessary by the HLC, staff will monitor projects
to ensure that the following guidelines are met:
a. Grant expenditures shall only cover increased costs attributable to lead-based hazard evaluation
and reduction activities; " .,..
b. The amount of grant funds available shall be limited to $7,500 of the total rehabilitation project
cost, unless otherwise approved by the HLC; and
c. Allocation of grant funds for lead-based hazard evaluation and reduction activities does not
increase the value of the home.
SECTION 7-INELlGIBLE COSTS
The following costs are not eligible costs for with a rehabilitation loan:
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A. Expansion of the structure or the finishing of unfinished spaces unless the proposed work meets
obiectives c1earlv defined in the City of Reddina Housina Division Property Rehabilitation Standards
and is approved bv the Housing Loan Committee, unless othentiise stated in thi~.
B. Materials, fixtures, equipment, or landscaping of a type and quality which exceeds adequate service,
or that is not customarily used for properties of the same general type.
c. Acquisition of land, excluding HOME Rental Program loans.
D. Purchase, installation, or repair of furnishings or trade fixtures.
E. Small appliances.
SECTION 8 - PROCESSING A LOAN
The following offers a brief outline of the steps necessary to process a loan. It is not intended to detail
all the mechanics of the process:
A. Interview applicant and determine basic eligibility.
B. Perform on-site inspection of property.
C. Prepare work write-up and cost estimate based on property inspection.
D. Obtain credit check, verifications, and appraisal (if needed).
E. Obtain Housing Loan Committee or Deputy City Manager approval or denial, as appropriate.
F. Prepare all applicable loan documents, perform loan closing, and arrange for disbursement of loan
proceeds.
G. The loan applicant will be informed in writing if a loan application is denied The applicant may correct
or exhibit a valid explanation of these disqualifications and resubmit the application. Upon re-
submission, the application will be re-evaluated by the staff and the Housing Loan Committee.
SECTION 9 - COMPLETING A HOME REHABILlTA TION
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.
.1' ~ .
A. Incorporate method of rehabilitation (Le., self-help, owner-assigned, owner-contractor, or open City
bid) into preparation of contracts.
B. Prepare all documents necessary to close the loan.
C. Arrange for disbursal of loan money.
D. Oversee work in progress and provide regular inspections of work.
B. Monitor disbursement of payments.
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F. Upon completion, file Notice of Completion, make final payments to contractors and suppliers for
rehabilitation work.
G. After expiration of 35 days, make final payments to contractors and suppliers for nehabilitation work.
H. Upon repayment of loan amount, execute documents required to cancel the promissory note and
reconvey the deed of trust, and deliver them to the borrower(s) or appropriate agent for recording
of the reconveyance.
SECTION 10 - LOAN SECURITY
Loan Security: With the exception of Emergency Repair Program Loans involving borrowers whose
residence is not located on real orooertv, all loans made pursuant to any of tlJe programs described in
this Policy shall be evidenced by a written promissory note signed by the borrower, payment of which is
secured by a deed of trust in a form approved by the City, which describes the real property and is
recorded with the Shasta County Recorder. A subordinate deed of trust is acceptable if sufficient equity
exists above the principal balances on any superior trust deeds to fully secure the loan amount.
A title insurance policy on the property shall be issued to the City for the full amount of the loan at the time
of loan closing.
Borrowers shall maintain current payments on all mortgage liens, property taxes, and hazard insurance.
The minimlJm amount of hazard insurance must cover all trust deeds on the property. The City shall
monitor annual verification of paid taxes and effective fire insurance. The borrower is to provide
verification of both paid property taxes and effective insurance premiums upon the City's request.
No Prepayment Penalty: The entire amount of any rehabilitation loan may be repaid early without
penalty.
Loan Assumption: Except for default activity specified under Section 13 of this Policy, loans to owner-
occupants are not assumable; however, the Housing Loan Committee shall have authority to consider
and approve such loan assumption once per loan, when an applicant is a member of the original
household and can demonstrate a compelling justification for the action. Assumption shall be considered
only when the loan risk factor remains consistent with prudent lending practices, and when the applicant:
1. Already has or can easily gain title to the property;
2. Meets program eligibility criteria;
3. Has the ability to be a responsible homeowner;
4. Is able to pay costs of assumption; and
5. Requests assumption of the loan.
Loan Subordination: Subordination of a City Rehabilitation Loan may be approved by the Housing Loan
Committee if the new first mortgage does not exceed the balance remaining on the original first mortgage,
excepting reasonable costs related to the refinancing; if the equity position of the City loan is not
decreased; and if the borrower is not receiving cash out of the transaction. The monthly financial savings
must be a substantial amount in order to justify approval. If the current market value of the property
indicates that there is sufficient equity to payoff the City loan when refinancing a superior loan, and if the
borrower's subsequent housing (or operating) expense is not increased beyond program guidelines, then
the subordination request shall be denied.
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Special consideration may be given to families experiencing undue hardship or that have had a drastic
change in circumstances which necessitate certain financial adjustments. The Housing Loan Committee
may take appropriate action under these circumstances subject to protection of the City's interest.
Based on the individual circumstances of any request (for either single-family or multi-family projects),
the Housing Loan Committee has the discretion to deviate from policy in approving or denying the
subordination keeping in mind that the action is consistent with traditional lending industry standards and
protects the City's public investment.
Reporting to Credit Agency: At the close of loan execution, staff shall submit all pertinent loan
information to a credit reporting agency and request that the loan be listed on the borrower's credit record
as an outstanding mortgage loan. Upon debt settlement, staff shall submit to the credit agency all
pertinent debt settlement information. In the event the City loan is lost through a foreclosure action, staff
shall instruct the credit agency to list the loss as a charged off mortgage loan account on the borrower's
credit report. '
SEcnON11-GENERALCONDlnONS
Civil Rights: Comply with all HUD requirements with respect to Title VI of the Civil Rights Act of 1964,
as amended, to not discriminate upon ". . . the basis of race, color, creed, sex or national origin in sale,
lease, rental, use or occupancy of the subject property."
Equal Employment Opportunity: Must comply with Executive Order 11246 and HUD equal opportunity
requirements.
Conflict of Interest: No person who is an employee, agent, consultant, officer, or elected (or appointed)
official who exercises or has exercised any function or responsibility with respect to City Housing program
activities, or who is in a position to participate in a decision-making process or gain inside information with
regard to such activities, may obtain a personal or financial interest or benefit from a City Housing activity,
or have an interest in any contract, subcontract, or agreement with respect thereto, or the proceeds
thereunder, either for themselves or those with whom they have family or business ties, during their
tenure or for one year thereafter.
Use of Proceeds: Loan proceeds shall be used only to pay for costs of services and materials necessary
to carry out the rehabilitation work for which the loan was approved.
Disbursement of Funds: Rehabilitation loan funds shall be disbursed in a manner defined by the City.
Completion of Work: Rehabilitation work will be carried out promptly and efficiently through written
contract let with pri~r conc~~r~nce of the City.
Inspection: The City or its agent shall inspect the property, the rehabilitation work, and all contract
materials, equipment, payroll and conditions of employment pertaining to the work.
Water and Sewer Connection: In those cases where water and sewer services are available, and the
structure is not connected to those services, a part of the proceeds of the loan must be used to connect
to these services.
Administrative Authority of Deputy City Manager: The Deputy City Manager, or his designee shall
be charged with approving or disapproving funding requests at or below $1 0,000 through the Homeowner
Loan Program which are otherwise in compliance with all applicable criteria listed in this document.
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Cumulative Loan Limits: No single for-profit borrower may obtain a loan or additional loans which in
combination exceed ten percent (10%) of the total assets (loan portfolio and resources on hand) of the
Housing Loan Program unless otherwise deemed appropriate by the Housing Loan Committee based
on community benefit, and/or special circumstances of the proposed project.
SECTION 12 - RELOCA TION ASSISTANCE AND ADVISORY SERVICES
Relocation assistance 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.
SECTION 13 - DEFAUL T, FORECLOSURE AND PROPERTY DISPOSITION POLICY
A DEFAULT: If a borrower violates any provision of (1) the loan agreement, (2) the promissory note,
(3) the deed of trust, (4) any other agreement pertaining to the loan, or (5) applicable program
regulations, the City shall give written notice to the borrower to cure the violation within a period of
not less than 30 days from such notice. If the violation is not cured to the satisfaction of the City
within the specified time period, the City, at its option, may declare a default under the relevant
document and seek legal remedies for the default which include the following:
1. The City may accelerate all amounts due under the prescribed loan, including outstanding
principal and interest, and demand immediate repayment. Upon a failure to repay such
accelerated amount in full, the City may proceed with foreclosure in accordance with the
provision of the deed of trust;
2. The City may seek such other remedies, with the Housing Loan Committee's approval, as may
be available under the relevant program regulations and the law. Possible alternatives include
the following:
Short Sale: When the market value of the property is less than the total indebtedness, the City
may consider a short sale. This action involves reduction of the loan payoff amount by the City
to facilitate the sale and avoid acquisition of an inventory property. Any discount by the City of
its promissory note in order to facilitate a sale may be subject to any junior lien holder of record
similarly discounting its promissory note. ..
Loan Assumption: This alternative offers an opportunity to place a program-eligible family in
a qualified property to avoid foreclosure. The borrower(s) can maintain their credit rating and
the City's loan remains secure.
Deed-in-Lieu of Foreclosure: This action is available when the City is in first position and
allows the borrower to deed the property to the lender to avoid foreclosure. Although first
lenders do not usually accept a Deed-in-lieu of Foreclosure if a second Deed of Trust exists, a
second lender could accept a Deed-in-lieu of Foreclosure. A title search must be completed on
the property to determine if any junior liens or judgments exist. It must be determined also if the
first lender has a "due upon sale" clause in their Deed of Trust.
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Discount Note Sale: This action offers the lender a method for selling a note on the open
market to recover a portion of their original investment.
B. FORECLOSURE: The purpose of this Policy is to state the City's position regarding protection of
housing rehabilitation loan investments in relation to delinquencies, default, foreclosure proceedings
by a senior lienholder and ultimate disposition of properties acquired through a trustee's sale.
1. Staff shall monitor all loan terms, conditions and agreements for compliance with rent
restrictions, program funding requirements, occupancy monitoring, and other mandated criteria.
If loans are not in compliance, they are in a technical default and staff is authorized to initiate
foreclosure proceedings against the property with the Housing Loan Committee's approval and
in accordance with the laws governing such transactions.
2. Staff is directed to aggressively pursue collection proceedings on any loans which become
delinquent. Staff is further directed to counsel and/or renegotiate loan terms with the
borrower(s), based on family hardship or drastic changes in circumstances which necessitate
certain financial adjustments. If the borrower is unsuccessful at meeting the obligations
associated with the newly-renegotiated repayment terms and the delinquent loan is not brought
current, staff is authorized to initiate foreclosure proceedings against the property in accordance
with the laws governing such transactions. If such default is not cured within the statutory time,
staff shall schedule a trustee's sale.
3. If a default is not cured and the City is faced with an investment loss, the trustee's sale may
proceed. A public auction shall be held with an opening bid establishE~d by staff after
consultation with the Housing Loan Committee. The property shall be sold to the highest bidder.
If there are no bids, ownership of the property will pass to the City.
4. If a senior lienholder files a Notice of Default on a property with a subordinate City loan, staff
may consider reinstating the senior lien to forestall a foreclosure action by the senior lienholder.
This action shall only be initiated when it is determined to be in the City's best interest and upon
Housing Loan Committee approval. In such cases, the City may subsequently record a Notice
of Default against the property on its behalf, and pursue foreclosure. If staff determines it is in
the City's best interest to let the senior lienholder's foreclosure proceed, staff shall then
determine whether the City should bid at the trustee's sale to protect the City's investment or
let the trustee's sale proceed without City participation. Staff shall bid at the trustee's sale only
upon the Housing Loan Committee's direction and approval of a pre-established amount.
C. PROPERTY DISPOSITION: When a property is acquired as authorized above, staff shall consider
if it is advisable to transfer the property to Housing Authority ownership as an affordable housing
resource, or to transfer ownership to a local, non-profit housing organization with restrictions that
would achieve an affordable housing objective.
If staff determines that it is not practical to utilize ttie property as an affordable housing resource, the
following procedures shall be initiated to sell the acquired property.
1. As deemed appropriate by the Housing Loan Committee, an appraisal by a qualified
professional appraiser will be ordered. The property will be aggressively marketed for sale as
soon as possible using any combination of the following methods:
· Interested parties who have previously contacted or worked with the City regarding
acquisitions will be notified.
· A "For Sale by City of Redding" sign will be placed on the property.
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. An advertisement for sale will be placed in the local newspaper.
. The property will be listed on the Internet or with the local Multiple Listing Service, or both.
2. All property shall be offered for sale on an "as is" basis as permitted by State law. Staff may
accept an offer to purchase or it may reject all bids, subject to approval of the Housing Loan
Committee.
3. If a senior lienholder files a Notice of Default on a mobile home which has a subordinate City
Housing loan, or if a mobile home park owner places a lien against a mobile home encumbered
by a City Housing loan, staff shall analyze the potential loss to the City and determine whether
to bid or not to bid at the senior lienholder's trustee's sale or the mobile home park owner's
auction. Staffs decision to bid or not to bid shall be based upon the feasibility of recouping the
City's loss through acquisition and resale of the mobile home and upon the Housing Loan
Committee's approval. In the event of the death of a mobile home loan borrower or any other
circumstance that jeopardizes the City's loan, staff may discount the City loan or forgive the loan
in its entirety, based on the value of the mobile home and the specific circumstances.
SEcnON14-CONTRACTORPERFORMANCESTANDARDS
A. STANDARDS OF PERFORMANCE:
A Housing Division contractor may be subject to corrective action up to and including removal from
the Contractor List and prohibition from participation in City programs for anyone or a combination
of the following:
1. Failure to attend meetings or training required by the Housing Division;
2. Failure to follow General and Supplemental Specifications;
3. Failure to follow generally acceptable construction work site safety practices;
4. Poor workmanship on any single project, as determined by the assigned Housing Specialist;
5. Documented poor working relationship with a single homeowner or a pattern with multiple
owners, as determined by the assigned Housing Specialist;
6. Failure to respond to an invitation to bid on at least one owner/occupied project within a one-
year period;
7. Documented poor working relationship with anyone of the Housing Specialists as determined
by the Housing Program Supervisor;
8. Failure to pay application or renewal fees which may be required by the City;
9. Lapse of insurance and/or contractor's license;
10. Physical or verbal threats made to clients or staff;
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11. Failure to make timely payments to sub-contractors and/or material suppliers, resulting in liens
against an owner's property.
B. CORRECTIVE ACTION: Possible corrective action may include. but is not limited to: limited
participation in the proaram: suspension for a limited period of time: and. removal from the
Contractor List and participation in the proaram for one year. All corrective action is intended to
provide the contractor with the opportunity to remedy deficiencies and re-establish aood standing
with the proaram.
B C. CORRECTIVE ACTION PROCESS:
1. As the assigned Housing Specialist becomes aware of projects or circumstances with a
homeowner, contractor and/or the work itself which fit the criteria for corrective action, the
assigned Housing Specialist shall document the file and alert the contractor both verbally and
in writing of the specific nature of the issue. The contractor shall be given the opportunity to
correct the issue without prejudice. If the issue is not appropriately resolved within the time
frame established by the assigned Housing Specialist, a recommendation for formal corrective
action shall be proposed to the Housing Program Supervisor.
2. The Housing Program Supervisor shall meet with the contractor and the assigned Housing
Specialist to review the issue(s) and the proposed course of action. The contractor will be
notified in writing of the decision and of the appeal process. Possible corrective action may
include, but is not limited to: probationary status; limited participation in the program;
suspension for a limited period of time; and, removal from the Contractor List and participation
in the program for one year. All corrective action is intended to provide the contractor with the
opportunity to correct deficiencies and re-establish good standing with the program.
3. Written appeals must be forwarded to the Deputy City Manager, or his designee within fifteen
(15) days receipt of the action. The Deputy City Manager, or his designee shall investigate the
appeal and render a decision in writing within thirty (30) days from receipt. The decision of the
Deputy City Manager, or his designee shall be final.
4. A contractor barred from participating in the program may reapply to the program after a one-
year period from the date of final decision. Reinstatement is not automatic. If reinstatement is
not approved by the City Housing Division, the contractor has the right to appeal the action.
Any appeal must be forwarded to the Deputy City Manager, or his designee within fifteen (15)
days receipt of the action. The Deputy City Manager, or his designee shall investigate the
appeal and render a decision in writing within thirty (30) days from receipt. The decision of the
Deputy City Manager, or his designee shall be final.
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