HomeMy WebLinkAboutAgenda Report - October 19, 2016 C-14TM
CITY OF LODI
COUNCIL COMMUNICATION
AGENDA ITEM
C-1 4
AGENDA TITLE: Adopt Resolution Approving the First Time Home Buyer Program Guidelines
MEETING DATE: October 19, 2016
PREPARED BY: Community Development Director
RECOMMENDED ACTION Adopt Resolution approving the First Time Home Buyer Program
guidelines.
BACKGROUND INFORMATION The Community Development Department — Neighborhood
Services Division is reestablishing the First Time Home Buyer
(FTHB) Program with an allocation of $125,701 of 2016-17
Community Development Block Grant (CDBG) program funding.
The purpose of the FTHB Program is to provide qualified low-income families with the opportunity to
purchase their first home by providing financial assistance to cover a portion of the down payment and
closing costs.
The City had previously operated a FTHB Program with Home Investments Partnership (HOME)
Program funding provided by the U.S. Department of Housing and Urban Development (HUD)
through the State of California Department of Housing and Community Development (HCD). The City
received two allocations of State HOME funds, first in 2009 and then again in 2013, each in the
amount of $800,000, for such a program.
With our 2009 program funding, we were able to assist just three homebuyers within the three years
that the funds were available. The real estate market at the time and the availability of housing that
could qualify for the program were extremely limited. With our second allocation in 2013, we were not
able to assist any homebuyers due to the HOME Program limits on the maximum purchase price for a
home, which is based upon a percentage of the County median sale price. On average, home sales
and asking prices in Lodi run higher than the County median sales price, so the market for first-time
homebuyers going through our program has been severely limited.
Of those three loans from the 2009 allocation, one was paid off in 2013, and another was paid off just
this year, leaving one remaining loan active. The proceeds from those loan payoffs, totaling
approximately $53,100, remain in an interest-bearing account and can be used for future loans under
the more restrictive State HOME Program Guidelines.
There is a significant need to provide this service to our low-income homebuyers within our
community, so we have moved the funding source to the CDBG program. While the funding amount is
considerably smaller than the HOME allocation from the State, the low purchase price limits do not
apply to CDBG funded programs. With continual funding for this activity, we could develop a decent
APPROVED:—
#ephen Schwabauer, City anager
FTHB Program Guidelines — 2016 CDBG
October 19, 2016
Page 2 of 2
loan portfolio that will eventually be recycled back into the program as the homes are sold or
refinanced and the loans are paid off.
The attached First Time Home Buyer Program Guidelines (Exhibit A) are proposed for this program.
Program Guidelines --- Key Points
Income Eligibility: Household incomes at or below 80 percent of Area Median Income (AMI).
(Updated annually)
1 Person 2 Persons 3 Persons 4 Persons 5 Persons 6 Persons 7 Persons 8 Persons
$33,000 $37,700 $42,400 $47,100 $50,900 $54,650 $58,450 $62,200
Credit Worthiness: Applicant's with a median credit score lower than 610 will require additional
consideration to determine credit worthiness.
Loan Type: Deferred (silent second) loan up to $25,000. Includes reasonable closing costs
and up to 50 percent of the lender's required down -payment amount.
Interest Rate: 2 percent.
Term.
Loan shall be "due and payable" 30 years from close of escrow, upon transfer
of the property, or when the home is no longer owner -occupied, whichever
comes first.
Buyer Contribution: Minimum 2 percent of the purchase price.
Affordability Period:
Qualification Req.:
Loans less than $15,000 — 5 years.
Loans $15,000 - $40,000 — 10 years.
Loans greater than $40,000 — 15 years.
Must not have owned a home in the past three years.
Must attend and obtain a certificate from an approved first-time homebuyer
education/counseling session.
The Program Guidelines also details that the City Manager, or their designee, is authorized to execute
all necessary loan documents, agreements and instruments for FTHB loans up to $25,000.
FISCAL IMPACT: CDBG are federal funds. Administrative costs for loan processing are an
eligible project delivery cost and can be charged against the program.
FUNDING AVAILABLE: $125,701 — 2016-17 Community Development Block Grant allocation.
Attachments
Jordan Ayers, Deputy City Manag
6tri Community Development Director
Stephen Schwabauer
--94cr
Exhibit A
First Time Home Buyer Program Guidelines
City of Lodi
First -Time Homebuyer Loan
Program Guidelines
EOVAL MOUSING
OPPORTUNITY
For:
Community Development Block Grant (CDBG) Program
Serving the City of Lodi, a HUD Entitlement Community
CITY OF LODI
FIRST-TIME HOMEBUYER LOAN PROGRAM GUIDELINES
1.0. GENERAL
The City of Lodi, hereinafter referred to as the "Sponsor," has received Community Development
Block Grant (CDBG) funds from the United States Department of Housing and Urban
Development (HUD), as an entitlement jurisdiction, to administer a homebuyer program. The
homebuyer program described herein (the "Program") is designed to provide assistance to eligible
homebuyers in purchasing homes, also referred to herein as "housing units", located within the
Program's eligible area, as described in Section 3.1.A. The Program provides this assistance in
the form of deferred payment "silent" second priority loans as "gap" financing toward the
purchase price, downpayment, and/or closing costs of affordable housing units that will be
occupied by the homebuyers as their primary residence. The Program will be administered by
City of Lodi's Neighborhood Services Manager and designee (the "Program Operator").
1.1. PROGRAM OUTREACH AND MARKETING
All outreach efforts will be done in accordance with state and federal fair lending regulations to
assure nondiscriminatory treatment, outreach and access to the Program. No person shall, on the
grounds of age, ancestry, color, creed, physical or mental disability or handicap, marital or
familial status, medical condition, national origin, race, religion, gender or sexual orientation be
excluded, denied benefits or subjected to discrimination under the Program. The Sponsor will
ensure that all persons, including those qualified individuals with handicaps, have access to the
Program.
A. The Fair Housing Lender and Accessibility logos will be placed on all outreach materials.
Fair housing marketing actions will be based upon a characteristic analysis comparison
(census data may be used) of the Program's eligible area compared to the ethnicity of the
population served by the Program (includes, separately, all applications given out and
those receiving assistance) and an explanation of any underserved segments of the
population. This information is used to show that protected classes (age, gender,
ethnicity, race, and disability) are not being excluded from the Program. Flyers or other
outreach materials, in English and any other language that is the primary language of a
significant portion of the area residents, will be widely distributed in the Program -eligible
area and will be available to any local social service agencies. The Program may sponsor
homebuyer classes to help educate homebuyers about the home buying process and future
responsibilities. Persons who have participated in local homebuyer seminars may be
notified about the Program.
B. The Program Operator will work with local real estate agents and primary lenders to
explain the Program requirements for eligible housing units and homebuyers, and to
review Program processes. Local real estate agents and primary lenders will also be
encouraged to have their customers participate in the Program.
C. Section 504 of the Rehabilitation Act of 1973 prohibits the exclusion of an otherwise
qualified individual, solely by reason of disability, from participation under any program
receiving Federal funds. The Program Sponsor will take appropriate steps to ensure
effective communication with disabled housing applicants, residents and members of the
public.
1.2. APPLICATION PROCESS AND SELECTION
A. The potential Applicant (homebuyer) should contact the City of Lodi, Neighborhood
Services Division at 209-333-6800 extension 2467, to obtain program information,
determine whether they meet basic program qualifications and to obtain the required
application.
B. Applicant must complete homebuyer -counseling provided by a HUD -approved Homebuyer
Education program, and receive a certificate of completion from the workshop provider.
More details about what homebuyer counseling qualifies is described in Section 1.5
Homebuyer Education below.
C. Applicant may wish to pre -qualify for a first mortgage loan. Any reputable lender can
participate in the program.
D. Applicant shops for a home and enters into a purchase contract for a home. A real estate
agent can assist the Applicant in selecting a home and executing the purchase contract. The
purchase offer must allow for the Program Operator's review of the home inspection report.
E. If not already pre -qualified, the Applicant works with the lender to qualify for a first
mortgage.
F. The Applicant will work with the first mortgage lender for completion of the Program
application package and the first mortgage lender will submit the application to the City.
a. The application will include attachments, including Sellers Lead -Based Paint
Disclosure and the EPA Booklet (Attachment A- Protect Your Family from Lead in
Your Home_ and a confirmation that the homebuyer has reviewed/understands
them.
b. Completed applications are processed on a first -come -first-served basis.
Applications are deemed complete only if all information is completed, the
application is signed and dated. Incomplete applications are returned and will not be
date/time stamped until complete.
G. Once completed, the Program Operator will review loan application package for eligibility
and will notify the lender of any additional documents that are required. Once the
applicant's eligibility is confirmed, they will be provided an eligibility -approval letter.
a. If the Program Operator encounters material discrepancies and/or
misrepresentations, and/or there are income, asset, household composition, or other
important questions that can't be resolved, the Sponsor reserves the right to deny
assistance to the household. In this case, the applicant may re -apply after six
months have elapsed from the time of written assistance denial.
H. Should the Applicant experience any material change in income, assets, household
composition, or other eligibility determination occurring after application submittal, but
prior to closing, they shall immediately report this to the first lender and Sponsor for review.
I. Upon receipt of appraisal and inspection reports (e.g. termite inspection, professional home
inspection), Program Operator will review the reports and provide a written list of any
repairs that will be required.
J. A report is submitted to the Program's Loan Committee for loan approval.
K. Once the loan is approved by the Loan Committee, the Sponsor will issue a conditional letter
of funding commitment that is good for 30 days and will prepare the necessary loan
documents and will meet with the Applicant to sign loan documents.
L. The City Manager, or their designee, will execute all necessary loan documents, agreements
and instruments on behalf of the Sponsor.
M. Subsequently, funds will be provided to the escrow or title company for the home purchase.
N. Escrow agent shall record the Program's Deed of Trust and the Declaration of Conditions,
Covenants, and Restrictions, and shall send original documents to the Sponsor within seven
(7) working days from the date of the closure.
O. If there are any cancellations or disqualifications of the first mortgage loan the lender shall
immediately notify the Sponsor in writing and shall include the reason for this action.
1.3. THE HOME PURCHASE PROCESS
A. The housing unit selection process will be conducted by the homebuyers. Prior to
making an offer to purchase an eligible housing unit (see Section 3.0), homebuyer shall
provide seller with a disclosure containing the following provisions, and obtain Sellers's
confirmation of receipt of these provisions (Attachment C):
1) Homebuyer has no power of eminent domain and, therefore, will not acquire the
property if negotiations fail to result in an amicable agreement; and
2) Homebuyer's offer is an estimate of the fair market value of the housing unit, to
be finally determined by a state licensed appraiser;
3) The housing unit will be subject to inspection. The housing unit must comply
with local codes at the time of construction and local health and safety standards.
4) All housing units built prior to January 1, 1978 will require a lead paint
disclosure to be signed by both the homebuyer and Seller (Attachment B);
5) Since the purchase would be voluntary, the seller would not be eligible for
relocation payments or other relocation assistance;
6) The seller understands that the housing unit must be either: currently owner -
occupied, newly constructed, or vacant for three months prior to submission of
the purchase offer.
7) If the seller is not provided with a statement of the above six provisions prior to
the purchase offer, the seller may withdraw from the agreement after this
information is provided.
B. Applicant will execute a standard form purchase and sale agreement. The purchase and
sale agreement will be contingent on the household and housing unit meeting Program
eligibility requirements and receiving Program loan approval.
C. The Primary Lender completes and submits the Application to the Program Operator,
who will verify applicant eligibility, housing unit and loan eligibility and amount of
assistance to be provided consistent with these guidelines.
D. Program Operator, where Program Operator is not the Sponsor, submits
recommendation to the Loan Committee for approval or denial, including the reasons for
the recommendation. The Loan Committee determines Applicant's approval or denial,
and instructs Program Operator to notify Applicant. Program Operator provides written
notification to Applicant of approval or denial with reason and, if denied, a copy of the
Program's appeal procedures.
E. When Primary Lender requirements are met, Program funds are deposited into escrow,
with required closing instructions and loan documents.
F. At the time of escrow closing, the Sponsor shall be named as an additional loss payee on
fire, flood (if required), and extended coverage insurance for the length of the loan and
in an amount sufficient to cover all encumbrances or full replacement cost of the
housing unit. A policy of Title Insurance naming the Sponsor as insured is also required.
1.4. HOMEBUYER COSTS
A. Eligible households must document that they have the funds necessary for down payment
and closing costs as required by the Primary Lender and the Sponsor. The Program's
down payment requirement (below) is in place even if the Primary Lender has a lower
down payment requirement. If the Primary Lender has a higher down payment
requirement, there is no additional down payment requirement required by the Program.
B. Homebuyer must contribute a minimum down payment of two percent (2%) of the
purchase price, but may contribute more if desired.
C. Sponsor will not provide a subsidy that is greater than the amount of the primary
mortgage, and at a maximum of $25,000. The subsidy will write down the cost of the
primary lender's loan so that the payments of PITI are no more than 31% of the gross
household income. The Program Operator will determine the level of subsidy and
affordability during underwriting of the Program's loan to make sure that it conforms to
the requirements of the CDBG funding Program.
1.5. HOMEBUYER EDUCATION
Buying a home can be one of the most confusing and complicated transactions anyone can make.
Providing the future homebuyer with informative homebuyer education training, can bring
success to the Sponsor, Program Operator, the Program and most importantly, the homebuyer. It
has been documented that first-time homebuyers that have had homebuyer education have the
ability to handle problems that occur with homeownership. All Program participants are required
to attend a HUD -approved homebuyer education class. The homebuyer education class will
cover such topics as the following: preparing for homeownership; available financing; credit
analysis; loan closing; homeownership responsibilities; home maintenance; impact of refinancing
and loan servicing. Methods of homebuyer counseling and education may include, but are not
limited to: one-on-one counseling between homebuyer, counselor and family/individual and/or
group workshops and informational sessions. Tools of instruction may include fliers, brochures,
power point presentations, worksheets, etc. If Applicant is unsure whether their homebuyer
counseling meets the above requirements, they can contact the Neighborhood Services Division
to confirm that it is approved under this Program.
1.6. CONFLICT OF INTEREST REQUIREMENTS
When the Sponsor's program contains Federal funds, the applicable Conflict of Interest
requirements of 24 CFR Section 570.611 shall be followed for CDBG assistance. Section 92.356
of the HOME Final Rule shall be followed for HOME assistance, as follows:
(a) Conflicts prohibited. No persons described in paragraph (b) of this section who exercises or
has exercised any functions or responsibilities with respect to activities assisted with HOME
funds or who are in a position to participate in a decision making process or gain inside
information with regard to these activities, may obtain a financial interest or benefit from a
HOME -assisted activity, or have a financial interest in any contract, subcontract or agreement
with respect to the HOME -assisted activity, or the proceeds from such activity, either for
themselves or those with whom they have business or immediate family ties, during their tenure
or for one year thereafter. Immediate family ties include (whether by blood, marriage or
adoption) the spouse, parent (including stepparent), child (including stepchild), brother, sister
(including a stepbrother or stepsister), grandparent, grandchild and in-laws of a covered person.
(b) Persons covered. The conflict of interest provisions of paragraph (a) of this section apply to
any person who is an employee, agent, consultant, officer, or elected official or appointed official
of the participating jurisdiction, State recipient, or subrecipient which are receiving HOME funds.
(c) Exceptions: Threshold requirements. Upon the written request of the participating jurisdiction
to HCD, HUD may grant an exception to the provisions of paragraph (a) of this section on a case-
by-case basis when it determines that the exception will serve to further the purposes of the
HOME Investment Partnerships Program and the effective and efficient administration of the
participating jurisdiction's program or project. See 24 CFR 92.356(d)(1-6) for details on the
documentation needed in order to submit an exception request to HUD.
1.7. NON-DISCRIMINATION REQUIREMENTS
The Program will be implemented in ways consistent with the Sponsor's commitment to non-
discrimination. No person shall be excluded from participation in, denied the benefit of, or be
subject to discrimination under any program or activity funded in whole or in part with State
funds on the basis of his or her religion or religious affiliation, age, race, color, creed, gender,
sexual orientation, marital status, familial status (children), physical or mental disability, national
origin, or ancestry, or other arbitrary cause.
2.0 APPLICANT QUALIFICATIONS
2.1. CURRENT INCOME LIMITS FOR THE AREA, BY HOUSEHOLD SIZE
All applicants must certify that they meet the household income eligibility requirements for the
applicable CDBG program(s) and have their household income documented. The income limits
in place at the time of loan approval will apply when determining applicant income eligibility.
All applicants must have incomes at or below 80% of the County's area median family income
(MFI), adjusted for household size, as published by HUD.
Household: Means one or more persons who will occupy a housing unit. Unborn children do not
count in family size determination.
Annual Income: Generally, the gross amount of income of all adult household members that is
anticipated to be received during the coming 12 -month period.
2.2. INCOME QUALIFICATION CRITERIA
Projected annual gross income of the applicant household will be used to determine whether they
are above or below the published HUD income limits. Income qualification criteria, as shown in
the most recent HCD program -specific guidance
at http://www.hcd.ca.gov/fa/cdbg/GuideFedPrograms.html, will be followed to independently
determine and certify the household's annual gross income. The Program Operator should
compare this annual gross income to the income the Primary Lender used when qualifying the
household. The Primary Lender is usually underwriting to FHA or conventional guidelines and
may not calculate the household income or assets in the same way as required by the Program.
Income will be verified by reviewing and documenting tax returns, copies of wage receipts,
subsidy checks, bank statements and third -party verification of employment forms sent to
employers. All documentation shall be dated within six months prior to loan closing and kept in
the applicant file and held in strict confidence.
A. HOUSEHOLD INCOME DEFINITION:
Household income is the annual gross income of all adult household members that is
projected to be received during the coming 12 -month period, and will be used to
determine program eligibility. Refer to Income Inclusions and Exclusions for further
guidance to the types of incomes to be included or excluded when calculating gross
annual income. For those types of income counted, gross amounts (before any
deductions have been taken) are used. Two types of income that are not considered
would be income of minors and live-in aides. Certain other household members living
apart from the household also require special consideration. The household's projected
ability to pay must be used, rather than past earnings, when calculating income.
The link to Annual Income Inclusions and Exclusions is:
http://www.hcd.ca.gov/fa/cdbq/FedProgGuideDocs/AppendixB Annuallncomelnc
IusionsExclusions.doc
B. ASSETS:
There is no asset limitation for participation in the Program. Income from assets,
however, is recognized as part of annual income under the Part 5 definition. An asset is a
cash or non-cash item that can be converted to cash. The value of necessary items such
as furniture and automobiles are not included. (Note: it is the income earned — e.g.
interest on a savings account — not the asset value, which is counted in annual income.)
An asset's cash value is the market value less reasonable expenses required to convert the
asset to cash, including, for example, penalties or fees for converting financial holdings,
and costs for selling real property. The cash value (rather than the market value) of an
item is counted as an asset.
The Link to Asset Inclusions and Exclusions is:
http://www.hcd.ca.qov/fa/cdbq/FedProgGuideDocs/AppendixC Annual1ncomeAs
setlnclusionsExclusions.doc
2.3. DEFINITION OF AN ELIGIBLE HOMEBUYER
For CDBG, an eligible homebuyer means an individual or individuals or an individual and his or
her spouse who meets the income eligibility requirements and is/are not currently on title to real
property. Persons may be on title of a manufactured home unit, who are planning to sell the unit
as part of buying a home located on real property. Documentation of homebuyer status will be
required for all homebuyers. CDBG-funded programs may assist eligible homebuyers who are
not "first-time" homebuyers.
3.0. HOUSING UNIT ELIGIBILITY
3.1. LOCATION AND CHARACTERISTICS
A. Housing units to be purchased must be located within the eligible area. The eligible area
is described as follows: "Within the City of Lodi."
B. Housing unit types eligible for the homebuyer Program are a new or previously owned
single-family residence (one -unit property); a condominium unit, or a manufactured
home in common -interest developments or on a single-family lot and placed on a
permanent foundation system.
C. All housing units must be in compliance with State and local codes and ordinances.
D. Housing units located within a 100 -year flood zone will be required to provide proof of
flood insurance with an endorsement naming the City as loss payee in order to close
escrow.
E. Housing must be "modest", having no more than three bedrooms, two bathrooms, and a
two -car garage. Larger homes are acceptable if necessary for the following reasons:
a. The family size necessitates additional bedroom(s); or
b. A reasonable accommodation is necessary due to the family's disability (e.g. an extra
bedroom for an aide).
Exceptions must be approved by the Loan Committee and must be documented for
monitoring purposes.
3.2. CONDITIONS
A. Construction Inspection and Determining Need for Repairs.
Once the participating homebuyer has executed a purchase agreement for a housing unit,
and prior to a commitment of Program funds, the following steps must be taken for the
housing unit to be eligible for purchase under the Program:
1) When the Sponsor's Program utilizes Federal funds and if the housing unit was
constructed prior to 1978 then the lead-based paint requirements of Section 3.2.0
will apply.
2) The Program Operator, a certified housing inspector, or a Sponsor representative
will walk through the housing unit, determine if it is structurally sound, and
identify any code related and health and safety deficiencies that need to be
corrected. A list of code related repair items will be given to the homebuyers and
their Realtor to be negotiated with the seller. Only new construction and homes
built within the previous 12 months and not previously occupied are not subject
to a home inspection.
3) Upon completion of all work required by the Program Operator, Sponsor,
appraiser, pest inspector and/or certified housing inspector, a final inspection will
be conducted prior to close of escrow. The inspector will sign off on all required
construction work assuring that each housing unit receiving Program assistance is
in compliance with local codes and health and safety requirements at the time of
purchase and prior to occupancy.
B. Lead -Based Paint Hazards: All housing units built prior to 1978 for which HOME or
CDBG funding is anticipated are subject to the requirements of this section 3.2.C. Such
homes must undergo a visual assessment by a person who has taken HUD's online Visual
Assessment course. Deteriorated paint must be stabilized using work safe methods.
Clearance must be obtained after paint stabilization by a DHS certified LBP Risk
Assessor/Inspector. HOME and CDBG general administrative and activity delivery funds
may be used to pay for lead-based paint visual assessments, and if lead mitigation and
clearance costs are incurred, these programs may incorporate the costs into the
calculation of Program assistance.
The following requirements must be met:
1) Notification: a) Prior to homebuyer's obligation to purchase a pre -1978 home,
the Buyer will be given the most recent copy of and asked to read the EPA
pamphlet "Protect Your Family From Lead in Your Home" (EPA 747-K-94-
001). A signed receipt of the pamphlet will be kept in the Sponsor's homebuyer
file; b) A notice to residents is required following a risk assessment/inspection
using form DHS 8552, which is provided by the DHS -certified Risk
Assessor/Inspector; c) a notice to residents is required following lead-based paint
mitigation work using Visual Assessment and Lead-based Paint Notice of
Presumption and Hazard Reduction form, LBP — 1 (Attachment B).
2) Disclosure: Prior to the homebuyer's obligation to purchase a pre -1978 housing
unit, the HUD disclosure (Attachment B), "Seller's Lead-based Paint Disclosure"
notice must be provided by the seller to the homebuyer.
3) Inspections: The Inspector shall conduct a "Visual Assessment" of all the
dwelling unit's painted surfaces in order to identify deteriorated paint. All
deteriorated paint will be stabilized in accordance with CFR 35.1330 (a) and (b);
and a Clearance shall be made in accordance with CFR 35.1340.
4) Mitigation: If stabilization is required, the contractor performing the mitigation
work must use appropriately trained workers. Prior to the contractor starting
mitigation work the Program Operator shall obtain copies of the contractor's and
workers' appropriate proof of LBP training, as applicable to the job in order to
assure that only qualified contractors and workers are allowed to perform the
mitigation.
C. The Program Operator will: 1) confirm that the housing unit is within the eligible area, 2)
will review each proposed housing unit to ensure that it meets all eligibility criteria
before funding, and 3) ensure a completed Lead Compliance Document Checklist is
placed in each purchaser's file.
3.3 ANTI -DISPLACEMENT POLICY AND RELOCATION ASSISTANCE
Eligible homes will be those that are currently owner -occupied or have been vacant for three
months prior to the acceptance of a contract to purchase. A unit is ineligible if its purchase would
result in the displacement of a tenant. It is not anticipated that the implementation of the Program
will result in the displacement of any persons, households, or families. However, if tenant -
occupied homes are included in the Program and relocation becomes necessary, the activity will
be carried out in compliance with Sponsor's relocation plan, which describes how those
permanently displaced will be relocated and paid benefits in accordance with the following
Federal laws.
A. Uniform Relocation Assistance (URA) and Real Property Acquisition Policies Act of
1970
The federal URA and Real Property Acquisition Policies, as amended by the URA
Amendments of 1987, contains requirements for carrying out real property acquisition or
the displacement of a person, regardless of income status, for a project or program for
which HUD financial assistance (including CDBG and HOME) is provided.
Requirements governing real property acquisition are described in Chapter VIII. The
implementing regulations, 49 CFR Part 24, require developers and owners to take certain
steps in regard to tenants of housing to be acquired, rehabbed or demolished, including
tenants who will not be relocated even temporarily.
B. Section104(d) of the Housing and Community Development Act of 1974
Section 104(d) requires each contractor (CHDO or State Recipient), as a condition of
receiving assistance under HOME or CDBG, to certify that it is following a residential
anti -displacement plan and relocation assistance plan. Section 104(d) also requires
relocation benefits to be provided to low-income persons who are physically displaced or
economically displaced as the result of a HOME or CDBG assisted project, and requires
the replacement of low-income housing, which is demolished or converted. The
implementing regulations for Section 104(d) can be found in 24 CFR Part 570(a).
3.4. PROPER NOTIFICATION AND DISCLOSURES
A. Upon selection of a housing unit, a qualified seller and homebuyer will be given the
necessary disclosures for the Program. The homebuyer must have read and signed all
Program disclosure forms. Any and all property disclosures must be reviewed and signed
by the homebuyer and seller.
B. All owners who wish to sell their housing units must receive an acquisition notice prior to
submission of the homebuyer's original offer. This notice will be included in the contract
and must be signed by all owners on title. The disclosure must contain the items listed in
1.3.B. (required for federally -funded programs).
4.0. PURCHASE PRICE LIMITS
There are no purchase price limits under this program.
5.0. THE PRIMARY LOAN
Prior to obtaining a loan from the Sponsor, a homebuyer must provide evidence of financing for
the maximum amount the Primary Lender is willing to loan (the "primary loan").
A. QUALIFYING RATIOS
The front-end (housing) debt -to -income ratio shall not exceed 30% and is the percentage of a
borrower's gross monthly income (before deductions) that would cover the cost of the loan
principal and interest payment, property taxes, property insurance, mortgage insurance, and HOA
dues, if any.
The back -end (total) debt -to -income ratio shall not exceed 45% and is the percentage of a
borrower's gross monthly income that would cover the cost of housing as described in the
paragraph above, plus any other monthly debt payments like car or personal loans and credit card
debt, as well as child support and alimony payments.
B. INTEREST RATE
The primary loan must have a fixed interest rate that does not exceed the current market rate, as
established by an index of the maximum primary rate rule of FNMA 90 -day rate plus 100 bps
(1%), found at the following website:
https://www.efanniemae.com/sf/refmaterials/hrny/index.j sp
No temporary interest rate buy -downs are permitted.
C. LOAN TYPE AND TERM
The primary loan shall be fully amortized and have a term "all due and payable" in no fewer than
30 years (unless conditions under 7.3 are met). There shall not be a balloon payment due before
the maturity date of the Program loan.
D. IMPOUND ACCOUNT
All households will be required to have impound accounts for the payment of taxes and insurance
to ensure they remain current.
6.0. THE PROGRAM LOAN
A. MAXIMUM AMOUNT OF PROGRAM ASSISTANCE
For downpayment assistance only (not closing costs or towards purchase price of home), the
Sponsor is limited to providing no more than 50% of the required downpayment for the home
purchase.
B. NON-RECURRING CLOSING COSTS
Non-recurring costs such as credit report, escrow, closing and recording fees, and title report and
title insurance, title updates and/or related costs may be included in the Program loan.
C. AFFORDABILITY PARAMETERS FOR HOMEBUYERS
The actual amount of a buyer's Program subsidy shall be computed according to the housing ratio
parameters specified in Section 5.0.A.. Each borrower shall receive only the subsidy needed to
allow them to become homeowners ("the Gap") while keeping their housing costs affordable.
The Program Operator will use the "front-end ratio" of housing -expense -to -income to determine
if the amount of the proposed primary loan is acceptable and, ultimately, the Program subsidy
amount required, bridging the gap between the acquisition cost (purchase price plus closing costs)
less down payment, and the amount of the primary loan.
D. RATE AND TERMS FOR PROGRAM LOAN
All Program assistance to individual households shall be made in the form of deferred payment
(interest and principal) loan (DPL).
The Program loan's term shall be for 30 years. Upon 30 years of the date of the signing of the
Loan, a lump sum (balloon payment) of principal and interest will be due.
The Program loan's interest rate shall be 2% simple interest, which accrues annually.
All Program loan payments shall be deferred because the borrowers will have their repayment
ability fully utilized under the primary loan. Loan principal shall not be forgiven, and the loan
period cannot be extended, except for loans that are resubordinated when a rate and term
refinance is approved, per Attachment A.
E. COMBINED LOAN -TO -VALUE RATIO
The loan -to -value ratio for a Program loan, when combined with all other indebtedness to be
secured by the property, shall not exceed 100 percent of the sales price plus a maximum of up to
5 percent of the sales price to cover actual closing costs.
7.0. PROGRAM LOAN REPAYMENT
7.1. PAYMENTS ARE VOLUNTARY
Borrowers may begin making voluntary payments at any time.
7.2. RECEIVING LOAN PAYMENTS
A. Program loan payments will be made to:
City of Lodi
Neighborhood Services Division
221 West Pine Street
Lodi, CA 95241
B. The Sponsor will be the receiver of loan payments or recaptured funds and will maintain
a financial record-keeping system to record payments and file statements on payment
status. Payments shall be deposited and accounted for in the Sponsor's Program Income
Account, as required by HUD programs. The Program lender will accept loan payments
from borrowers prepaying deferred loans, and from borrowers making payments in full
upon sale or transfer of the property. All loan payments are payable to the Sponsor. The
Sponsor may at its discretion, enter into an agreement with a third party to collect and
distribute payments and/or complete all loan servicing aspects of the Program.
7.3. DUE UPON SALE OR TRANSFER
In the event that an owner sells, transfers title, or discontinues residence in the purchased property
for any reason, the principal balance of the Deferred Payment Loan is due and payable, except:
A. The owner shall be assured a fair return on investment including the owner's investment
and any capital improvement. If the Net proceeds are insufficient for the Sponsor to
recapture the balance of Program Loan owed, the Sponsor shall share the Net proceeds
with the owner in proportion to each party's investment in the property. The Net
proceeds are the sales price less repayment of the primary loan, and closing costs.
B. If the owner of the property dies, and the heir to the property meets income requirements,
the First -Time Homebuyer definition, and intends to occupy the home as a principal
residence, the heir may be permitted, upon approval of the Sponsor, to assume the loan at
the rate and terms the heir qualifies for under the current participation guidelines. If the
property owner dies and the heir does not meet eligibility requirements, the loan is due
and payable.
C. If an owner wants to convert the property to a rental unit, or any commercial or non-
residential use, the loan is due and payable.
D. The loan will be in default if the borrower fails to maintain required fire or flood
insurance or fails to pay property taxes. See Attachment A on loan defaults for further
information on property restrictions.
7.4. LOAN SERVICING POLICIES AND PROCEDURES
See Attachment A for local loan servicing policies and procedures. While the attached policy
outlines a system that can accommodate a crisis that restricts borrower repayment ability, it
should in no way be misunderstood: The loan must be repaid. All legal means to ensure the
repayment of a delinquent loan as outlined in the Loan Servicing Policies and Procedures will be
pursued.
7.5. LOAN MONITORING PROCEDURES
Sponsor will monitor Borrowers and their housing units annually to ensure adherence to Program
requirements including, but not limited to, the following:
A. Owner -occupancy
B. Property tax payment
C. Hazard insurance coverage
D. Good standing on Primary loans
E. General upkeep of housing units
8.0. PROGRAM LOAN PROCESSING AND APPROVAL
A. Loan Processing
Per the request of the homebuyer, the City will send out an eligibility packet with all the
necessary forms, disclosures, information, and application. They should submit a
complete application packet with all the Sponsor's Program loan documents executed as
well as all the information from the Primary Lender. The Primary Lender should submit
all documents listed in the Application Transmittal Checklist Form, which includes but is
not limited to: 1) accepted property sales contract with proper seller notification; 2)
mortgage application with good faith estimates and first mortgage disclosures; 3) full
mortgage credit report and rent verification; 4) current third party income verifications
and verifications of assets; 5) homeownership education certificate, if applicable; and 6)
signed underwriting transmittal summary and final signed loan application, both from
primary lender. Staff will work with local lenders to ensure qualified participants receive
only the benefit from the Sponsor's Program needed to purchase the housing unit and that
leveraged funds will be used when possible.
B. Creditworthiness
Qualifying ratios are only a rough guideline in determining a potential borrower's
creditworthiness. Many factors such as excellent or poor credit history, amount of down
payment, and size of loan will influence the decision to approve or disapprove a
particular loan. The borrower's credit history will be reviewed by the Sponsor and
documentation of such maintained in the loan file. The Sponsor may elect to obtain a
credit report or rely on a current copy obtained by the primary lender. As a guide, if the
applicant's middle credit score is less than 610, which is based on certified credit
agencies, including Equifax, Experian, and TransUnion, then consideration of the
additional factors will be evaluated and a determination of creditworthiness will be
approved by the Loan Committee.
Applicant's must allow a certain amount to time pass, after one of the following events:
a. Two years from the date of discharge for Bankruptcy, Chapter 7, or Chapter 13.
b. Three years from the date of foreclosure.
C. Documents from Primary Lender
After initial review of the qualified homebuyer's application packet, which includes both
the Applicant's and the Primary Lender's sections, the Program Operator will request any
additional documents needed. Documents may be faxed, but originals shall be received
through the mail before Program funds are committed to escrow. Based on receipt and
review of the final documents, the Program Operator will do an income certification
(using most recent HUD program's guidance on income calculation and determination),
and homebuyer certification (review of credit report and income taxes). Documentation
of affordability will then be verified and subsidy requirement determined.
D. Disclosure of Program and Loan Information to Homebuyers
The Program's application and disclosure forms will contain a summary of the loan
qualifications of the borrower with and without Program assistance. Housing ratios with
and without Program assistance are also outlined in these guidelines. Information on the
Program's application will be documented with third party verifications in the file. For
example, the sales contact will provide the final purchase price and outline how much of
the closing costs are to be paid by the seller, etc. The appraisal, termite and title report
will provide information to substantiate the information in the sales contract and guide
the construction inspection. The Program loan application will provide current debt and
housing information and will be documented by the credit report and income/asset
verifications. The Primary Lender's approval letter and estimated closing cost statement
should reflect all the information in the loan package and show any contingencies of loan
funding. Reviewing the Primary Lender's loan underwriting documentation will provide
basic information about the qualification of the applicant and substantiate the
affordability provided by the Program loan. By reviewing and crosschecking all the
Primary Lender information, the final Program loan amount approved will fall within the
affordability parameters of the Program.
8.1. COMPLETION OF UNDERWRITING AND APPROVAL OF PROGRAM LOAN
Once the loan approval package has been completed the Program Operator will submit it to the
Sponsor for approval. Sponsor will review the request and may approve it with or without
conditions. Upon approval, a final closing date for escrow is set and Program funds are accessed
for the homebuyer.
8.2. PRIMARY AND PROGRAM LOAN DOCUMENT SIGNING
The homebuyer(s) sign promissory notes, loan agreements, deeds of trust, and statutory lending
notices (Truth In Lending (TIL), etc.); the Deeds of Trust are recorded with the County
Clerk/Recorder at the same time, and the request(s) for copy of Notice of Default are also
recorded with the County Clerk/Recorder.
The City Manager, or their designee, will execute all necessary loan documents, agreements and
instruments on behalf of the Sponsor.
8.3. ESCROW PROCEDURES
The escrow/title company shall review the escrow instruction provided by the Program lender and
shall issue a California Land Title Association (CLTA) and the American Land Title Association
(ALTA) after closing. The CLTA policy is issued to the homebuyer and protects them against
failure of title based on public records and against such unrecorded risks as forgery of a deed.
The ALTA is issued to each lender providing additional coverage for the physical aspects of the
property as well as the homebuyer's title failure. These aspects include anything which can be
determined by only physical inspection, such as correct survey lines; encroachments; mechanics
liens; mining claims and water rights. The Program lender instructs the escrow/title company in
the escrow instructions as to what may show on the policy; the amount of insurance on the policy
(all liens should be covered) and the loss payee (each lender should be listed as a loss payee and
receive an original ALTA).
9.0. SUBORDINATE FINANCING
With today's high costs, in order for a low-income household to obtain a home, several funding
sources might be required. Subordinate loans may be used to cover mortgage subsidy costs that
exceed the Program maximum loan amount. All subordinate liens must have the payments
deferred and the term must be for at least as long as the term of the Program loan.
10.0. EXCEPTIONS AND SPECIAL CIRCUMSTANCES
The Sponsor may make amendments to these Participation Guidelines. Any changes shall be
made in accordance with regulations and approved by the Sponsor's Loan Committee and/or
governing body. Material changes only shall then be sent to HUD for approval.
10.1. DEFINITION OF EXCEPTION
Any case to which a standard policy or procedure, as stated in the guidelines, does not apply or an
applicant treated differently from others of the same class would be an exception.
10.2. PROCEDURES FOR EXCEPTIONAL CIRCUMSTANCES
A. The Sponsor or its agent may initiate consideration of an exception and prepare a
report. This report shall contain a narrative, including the Sponsor's recommended
course of action and any written or verbal information supplied by the applicant.
B. The Sponsor shall make a determination of the exception based on the recommendation
of the Program Operator. The request can be presented to the Sponsor's loan committee
and/or governing body for a decision.
11.0. DISPUTE RESOLUTION AND APPEALS PROCEDURE
Any applicant denied assistance from the Program has the right to appeal. Complaints
concerning the Program should be made to the Program Operator first. If unresolved in this
mariner, the complaint or appeal must be made in writing and filed with the Sponsor. The
Sponsor will then schedule a meeting with the Loan Review Committee. Their written response
will be made within thirty (30) working days. If the applicant is not satisfied with the
Committee's decision, a request for an appeal may be filed with the Sponsor's governing body.
Final appeal must be filed in writing with HUD within one year after denial.
ATTACHMENT A
LOAN SERVICING POLICIES AND PROCEDURES
FOR CITY OF LODI
The City of Lodi, hereafter called "Lender," has adopted these policies and procedures in order to
preserve its financial interest in properties whose "Borrowers" have been assisted with public funds. The
Lender will to the greatest extent possible follow these policies and procedures, but each loan will be
evaluated and handled on a case-by-case basis. The Lender has formulated this document to comply with
state and federal regulations regarding the use of these public funds and any property restrictions, which
are associated with them.
The policies and procedures are broken down into the following areas: 1) making required monthly
payments or voluntary payments on a loan's principal and interest; 2) required payment of property taxes
and insurance; 3) required Request for Notice of Default on all second mortgages; 4) loans with annual
occupancy restrictions and certifications 5) required noticing and limitations on any changes in title or use
of property; 6) required noticing and process for requesting a subordination during a refinance; 7)
processing of foreclosure in case of default on the loan.
1. Loan Repayments:
The Lender will collect monthly payments from those borrowers who are obligated to do so under Notes
which are amortized promissory notes (or Lender will use an appointed loan collection Company to
collect payments). Late fees will be charged for payments received after the assigned monthly due date.
For Notes which are deferred payment loans, the Lender must accept voluntary payments on the loan.
Loan payments will be credited to principal. The Borrower may repay the loan balance at any time with
no penalty.
2. Payment of Property Taxes and Insurance:
As part of keeping the loan from going into default, borrower must maintain property insurance coverage
naming the Lender as loss payee. Except for HOME -funded loans, if borrower fails to maintain the
necessary insurance, the Lender may take out force placed insurance to cover the property while the
Borrower puts a new insurance policy in place. All costs for installing the necessary insurance will be
added to the loan balance at time of installation of Borrower's new insurance.
When a property is located in a 100 -year flood plain, the Borrower will be required to carry the necessary
flood insurance. A certificate of insurance for flood and for standard property insurance with an
endorsement naming the City as lender loss payee will be required at close of escrow. The lender will
verify the insurance on an annual basis.
Property taxes must be kept current during the term of the loan. If the Borrower fails to maintain payment
of property taxes then the lender may pay the taxes current and add the balance of the tax payment plus
any penalties to the balance of the loan (not permissible when funded with HOME). Wherever possible,
the Lender encourages Borrower to have impound accounts set up with their first mortgagee wherein they
pay their taxes and insurance as part of their monthly mortgage payment.
3. Required Request for Notice of Default:
When the Borrower's loan is in second position behind an existing first mortgage, it is the Lender's policy
to prepare and record a "Request for Notice of Default" for each senior lien in front of Lender's loan.
This document requires any senior lienholder listed in the notice to notify the lender of initiation of a
foreclosure action. The Lender will then have time to contact the Borrower and assist them in bringing
the first loan current, if possible. The Lender can also monitor the foreclosure process and go through the
necessary analysis to determine if the loan can be made whole or preserved. When the Lender is in a
third position and receives notification of foreclosure from only one senior lienholder, it is in their best
interest to contact any other senior lienholders regarding the status of their loans.
4. Annual Occupancy Restrictions and Certifications:
On owner -occupant loans, the Lender may require that Borrowers submit utility bills and/or other
documentation every five (5) year to prove occupancy during the term of the loan. For CDBG, some
loans may have income and housing cost evaluations, which require a household to document that they
are not able to make amortized loan payments, typically every five years. These loan terms are
incorporated in the original Note and Deed of Trust.
5. Required Noticing and Restrictions on Any Changes of Title or Occupancy:
In all cases where there is a change in title or occupancy or use, the Borrower must notify the Lender in
writing of any change. Lender and Borrower will work together to ensure the property is kept in
compliance with the original Program terms and conditions such that it remains available as an affordable
home for low-income families. These types of changes are typical when Borrowers do estate planning
(adding a relative to title) or if a Borrower dies and property is transferred to heirs or when the property is
sold or transferred as part of a business transaction. In some cases the Borrower may move and turn the
property into a rental unit without notifying the Lender. Changes in title or occupancy must be in keeping
with the objective of benefit to low-income households (below 80 percent of AMI).
Change from owner -occupant to owner -occupant occurs at a sale. When a new owner -occupant is not
low-income, the loan is not assumable and the loan balance is immediately due and payable. If the new
owner -occupant qualifies as low-income, the purchaser may either pay the loan in full or assume all loan
repayment obligations of the original owner -occupant, subject to the approval of the Lender's Loan
Committee.
If a transfer of the property occurs through inheritance, the heir (as owner -occupant) may be provided the
opportunity to assume the loan at an interest rate based on household size and household income,
provided the heir is income eligible. If the heir intends to occupy the property and is not low-income, the
balance of the loan is due and payable. For CDBG only, if the heir intends to act as an owner -investor
(not permitted under HOME), the balance of the loan may be converted to an owner/investor interest rate
and loan term and a rent limitation agreement is signed and recorded on title. All such changes are
subject to the review and approval of the Lender's Loan Committee.
Change from owner -occupant to owner -investor occurs when an owner -occupant decides to move out and
rent the assisted property, or if the property is sold to an investor. If the owner converts any assisted unit
from owner -occupied to rental, the loan is due in full.
Conversion to use other than residential use is not allowable where the full use of the property is changed
from residential to commercial or other. In some cases, Borrowers may request that the Lender allow for
a partial conversion where some of the residence is used for a business but the household still resides in
the property. Partial conversions can be allowed if it is reviewed and approved by any and all agencies
required by local statute. If the use of the property is converted to a fully non-residential use, the loan
balance is due and payable.
6. Requests for Subordinations:
When a Borrower wishes to refinance their existing first mortgage, they must submit a subordination
request to the Sponsor. The Sponsor will subordinate their loan only when there is no "cash out" as part
of the refinance No cash out means there are no additional charges on the transaction above loan and
escrow closing fees. There can be no third -party debt payoffs or additional encumbrances on the property
above traditional refinance transaction costs. The refinance should lower the existing housing cost of the
household. The total indebtedness on the property should not exceed the current market value except
when the borrower is obtaining a HARP II or other similar federally approved refinance loan. If the
HARP II or other similar financing is approved and meets all other requirements, combined Loan -To -
Value will not be considered when reviewing the subordination request.
Also, the loan must:
1. be fully amortized and have a fixed interest rate that does not exceed the current market rate, as
established by an index of the maximum primary rate rule of FNMA 90 -day rate plus 100 bps
(1%), found at the following website:
https://www.efanniemae.com/sfrefmaterials/hrny/index.jsp
2. not have a temporary interest rate buy -down;
3. have a term "all due and payable" that matures prior to or concurrently with the maturity date of
the Promissory Note. Therefore, the maturity date of the existing Promissory Note should be
modified to coincide with the maturity date of the new first mortgage; and,
4. not have a balloon payment due before the maturity date of the Program loan.
Upon receiving the proper documentation from the refinance lender, the request will be considered by the
loan committee for review and approval. Upon approval, the escrow company will provide the proper
subordination document for execution and recordation by the Sponsor.
7. Process for Loan Foreclosure:
Upon any condition of loan default: 1) non-payment; 2) lack of insurance or property tax payment; 3)
change in title or use without approval; 4) default on senior loans, the Lender will send out a letter to the
Borrower notifying them of the default situation. If the default situation continues then the Lender may
start a formal process of foreclosure.
When a senior lienholder starts a foreclosure process and the Lender is notified via a Request for Notice
of Default, the Lender, who is the junior lienholder, may cancel the foreclosure proceedings by
"reinstating" the senior lienholder. The reinstatement amount or payoff amount must be obtained by
contacting the senior lienholder. This amount will include all delinquent payments, late charges and fees
to date. Lender must confer with Borrower to determine if, upon paying the senior lienholder current, the
Borrower can provide future payments. If this is the case then the Lender may cure the foreclosure and
add the costs to the balance of the loan with a Notice of Additional Advance on the existing note.
If the Lender determines, based on information on the reinstatement amount and status of Borrower, that
bringing the loan current will not preserve the loan, then staff must determine if it is cost effective to
protect their position by paying off the senior lienholder in total and restructure the debt such that the unit
is made affordable to the Borrower. If the Lender does not have sufficient funds to pay the senior
lienholder in full, then they may choose to cure the senior lienholder and foreclose on the property
themselves. As long as there is sufficient value in the property, the Lender can afford to pay for the
foreclosure process and pay off the senior lienholder and retain some or all of their investment.
If the Lender decides to reinstate, the senior lienholder will accept the amount to reinstate the loan up
until five (5) days prior to the set "foreclosure sale date." This "foreclosure sale date" usually occurs
about four (4) to six (6) months from the date of recording of the "Notice of Default." If the Lender fails
to reinstate the senior lienholder before five (5) days prior to the foreclosure sale date, the senior
lienholder would then require a full pay off of the balance, plus costs, to cancel foreclosure. If the Lender
determines the reinstatement and maintenance of the property not to be cost effective and allows the
senior lienholder to complete foreclosure, the Lender's lien may be eliminated due to insufficient sales
proceeds.
Lender as Senior Lienholder
When the Lender is first position as a senior lienholder, active collection efforts will begin on any loan
that is 31 or more days in arrears. Attempts will be made to assist the homeowner in bringing and
keeping the loan current. These attempts will be conveyed in an increasingly urgent manner until loan
payments have reached 90 days in arrears, at which time the Lender may consider foreclosure. Lender's
staff will consider the following factors before initiating foreclosure:
1) Can the loan be cured and can the rates and terms be adjusted to allow for affordable payments
such that foreclosure is not necessary?
2) Can the Borrower refinance with a private lender and pay off the Lender?
3) Can the Borrower sell the property and pay off the Lender?
4) Does the balance warrant foreclosure? (If the balance is under $5,000, the expense to foreclose
may not be worth pursuing.)
5) Will the sales price of home "as is" cover the principal balance owing, necessary advances,
(maintain fire insurance, maintain or bring current delinquent property taxes, monthly yard
maintenance, periodic inspections of property to prevent vandalism, etc.) foreclosure, and
marketing costs?
If the balance is substantial and all of the above factors have been considered, the Lender may opt to
initiate foreclosure. The Borrower must receive, by certified mail, a thirty -day notification of foreclosure
initiation. This notification must include the exact amount of funds to be remitted to the Lender to
prevent foreclosure (such as, funds to bring a delinquent Below Market Interest Rate current or pay off a
Deferred Payment Loan..
At the end of thirty days, the Lender should contact a reputable foreclosure service or local title company
to prepare and record foreclosure documents and make all necessary notifications to the owner and junior
lienholders. The service will advise the Lender of all required documentation to initiate foreclosure (Note
and Deed of Trust usually) and funds required from the owner to cancel foreclosure proceedings. The
service will keep the Lender informed of the progress of the foreclosure proceedings.
When the process is completed, and the property has "reverted to the beneficiary" at the foreclosure sale,
the Lender could sell the home themselves under a homebuyer program or use it for an affordable rental
property managed by a local housing authority or use it for transitional housing facility or other eligible
use. The Lender could contract with a local real estate broker to list and sell the home and use those
funds for program income eligible uses.
ATTACHMENT B
SELLERS LEAD-BASED PAINT DISCLOSURE
Disclosure of Information on Lead -Based Paint and/or Lead -Based Paint Hazards
Lead Warning Statement
Every purchaser of any interest in residential real property on which a residential dwelling was built prior to
1978 is notified that such property may present exposure to lead from lead-based paint that may place young
children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent
neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and
impaired memory. Lead poisoning also poses a particular risk to pregnant women. The seller of any interest in
residential real property is required to provide the buyer with any information on lead-based paint hazards from
risk assessments or inspections in the seller's possession and notify the buyer of any known lead-based paint
hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to
purchase.
Seller's Disclosure
(a) Presence of lead-based paint and/or lead-based paint hazards (check (i) or (ii) below):
(i) Known lead-based paint and/or lead-based paint hazards are present in the housing (explain).
(ii) Seller has no knowledge of lead-based paint and/or lead-based paint hazards in the housing.
(b) Records and reports available to the seller (check (i) or (ii) below):
(i) Seller has provided the purchaser with all available records and reports pertaining to
Lead-based paint and/or lead-based paint hazards in the housing (list documents below).
(ii) Seller has no reports or records pertaining to lead-based paint and/or lead-based
paint hazards in the housing.
Purchaser's Acknowledgment (initial)
(c) Purchaser has received copies of all information listed above.
(d) Purchaser has received the pamphlet Protect Your Family from Lead in Your Home.
(e) Purchaser has (check (i) or (ii) below):
(i) received a 10 -day opportunity (or mutually agreed upon period) to conduct a risk assessment
or inspection for the presence of lead-based paint and/or lead-based paint hazards; or
(ii) waived the opportunity to conduct a risk assessment or inspection for the presence of
Lead-based paint and/or lead-based paint hazards (NOT PERMISSIBLE FOR HOME AND CDBG).
Agent's Acknowledgment (initial)
(f) Agent has informed the seller of the seller's obligations under 42 U.S.C. 4852d and is aware
of his/her responsibility to ensure compliance.
Certification of Accuracy
The following parties have reviewed the information above and certify, to the best of their knowledge, that the
information they have provided is true and accurate.
Seller Date Seller Date
Purchaser Date Purchaser Date
Agent Date Agent Date
ATTACHMENT C
Disclosure to Seller with Voluntary, Arm's Length Purchase Offer
DECLARATION
This is to inform you that would like to purchase the property, located at _
, if a satisfactory agreement can be reached. We are prepared to pay
$ for a clear title to the property under conditions described in the attached proposed
contract of sale.
Because Federal funds may be used in the purchase, however, we are required to disclose to you the
following information:
1. The sale is voluntary. If you do not wish to sell, the buyer, , thru
the agency, will not acquire your property. The buyer does
not have the power of eminent domain to acquire your property by condemnation (i.e.
eminent domain) and the agency/Sponsor will not
use the power of eminent domain to acquire the property.
2. The estimated fair market value of the property is $ and was estimated by
, to be finally determined by a professional
appraiser prior to close of escrow.
Since the purchase would be a voluntary, arms length, transaction you would not be eligible for
relocation payments or other relocation assistance under the Uniform Relocation Assistance and
Real Property Acquisition Policies Act of 1970 (URA), or any other law or regulation. Also, as
indicated in the contract of sale, this offer is made on the condition that no tenant will be
permitted to occupy the property before the sale is completed.
Again, please understand that if you do not wish to sell your property, we will take no further
action to acquire it. If you are willing to sell the property under the conditions described in the
attached contract of sale, please sign the contract and return it to us at:
. If you have any questions about this
matter, please contact at
Sincerely,
Title
Buyer Date
Buyer Date
Form continues on next page with Seller's Acknowledgment
Disclosure to Seller with Voluntary, Arm's Length Purchase Offer (Page 2)
Acknowledgement
As the Seller Uwe understand that the will inspect the property for health and
safety deficiencies. Uwe also understand that public funds may be involved in this transaction and, as
such, if the property was built before 1978, a lead-based paint disclosure must be signed by both the buyer
and seller, and that a Visual Assessment will be conducted to determine the presence of deteriorated paint.
As the Seller, Uwe understand that under the City's program, the property must be currently owner -
occupied, vacant for three months at the time of submission of purchase offer, new (never occupied), or
renter purchasing the unit. Uwe hereby certify that the property is:
❑ Vacant at least 3 months; ❑ Owner -occupied; ['New; or ['Being Purchased by Occupant
I/we hereby certify that I have read and understand this "Declaration" and n a copy of said Notice
was given to me prior to the offer to purchase. If received after presentation of the purchase offer,
I/We choose ❑ to withdraw or ❑ not to withdraw, from the Purchase Agreement.
Seller Date
Seller Date
ATTACHMENT D
LEAD-BASED PAINT
VISUAL ASSESSMENT, NOTICE OF PRESUMPTION, AND HAZARD REDUCTION FORM
Section 1: Background Information
Property Address:
No LBP found or LBP exempt 0
Select one:
Visual Assessment 0
Presumption 0
Hazard Reduction 0
Section 2: Visual Assessment. Fill out Sections 1, 2, and 6. If paint stabilization is performed, also fill out
Sections 4 and 5 after the work is completed.
Visual Assessment Date:
Report Date:
Check if no deteriorated paint found •
Lead-based paint is presumed to be present • and/or Lead-based paint hazards are presumed to be present
Attachment A: Summary where deteriorated paint was found.
Section 3: Notice of Presumption. Fill out Sections 1, 3, 5, and 6. Provide to occupant w/in 15 days of
presumption.
Date of Hazard Reduction Notice:
Date of Presumption Notice:
Start & Completion Dates:
Lead-based paint is presumed to be present • and/or Lead-based paint hazards are presumed to be present
•
Attachment B: Summary of Presumption:
Attachment D: Location of building components with
where activities were conducted.
Section 4: Notice of Lead -Based Paint Hazard Reduction Activity. Fill out Sections 1, 4, 5, and 6. Provide
to occupant w/in 15 days of after work completed.
Date of Hazard Reduction Notice:
Initial Hazard Reduction Notice? Yes • No •
Start & Completion Dates:
If "No", dates of previous Hazard Reduction Activity Notices:
Attachment C: Activity locations and types.
Attachment D: Location of building components with
where activities were conducted.
lead-based paint remaining in the rooms, spaces or areas
Attachment E: Attach clearance report(s), using DHS form 8552 (and 8551 for abatement activities)
Section 5: Resident Receipt of Notice for Presumption or Lead -Based Paint Hazard Reduction Activity
Printed Name:
Signature:
Date:
Section 6: Contact Information
Organization:
Contact Name:
Contact Signature:
Date:
Address:
Phone:
ATTACHMENT E
Homebuyer Program Lead Compliance Document Checklist
The following documents should be in each Homebuyer unit file to document
compliance with the lead requirements:
Document Name
Purpose
Lead Safe Housing Rule Screening Sheet
Documents
exemptions
Physical inspection form (HQS or equivalent)
Documents visual
assessment results
Seller Certification
Seller certifies that
paint was stabilized
by qualified workers
and that safe work
practices were
followed during paint
stabilization
Clearance Report and Clearance Review Worksheet
Documents that unit
passed clearance
Disclosure Form
Documents that
buyer received
disclosure and
pamphlet.
Lead Hazard Reduction Notice
Documents that
buyer received
required lead hazard
reduction notification.
This was taken from the HUD Website at:
http://www.hud.gov/offices/cpd/affordablehousing/training/leadsafe/usefulforms/index.cf
m#crosscutting
RESOLUTION NO. 2016-184
A RESOLUTION OF THE LODI CITY COUNCIL APPROVING PROGRAM
GUIDELINES FOR A FIRST TIME HOME BUYER PROGRAM
WHEREAS, the Department of Housing and Urban Development (HUD) has determined
that the City of Lodi, California, is entitled to Community Development Block Grant (CDBG)
funds as an entitlement community; and
WHEREAS, CDBG funds are to be used for the purposes set forth in Title I of the
Housing and Community Development Act of 1974 (HCDA) to provide decent housing, a
suitable living environment, and expanding economic opportunities, principally for persons of
low- and moderate -income; and
WHEREAS, under the provisions at 24 CFR §570.201(n), grantees may provide financial
assistance to low- and moderate -income households to assist them in the purchase of a home;
and
WHEREAS, there is a significant need to provide this service to low-income homebuyers
within our community and the CDBG Program provides the best options for implementing such
a program.
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby approve
the Program Guidelines, as attached hereto as Exhibit A, for the First Time Home Buyer
Program that is to be funded through the City of Lodi's CDBG Program; and
BE IT FURTHER RESOLVED that the Lodi City Council hereby authorizes the
City Manager, or his designee, to execute all necessary loan documents, agreements, and
instruments for First Time Home Buyer Program loans up to $25,000.
Dated: October 19, 2016
I hereby certify that Resolution No. 2016-184 was passed and adopted by the Lodi City
Council in a regular meeting held October 19, 2016, by the following vote:
AYES: COUNCIL MEMBERS — Johnson, Kuehne, Mounce, and Nakanishi
NOES: COUNCIL MEMBERS — None
ABSENT: COUNCIL MEMBERS — Mayor Chandler
ABSTAIN: COUNCIL MEMBERS — None
2016-184
NIFER
ity Clerk
. FERRAIOLO
City of Lodi
First -Time Homebuyer Loan
Program Guidelines
muni �uwra :c
l]AAL7HTl1N li �'
For:
C�
Community Development Block Grant (CDBG) Program
Serving the City of Lodi, a HUD Entitlement Community
CITY OF LODI
FIRST-TIME HOMEBUYER LOAN PROGRAM GUIDELINES
1.0. GENERAL
The City of Lodi, hereinafter referred to as the "Sponsor," has received Community Development
Block Grant (CDBG) funds from the United States Department of Housing and Urban
Development (HUD), as an entitlement jurisdiction, to administer a homebuyer program. The
homebuyer program described herein (the "Program") is designed to provide assistance to eligible
homebuyers in purchasing homes, also referred to herein as "housing units", located within the
Program's eligible area, as described in Section 3.1.A. The Program provides this assistance in
the form of deferred payment "silent" second priority loans as "gap" financing toward the
purchase price, downpayment, and/or closing costs of affordable housing units that will be
occupied by the homebuyers as their primary residence. The Program will be administered by
City of Lodi's Neighborhood Services Manager and designee (the "Program Operator").
1.1. PROGRAM OUTREACH AND MARKETING
All outreach efforts will be done in accordance with state and federal fair lending regulations to
assure nondiscriminatory treatment, outreach and access to the Program. No person shall, on the
grounds of age, ancestry, color, creed, physical or mental disability or handicap, marital or
familial status, medical condition, national origin, race, religion, gender or sexual orientation be
excluded, denied benefits or subjected to discrimination under the Program. The Sponsor will
ensure that all persons, including those qualified individuals with handicaps, have access to the
Program.
A. The Fair Housing Lender and Accessibility logos will be placed on all outreach materials.
Fair housing marketing actions will be based upon a characteristic analysis comparison
(census data may be used) of the Program's eligible area compared to the ethnicity of the
population served by the Program (includes, separately, all applications given out and
those receiving assistance) and an explanation of any underserved segments of the
population. This information is used to show that protected classes (age, gender,
ethnicity, race, and disability) are not being excluded from the Program. Flyers or other
outreach materials, in English and any other language that is the primary language of a
significant portion of the area residents, will be widely distributed in the Program -eligible
area and will be available to any local social service agencies. The Program may sponsor
homebuyer classes to help educate homebuyers about the home buying process and future
responsibilities. Persons who have participated in local homebuyer seminars may be
notified about the Program.
B. The Program Operator will work with local real estate agents and primary lenders to
explain the Program requirements for eligible housing units and homebuyers, and to
review Program processes. Local real estate agents and primary lenders will also be
encouraged to have their customers participate in the Program.
C. Section 504 of the Rehabilitation Act of 1973 prohibits the exclusion of an otherwise
qualified individual, solely by reason of disability, from participation under any program
receiving Federal funds. The Program Sponsor will take appropriate steps to ensure
effective communication with disabled housing applicants, residents and members of the
public.
1.2. APPLICATION PROCESS AND SELECTION
A. The potential Applicant (homebuyer) should contact the City of Lodi, Neighborhood
Services Division at 209-333-6800 extension 2467, to obtain program information,
determine whether they meet basic program qualifications and to obtain the required
application.
B. Applicant must complete homebuyer -counseling provided by a HUD -approved Homebuyer
Education program, and receive a certificate of completion from the workshop provider.
More details about what homebuyer counseling qualifies is described in Section 1.5
Homebuyer Education below.
C. Applicant may wish to pre -qualify for a first mortgage loan. Any reputable lender can
participate in the program.
D. Applicant shops for a home and enters into a purchase contract for a home. A real estate
agent can assist the Applicant in selecting a home and executing the purchase contract. The
purchase offer must allow for the Program Operator's review of the home inspection report.
E. If not already pre -qualified, the Applicant works with the lender to qualify for a first
mortgage.
F. The Applicant will work with the first mortgage lender for completion of the Program
application package and the first mortgage lender will submit the application to the City.
a. The application will include attachments, including Sellers Lead -Based Paint
Disclosure and the EPA Booklet (Attachment A- Protect Your Family from Lead in
Your Home_ and a confirmation that the homebuyer has reviewed/understands
them.
b. Completed applications are processed on a first -come -first-served basis.
Applications are deemed complete only if all information is completed, the
application is signed and dated. Incomplete applications are returned and will not be
date/time stamped until complete.
G. Once completed, the Program Operator will review loan application package for eligibility
and will notify the lender of any additional documents that are required. Once the
applicant's eligibility is confirmed, they will be provided an eligibility -approval letter.
a. If the Program Operator encounters material discrepancies and/or
misrepresentations, and/or there are income, asset, household composition, or other
important questions that can't be resolved, the Sponsor reserves the right to deny
assistance to the household. In this case, the applicant may re -apply after six
months have elapsed from the time of written assistance denial.
H. Should the Applicant experience any material change in income, assets, household
composition, or other eligibility determination occurring after application submittal, but
prior to closing, they shall immediately report this to the first lender and Sponsor for review.
I. Upon receipt of appraisal and inspection reports (e.g. termite inspection, professional home
inspection), Program Operator will review the reports and provide a written list of any
repairs that will be required.
J. A report is submitted to the Program's Loan Committee for loan approval.
K. Once the loan is approved by the Loan Committee, the Sponsor will issue a conditional letter
of funding commitment that is good for 30 days and will prepare the necessary loan
documents and will meet with the Applicant to sign loan documents.
L. The City Manager, or their designee, will execute all necessary loan documents, agreements
and instruments on behalf of the Sponsor.
M. Subsequently, funds will be provided to the escrow or title company for the home purchase.
N. Escrow agent shall record the Program's Deed of Trust and the Declaration of Conditions,
Covenants, and Restrictions, and shall send original documents to the Sponsor within seven
(7) working days from the date of the closure.
O. If there are any cancellations or disqualifications of the first mortgage loan the lender shall
immediately notify the Sponsor in writing and shall include the reason for this action.
1.3. THE HOME PURCHASE PROCESS
A. The housing unit selection process will be conducted by the homebuyers. Prior to
making an offer to purchase an eligible housing unit (see Section 3.0), homebuyer shall
provide seller with a disclosure containing the following provisions, and obtain Sellers's
confirmation of receipt of these provisions (Attachment C):
1) Homebuyer has no power of eminent domain and, therefore, will not acquire the
property if negotiations fail to result in an amicable agreement; and
2) Homebuyer's offer is an estimate of the fair market value of the housing unit, to
be finally determined by a state licensed appraiser;
3) The housing unit will be subject to inspection. The housing unit must comply
with local codes at the time of construction and local health and safety standards.
4) All housing units built prior to January 1, 1978 will require a lead paint
disclosure to be signed by both the homebuyer and Seller (Attachment B);
5) Since the purchase would be voluntary, the seller would not be eligible for
relocation payments or other relocation assistance;
6) The seller understands that the housing unit must be either: currently owner -
occupied, newly constructed, or vacant for three months prior to submission of
the purchase offer.
7) If the seller is not provided with a statement of the above six provisions prior to
the purchase offer, the seller may withdraw from the agreement after this
information is provided.
B. Applicant will execute a standard form purchase and sale agreement. The purchase and
sale agreement will be contingent on the household and housing unit meeting Program
eligibility requirements and receiving Program loan approval.
C. The Primary Lender completes and submits the Application to the Program Operator,
who will verify applicant eligibility, housing unit and loan eligibility and amount of
assistance to be provided consistent with these guidelines.
D. Program Operator, where Program Operator is not the Sponsor, submits
recommendation to the Loan Committee for approval or denial, including the reasons for
the recommendation. The Loan Committee determines Applicant's approval or denial,
and instructs Program Operator to notify Applicant. Program Operator provides written
notification to Applicant of approval or denial with reason and, if denied, a copy of the
Program's appeal procedures.
E. When Primary Lender requirements are met, Program funds are deposited into escrow,
with required closing instructions and loan documents.
F. At the time of escrow closing, the Sponsor shall be named as an additional loss payee on
fire, flood (if required), and extended coverage insurance for the length of the loan and
in an amount sufficient to cover all encumbrances or full replacement cost of the
housing unit. A policy of Title Insurance naming the Sponsor as insured is also required.
1.4. HOMEBUYER COSTS
A. Eligible households must document that they have the funds necessary for down payment
and closing costs as required by the Primary Lender and the Sponsor. The Program's
down payment requirement (below) is in place even if the Primary Lender has a lower
down payment requirement. If the Primary Lender has a higher down payment
requirement, there is no additional down payment requirement required by the Program.
B. Homebuyer must contribute a minimum down payment of two percent (2%) of the
purchase price, but may contribute more if desired.
C. Sponsor will not provide a subsidy that is greater than the amount of the primary
mortgage, and at a maximum of $25,000. The subsidy will write down the cost of the
primary lender's loan so that the payments of PITI are no more than 31% of the gross
household income. The Program Operator will determine the level of subsidy and
affordability during underwriting of the Program's loan to make sure that it conforms to
the requirements of the CDBG funding Program.
1.5. HOMEBUYER EDUCATION
Buying a home can be one of the most confusing and complicated transactions anyone can make.
Providing the future homebuyer with informative homebuyer education training, can bring
success to the Sponsor, Program Operator, the Program and most importantly, the homebuyer. It
has been documented that first-time homebuyers that have had homebuyer education have the
ability to handle problems that occur with homeownership. All Program participants are required
to attend a HUD -approved homebuyer education class. The homebuyer education class will
cover such topics as the following: preparing for homeownership; available financing; credit
analysis; loan closing; homeownership responsibilities; home maintenance; impact of refinancing
and loan servicing. Methods of homebuyer counseling and education may include, but are not
limited to: one-on-one counseling between homebuyer, counselor and family/individual and/or
group workshops and informational sessions. Tools of instruction may include fliers, brochures,
power point presentations, worksheets, etc. If Applicant is unsure whether their homebuyer
counseling meets the above requirements, they can contact the Neighborhood Services Division
to confirm that it is approved under this Program.
1.6. CONFLICT OF INTEREST REQUIREMENTS
When the Sponsor's program contains Federal funds, the applicable Conflict of Interest
requirements of 24 CFR Section 570.611 shall be followed for CDBG assistance. Section 92.356
of the HOME Final Rule shall be followed for HOME assistance, as follows:
(a) Conflicts prohibited. No persons described in paragraph (b) of this section who exercises or
has exercised any functions or responsibilities with respect to activities assisted with HOME
funds or who are in a position to participate in a decision making process or gain inside
information with regard to these activities, may obtain a financial interest or benefit from a
HOME -assisted activity, or have a financial interest in any contract, subcontract or agreement
with respect to the HOME -assisted activity, or the proceeds from such activity, either for
themselves or those with whom they have business or immediate family ties, during their tenure
or for one year thereafter. Immediate family ties include (whether by blood, marriage or
adoption) the spouse, parent (including stepparent), child (including stepchild), brother, sister
(including a stepbrother or stepsister), grandparent, grandchild and in-laws of a covered person.
(b) Persons covered. The conflict of interest provisions of paragraph (a) of this section apply to
any person who is an employee, agent, consultant, officer, or elected official or appointed official
of the participating jurisdiction, State recipient, or subrecipient which are receiving HOME funds.
(c) Exceptions: Threshold requirements. Upon the written request of the participating jurisdiction
to HCD, HUD may grant an exception to the provisions of paragraph (a) of this section on a case-
by-case basis when it determines that the exception will serve to further the purposes of the
HOME Investment Partnerships Program and the effective and efficient administration of the
participating jurisdiction's program or project. See 24 CFR 92.356(d)(1-6) for details on the
documentation needed in order to submit an exception request to HUD.
1.7. NON-DISCRIMINATION REQUIREMENTS
The Program will be implemented in ways consistent with the Sponsor's commitment to non-
discrimination. No person shall be excluded from participation in, denied the benefit of, or be
subject to discrimination under any program or activity funded in whole or in part with State
funds on the basis of his or her religion or religious affiliation, age, race, color, creed, gender,
sexual orientation, marital status, familial status (children), physical or mental disability, national
origin, or ancestry, or other arbitrary cause.
2.0 APPLICANT QUALIFICATIONS
2.1. CURRENT INCOME LIMITS FOR THE AREA, BY HOUSEHOLD SIZE
All applicants must certify that they meet the household income eligibility requirements for the
applicable CDBG program(s) and have their household income documented. The income limits
in place at the time of loan approval will apply when determining applicant income eligibility.
All applicants must have incomes at or below 80% of the County's area median family income
(MFI), adjusted for household size, as published by HUD.
Household: Means one or more persons who will occupy a housing unit. Unborn children do not
count in family size determination.
Annual Income: Generally, the gross amount of income of all adult household members that is
anticipated to be received during the coming 12 -month period.
2.2. INCOME QUALIFICATION CRITERIA
Projected annual gross income of the applicant household will be used to determine whether they
are above or below the published HUD income limits. Income qualification criteria, as shown in
the most recent HCD program -specific guidance at
http:llwww.hcd.ca.govlfalcdbg/GuideFedPrograms.html, will be followed to independently
determine and certify the household's annual gross income. The Program Operator should
compare this annual gross income to the income the Primary Lender used when qualifying the
household. The Primary Lender is usually underwriting to FHA or conventional guidelines and
may not calculate the household income or assets in the same way as required by the Program.
Income will be verified by reviewing and documenting tax returns, copies of wage receipts,
subsidy checks, bank statements and third -party verification of employment forms sent to
employers. All documentation shall be dated within six months prior to loan closing and kept in
the applicant file and held in strict confidence.
A. HOUSEHOLD INCOME DEFINITION:
Household income is the annual gross income of all adult household members that is
projected to be received during the coming 12 -month period, and will be used to
determine program eligibility. Refer to Income Inclusions and Exclusions for further
guidance to the types of incomes to be included or excluded when calculating gross
annual income. For those types of income counted, gross amounts (before any
deductions have been taken) are used. Two types of income that are not considered
would be income of minors and live-in aides. Certain other household members living
apart from the household also require special consideration. The household's projected
ability to pay must be used, rather than past earnings, when calculating income.
The link to Annual Income Inclusions and Exclusions is:
http:/fwww.hcd.ca.govffa/cdbg/FedProQGuideDocs/AgpendixB Annuallncomelnc
IusionsExclusions.doc
B. ASSETS:
There is no asset limitation for participation in the Program. Income from assets,
however, is recognized as part of annual income under the Part 5 definition. An asset is a
cash or non-cash item that can be converted to cash. The value of necessary items such
as furniture and automobiles are not included. (Note: it is the income earned — e.g.
interest on a savings account — not the asset value, which is counted in annual income.)
An asset's cash value is the market value less reasonable expenses required to convert the
asset to cash, including, for example, penalties or fees for converting financial holdings,
and costs for selling real property. The cash value (rather than the market value) of an
item is counted as an asset.
The Link to Asset Inclusions and Exclusions is:
http://www.hcd.ca.govffa/cdbn/FedProgGuideDacs/AppendixC AnnuallncomeAs
sett ncl usionsExdusi ons. doc
2.3. DEFINITION OF AN ELIGIBLE HOMEBUYER
For CDBG, an eligible homebuyer means an individual or individuals or an individual and his or
her spouse who meets the income eligibility requirements and is/are not currently on title to real
property. Persons may be on title of a manufactured home unit, who are planning to sell the unit
as part of buying a home located on real property. Documentation of homebuyer status will be
required for all homebuyers. CDBG-funded programs may assist eligible homebuyers who are
not "first-time" homebuyers.
3.0. HOUSING UNIT ELIGIBILITY
3.1. LOCATION AND CHARACTERISTICS
A. Housing units to be purchased must be located within the eligible area. The eligible area
is described as follows: "Within the City of Lodi."
B. Housing unit types eligible for the homebuyer Program are a new or previously owned
single-family residence (one -unit property); a condominium unit, or a manufactured
home in common -interest developments or on a single-family lot and placed on a
permanent foundation system.
C. All housing units must be in compliance with State and local codes and ordinances.
D. Housing units located within a 100 -year flood zone will be required to provide proof of
flood insurance with an endorsement naming the City as loss payee in order to close
escrow.
E. Housing must be "modest", having no more than three bedrooms, two bathrooms, and a
two -car garage. Larger homes are acceptable if necessary for the following reasons:
a. The family size necessitates additional bedroom(s); or
b. A reasonable accommodation is necessary due to the family's disability (e.g. an extra
bedroom for an aide).
Exceptions must be approved by the Loan Committee and must be documented for
monitoring purposes.
3.2. CONDITIONS
A. Construction Inspection and Determining Need for Repairs.
Once the participating homebuyer has executed a purchase agreement for a housing unit,
and prior to a commitment of Program funds, the following steps must be taken for the
housing unit to be eligible for purchase under the Program:
1) When the Sponsor's Program utilizes Federal funds and if the housing unit was
constructed prior to 1978 then the lead-based paint requirements of Section 3.2.0
will apply.
2) The Program Operator, a certified housing inspector, or a Sponsor representative
will walk through the housing unit, determine if it is structurally sound, and
identify any code related and health and safety deficiencies that need to be
corrected. A list of code related repair items will be given to the homebuyers and
their Realtor to be negotiated with the seller. Only new construction and homes
built within the previous 12 months and not previously occupied are not subject
to a home inspection.
3) Upon completion of all work required by the Program Operator, Sponsor,
appraiser, pest inspector and/or certified housing inspector, a final inspection will
be conducted prior to close of escrow. The inspector will sign off on all required
construction work assuring that each housing unit receiving Program assistance is
in compliance with local codes and health and safety requirements at the time of
purchase and prior to occupancy.
B. Lead -Based Paint Hazards: All housing units built prior to 1978 for which HOME or
CDBG funding is anticipated are subject to the requirements of this section 3.2.C. Such
homes must undergo a visual assessment by a person who has taken HUD's online Visual
Assessment course. Deteriorated paint must be stabilized using work safe methods.
Clearance must be obtained after paint stabilization by a DHS certified LBP Risk
Assessor/Inspector. HOME and CDBG general administrative and activity delivery funds
may be used to pay for lead-based paint visual assessments, and if lead mitigation and
clearance costs are incurred, these programs may incorporate the costs into the
calculation of Program assistance.
The following requirements must be met:
1) Notification: a) Prior to homebuyer's obligation to purchase a pre -1978 home,
the Buyer will be given the most recent copy of and asked to read the EPA
pamphlet "Protect Your Family From Lead in Your Home" (EPA 747-K-94-
001). A signed receipt of the pamphlet will be kept in the Sponsor's homebuyer
file; b) A notice to residents is required following a risk assessment/inspection
using form DHS 8552, which is provided by the DHS -certified Risk
Assessor/Inspector; c) a notice to residents is required following lead-based paint
mitigation work using Visual Assessment and Lead-based Paint Notice of
Presumption and Hazard Reduction form, LBP — 1 (Attachment B).
2) Disclosure: Prior to the homebuyer's obligation to purchase a pre -1978 housing
unit, the HUD disclosure (Attachment B), "Seller's Lead-based Paint Disclosure"
notice must be provided by the seller to the homebuyer.
3) Inspections: The Inspector shall conduct a "Visual Assessment" of all the
dwelling unit's painted surfaces in order to identify deteriorated paint. All
deteriorated paint will be stabilized in accordance with CFR 35.1330 (a) and (b);
and a Clearance shall be made in accordance with CFR 35.1340.
4) Mitigation: If stabilization is required, the contractor performing the mitigation
work must use appropriately trained workers. Prior to the contractor starting
mitigation work the Program Operator shall obtain copies of the contractor's and
workers' appropriate proof of LBP training, as applicable to the job in order to
assure that only qualified contractors and workers are allowed to perform the
mitigation.
C. The Program Operator will: 1) confirm that the housing unit is within the eligible area, 2)
will review each proposed housing unit to ensure that it meets all eligibility criteria
before funding, and 3) ensure a completed Lead Compliance Document Checklist is
placed in each purchaser's file.
3.3 ANTI -DISPLACEMENT POLICY AND RELOCATION ASSISTANCE
Eligible homes will be those that are currently owner -occupied or have been vacant for three
months prior to the acceptance of a contract to purchase. A unit is ineligible if its purchase would
result in the displacement of a tenant. It is not anticipated that the implementation of the Program
will result in the displacement of any persons, households, or families. However, if tenant -
occupied homes are included in the Program and relocation becomes necessary, the activity will
be carried out in compliance with Sponsor's relocation plan, which describes how those
permanently displaced will be relocated and paid benefits in accordance with the following
Federal laws.
A. Uniform Relocation Assistance (URA) and Real Property Acquisition Policies Act of
1970
The federal URA and Real Property Acquisition Policies, as amended by the URA
Amendments of 1987, contains requirements for carrying out real property acquisition or
the displacement of a person, regardless of income status, for a project or program for
which HUD financial assistance (including CDBG and HOME) is provided.
Requirements governing real property acquisition are described in Chapter VIII. The
implementing regulations, 49 CFR Part 24, require developers and owners to take certain
steps in regard to tenants of housing to be acquired, rehabbed or demolished, including
tenants who will not be relocated even temporarily.
B. Section104(d) of the Housing and Community Development Act of 1974
Section 104(d) requires each contractor (CHDO or State Recipient), as a condition of
receiving assistance under HOME or CDBG, to certify that it is following a residential
anti -displacement plan and relocation assistance plan. Section 104(d) also requires
relocation benefits to be provided to low-income persons who are physically displaced or
economically displaced as the result of a HOME or CDBG assisted project, and requires
the replacement of low-income housing, which is demolished or converted. The
implementing regulations for Section 104(d) can be found in 24 CFR Part 570(a).
3.4. PROPER NOTIFICATION AND DISCLOSURES
A. Upon selection of a housing unit, a qualified seller and homebuyer will be given the
necessary disclosures for the Program. The homebuyer must have read and signed all
Program disclosure forms. Any and all property disclosures must be reviewed and signed
by the homebuyer and seller.
B. All owners who wish to sell their housing units must receive an acquisition notice prior to
submission of the homebuyer's original offer. This notice will be included in the contract
and must be signed by all owners on title. The disclosure must contain the items listed in
1.3.B. (required for federally -funded programs).
4.0. PURCHASE PRICE LIMITS
There are no purchase price limits under this program.
5.0. THE PRIMARY LOAN
Prior to obtaining a loan from the Sponsor, a homebuyer must provide evidence of financing for
the maximum amount the Primary Lender is willing to loan (the "primary loan").
A. QUALIFYING RATIOS
The front-end (housing) debt -to -income ratio shall not exceed 30% and is the percentage of a
borrower's gross monthly income (before deductions) that would cover the cost of the loan
principal and interest payment, property taxes, property insurance, mortgage insurance, and HOA
dues, if any.
The back -end (total) debt -to -income ratio shall not exceed 45% and is the percentage of a
borrower's gross monthly income that would cover the cost of housing as described in the
paragraph above, plus any other monthly debt payments like car or personal loans and credit card
debt, as well as child support and alimony payments.
B. INTEREST RATE
The primary loan must have a fixed interest rate that does not exceed the current market rate, as
established by an index of the maximum primary rate rule of FNMA 90 -day rate plus 100 bps
(1 %), found at the following website:
https:f/www.c fanniemae.com/sf/refmaterials/hrny/index jsp
No temporary interest rate buy -downs are permitted.
C. LOAN TYPE AND TERM
The primary loan shall be fully amortized and have a term "all due and payable" in no fewer than
30 years (unless conditions under 7.3 are met). There shall not be a balloon payment due before
the maturity date of the Program loan.
D. IMPOUND ACCOUNT
All households will be required to have impound accounts for the payment of taxes and insurance
to ensure they remain current.
6.0. THE PROGRAM LOAN
A. MAXIMUM AMOUNT OF PROGRAM ASSISTANCE
For downpayment assistance only (not closing costs or towards purchase price of home), the
Sponsor is limited to providing no more than 50% of the required downpayment for the home
purchase.
B. NON-RECURRING CLOSING COSTS
Non-recurring costs such as credit report, escrow, closing and recording fees, and title report and
title insurance, title updates and/or related costs may be included in the Program loan.
C. AFFORDABILITY PARAMETERS FOR HOMEBUYERS
The actual amount of a buyer's Program subsidy shall be computed according to the housing ratio
parameters specified in Section 5.0.A.. Each borrower shall receive only the subsidy needed to
allow them to become homeowners ("the Gap") while keeping their housing costs affordable.
The Program Operator will use the "front-end ratio" of housing -expense -to -income to determine
if the amount of the proposed primary loan is acceptable and, ultimately, the Program subsidy
amount required, bridging the gap between the acquisition cost (purchase price plus closing costs)
less down payment, and the amount of the primary loan.
D. RATE AND TERMS FOR PROGRAM LOAN
All Program assistance to individual households shall be made in the form of deferred payment
(interest and principal) loan (DPL).
The Program loan's term shall be for 30 years. Upon 30 years of the date of the signing of the
Loan, a lump sum (balloon payment) of principal and interest will be due.
The Program loan's interest rate shall be 2% simple interest, which accrues annually.
All Program loan payments shall be deferred because the borrowers will have their repayment
ability fully utilized under the primary loan. Loan principal shall not be forgiven, and the loan
period cannot be extended, except for loans that are resubordinated when a rate and term
refinance is approved, per Attachment A.
E. COMBINED LOAN -TO -VALUE RATIO
The loan -to -value ratio for a Program loan, when combined with all other indebtedness to be
secured by the property, shall not exceed 100 percent of the sales price plus a maximum of up to
5 percent of the sales price to cover actual closing costs.
7.0. PROGRAM LOAN REPAYMENT
7.1. PAYMENTS ARE VOLUNTARY
Borrowers may begin making voluntary payments at any time.
7.2. RECEIVING LOAN PAYMENTS
A. Program loan payments will be made to:
City of Lodi
Neighborhood Services Division
221 West Pine Street
Lodi, CA 95241
B. The Sponsor will be the receiver of loan payments or recaptured funds and will maintain
a financial record-keeping system to record payments and file statements on payment
status. Payments shall be deposited and accounted for in the Sponsor's Program Income
Account, as required by HUD programs. The Program lender will accept loan payments
from borrowers prepaying deferred loans, and from borrowers making payments in full
upon sale or transfer of the property. All loan payments are payable to the Sponsor. The
Sponsor may at its discretion, enter into an agreement with a third party to collect and
distribute payments and/or complete all loan servicing aspects of the Program.
7.3. DUE UPON SALE OR TRANSFER
In the event that an owner sells, transfers title, or discontinues residence in the purchased property
for any reason, the principal balance of the Deferred Payment Loan is due and payable, except:
A. The owner shall be assured a fair return on investment including the owner's investment
and any capital improvement. If the Net proceeds are insufficient for the Sponsor to
recapture the balance of Program Loan owed, the Sponsor shall share the Net proceeds
with the owner in proportion to each party's investment in the property. The Net
proceeds are the sales price less repayment of the primary loan, and closing costs.
B. If the owner of the property dies, and the heir to the property meets income requirements,
the First -Time Homebuyer definition, and intends to occupy the home as a principal
residence, the heir may be permitted, upon approval of the Sponsor, to assume the loan at
the rate and terms the heir qualifies for under the current participation guidelines. If the
property owner dies and the heir does not meet eligibility requirements, the loan is due
and payable.
C. If an owner wants to convert the property to a rental unit, or any commercial or non-
residential use, the loan is due and payable.
D. The loan will be in default if the borrower fails to maintain required fire or flood
insurance or fails to pay property taxes. See Attachment A on loan defaults for further
information on property restrictions.
7.4. LOAN SERVICING POLICIES AND PROCEDURES
See Attachment A for local loan servicing policies and procedures. While the attached policy
outlines a system that can accommodate a crisis that restricts borrower repayment ability, it
should in no way be misunderstood: The loan must be repaid. All legal means to ensure the
repayment of a delinquent loan as outlined in the Loan Servicing Policies and Procedures will be
pursued.
7.5. LOAN MONITORING PROCEDURES
Sponsor will monitor Borrowers and their housing units annually to ensure adherence to Program
requirements including, but not limited to, the following:
A. Owner -occupancy
B. Property tax payment
C. Hazard insurance coverage
D. Good standing on Primary loans
E. General upkeep of housing units
8.0. PROGRAM LOAN PROCESSING AND APPROVAL
A. Loan Processing
Per the request of the homebuyer, the City will send out an eligibility packet with all the
necessary forms, disclosures, information, and application. They should submit a
complete application packet with all the Sponsor's Program loan documents executed as
well as all the information from the Primary Lender. The Primary Lender should submit
all documents listed in the Application Transmittal Checklist Form, which includes but is
not limited to: 1) accepted property sales contract with proper seller notification; 2)
mortgage application with good faith estimates and first mortgage disclosures; 3) full
mortgage credit report and rent verification; 4) current third party income verifications
and verifications of assets; 5) homeownership education certificate, if applicable; and 6)
signed underwriting transmittal summary and final signed loan application, both from
primary lender. Staff will work with local lenders to ensure qualified participants receive
only the benefit from the Sponsor's Program needed to purchase the housing unit and that
leveraged funds will be used when possible.
B. Creditworthiness
Qualifying ratios are only a rough guideline in determining a potential borrower's
creditworthiness. Many factors such as excellent or poor credit history, amount of down
payment, and size of loan will influence the decision to approve or disapprove a
particular loan. The borrower's credit history will be reviewed by the Sponsor and
documentation of such maintained in the loan file. The Sponsor may elect to obtain a
credit report or rely on a current copy obtained by the primary lender. As a guide, if the
applicant's middle credit score is less than 610, which is based on certified credit
agencies, including Equifax, Experian, and TransUnion, then consideration of the
additional factors will be evaluated and a determination of creditworthiness will be
approved by the Loan Committee.
Applicant's must allow a certain amount to time pass, after one of the following events:
a. Two years from the date of discharge for Bankruptcy, Chapter 7, or Chapter 13.
b. Three years from the date of foreclosure.
C. Documents from Primary Lender
After initial review of the qualified homebuyer's application packet, which includes both
the Applicant's and the Primary Lender's sections, the Program Operator will request any
additional documents needed. Documents may be faxed, but originals shall be received
through the mail before Program funds are committed to escrow. Based on receipt and
review of the final documents, the Program Operator will do an income certification
(using most recent HUD program's guidance on income calculation and determination),
and homebuyer certification (review of credit report and income taxes). Documentation
of affordability will then be verified and subsidy requirement determined.
D. Disclosure of Program and Loan Information to Homebuyers
The Program's application and disclosure forms will contain a summary of the loan
qualifications of the borrower with and without Program assistance. Housing ratios with
and without Program assistance are also outlined in these guidelines. Information on the
Program's application will be documented with third party verifications in the file. For
example, the sales contact will provide the final purchase price and outline how much of
the closing costs are to be paid by the seller, etc. The appraisal, termite and title report
will provide information to substantiate the information in the sales contract and guide
the construction inspection. The Program loan application will provide current debt and
housing information and will be documented by the credit report and income/asset
verifications. The Primary Lender's approval letter and estimated closing cost statement
should reflect all the information in the loan package and show any contingencies of loan
funding. Reviewing the Primary Lender's loan underwriting documentation will provide
basic information about the qualification of the applicant and substantiate the
affordability provided by the Program loan. By reviewing and crosschecking all the
Primary Lender information, the final Program loan amount approved will fall within the
affordability parameters of the Program.
8.1. COMPLETION OF UNDERWRITING AND APPROVAL OF PROGRAM LOAN
Once the loan approval package has been completed the Program Operator will submit it to the
Sponsor for approval. Sponsor will review the request and may approve it with or without
conditions. Upon approval, a final closing date for escrow is set and Program funds are accessed
for the homebuyer.
8.2. PRIMARY AND PROGRAM LOAN DOCUMENT SIGNING
The homebuyer(s) sign promissory notes, loan agreements, deeds of trust, and statutory lending
notices (Truth In Lending (TIL), etc.); the Deeds of Trust are recorded with the County
Clerk/Recorder at the same time, and the request(s) for copy of Notice of Default are also
recorded with the County Clerk/Recorder.
The City Manager, or their designee, will execute all necessary loan documents, agreements and
instruments on behalf of the Sponsor.
8.3. ESCROW PROCEDURES
The escrow/title company shall review the escrow instruction provided by the Program lender and
shall issue a California Land Title Association (CLTA) and the American Land Title Association
(ALTA) after closing. The CLTA policy is issued to the homebuyer and protects them against
failure of title based on public records and against such unrecorded risks as forgery of a deed.
The ALTA is issued to each lender providing additional coverage for the physical aspects of the
property as well as the homebuyer's title failure. These aspects include anything which can be
determined by only physical inspection, such as correct survey lines; encroachments; mechanics
liens; mining claims and water rights. The Program lender instructs the escrow/title company in
the escrow instructions as to what may show on the policy; the amount of insurance on the policy
(all liens should be covered) and the loss payee (each lender should be listed as a loss payee and
receive an original ALTA).
9.0. SUBORDINATE FINANCING
With today's high costs, in order for a low-income household to obtain a home, several funding
sources might be required. Subordinate loans may be used to cover mortgage subsidy costs that
exceed the Program maximum loan amount. All subordinate liens must have the payments
deferred and the term must be for at least as long as the term of the Program loan.
10.0. EXCEPTIONS AND SPECIAL CIRCUMSTANCES
The Sponsor may make amendments to these Participation Guidelines. Any changes shall be
made in accordance with regulations and approved by the Sponsor's Loan Committee and/or
governing body. Material changes only shall then be sent to HUD for approval.
10.1. DEFINITION OF EXCEPTION
Any case to which a standard policy or procedure, as stated in the guidelines, does not apply or an
applicant treated differently from others of the same class would be an exception.
10.2. PROCEDURES FOR EXCEPTIONAL CIRCUMSTANCES
A. The Sponsor or its agent may initiate consideration of an exception and prepare a
report. This report shall contain a narrative, including the Sponsor's recommended
course of action and any written or verbal information supplied by the applicant.
B. The Sponsor shall make a determination of the exception based on the recommendation
of the Program Operator. The request can be presented to the Sponsor's loan committee
and/or governing body for a decision.
11.0. DISPUTE RESOLUTION AND APPEALS PROCEDURE
Any applicant denied assistance from the Program has the right to appeal. Complaints
concerning the Program should be made to the Program Operator first. If unresolved in this
manner, the complaint or appeal must be made in writing and filed with the Sponsor. The
Sponsor will then schedule a meeting with the Loan Review Committee. Their written response
will be made within thirty (30) working days. If the applicant is not satisfied with the
Committee's decision, a request for an appeal may be filed with the Sponsor's governing body.
Final appeal must be filed in writing with HUD within one year after denial.
ATTACHMENT A
LOAN SERVICING POLICIES AND PROCEDURES
FOR CITY OF LODI
The City of Lodi, hereafter called "Lender," has adopted these policies and procedures in order to
preserve its financial interest in properties whose "Borrowers" have been assisted with public funds. The
Lender will to the greatest extent possible follow these policies and procedures, but each loan will be
evaluated and handled on a case-by-case basis. The Lender has formulated this document to comply with
state and federal regulations regarding the use of these public funds and any property restrictions, which
are associated with them.
The policies and procedures are broken down into the following areas: 1) making required monthly
payments or voluntary payments on a loan's principal and interest; 2) required payment of property taxes
and insurance; 3) required Request for Notice of Default on all second mortgages; 4) loans with annual
occupancy restrictions and certifications 5) required noticing and limitations on any changes in title or use
of property; 6) required noticing and process for requesting a subordination during a refinance; 7)
processing of foreclosure in case of default on the loan.
1. Loan Repayments:
The Lender will collect monthly payments from those borrowers who are obligated to do so under Notes
which are amortized promissory notes (or Lender will use an appointed loan collection Company to
collect payments). Late fees will be charged for payments received after the assigned monthly due date.
For Notes which are deferred payment loans, the Lender must accept voluntary payments on the loan.
Loan payments will be credited to principal. The Borrower may repay the loan balance at any time with
no penalty.
2. Payment of Property Taxes and Insurance:
As part of keeping the loan from going into default, borrower must maintain property insurance coverage
naming the Lender as loss payee. Except for HOME -funded loans, if borrower fails to maintain the
necessary insurance, the Lender may take out force placed insurance to cover the property while the
Borrower puts a new insurance policy in place. All costs for installing the necessary insurance will be
added to the loan balance at time of installation of Borrower's new insurance.
When a property is located in a 100 -year flood plain, the Borrower will be required to carry the necessary
flood insurance. A certificate of insurance for flood and for standard property insurance with an
endorsement naming the City as lender loss payee will be required at close of escrow. The lender will
verify the insurance on an annual basis.
Property taxes must be kept current during the term of the loan. If the Borrower fails to maintain payment
of property taxes then the lender may pay the taxes current and add the balance of the tax payment plus
any penalties to the balance of the loan (not permissible when funded with HOME). Wherever possible,
the Lender encourages Borrower to have impound accounts set up with their first mortgagee wherein they
pay their taxes and insurance as part of their monthly mortgage payment.
3. Required Request for Notice of Default:
When the Borrower's loan is in second position behind an existing first mortgage, it is the Lender's policy
to prepare and record a "Request for Notice of Default" for each senior lien in front of Lender's loan.
This document requires any senior lienholder listed in the notice to notify the lender of initiation of a
foreclosure action. The Lender will then have time to contact the Borrower and assist them in bringing
the first loan current, if possible. The Lender can also monitor the foreclosure process and go through the
necessary analysis to determine if the loan can be made whole or preserved. When the Lender is in a
third position and receives notification of foreclosure from only one senior lienholder, it is in their best
interest to contact any other senior lienholders regarding the status of their loans.
4. Annual Occupancy Restrictions and Certifications:
On owner -occupant loans, the Lender may require that Borrowers submit utility bills and/or other
documentation every five (5) year to prove occupancy during the term of the loan. For CDBG, some
loans may have income and housing cost evaluations, which require a household to document that they
are not able to make amortized loan payments, typically every five years. These loan terms are
incorporated in the original Note and Deed of Trust.
5. Required Noticing and Restrictions on Any Changes of Title or Occupancy:
In all cases where there is a change in title or occupancy or use, the Borrower must notify the Lender in
writing of any change. Lender and Borrower will work together to ensure the property is kept in
compliance with the original Program terms and conditions such that it remains available as an affordable
home for low-income families. These types of changes are typical when Borrowers do estate planning
(adding a relative to title) or if a Borrower dies and property is transferred to heirs or when the property is
sold or transferred as part of a business transaction. In some cases the Borrower may move and turn the
property into a rental unit without notifying the Lender. Changes in title or occupancy must be in keeping
with the objective of benefit to low-income households (below 80 percent of AMI).
Change from owner -occupant to owner -occupant occurs at a sale. When a new owner -occupant is not
low-income, the loan is not assumable and the loan balance is immediately due and payable. If the new
owner -occupant qualifies as low-income, the purchaser may either pay the loan in full or assume all loan
repayment obligations of the original owner -occupant, subject to the approval of the Lender's Loan
Committee.
If a transfer of the property occurs through inheritance, the heir (as owner -occupant) may be provided the
opportunity to assume the loan at an interest rate based on household size and household income,
provided the heir is income eligible. If the heir intends to occupy the property and is not low-income, the
balance of the loan is due and payable. For CDBG only, if the heir intends to act as an owner -investor
(not permitted under HOME), the balance of the loan may be converted to an owner/investor interest rate
and loan term and a rent limitation agreement is signed and recorded on title. All such changes are
subject to the review and approval of the Lender's Loan Committee.
Change from owner -occupant to owner -investor occurs when an owner -occupant decides to move out and
rent the assisted property, or if the property is sold to an investor. If the owner converts any assisted unit
from owner -occupied to rental, the loan is due in full.
Conversion to use other than residential use is not allowable where the full use of the property is changed
from residential to commercial or other. In some cases, Borrowers may request that the Lender allow for
a partial conversion where some of the residence is used for a business but the household still resides in
the property. Partial conversions can be allowed if it is reviewed and approved by any and all agencies
required by local statute. If the use of the property is converted to a fully non-residential use, the loan
balance is due and payable.
6. Requests for Subordinations:
When a Borrower wishes to refinance their existing first mortgage, they must submit a subordination
request to the Sponsor. The Sponsor will subordinate their loan only when there is no "cash out" as part
of the refinance. No cash out means there are no additional charges on the transaction above loan and
escrow closing fees. There can be no third -party debt payoffs or additional encumbrances on the property
above traditional refinance transaction costs. The refinance should lower the existing housing cost of the
household. The total indebtedness on the property should not exceed the current market value except
when the borrower is obtaining a HARP II or other similar federally approved refinance loan. If the
HARP II or other similar financing is approved and meets all other requirements, combined Loan -To -
Value will not be considered when reviewing the subordination request.
Also, the loan must:
1. be fully amortized and have a fixed interest rate that does not exceed the current market rate, as
established by an index of the maximum primary rate rule of FNMA 90 -day rate plus 100 bps
(1%), found at the following website:
littps]/www.efanniemae.comisflrefmaterials/hrn_y/index jsp
2. not have a temporary interest rate buy -down;
3. have a term "all due and payable" that matures prior to or concurrently with the maturity date of
the Promissory Note. Therefore, the maturity date of the existing Promissory Note should be
modified to coincide with the maturity date of the new first mortgage; and,
4. not have a balloon payment due before the maturity date of the Program loan.
Upon receiving the proper documentation from the refinance lender, the request will be considered by the
loan committee for review and approval. Upon approval, the escrow company will provide the proper
subordination document for execution and recordation by the Sponsor.
7. Process for Loan Foreclosure:
Upon any condition of loan default: 1) non-payment; 2) lack of insurance or property tax payment; 3)
change in title or use without approval; 4) default on senior loans, the Lender will send out a letter to the
Borrower notifying them of the default situation. If the default situation continues then the Lender may
start a formal process of foreclosure.
When a senior lienholder starts a foreclosure process and the Lender is notified via a Request for Notice
of Default, the Lender, who is the junior lienholder, may cancel the foreclosure proceedings by
"reinstating" the senior lienholder. The reinstatement amount or payoff amount must be obtained by
contacting the senior lienholder. This amount will include all delinquent payments, late charges and fees
to date. Lender must confer with Borrower to determine if, upon paying the senior lienholder current, the
Borrower can provide future payments. If this is the case then the Lender may cure the foreclosure and
add the costs to the balance of the loan with a Notice of Additional Advance on the existing note.
If the Lender determines, based on information on the reinstatement amount and status of Borrower, that
bringing the loan current will not preserve the loan, then staff must determine if it is cost effective to
protect their position by paying off the senior lienholder in total and restructure the debt such that the unit
is made affordable to the Borrower. If the Lender does not have sufficient funds to pay the senior
lienholder in full, then they may choose to cure the senior lienholder and foreclose on the property
themselves. As long as there is sufficient value in the property, the Lender can afford to pay for the
foreclosure process and pay off the senior lienholder and retain some or all of their investment.
If the Lender decides to reinstate, the senior lienholder will accept the amount to reinstate the loan up
until five (5) days prior to the set "foreclosure sale date." This "foreclosure sale date" usually occurs
about four (4) to six (6) months from the date of recording of the "Notice of Default." If the Lender fails
to reinstate the senior lienholder before five (5) days prior to the foreclosure sale date, the senior
lienholder would then require a full pay off of the balance, plus costs, to cancel foreclosure. If the Lender
determines the reinstatement and maintenance of the property not to be cost effective and allows the
senior lienholder to complete foreclosure, the Lender's lien may be eliminated due to insufficient sales
proceeds.
Lender as Senior Lienholder
When the Lender is first position as a senior lienholder, active collection efforts will begin on any loan
that is 31 or more days in arrears. Attempts will be made to assist the homeowner in bringing and
keeping the loan current. These attempts will be conveyed in an increasingly urgent manner until loan
payments have reached 90 days in arrears, at which time the Lender may consider foreclosure. Lender's
staff will consider the following factors before initiating foreclosure:
1) Can the loan be cured and can the rates and terms be adjusted to allow for affordable payments
such that foreclosure is not necessary?
2) Can the Borrower refinance with a private lender and pay off the Lender?
3) Can the Borrower sell the property and pay off the Lender?
4) Does the balance warrant foreclosure? (If the balance is under $5,000, the expense to foreclose
may not be worth pursuing.)
5) Will the sales price of home "as is" cover the principal balance owing, necessary advances,
(maintain fire insurance, maintain or bring current delinquent property taxes, monthly yard
maintenance, periodic inspections of property to prevent vandalism, etc.) foreclosure, and
marketing costs?
If the balance is substantial and all of the above factors have been considered, the Lender may opt to
initiate foreclosure. The Borrower must receive, by certified mail, a thirty -day notification of foreclosure
initiation. This notification must include the exact amount of funds to be remitted to the Lender to
prevent foreclosure (such as, funds to bring a delinquent Below Market Interest Rate current or pay off a
Deferred Payment Loan..
At the end of thirty days, the Lender should contact a reputable foreclosure service or local title company
to prepare and record foreclosure documents and make all necessary notifications to the owner and junior
lienholders. The service will advise the Lender of all required documentation to initiate foreclosure (Note
and Deed of Trust usually) and funds required from the owner to cancel foreclosure proceedings. The
service will keep the Lender informed of the progress of the foreclosure proceedings.
When the process is completed, and the property has "reverted to the beneficiary" at the foreclosure sale,
the Lender could sell the home themselves under a homebuyer program or use it for an affordable rental
property managed by a local housing authority or use it for transitional housing facility or other eligible
use. The Lender could contract with a local real estate broker to list and sell the home and use those
funds for program income eligible uses.
ATTACHMENT B
SELLERS LEAD-BASED PAINT DISCLOSURE
Disclosure of Information on Lead -Based Paint and/or Lead -Based Paint Hazards
Lead Warning Statement
Every purchaser of any interest in residential real property on which a residential dwelling was built prior to
1978 is notified that such property may present exposure to lead from lead-based paint that may place young
children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent
neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and
impaired memory. Lead poisoning also poses a particular risk to pregnant women. The seller of any interest in
residential real property is required to provide the buyer with any information on lead-based paint hazards from
risk assessments or inspections in the seller's possession and notify the buyer of any known lead-based paint
hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to
purchase.
Seller's Disclosure
(a) Presence of lead-based paint and/or lead-based paint hazards (check (i) or (ii) below):
(i) Known lead-based paint and/or lead-based paint hazards are present in the housing (explain).
(ii) Seller has no knowledge of lead-based paint and/or lead-based paint hazards in the housing.
(b) Records and reports available to the seller (check (i) or (ii) below):
(i) Seller has provided the purchaser with all available records and reports pertaining to
Lead-based paint and/or lead-based paint hazards in the housing (list documents below).
(ii) Seller has no reports or records pertaining to lead-based paint and/or lead-based
paint hazards in the housing.
Purchaser's Acknowledgment (initial)
(c) Purchaser has received copies of all information listed above.
(d) Purchaser has received the pamphlet Protect Your Family from Lead in Your Home.
(e) Purchaser has (check (i) or (ii) below):
(i) received a 10 -day opportunity (or mutually agreed upon period) to conduct a risk assessment
or inspection for the presence of lead-based paint and/or lead-based paint hazards; or
(ii) waived the opportunity to conduct a risk assessment or inspection for the presence of
Lead-based paint and/or lead-based paint hazards (NOT PERMISSIBLE FOR HOME AND CDBG).
Agent's Acknowledgment (initial)
(f) Agent has informed the seller of the seller's obligations under 42 U.S.C. 4852d and is aware
of his/her responsibility to ensure compliance.
Certification of Accuracy
The following parties have reviewed the information above and certify, to the best of their knowledge, that the
information they have provided is true and accurate.
Seller Date Seller Date
Purchaser Date Purchaser Date
Agent Date Agent Date
ATTACHMENT C
Disclosure to Seller with Voluntary, Arm's Length Purchase Offer
DECLARATION
This is to inform you that would like to purchase the property, located at _
, if a satisfactory agreement can be reached. We are prepared to pay
$ for a clear title to the property under conditions described in the attached proposed
contract of sale.
Because Federal funds may be used in the purchase, however, we are required to disclose to you the
following information:
1. The sale is voluntary. If you do not wish to sell, the buyer, , thru
the agency, will not acquire your property. The buyer does
not have the power of eminent domain to acquire your property by condemnation (i.e.
eminent domain) and the agency/Sponsor will not
use the power of eminent domain to acquire the property.
2. The estimated fair market value of the property is $ and was estimated by
, to be finally determined by a professional
appraiser prior to close of escrow.
Since the purchase would be a voluntary, arms length, transaction you would not be eligible for
relocation payments or other relocation assistance under the Uniform Relocation Assistance and
Real Property Acquisition Policies Act of 1970 (URA), or any other law or regulation. Also, as
indicated in the contract of sale, this offer is made on the condition that no tenant will be
permitted to occupy the property before the sale is completed.
Again, please understand that if you do not wish to sell your property, we will take no further
action to acquire it. If you are willing to sell the property under the conditions described in the
attached contract of sale, please sign the contract and return it to us at:
. If you have any questions about this
matter, please contact at
Sincerely,
Title
Buyer Date
Buyer Date
Form continues on next page with Seller's Acknowledgment
Disclosure to Seller with Voluntary, Arm's Length Purchase Offer (Page 2)
Acknowledgement
As the Seller I/we understand that the will inspect the property for health and
safety deficiencies. I/we also understand that public funds may be involved in this transaction and, as
such, if the property was built before 1978, a lead-based paint disclosure must be signed by both the buyer
and seller, and that a Visual Assessment will be conducted to determine the presence of deteriorated paint.
As the Seller, I/we understand that under the City's program, the property must be currently owner -
occupied, vacant for three months at the time of submission of purchase offer, new (never occupied), or
renter purchasing the unit. I/we hereby certify that the property is:
n Vacant at least 3 months; n Owner -occupied; ['New; or 111 Being Purchased by Occupant
I/we hereby certify that I have read and understand this "Declaration" and n a copy of said Notice
was given to me prior to the offer to purchase. If received after presentation of the purchase offer,
I/We choose ❑ to withdraw or ❑ not to withdraw, from the Purchase Agreement.
Seller Date
Seller Date
ATTACHMENT D
LEAD-BASED PAINT
VISUAL ASSESSMENT, NOTICE OF PRESUMPTION, AND HAZARD REDUCTION FORM
Section 1: Background Information
Property Address:
No LBP found or LBP exempt 0
Select one:
Visual Assessment 0
Presumption 0
Hazard Reduction 0
Section 2: Visual Assessment. Fill out Sections 1, 2, and 6. If paint stabilization is performed, also fill out
Sections 4 and 5 after the work is completed.
Visual Assessment Date:
Report Date:
Check if no deteriorated paint found 0
Attachment A: Summary where deteriorated paint was found.
Section 3: Notice of Presumption. Fill out Sections 1, 3, 5, and 6. Provide to occupant w/in 15 days of
presumption.
Date of Hazard Reduction Notice:
Date of Presumption Notice:
Start & Completion Dates:
Lead-based paint is presumed to be present • and/or Lead-based paint hazards are presumed to be present
•
Attachment B: Summary of Presumption:
Attachment D: Location of building components with
where activities were conducted.
Section 4: Notice of Lead -Based Paint Hazard Reduction Activity. Fill out Sections 1, 4, 5, and 6. Provide
to occupant w/in 15 days of after work completed.
Date of Hazard Reduction Notice:
Initial Hazard Reduction Notice? Yes • No ■
Start & Completion Dates:
If "No", dates of previous Hazard Reduction Activity Notices:
Attachment C: Activity locations and types.
Attachment D: Location of building components with
where activities were conducted.
lead-based paint remaining in the rooms, spaces or areas
Attachment E: Attach clearance report(s), using DHS form 8552 (and 8551 for abatement activities)
Section 5: Resident Receipt of Notice for Presumption or Lead -Based Paint Hazard Reduction Activity
Printed Name:
Signature:
Date:
Section 6: Contact Information
Organization:
Contact Name:
Contact Signature:
Date:
Address:
Phone:
ATTACHMENT E
Homebuyer Program Lead Compliance Document Checklist
The following documents should be in each Homebuyer unit file to document
compliance with the lead requirements:
Document Name
Purpose
Lead Safe Housing Rule Screening Sheet
Physical inspection form (HQS or equivalent)
Seller Certification
Documents
exemptions
Documents visual
assessment results
Seller certifies that
paint was stabilized
by qualified workers
and that safe work
practices were
followed during paint
stabilization
Clearance Report and Clearance Review Worksheet
Disclosure Form
Lead Hazard Reduction Notice
Documents that unit
passed clearance
Documents that
buyer received
disclosure and
pamphlet.
Documents that
buyer received
required lead hazard
reduction notification.
This was taken from the HUD Website at:
http://www.hud.gov/offices/cpd/affordablehousing/training/leadsafe/usefulforms/index.cf
m#crosscutting