City of Grass Valley CityCouncil Agenda Action Sheet. Beth Owens, Housing Technician/Administrative C1erf) Thomas Last, Community Development Director

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1 CityCouncil Agenda Action Sheet iiw... [!1 pv Council Meeting Date: May 28, 2013 Date Prepared: May 21, 2013 Prepared by: Beth Owens, Housing Technician/Administrative C1erf) Thomas Last, Community Development Director Title: Agenda: Public hearing and Resolution to approve the updated Community Development Block Grant Housing Rehabilitation Program Guidelines. Public Hearing Recommendation: Conduct a public hearing and adopt resolution approving the City s updated Community Development Block Grant (CDBG) Housing Rehabilitation Program Guidelines. Background Information: Since the 1980 s, the City has managed a housing loan program used to repair and rehabilitate homes in the community. Funding for this program came from the CDBG grant program. Program Income has also been used to supplement the funding. The City has administered this program under the guidance of the Housing Rehabilitation Program Guidelines "Guidelines", which were last revised in The Guidelines establish the operation and implementation procedures for the loan program. The 2005 revisions included some significant changes, such as but not limited to: 1) increasing the owner-occupant and owner-investor loan maximum amounts; 2) revising the deferred loans terms; 3) creating approval criteria for "Reconstruction" and establishing a maximum loan amount; 4) amending lead based paint and asbestos consultant services payment provisions; and 5) creating criteria for emergency repair grants. The proposed update modifies the overall format to more closely meet the HCD s template. Based on input from the City s HCD representative, and to address the current economic conditions facing the City, staff recommends the addition of the following four items: 1) allow grants up to $7,500 for Energy Efficient Upgrades; 2) establish Short Sales procedures; 3) establish Subordination procedures; and 4) use of sweat equity on a case-by-case basis. Upon Council s approval of Resolution , staff will forward the Housing Rehabilitation Guidelines to HCD for review and signature. Route to be Reviewed by: City Administrator Attachments: Resolution # Draft Guidelines /2f

2 CITY OF GRASS VALLEY RESOLUTION NO: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GRASS VALLEY ADOPTING AN UPDATED COMMUNITY DEVELOPMENT BLOCK GRANT HOUSING REHABILITATION PROGRAM GUIDELINES WHEREAS, the City Council has reviewed and hereby agrees to comply with the updated Community Development Block Grant Housing Rehabilitation Program Guidelines; and WHEREAS, the California State Department of Housing and Community Development requires local jurisdictions program guidelines to contain certain criteria at a minimum per the State s guideline template, but allows flexibility beyond this required checklist; and WHEREAS, the City wishes to assure compliance with all State and Federal regulation; and WHEREAS, the City adopts the revised Housing Rehabilitation Program Guidelines, as shown in Exhibit "A" and attached to this resolution; and WHEREAS, the Community Development Director is hereby authorized and directed to act on the City s behalf in all matters pertaining to the City s Housing Rehabilitation Program, including the party responsible for Program Income administration and execution of all documents associated with Program Income. NOW, THEREFORE BE IT FURTHER RESOLVED BY THE CITY COUNCIL OF THE CITY OF GRASS VALLEY requests the California Department of Housing and Community Development to approve the Housing Rehabilitation Program Guidelines shown in Exhibit "A". PASSED AND ADOPTED as resolution at a regular meeting of the City Council of the City of Grass Valley held on May 28, 2013 by the following vote: AYES: Council Members: NOES: Council Members: ABSENT: Council Members: ABSTAINING: Council Members: am Dan Miller, Mayor Attest: Kristi K. Bashor, City Clerk Approved as to form: Michael G. Colantuono, City Attorney

3 CITY OF GRASS VALLEY HOUSING REHABILITATION GUIDELINES CDBG Approved (date) J? /

4 I K PROGRAM OUTREACH AND MARKETING...,., APPLICATION PROCESS AND SELECTION PROCESSING THE APPLICATION CONFLICT OF INTEREST REQUIREMENTS DEFINITIONS AND APPLICABILITY APPLICANT QUALIFICATIONS 2.1. INCOME LIMITS OWNER-OCCUPANT REQUIREMENTS OWNER-INVESTOR REQUIREMENTS INCOME QUALIFICATION CRITERIA HOMEOWNER ELIGIBILITY & RESIDENCY REQUIREMENTS OWNER-OCCUPANTS OWNER-INVESTORS PROPERTY ELIGIBILITY 3.1. CONDITIONS ANTI-DISPLACEMENT POLICY AND RELOCATION ASSISTANCE NOTIFICATIONS AND DISCLOSURES , LOAN AND GRANT PROGRAMS 4.1. LOANS GRANTS, APPRAISAL FIRE INSURANCE FLOOD INSURANCE LOAN SECURITY PROGRAM LOAN SERVICING AND MAINTENANCE 5.1 RECEIVING LOAN REPAYMENTS LOAN SERVICING POLICIES AND PROCEDURES LOAN MONITORING PROCEDURES DEFAULT AND FORECLOSURE SHORT SALES SUBORDINATIONS CONSTRUCTION 6.1. REHABILITATION STANDARDS , ELIGIBLE CONSTRUCTION COSTS ELIGIBLE PROJECT COSTS REPAIR CALLBACKS SWEAT EQUITY EXCEPTIONS AND SPECIAL CIRCUMSTANCES 7.1. AMENDMENTS /2-1

5 7.2. EXCEPTIONS PROCEDURES FOR EXCEPTIONAL CIRCUMSTANCES DISPUTE RESOLUTION AND APPEALS PROCEDURES 8.1. PROGRAM COMPLAINT AND APPEAL PROCEDURE CONFLICT RESOLUTION BETWEEN APPLICANT AND CONTRACTOR...35 CITY OF GRASS VALLEY IER-OCCUPIED HOUSING REHABILITATIOK PROGRAM GUIDELINES ATTACHMENTS TABLE OF CONTENTS ATTACHMENTA: 24 CFR PART 5 ANNUAL INCOME INCLUSIONS AND EXCLUSIONS UTVI -Cl HOME WJjB1bA. ATTACHMENTB: ANNUAL INCOME NET FAMILY ASSET INCLUSIONS AND ATTACHMENT C: MAXIMUM PURCHASE PRICE AFTER-REHAB VALUE LIMIT; HOME SUBSIDY LIMIT PER UNIT SECTION 221 (d)(3); CURRENT INCOME LIMITS; BEDROOM & BATHROOM ADDITION STANDARDS ATTACHMENT D: MARKETING PLAN...43 ATTACHMENT C: FORECLOSURE POLICY...60 ATTACHMENT H: CERTIFICATION OF OCCUPANCY ATTACHMENT 1: LEAD-BASED PAINT NOTICE OF PRESUMPTION AND HAZARD 3

6 Rehabilitation Guidelines IZS]Z11IYL1iUd HOUSING REHABILITATION PROGRAM GUIDELINES to. GENERAL The above-named entity (), hereinafter referred to as the "Sponsor", has entered into a contractual relationship with the California Department of Housing and Community Development ("HCD") to administer one or more HCD-funded housing rehabilitation programs. The rehabilitation program described herein and hereinafter referred to as the "Program" is designed to provide assistance to eligible homeowners for correction of health and safety items, as well as code violations, located within the Program s eligible area, as described in Section 3.0. The Program provides different loan terms, depending on eligibility to finance the cost of necessary repairs that will provide the homeowner with a healthy, safe, sanitary and code compliant home, referred to herein as "housing unit". The Program will be administered by the, hereinafter referred to as the "Program Operator". 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. A Fair Housing Marketing Plan can be found as Attachment D. 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 provided to any local social service agencies. 4 /2-7

7 B. 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 Operator will take appropriate steps to ensure effective communication with disabled housing applicants, residents and members of the public. A. Waiting List/Homeowner Contact The Sponsor will utilize a waiting list. In response to a homeowner s request, the homeowner is placed on the waiting list. Homeowners are offered the opportunity to qualify for assistance by waiting list priority (a first-come, first served basis). The Program Operator will contact homeowners by mail and/or by telephone to advise of funding availability. The homeowner has 30 days to complete and return the loan application and supporting documentation. Should a homeowner fail to respond to the initial contact for assistance or to provide any of the required documentation within the 30-day period, the homeowner s name will be removed from the waiting list. If the homeowner desires assistance at a later time, he/she will be placed on the waiting list at that time. Should the waiting list be exhausted, the Program will be marketed in accordance with the Sponsor s Marketing Plan. See Attachment D. B. Application/Interview An application packet is provided to the homeowner for completion and submittal to the Program Operator, along with supporting documentation. An interview is scheduled with the applicant. The Program is fully explained; application forms and documentation are reviewed. Verifications are obtained for income, assets, employment, benefits, and mortgage. Title report and appraisals are also obtained. (see 1.3 below for more details) 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. C. Household Selection Households selected for participation in the Sponsor s Housing Rehabilitation Program are those determined eligible upon completion of processes described in A. and B. above. 5 /2--I

8 D. InitialInspection/Work Write-U p/estimate Prospective units are inspected by the Program Operator, a certified housing inspector, or a Sponsor representative to determine eligibility and acceptability of properties for participation in the Program. If the home is a pre-1978 unit, the initial inspection will also include paint testing by a certified Lead-Based Paint (LBP) inspector/assessor or presumption of LBP. Code deficiencies will be corrected and if presumption is used or lead hazards are found they will be properly treated according to HUD regulations (Section 6.1.E & F) and cleared by a certified LBP inspector/assessor. Note: CDBG projects shall refer to Chapter 20, Lead- Based Paint Requirements for guidance in the CDBG Grant Management Manual. Measurements and observations are noted about the property, including special conditions with potential cost consequences (dilapidated outbuildings, absence of curb and gutter when required by code, etc.). A floor plan and site plan, as needed, are drawn for the home and property, including all appurtenances. Findings are noted on an inspection form, and later used by the Program Operator to prepare the work write-up. Estimated costs are determined by the Program Operator who has years of experience in the building industry, and in reviewing contractor bids and verifying cost with materials suppliers. The homeowner reviews the completed work write-up and cost estimate, and the approved write-up is incorporated into bid documents. E. Bid Solicitation A bid walk-through date and time are scheduled. With prior approval from the Sponsor, the homeowner may choose to solicit his/her own bids or request that the Program Operator solicit bids on his/her behalf. Invitations to bid are mailed to all eligible contractors on file in efforts to obtain three reasonable bids. Bid results will be provided to participating contractors. Contractors must be licensed and bonded by the State of California Contractors Licensing Board. Contractors must also provide Program Operator with evidence of Workers Compensation Insurance and Comprehensive General Liability and Property Damage Insurance with Combined Single Limits of at least $1,000,000. Cost reasonableness is determined by comparing the bids received with the cost estimate prepared by the Program Operator. Bids should be within 10% of the Program Operator s cost estimate, otherwise an explanation must be provided to the file for any bid selected exceeding 10% of the estimate. The homeowner is encouraged to accept the lowest reasonable bid (

9 The Program Operator determines eligibility of the contractor by contacting the State Contractors License Board and checking the Federal List of Debarred Contractors. The contractor is also required to provide a selfcertification stating that he/she is not on the Federal debarred list. Once determined eligible, the contractor is then notified of provisional award of bid (pending loan approval). Notices of non-award are mailed to participating contractors. F. Loan Request/Approval A Loan Commitment Request is prepared by the Program Operator on behalf of the applicant. The loan request includes the cost of construction, a contingency fund, and other project costs (listed in Section 6.3.). A Loan Review Committee meeting is scheduled to hear the loan request. Section 1.3 provides additional information on the loan approval process. Once approved, loan documents are executed and the loan is funded. G. Pre-Construction Conference A pre-construction conference is scheduled with homeowner, contractor, and Program Operator. The Program Operator reviews the Owner-Contractor Construction Contract, including the work write-up, start date, pay schedule, and date of completion, with the homeowner and contractor. The construction contract and Notice to Proceed are executed. H. Start-Up/Field Inspections The Program Operator monitors date of start-up and performs field inspections on a regular basis. The Program Operator will visit the job site regularly in order to check the scope of work, inspect materials, and to confirm the job is on schedule and within budget. The Program Operator works with the Sponsor s Building Inspector to ensure the work meets building codes, while not exceeding funding limits. The Program Operator reviews the work status with the homeowner and with the contractor in order to remedy any developing problems quickly and to ensure that both are satisfied with the construction process. At the completion of each phase, the Program Operator inspects the work and the homeowner authorizes contractor payments. The Program Operator will refer back to original plans and specifications to verify the work was completed as contracted. Homeowner s "sweat equity" commitment will also be checked, if any. Change Orders 7

10 Written change orders are required when the homeowner requests any changes in the write-up, such as eliminating an item completely, eliminating one item and substituting another, or adding items. The change order will state the change and dollar value for the change. The change order must be signed by both the contractor and the homeowner, and submitted to the Program Operator for approval. If the change order exceeds the approved financing, the homeowner will be asked to provide additional funds or a report and request for additional funds may be presented to the Program Operator to determine if additional debt is within the allowed loan to value ratios prior to presenting it to the Sponsor s Loan Review Committee for approval of the change order. Progress Payments Ninety percent (90%) of the contract amount is distributed to the contractor in the form of progress payments during construction. The final ten-percent (10%) of the contract amount is set aside as a retention payment. The contractor requests a progress payment from the homeowner and notifies the Program Operator that he/she has done so. Upon favorable inspection by the homeowner, Program Operator, and Sponsor or Sponsor s Building Inspector, the payment authorization is signed by the homeowner and submitted for payment. K. Final Inspections/Notice of Completion/Final Payment When the project is completed, the Program Operator inspects the work item by item with the homeowner, the contractor, and/or the Sponsor. The Sponsor s Building Inspector performs a final inspection. Any corrections or deficiencies are noted and corrected by the contractor. Upon favorable final inspections, a Notice of Completion is prepared, signed by the homeowner, and then recorded. The final ten-percent (10%) retention payment is released 35 days after the recording of the Notice of Completion jwin*1 I [c i: JIu[WI[.J The Sponsor will obtain all financial information necessary to determine applicant eligibility and their ability to repay a loan. An application consists of, but may not be limited to: a. Financial and household information related to the property owner when owner-occupied and owner-investor and the tenant(s) when rental properties are involved. All income will be verified by use of the following forms: 1) Verification of employment 2) Verification of non-employment income 3) Verification of social security 4) Verification of assets 5) Verification of retirement accounts 8

11 6) Income tax information (1040 s, etc) b. Credit evaluations and mortgage verifications for property owner. c. Title Report and Appraisal of current market and afterrehabilitation market values. d. A description of work desired by the property owner. 2. All loans will be evidenced by a promissory note and secured by a Deed of Trust, regardless of the position of the security interest. 3. Loans will not be subject to a prepayment penalty. 4. Contingency funding will be included in each loan, the amount of which will be determined by the Sponsor. Unused contingency funds will be applied to the loan principal, or be allowed to be used for additional justifiable improvements prior to the close of a rehabilitation project. Such funding will not be available for use on a project upon the closing of the same. 5. Expenses: a. Costs for the following rehabilitation related services will be included in each loan: 1) Loan processing fees (such as, but not limited to, escrow documentation and recordation, title reports, and credit reports) 2) Appraisals 3) Legal fees 4) Termite inspections 5) Lead Based Paint and asbestos consultant(s) 6) Boundary surveys 7) Design and/or drafting 8) Engineering 9) Other project related costs b. When expenses as noted in "a" above are anticipated by the Sponsor to be necessary for project preparation and loan approval, the Sponsor will enter into a pre-project agreement with the applicant. Terms of this agreement will include provisions such as, but may not be limited to: 1) The Sponsor may agree to advance funds for pre-project costs with the understanding that, if the loan is not approved by the Sponsor, the Sponsor will bear the burden of said costs. 2) As is financially possible, applicants will agree to privately fund pre- project costs. 3) If the applicant voluntarily withdraws from the program after incurring any such costs, the applicant will be responsible to repay the City in full for the same. Payment will be due within sixty (60) days of a notice of withdrawal, except that alternate payment options may be considered by the City dependent upon the financial status of the applicant and recommendations of the City. 9

12 Grass Valley Payment options must be approved by the Loan Committee. The City reserves the right to deny any options other than direct and immediate payment. 4) Investors who voluntarily withdraw after incurring costs noted in "a" above are responsible to repay the City for all such costs. Said payment is due within 60 days of withdrawal. Failure to repay within the time allowed will result in further action which may include executing a lien on the property for the amount owed, plus interest accrued, legal costs and additional recording fees. 6. Tenants will receive information regarding fair housing rights and an authorization form for signature which states that the tenant understands that he/she may be inconvenienced by the necessary repairs and that he/she agrees to authorize inspectors and repair persons to enter his/her living quarters during normal business hours and as otherwise allowed by program contract documents and City ordinance. 7. Project approval - When all costs related to a prospective loan have been determined, a Loan Commitment Request (LCR) will be submitted to the CDBG Loan Committee for approval. The LCR will contain information such as, but not limited to: a. Loan terms, interest rate, special conditions. b. Applicant information, including income, expenses, credit history, etc. c. Project summary and possible analysis. d. Breakdown of project related costs, including Lead Based Paint and asbestos abatement and consultant fees. e. Construction bids. f. Staff recommendations. 8. Loan approval - All loans must be approved by the CDBG Loan Committee. Applicants must meet all property and income eligibility guidelines in effect at the time of loan approval. All applications will be submitted for consideration regardless of whether the recommendation is for approval or denial. Applicants will receive written notification of approval or denial, and a written explanation if denied. IA, CONFLICT OF INTEREST REQUIREMENTS When the Sponsor s program contains Federal funds, the applicable Conflict of Interest requirements of 24 CFR Section shall be followed for CDBG assistance, and Section of the HOME Final Rule shall be followed for HOME assistance. A contractor with a vested interest in the property cannot bid on a rehabilitation job. Such a contractor may act as owner/builder, subject to standard construction procedures. Owner/builders are reimbursed for materials purchased which are verified by invoice/receipt and used on the job. Reimbursement occurs after the installation is verified by the Program Operator to be part of the scope of work. Owner/builders are not reimbursed for labor. 10 /2-/

13 of Grass Valley In addition, no member of the governing body of the Sponsor and no other official, employee, or agent of the Sponsor who exercises policy, decision-making functions or responsibilities in connection with the planning and implementation of the program shall directly or indirectly be eligible for this program, unless the application for rehabilitation assistance has been reviewed and approved according to applicable California Department of Housing and Community Development (HCD) guidelines. This ineligibility shall continue for one year after an individual s relationship with the Sponsor ends. 1L1] I li Within these guidelines, these terms can be applied as follows 1. "Sponsor" means the. The members of the Sponsor s Community Development Department shall be responsible for implementing the provision of the guidelines. 2. "Applicant" means the property owner who has applied for rehabilitation assistance. An applicant can be an owner-occupant or an ownerinvestor. 3. "Contractor" means the prime construction general contractor, unless otherwise noted. 4. "Rehabilitation" means the physical rehabilitation of a structure, and includes reconstruction. 5. "Reconstruction" means the demolition and construction of a structure. 6. "Household" means one or more persons who will occupy a housing unit. Unborn children do count in family size determination. 7. "Annual Income" means the gross amount of income of all adult household members that is anticipated to be received during the coming twelve month period. All homeowners must certify that they meet the household income eligibility requirements for the applicable HOD 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 Sponsor s county s area median income (AMI), adjusted for household size, as published by HOD each year. See Attachment C. The link to the official HOD-maintained income limits for HOME and CDBG Funded activities is: hftp:// 2.2 OWNER-OCCUPANT REQUIREMENTS Owner-Occupant - to be eligible, household income must be equal to or less than 11

14 City of Grass Vail the applicable HOD income limits. Owner will be required to provide income documentation. Refer to Income Inclusions and Exclusions for further guidance to the types of incomes to be included or excluded when calculating gross annual income. See Attachment A for HOME and CDBG.. Refer to Asset Inclusions and Exclusions for further guidance to the types of assets to be included or excluded when calculating gross annual income. See Attachment B. 2.3 OWNER-INVESTOR REQUIREMENTS - (eligible under only CDBG-funded programs) Owner-Investor requirements - There are no minimum or maximum income restrictions for owner-investors. Total income and debt will be reviewed to determine a positive cash flow and a secure loan. If an owner-investor has a mortgage on the property to be rehabilitated, it is verified that all payments are current and that no late payments have been received in the past twelve months. Tenant requirements (eligible under only CDBG-funded programs) - If a rental is currently occupied, the tenant s household income must be equal to or less than the applicable HOD income guidelines. Tenants will be asked to cooperate by proving income documentation and income will be projected for twelve months based on current income. See Attachments A and B. 2,4 INCOME QUALIFICATION CRITERIA Projected annual gross income of the applicant household will be used to determine whether they are above or below the published HOD income limits. Income qualification criteria for HOME and CDBG, as shown in the most recent HOD program-specific guidance at g rams.htm1, will be followed to independently determine and certify the household s annual gross income. 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. 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 of 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: /9

15 Grass Valley Annuallncomel nclus ionsexclus ions. doc See Attachment A: HOME and CDBG 24 CFR Part 5 Annual Income Inclusions and Exclusions and Attachment A-I. B. ASSETS: There is no asset limitation for participation in the Program. Income from assets is, however, 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/s 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: 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: AnnualincomeAsset I nclusionsexclusions.doc See Attachment B: Part 5 Annual Income Net Family Asset Inclusions and Exclusions L:[.1lS1 A A I IIIeil:11IIi I I The Sponsor s Housing Rehabilitation Program allows for owner-occupied and owner-investor/tenant occupied properties to participate in the Program. Owneroccupied units must be the owner s principal place of residence. Note: Ownerinvestor/tenant occupied properties are eligible under only CDBG funding, and must meet all requirements listed under section A photocopy of a recent utility bill will verify proof of occupancy. No unit to be rehabilitated will receive financial assistance if it is currently occupied by an over-income household or does not meet the eligibility standards outlined in these guidelines. A. In the event that a homeowner sells, transfers title, or discontinues residence in the rehabilitated property for any reason, the loan becomes due and payable, unless the following conditions are met: The homeowner who received the loan dies and the heir to the property meets income requirements and intends to occupy the home as his/her principal residence. Upon approval of the Sponsor, the heir may be permitted to assume the loan at the rate and terms the heir qualifies for under current participation guidelines. All costs related to this allowance 13 /2-/$

16 City of Grass v will be the responsibility of the heir. If the heir does not meet applicable eligibility requirements, the loan is due and payable. B. If the owner-occupant who qualifies for CDBG financing dies and the heir is not income eligible to assume the loan, but he/she desires to rent the unit to a low income family and agrees to comply with owner-investor restrictions (i.e Rent Limitation Agreement), the heir may be permitted, upon review and written approval of the City, to assume the loan at the same rate and terms offered owner-investors under current program guidelines. All costs incurred from such an arrangement will be the responsibility of the heir. If the heir does not comply with owner-investors restrictions, the loan is due and payable. C. If the owner-occupant desires to sell or transfer title to the property to another party (including a future heir) during the owner s lifetime, the loan is due and payable and may not be assumed unless the new owner meets all of the eligibility requirements of these guidelines, submits proof of such eligibility, pays all fees and costs associated with the assumption, and such an arrangement is reviewed and approved by the Loan Committee. D. If an owner-occupant desires to convert the rehabilitated property to any commercial or other non-residential use, the loan is due and payable. Iił1 A i I II F IF WIFE I A. If an owner-investor sells or transfers title to the rehabilitated property for any reason, the loan is due and payable. B. If an owner-investor wants to use his/her rehabilitated investment property for their personal residence, they must submit a written request to the Sponsor, be income eligible per current State Income limits, prove that the previous tenant was not evicted without sufficient and legal cause, and receive written approval from the Sponsor. C. If the use of rehabilitated owner-investor property changes to that of any non-residential use, or the process for approval for the same is commenced, the loan becomes due and payable. jse]jf1& &U [cli :11 lii d A. No unit will be eligible if a household s income exceeds the prescribed income limits listed in Attachment C. B. Units to be rehabilitated must be located within the Sponsor s city limits. 14 /1-/f-

17 C. Property must contain a legal residential structure intended for continued residential occupancy. D. All repair work must meet all applicable State Housing Law and Uniform Building Codes, in addition to the Sponsor s Municipal Codes at time of project completion. The priority will be the elimination of health and safety hazards. Sponsor may also require elimination of code deficiencies. If certain components of the house are sound and were built to the codes prescribed at the time of installation, no repair or alteration will be made to those components. Section 8 Housing Quality Standards may be required on rentals by Sponsor when CDBG funds are used. E. Applicants meeting all other eligibility criteria who hold a Life Estate on the property and reside on the property are eligible for a rehabilitation loan. Income eligibility will be determined by the income of the occupant/holder of the Life Estate, The hold of the Fee Simple Estate will be required to sign all loan documents. F. Applicants meeting all other eligibility criteria and who currently reside on a property with a title held by a living trust are eligible for a rehabilitation loan. Income eligibility is determined by the income of the applicant/occupant. Loan conditions are based on the continued occupancy of that specific occupant in the residence. j Tenants will be informed of their eligibility for temporary relocation assistance (TRA) if occupancy during rehabilitation constitutes a danger to health and safety of occupants or public danger or is otherwise undesirable because of the nature of the project. Eligible persons to be relocated will receive increased housing costs, payment for moving and related expenses and appropriate advisory services, as detailed in the Sponsor s "Residential Anti-displacement and Relocation Assistance Plan" (Attachment E). Owner-occupants are not eligible for temporary relocation benefits except as follows: 1. In extreme cases such as reconstruction or substantial rehabilitation when the work will render the dwelling unusable for some or all of the duration of the project. 2. When determined by the City to be necessary due to the health and safety of the occupants such as, but not limited to, when abatement of Lead Based Paint and/or Asbestos is required. 3. When items 1 and 2 above apply and the occupant has no private (family or otherwise) access to alternative housing or the financial means to support alternate housing. Verification of the latter to the City s satisfaction will be required

18 HOME-funded projects will provide relocation assistance in the form of a grant, which shall be included in the maximum assistance amount. 33. NOTIFICATION AND DISCLOSURES!iJL7! A. Occupants of units constructed prior to 1978 will receive proper notification of Lead-Based Paint (LBP) hazards as follows: The Lead Hazard Information Pamphlet published by the EPA/HUD/Consumer Product Safety Commission will be given to all owners regardless of the cost of rehabilitation or paint test findings. If lead-based paint is found through testing or if presumed, a Notice of Lead Hazard Evaluation or Presumption will also be supplied. When lead hazards are present, a Notice of Lead Hazard Reduction Activity and a Lead Hazard Evaluation Report will also be provided (Attachment I). B. Tenants located in properties that will receive housing rehabilitation will be provided a notice outlining their relocation rights and benefits (Attachment E). 4.1 LOANS Sir H I wort MW Limits - The Maximum assistance amount which can be borrowed is $85,000. Loans in excess of the maximum assistance amount may be approved based on, but not limited to: a. When existing conditions pose an imminent or developing threat to the life, health and/or safety of the occupants, other users of the property and/or the general public. b. When substantial dilapidation and deterioration are evident, and need correcting. c. When structural instability or the likelihood of the same is evident. d. When environmental infiltration (rain, heat, cold, etc.) is occurring, requiring substantial corrective work. e. When in the Sponsor s estimation, one or all of the above conditions may occur within the reasonably near future (e.g. one to three years) if not corrected. f. When proposed rehabilitation work will affect the structural and nonstructural elements and integrity of a building, thereby necessitating additional work. g. When the occupant is physically impaired due to age or other legitimate reasons, and structural and/or nonstructural improvements are therefore necessary for reasons of accessibility and/or safety /f

19 h. When sufficient program funding for the project is available. i. Procedural: The CDBG Loan Committee will be apprised via memorandum when staff estimates that the maximum assistance limit could or will be exceeded. The Loan Committee will then review and comment in a timely manner. Formal Loan Committee approval for proceeding is not required at this stage. 2. Loan to value - The maximum loan to value ratio that will be considered is 110% of the after rehabilitation value. If total indebtedness against the property exceeds 95% of the after rehabilitation value, the following considerations will apply: a. The Sponsor is to be in a second or better security position. b. Any existing mortgage must be current in payments. c. Property values will be determined based on professional appraisals. d. The applicant(s) must have an excellent credit rating, with no derogatory accounts, unpaid collections or judgments at time of application to the Sponsor. e. Applicants will be required to sign an acknowledgment at close of escrow stating that they are aware that the property will be encumbered for more than its currently projected worth (if applicable), and that they are proceeding with the Sponsor s loan of their own free will. Rehabilitation costs for CDBG-funded projects may be supplemented with personal financing or with other loan or grant programs, which are sources of leverage for the Sponsor. 3. Types of Financing and Terms a. Deferred Payment Loan (DPL) - DPL are loans as evidenced by a promissory note and secured by a Deed of Trust with no payments required until sale, transfer of title, discontinuance of residency by the participant, or in fifteen years, whichever comes first. In those events, the DPL and any accrued interest becomes immediately due and payable. Payments may be made voluntarily on a DPL. Borrowers with a DPL will be evaluated at least every five years for continued eligibility based on income. Those borrowers who no longer qualify for a DPL will have their loans converted to fully amortized at I % interest for fifteen years. b. Unless otherwise noted herein, all loans (both deferred and amortized) will bear an interest rate of 1%. Whenever possible, loans will be amortized. Interest begins at the close of escrow. Payments begin 30 days after the close of escrow. Any exceptions must be approved by the City. The maximum term of 17

20 City of Grass Vail Housin, Rehabilitation Guidelines all amortized loans will be 15 years unless a longer period is deemed necessary to protect the integrity of the loan. There will be no prepayment penalty. Exception: Possible options for the repayment of loans for reconstruction are to be as follows: Payment to be fully amortized, or Payment to be 1% interest only, or Payment to be deferred with 3% interest. 3% interest would be maintained for the life of the loan. 4. Maintenance Agreement Properties must be maintained at post-rehabilitation conditions for the life of the loan. The Sponsor will periodically conduct scheduled and/or unscheduled inspections to verify the maintenance of rehabilitated structures. Unscheduled inspections will not be in violation of property rights. Failure to uphold these requirements is grounds for loans to be accelerated if the problem is not corrected within 60 days of notification by the City, or as otherwise determined appropriate by the Sponsor. 5. Determining Eligibility All owner-occupant participants with incomes below 50% of the median income for the Sponsor s county (based on household size) are eligible for Deferred Payment Loans which will not exceed current equity. On a case-by-case basis, other hardship expenses such as medical and/or housing expenses in excess of 38% of the household s gross monthly income may be considered in determining the need for a deferred loan. B. Owner-Investor Loans 1. Limits - An owner-investor may be eligible for rehabilitation funding assistance needed to comply with Section 8 Standards. Maximum assistance from CDBG funds is $60,000 each for I or 2 units. A maximum of $20,000 per unit for each unit in excess of two units is allowed. Total indebtedness against property will not exceed 90% of the after-rehabilitation value. Rehabilitation costs for CDBG funded jobs may be supplemented with personal financing or with other sources of leverage. The guidelines found in 3 A.1 will be used when considering projects that require loans higher than these limits. 2. Types and Terms of Financing - All loans will be amortized at 3% interest for fifteen (15) years as evidenced by a promissory note and secured by a Deed of Trust. NOTE: Deferred Payment Loans (DPLs) are not available to investors. 18 /22O

21 3. Restrictions a) Rent Limitation Agreement (RLA) - An owner-investor who elects to rehabilitate a rental unit with CDBG financing must sign a Rent Limitation Agreement which will specify the following: 1) Maximum Allowed Rent for Occupied Units: If the unit is occupied, rent charges will not exceed 30% of the existing low-income tenants household income; or, where before rehabilitation, rents already exceed 30% of the existing tenants income, no rent increases shall be allowed for the term of the Rent Limitation Agreement. 2) Maximum Allowed Rent for Vacant Units: If the unit is vacant, the investor shall rent to tenants who earn 80% or less of the median income for Nevada County. Rent charges shall not exceed 30% of 80% of Nevada County median income for the appropriate household size in that unit. Investors shall affirmatively seek low income households by contacting the local housing authority. Where such contact does not result in eligible low income tenants, the investor shall contact the for guidance. 3) Terms: Adherence to these rent limitation provisions shall be for five years from the date the Notice of Completion is recorded. The RLA is a recorded document and transfers with the land. The borrower agrees that reference to the RLA will be inserted in any subsequent deeds and other legal instruments by which the assisted rental property is conveyed. 4) Compliance: Failure to comply with these terms and conditions will result in the loan becoming due and payable. If necessary, foreclosure proceedings will be instituted. b) Tenant Certification - An annual certification form will be sent to the owner of rental properties to verify that no tenant has been forced to move without cause during the previous years, that tenants satisfy required income criteria, and that rents do not exceed the terms of the RLA. 4. Maintenance Agreement Properties must be maintained at post-rehabilitation conditions for the life of a loan. The Sponsor will periodically conduct scheduled and/or 19 /2-2/

22 of Grass V unscheduled inspections to verify the maintenance of rehabilitated structures. Unscheduled inspections will not be in violation of property rights. Failure to uphold these requirements is grounds for loans to be accelerated if the problem is not corrected within 60 days of notification by the Sponsor, or as otherwise determined appropriate by the Sponsor. 42 GRANTS A. Grants for Emergency Repairs Applications will be evaluated and grants may be approved for emergency repairs (corrections at a property that is determined by the Sponsor to be of an imminent and emergency nature) for very low income households (50% or less of the median income based on household size) or for handicap retrofitting for disabled persons. Grants will be based on the following: 1. Each grant is not to exceed a maximum assistance amount of $ Only one occurrence of this funding is allowed per property. 3. Assistance will be considered for, but not limited to: a. Disruptions in plumbing service and the flow of hot and/or cold running water. b. Failure of a domestic hot water heater. c. Failure of the main heating facilities. Air condition repairs are not eligible. d. Failure of private sewage piping and/or system. e. Failure of electrical or gas facilities f. Structural failure. g. Repairs related to damage due to impact of a moving vehicle, falling limbs or trees, and/or a storm. Such damage must be of a nature that renders the dwelling open to the elements, threatens structural stability and/or otherwise constitutes an immediate threat the health and safety of the occupants. h. Alternations necessary to facilitate access for disabled persons who are permanent occupants of the dwelling. 4. Applications for assistance must be filed with the Sponsor. 5. Funding is only possible following the Sponsor s evaluation and approval of a request for assistance. Funding may be denied. 6. If practical, three bids must be obtained from State licensed contractors for the work requested. Bids will be obtained by the applicant of the Sponsor at the Sponsor s discretion, and bids will be based upon a work description provided by the Sponsor. 7. Funding may be approved to augment other funding (public and/or private-applicant to arrange) necessary to complete corrective work. In this instance, the Sponsor will require written verification that the work can be completed to the Sponsor s satisfaction with the combined funds. 8. Funding assistance is not available for work that has occurred prior to any of the following: ,

23 a. Filing of an application for assistance. b. Sponsor s approval for assistance. c. Issuance of a Notice to Proceed and building permit issuance from the Sponsor. 9. Unless approved and arranged otherwise with the Sponsor, payment for emergency repair services will only occur upon the completion of all work, and inspection and approval of the same by the Sponsor. B. Grants for Energy Efficient Upgrades 4.3. APPRAISAL In addition to the above mentioned emergency repair grants for health and safety reasons, the Sponsor offers grants up to $7500 for weatherization improvements, such as doors and windows, to those households qualifying as very low incomed (50% or less of the median income based on household size). Only one occurrence of this funding is allowed per property. A licensed appraiser determines the After-Rehab Value for rehabilitation and reconstruction projects using the building plans and specifications provided by the Sponsor. The cost of the appraisal will be paid through escrow. The purpose of the appraisal is to determine that the after-rehabilitation value of the housing unit will not exceed the permitted amount per HOD Program regulations (See Attachment C), and that the combined loans will not exceed the maximum combined loan-tovalue limit. The homeowner shall maintain fire insurance on the property for the duration of the Program loan(s). This insurance must be an amount adequate to cover all encumbrances on the property. The insurer must identify the Sponsor as Loss Payee for the amount of the Program loan(s). A binder shall be provided to the Sponsor. In the event the applicant fails to make the fire insurance premium payments in a timely fashion, the Sponsor at their option, may make such payments for a period not to exceed 60 days. The Sponsor may, in its discretion and upon the showing of special circumstances, make such premium payments for a longer period of time. Should the Sponsor make any payments, it may, in its sole discretion, add such payments to the principal amount that the applicant is obligated to repay the Sponsor under this Program. The premium may be paid by the Program loan for one year. Note: HOME funds can not be used to pay insurance cost beyond those identified as initial loan costs. 21 /2-23

24 Grass Valley For homes in a 100-year flood zone, the owner is required to maintain flood insurance in an amount adequate to secure the Program loan and all other encumbrances. This policy must designate the Sponsor as Loss Payee and a binder shall be provided to the Sponsor and maintained in the borrowers file, Note: HOME funds can not be used to pay insurance cost beyond those identified as initial loan costs. 4.6 LOAN SECURITY A. Loan security for all owner-occupied rehabilitation stick-built homes will be secured by the real property and improvements, and will also include a Deed of Trust, Promissory Note and Loan Agreement in favor of the Sponsor. B. Entering a subordinate lien is acceptable. However, the Sponsor will not subordinate a first lien position once established. IJ1 I 5.1 RECEIVING LOAN REPAYMENTS The Sponsor will be the receiver of loan payments or recapture 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 appropriate Program Income Account, as required by both HOD programs. The Program Sponsor will accept payment in full from borrowers prepaying deferred loans, from borrowers making payments in full upon sale or transfer of the property, and homeowners of tenant occupied units. However, borrowers with deferred loans who want to begin making monthly payments must receive prior written approval from the Sponsor. 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. I II t i.iiij See Attachment F 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. 22 /Z 21