City of Buena Park FIRST-TIME HOMEBUYER PROGRAM GUIDELINES RULES, POLICIES AND PROCEDURES FOR HOME PROGRAM FUNDS

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1 City of Buena Park FIRST-TIME HOMEBUYER PROGRAM GUIDELINES RULES, POLICIES AND PROCEDURES FOR HOME PROGRAM FUNDS Revised June 1, 2015

2 TABLE OF CONTENTS I. PROGRAM SUMMARY... 3 A. Purpose... 3 B. Goals... 3 C. Fair Housing Policy... 3 D. Conflict of Interest Requirements... 4 E. Marketing Strategy/Program Advertising... 4 F. Assessment of Policies/Restructuring of Program... 5 II. PROPERTY SELECTION REQUIREMENTS... 5 A. Location... 5 B. Eligible Properties/Property Type/Condition... 5 C. Maximum Purchase Price/Property Value... 5 D. Title and Form of Home Ownership... 5 E. Lead-Based Paint Requirements... 6 F. Homeowner s Insurance... 6 G. Flood Insurance... 6 III. HOUSEHOLD SELECTION/ELIGIBILITY REQUIREMENTS... 6 A. Preference Criteria... 6 B. Social Security Number... 7 C. Income Requirements... 7 D. Asset requirements... 7 E. First-Time Homebuyer Defined... 7 F. Principal Residence Requirements... 8 G. Household Composition... 8 H. Homebuyer Education... 8 IV. DETERMINATION OF GROSS INCOME... 9 A. Employment Status... 9 B. Verification of All Income... 9 C. Gross Income - Defined... 9 D. Income from Assets is Part of Annual Income... 9 V. HOUSEHOLD FINANCIAL REQUIREMENTS A. Income/Credit Worthiness B. Down Payment Requirement C. First Mortgage Loan Requirements Obtaining First Mortgage Loan Fixed Rate Mortgage Above Market Interest Rate Qualifying Ratios Buena Park FTHB 2014 Guideline

3 VI. CITY SECOND MORTGAGE TERMS AND CLOSING COST ASSISTANCE A. Closing Costs B. City Second Mortgage/Down Payment Assistance C. Lead-Based Paint Assistance D. Terms of City Second Mortgage Loan Secured Second Mortgage Monthly Loan Payments Interest on City Second Mortgage Payment of City Second Mortgage and Accrued Interest Acceleration Clause Assumption E. Resale, Refinancing, Payment of First Mortgage, Withdrawal of Equity and Subordination Resale Amount Refinancing to Reduce Monthly Payment Withdrawal of Equity-City Loan Pay-Off Required F. Annual Re-Certification of Occupancy/Annual Report to the City VII. LOAN APPLICATION AND PROGRAM PROCESSING PROCEDURE VIII. PENALTIES IX. GRIEVANCE PROCEDURE X. RECAPTURE PERIOD/PERIOD OF AFFORDABILITY/ACCOUNTING REQUIREMENTS ATTACHMENT A Median Home Price/Median Family Income ATTACHMENT B Disclosure & Seller w/voluntary Arm s Length Purchase Offer Buena Park FTHB 2014 Guideline

4 I. PROGRAM SUMMARY A. PURPOSE This document describes the Rules, Policies and Procedures for implementation of the City s First-Time Homebuyer Program. The information is intended to explain the City s first-time homebuyer/down payment assistance loan program to interested parties, particularly lower income individuals, families and households who want to become homeowners. The standards, criteria and requirements of the Program are consistent with the regulations of the HOME Investment Partnership Program, HOME Program and Fannie Mae s Community Homebuyer s Program. The regulations of the HOME Programs are defined in CFR 24 Part 92 published by the U.S. Department of Housing and Urban Development (HUD) on September 16, The underwriting criteria described in this document are consistent with the parameters set forth by Fannie Mae for first-time homebuyer programs. The statement may be modified from time-to-time to account for changes in the regulations of HUD and the County of Orange and/or the State of California Department of Housing and Community Development or the housing policies adopted by the City Council. B. GOALS The City Council has approved a program of down payment assistance to help low- income working individuals and families buy their first home. The program is known as the First-Time Homebuyer Program. The City Council has created this program to meet the following goals: Increase homeownership opportunities in the City. Provide working individuals and families with the opportunity to become homeowners. Improve the condition of housing through pride of ownership. Increase the number of owner-occupied homes in low-income census tract block groups. Stimulate private and public investment in the City. Facilitate the resale of existing housing. C. FAIR HOUSING POLICY The City of Buena Park will not discriminate against any applicant for a down payment assistance loan on the basis 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, or sex. The City program will be conducted and administered in conformity with Title VI of the Civil Rights Act of 1964 and the Fair Housing Act and implementing regulations. In addition, the City will affirmatively further fair housing and take actions to overcome the effects of any impediments to fair housing. The City will ensure that all persons, including those qualified individuals with handicaps, have access to the Program Buena Park FTHB 2014 Guideline

5 D. CONFLICT OF INTEREST REQUIREMENTS In accordance with title 24, Section of the Code of Federal Regulations for CDBG assistance and Section of the HOME Final Rule for HOME assistance no member of the City Council nor any of its Commissions, and officials or employees of the City of Buena Park, nor any other person who exercises policy or decision-making responsibilities in connection with the planning and implementation of the program shall directly or indirectly be eligible for this Program. Exceptions to this policy can be made only after public disclosure and formal approval by the City Council. E. MARKETING STRATEGY/PROGRAM ADVERTISING 1. The City will provide information to the public to encourage the widest participation to the program. Include the program in the City of Buena Park s website Discuss with local real estate agents and primary lenders Discuss with non-profit organizations Advertise in the City newsletters and local newspapers Attend community meetings, homebuyer fairs and seminars 2. The information disseminated to the public will cover: Purpose of the program Terms of the financial assistance Income limits Eligibility criteria Participants to the program will be selected based on meeting eligibility criteria, as described in pages 7 through 9 of the Guidelines. 3. The City will target outreach to low-income individuals and families in government assisted housing, trailer parks and affordable multi-unit rental housing in Buena Park who are ready to purchase and own their first homes. Program posters and/or flyers will be distributed. 4. As a recipient of State HOME funds, the City of Buena Park is required to adopt Fair Housing and Affirmative Marketing requirements. The following shall be undertaken: Fair Housing and Accessibility Logos will be placed on all outreach materials Underserved groups will be determined and City will advertise in periodicals that are written in languages other than English to target the minority group that are under-represented Records to determine that the program is not excluding protected groups will be maintained; the City is required to gather race/ethnicity data but is no longer required to analyze it annually 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 City will take appropriate steps to ensure effective communication with disabled housing applicants, residents and members of the public Buena Park FTHB 2014 Guideline (rev) (2)

6 F. ASSESSMENT OF POLICIES/RESTRUCTURING OF PROGRAM On an ongoing basis, the City will assess these program policies and procedures. This assessment will include an evaluation of current market values, interest rates and incomes to determine if changes are necessary to ensure that applicants are assisted in the most efficient and equitable manner. Changes may include, but are not limited to increase/decrease of; (1) the City second loan amount, (2) purchase price value, (3) city second interest rate. II. PROPERTY SELECTION REQUIREMENTS This section describes the requirements pertaining to properties eligible for acquisition through the program. The Applicant may select any property for purchase through this program that meets the requirements of these program regulations. A. LOCATION The property must be located within the City of Buena Park city limits. B. ELIGIBLE PROPERTIES/PROPERTY TYPE/CONDITION Properties eligible to be purchased through the program must meet the following criteria: 1. Tenant-occupied properties are not eligible for purchase through this program unless: (1) the tenant occupying the property is also the purchaser of the property. (2) or home is vacant for a minimum of 90 days at time of purchase. 2. Eligible properties include (a) single family (one unit) attached or detached dwellings, and (b) condominiums. Mobile homes and manufactured homes are not eligible for purchase through the program. 3. The property must be in compliance with all applicable Uniform Building Codes, Uniform Plumbing Codes, National Electrical Codes and additional City local codes, as applicable, prior to close of escrow. The cost of repairs required to bring the property into compliance with applicable codes will be paid by seller or buyer. In no case may HOME Funds be used to make any of the necessary repairs. Based on certain conditions and upon approval by the City Manager, compliance with the above requirements may be extended up to the time of occupancy, but no later than sixty days after the transfer of ownership of the property. C. MAXIMUM PURCHASE PRICE/PROPERTY VALUE The purchase price of the property cannot exceed 95% of the area median home value in Orange County as approved by the US Department of Housing and Urban Development, as periodically adjusted (See Attachment A). D. TITLE AND FORM OF HOME OWNERSHIP Home ownership means ownership in fee simple Buena Park FTHB 2014 Guideline (rev) (2)

7 E. LEAD-BASED PAINT REQUIREMENTS For properties constructed prior to 1978 the following shall apply: (1) the City shall provide the Applicant the EPA lead-based paint notification, the Protect Your Family From Lead In Your Home pamphlet. This notification shall be read and signed by the Applicant, submitted to the City at the time of application, and retained in the applicant s file; (2) each property will be inspected for defective paint surfaces and, (3) if defective paint surfaces are found the City will require that they be abated prior to close of escrow Refer to Step 9 of the Program Implementation Procedures. To ensure compliance with lead-based paint requirements, the City staff shall complete and include in the applicant s file, a completed Homebuyer Program Lead Compliance Document Checklist. F. HOMEOWNER S INSURANCE The Applicant must, as a condition of the loan, maintain homeowner s insurance on the property for the life of the loan and add the City as a loss payee on the policy. G. FLOOD INSURANCE As applicable, properties located within a 100-year flood plain as identified by FEMA are not eligible for loans from the Program unless flood insurance is obtained. This insurance will be required to be maintained for the life of the loan. The insurance policy must name the City of Buena Park as loss payee. III. HOUSEHOLD SELECTION/ELIGIBILITY REQUIREMENTS This section describes the program requirements pertaining to household/applicant ("Applicant") selection to participate in the program including eligibility criterion such as income and asset requirements, first-time homebuyer and principal residence requirements, down payment and housing cost criteria, household composition and preference criteria. Applications will be processed by the City on a first-come, firstserve basis. Only complete applications will be accepted for processing. A. PREFERENCE CRITERIA Preference will be given in the following order to the following eligible Applicants: 1. Households displaced due to actions of the City, County, State or Federal governments. 2. Residents who live or work in the City at the time of application. 3. All other eligible households. The City will conduct outreach to low-income individuals and families in rental or government assisted housing units, trailer parks, and affordable multi-rental units in Buena Park who are ready to purchase and own their first homes Buena Park FTHB 2014 Guideline (rev) (2)

8 B. SOCIAL SECURITY NUMBER All Applicant household members must provide proof of a valid Social Security number, proof of citizenship/or legal residency and must be residing in the United States. C. INCOME REQUIREMENTS The prospective purchaser household must meet the following eligibility requirements: 1. Must have a gross annual income that does not exceed the unadjusted 80% of the Orange County Area median income, adjusted for household size, established by HCD and adjusted annually (see Attachment A). D. ASSET REQUIREMENTS Applicant will be permitted to retain up to $10,000 in liquid assets after close of escrow. Liquid assets are defined as stocks, bonds, securities, and funds from savings and/or checking accounts. Retirement accounts will not be considered a liquid asset for the purposes of the program. Generally, liquid assets are assets that can be liquidated into cash within a short period of time (i.e., 30 days). E. FIRST-TIME HOMEBUYER-DEFINED Must be a first-time homebuyer, which is defined as: First-time homebuyer means an individual or individuals or an individual and his or her spouse who have not owned a home during the three-year period before the purchase of a home with City assistance, except that the following individual or individuals may not be excluded from consideration as a first-time homebuyer under this definition: 1. A displaced homemaker who, while a homemaker, owned a home with his or her spouse or resided in a home owned by the spouse. A displaced homemaker is an adult who has not, within the preceding two years, worked on a full-time basis as a member of the labor force for a consecutive twelve-month period and who has been unemployed or under-employed, experienced difficulty in obtaining or upgrading employment and worked primarily without remuneration to care for his or her home and family; 2. A single parent who, while married, owned a home with his or her spouse or resided in a home owned by the spouse. A single parent is an individual who is unmarried or legally separated from a spouse and has one or more minor children for whom the individual has custody or joint custody or is pregnant; and/or 3. An individual or individuals who own or owned, as a principal residence during the three-year period before the purchase of a home with City assistance, a dwelling unit whose structure is: (i) not permanently affixed to a permanent foundation in Buena Park FTHB 2014 Guideline (rev) (2)

9 accordance with local or state regulations; or (ii) not in compliance with state, local, or model building codes and cannot be brought into compliance with such codes for less than the cost of constructing a permanent structure. Federal Income Tax Returns/First Time Homebuyer Determination - The Applicant shall be required to provide Federal income tax returns for the prior three years and documents verifying current income eligibility for the program. If the deduction of mortgage interest is shown in any of the last three years, the Applicant(s) will not be eligible for assistance unless dissolution of a marriage can be shown through finalized divorce papers and a quit claim has been recorded removing the Applicant from title of the other property. F. PRINCIPAL RESIDENCE REQUIREMENTS The Applicant must occupy the property as a principal residence. A loan agreement in the second trust deed will require that the purchased property remain as the first-time homebuyer s principal residence. The loan documents (promissory note) between the City of Buena Park and the prospective purchaser household will also incorporate this requirement. G. HOUSEHOLD COMPOSITION Households applying for assistance must show proof that all household members identified on the City s application and those shown on the most recent Federal income tax return have lived together at the same address the last consecutive 12 months prior to the date of submittal of the City s application. In the case where a person is shown on a Federal income tax return but no longer resides in the household, recent documentation must be provided to the City showing the new address of that person and this address must be different from that of the Applicant(s). This document can be in the form of a copy of recent social security statement, telephone bill or other documentation deemed appropriate by the Administrative Analyst. H. 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 City, 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. Effective July 1, 2008, the City of Buena Park requires all program participants to attend a homebuyer education class. The City of Buena Park therefore entered into a partnership with the Neighborhood Housing Services of Orange County (NHSOC) to provide homebuyer education seminars for the City s First-Time Homebuyer Program applicants. The City of Buena Park requires that applicants submit certificates of attendance to NHSOC s homebuyer seminars or a comparable HUD certified homebuyer education program at the time they apply with the City. The NHSOC s homebuyer classes cover such topics as: credit and budgeting; homeowners Buena Park FTHB 2014 Guideline (rev) (2)

10 insurance; preparing for homeownership; roles and responsibilities of the real estate professional; home maintenance and preventive care; predatory lending and foreclosure prevention. IV. DETERMINATION OF GROSS INCOME A. EMPLOYMENT STATUS Employment History - All persons in the household showing a work history in the last 12 months must be employed at the time their City application is submitted. For example, if a person has worked in the last 12 months but is currently unemployed for various reasons including, but not limited to, being laid off, temporarily disabled, attending school, or is not working but has held a job within the last twelve months prior to submitting an application, the City cannot provide assistance until he/she has been re-employed. B. VERIFICATION OF ALL INCOME The source of all income must be documented through employment verifications, paycheck stubs, and/or claimed for federal and state income tax purposes. The income of any household members which cannot be verified and/or was not claimed on a federal income tax return cannot be used as income for loan qualification purposes. C. HOUSEHOLD INCOME-DEFINED In determining the household income, the method for income determination will be used as described in the what is Housing & Community Development s equivalent for Determining Income and Allowances shall be used. Household income is the gross annual 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. Unborn children will not be counted in the determination of family size. For types of income counted, gross amounts (before any deductions have been taken) are used; and the types of income that are not considered would be income of minors or 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 Method for Calculating Annual Gross Income and the Annual Income Inclusions and Exclusions as provided in 24 CFR Part 5. D. INCOME FROM ASSETS IS PART OF ANNUAL INCOME Income from assets 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 into cash. The value of necessary items such as furniture and automobiles are not included. An asset s cash value is the market value less reasonable expenses 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 Annual Income Net Family Asset Inclusions and Exclusions as provided in 24 CFR Part Buena Park FTHB 2014 Guideline (rev) (2)

11 V. HOUSEHOLD FINANCIAL REQUIREMENTS A. INCOME/CREDIT WORTHINESS Applicant shall have sufficient income and credit worthiness to qualify for primary financing. A bankruptcy that is less than 3 years old, or a short sale or a foreclosure that is less than 4 years old, will automatically disqualify the applicant. On a case-by-case basis, the City Manager may consider exceptions for extreme extenuating circumstances (including but not limited to divorce or death of a spouse). The City will require the applicant to submit a current credit report at the time of conditional approval to confirm essential credit worthiness. B. DOWN PAYMENT REQUIREMENT 1. Minimum Monetary Contribution toward Purchase The Applicant must have sufficient assets to provide a minimum monetary contribution equal to 3% of the purchase price of the home to be used as a down payment. The 3% down payment from the Applicant may be either a gift or from the Applicant s own funds. C. FIRST MORTGAGE LOAN REQUIREMENTS 1. Obtaining First Mortgage Loan The Applicant will be required to obtain financing for a first mortgage loan. 2. Fixed Rate First Mortgage The Applicant will be required to accept a minimum of 30-years, fixed rate first mortgage loan. No temporary interest rate buy-downs are permitted. The loan must be fully amortizing and have a fixed interest rate that does not exceed the current market rate, as established by the 90-day posted yield for thirty year fixed rate loans, as established by Fannie Mae. This means that loans that have an interest only period are not eligible, even if they convert to a fully-amortized loan at some point in the loan term. 3. Above Market Interest Rates First mortgage interest rates that are above the current going market rate due to the Applicant s poor credit, housing cost ratios to provide for lender assistance with costs or for any other reasons, will not be permitted. 4. Qualifying Ratios The front end ratio shall be between 28% and 38% and is the percentage of a borrower s gross monthly income (before deductions) that would cover the monthly housing cost (principal, interest, taxes, mortgage insurance, hazard insurance, homeowner association dues, special assessments, etc.). The back end ratio shall be up to 38% -and is the percentage of the borrower s gross monthly income that would cover the monthly housing cost payment plus any other monthly debt payments like car or personal loans and credit card debt Buena Park FTHB 2014 Guideline

12 Note: A qualifying ratio higher than the guidelines, up to 42% may be acceptable if there are compensating factors. Some examples of these compensating factors are: 1) the prospective buyer has successfully demonstrated that over a minimum 12-month period the ability to pay housing costs equal to or greater than the proposed monthly housing costs for the home to be purchased; (2) the prospective buyer is a limited user of credit and they show a history of being able to save money; etc. VI. CITY SECOND MORTGAGE AND CLOSING COST ASSISTANCE A. CLOSING COSTS The City may provide up to $5,000 of the City assistance to pay for non-recurring closing costs. The amount of closing cost assistance will be combined with the amount of down payment assistance and secured against the property as a part of the City s second mortgage. B. CITY SECOND MORTGAGE/DOWN PAYMENT ASSISTANCE Each Applicant will be eligible for up to $100,000 in City assistance per unit for either down payment, loan processing costs (associated with the City loan costs) and closing cost assistance. (Assistance provided for closing costs will reduce the amount available for down payment assistance.) The City will only provide that amount necessary to enable the Applicant to purchase a home. Example: Purchase Price: $320,000 Buyer 3% Down Payment: $ 9,600 Bank Loan: $254,900 GAP Financing (City Loan): $ 53,500 (Does not include closing costs) The Applicant may also receive up to $5,000 for closing cost assistance that will be added to the City s second mortgage. The applicant will be required to contribute all assets in excess of $10,000 and a minimum monthly housing payment equal to not less than 28% of the applicant s monthly gross income. Homebuyer s mortgage assistance loans when combined must have a combined loan-to-value ratio not exceeding 97% of the sales price plus a maximum of up to 5% of the sales price to cover actual non-recurring costs. C. LEAD-BASED PAINT ASSISTANCE The cost for controlling/abating any lead-based paint identified in the housing unit purchased through the program will be provided as a grant from the City, for leadbased paint control/abatement including the cost of the assessment and/or actual repairs/abatement. This grant would be funded using City of Buena Park Community Development Block Grant program income. D. TERMS OF CITY SECOND MORTGAGE LOAN 1. Secured Second Mortgage Buena Park FTHB 2014 Guideline

13 The City s assistance will be in the form of a secured second mortgage. However, due to the high sales prices of homes in Buena Park, the City may go on a secured third mortgage position to enable eligible families to secure additional financing and thereby qualify to buy a home. This will require approval by the City Manager. 2. Monthly Loan Payments There will be no monthly payments on the City second mortgage. 3. Interest on Second Mortgage Interest will be charged on the City second mortgage at a 3% simple annual interest for the 30 years of the loan SAMPLE - CITY SECOND MORTGAGE LOAN REPAYMENT SCHEDULE THE INTEREST RATE IS A 3% SIMPLE INTEREST PER ANNUM FOR THE ENTIRE 30-YEAR LOAN TERM Number of Loan Interest Yearly Accumulated Accumulated Years Amount Rate Interest Interest Interest/Loan Per Year 1 $60,000 3% $1,800 $ 1,800 $ 61, $60,000 3% $1,800 $ 3,600 $ 63, $60,000 3% $1,800 $ 5,400 $ 65, $60,000 3% $1,800 $ 7,200 $ 67, $60,000 3% $1,800 $ 9,000 $ 69, $60,000 3% $1,800 $10,800 $ 70, $60,000 3% $1,800 $12,600 $72, $60,000 3% $1,800 $14,400 $ 74, $60,000 3% $1,800 $16,200 $ 76, $60,000 3% $1,800 $18,000 $ 78, $60,000 3% $1,800 $19,800 $ 79, $60,000 3% $1,800 $21,600 $ 81, $60,000 3% $1,800 $23,400 $ 83, $60,000 3% $1,800 $25,200 $ 85, $60,000 3% $1,800 $27,000 $ 87, $60,000 3% $1,800 $28,800 $ 88, $60,000 3% $1,800 $30,600 $ $60,000 3% $1,800 $32,400 $ 92, $60,000 3% $1,800 $34,200 $ 94, $60,000 3% $1,800 $36,000 $ 96, $60,000 3% $1,800 $37,800 $ 97, $60,000 3% $1,800 $ $ 99, $60,000 3% $1,800 $41,400 $101, $60,000 3% $1,800 $43,200 $103, $60,000 3% $1,800 $45,000 $105, $60,000 3% $1,800 $46,800 $106, $60,000 3% $1,800 $48,600 $108, $60,000 3% $1,800 $50,400 $110, $60,000 3% $1,800 $52,200 $112, $60,000 3% $1,800 $54,000 $114, Payment of City Second Mortgage and Accrued Interest The City second mortgage including principal and accrued interest is 100% Buena Park FTHB 2014 Guideline

14 immediately due and payable (a) upon sale of the property, (b) transfer of title of the property or any interest in the property (i.e., adding any new owner to the title), (c) when the Applicant ceases to reside in the property, (d) when the Applicant leases or subleases the property and the home is not owner occupied, or (e) when the Applicant breaches the terms of the City deed of trust or at a minimum of 30 years, whichever comes first. Under no circumstance will temporary or permanent leases of the property be permitted. (i.e., renting or leasing of the property due to job relocation is also prohibited). 5. Acceleration Clause An acceleration clause shall be in effect when the property is transferred, equity is withdrawn from the property, the property is no longer the borrower s principal residence, or there is a failure to report changes, including, but not limited to, fire and vandalism, discovery of willful misrepresentations in connection with the program regulations or financial default; failure to maintain the property to meet health and safety and the Buena Park Municipal Code requirements. On a case-bycase basis, the City may consider the transfer of title in the case of marriage and/or dissolution of marriage. The acceleration clause shall become operative if the borrower willfully and knowingly makes a false statement or representation or knowingly fails to disclose a material fact for the purpose of qualifying for the down payment assistance or, in completing certifications, affidavits or recertification of occupancy. The City shall demand full repayment of the loan principal and interest. 6. Assumption/Transferable By statue, HOME Program loans are not assumable. However, exceptions of transfer of interest shall not require the repayment of the loan as follows: Transfer to a surviving joint tenant on the death of a joint tenant, Transfer in which the spouse becomes the owner of the property Transfer resulting from a decree of dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement by which the spouse becomes an owner of the property; or A transfer into an inter vivo trust in which the borrower is and remains the beneficiary and occupant of the property. E. RESALES, REFINANCING, PAYMENT OF FIRST MORTGAGE, WITHDRAWAL OF EQUITY AND SUBORDINATION 1. Refinancing to Reduce Monthly Payments Refinancing of the first mortgage is allowed for the purpose of reducing monthly payments on the first mortgage loan due to lower market interest rates. In no case shall the amount of the new first mortgage exceed the then outstanding balance of the original first mortgage plus reasonable closing costs (not-to-exceed 5% of the new first mortgage) associated with the refinance. Under this circumstance only, a request for subordination of the City second deed of trust may be reviewed and approved by City staff. 2. Withdrawal of Equity - City Loan Pay-Off Required Buena Park FTHB 2014 Guideline

15 The withdrawal of equity from the property will require the immediate repayment of the City's second mortgage in full including principal plus accrued interest. A withdrawal of equity does not include the use of equity to pay for the lender and escrow costs associated with a refinance. 3. Default and/or foreclosure On a default/and or foreclosure, Staff will negotiate with the first lender to obtain the best possible amount allowable through the foreclosure process. On a Short Sale, Staff will follow the Short Sale Policy of HOME Management Memo # F. ANNUAL RECERTIFICATION OF OCCUPANCY/ANNUAL REPORT TO THE CITY Each Applicant will be required to allow the City to recertify occupancy. At a minimum, this re-certification will occur on an annual basis for the duration of the Applicant occupancy of the unit. The recertification of occupancy is to confirm that the assisted household is still the resident of the home. Recertification may include requiring the Applicant to provide copies of current federal tax returns, telephone bills or other documentation, as requested by the City. Staff will also verify annually through the County Assessor s website that all property taxes are current. VII. LOAN APPLICATION AND PROGRAM PROCESSING PROCEDURES The First-Time Home Buyer Program is designed to be used in conjunction with the normal mortgage loan application process. The following outline sets forth the general program procedures and sequence of events. From time to time, at the discretion of the City Manager or designee, these procedures may be modified. STEP 1. APPLICANT CONTACTS CITY Upon request, an applicant will be given an application package. The application package includes: 1. Signed application for all persons applying for the loan (application): Exhibit A (Current Monthly Income Chart) Exhibit B (Household Composition Sheet) Exhibit C (Lead Based Paint Information) Exhibit D (Federal Income Tax Statement, if Applicable) Exhibit E (Consent for Credit Report) 2. COPY of last 3 years Federal Income Tax Returns SIGNED & WITH W-2 and ALL Schedules. 3. COPY of Purchase and Sales Agreement and/or Escrow Instruction (if any). 4. COPY of first mortgage loan approval commitment letter (if any). 5. COPY of divorce decree (if applicable). 6. COPY of two months of the most recent paycheck stubs. Self-employed must also provide a year-to-date profit and loss statement. 7. COPY of other income documentation (supply a copy of the award letter or a copy of the check or direct deposit bank statement): Child Support (if child support has been ordered but never or periodically received please provide proof from the District Attorney Office) Alimony Social Security, SSI Retirement Buena Park FTHB 2014 Guideline

16 Disability AFDC (Aid to Families with Dependent Children/food stamps) Interest on Savings/Income Earning Accounts Proof of income for ALL persons living in the household over the age of Three (3) most recent savings statements and six (6) most recent checking statements for all accounts (all pages) 9. COPY of current identification (i.e., driver's license or State of California ID) birth certificate and/or proof of legal residency 10. COPY of Certificate of Attendance to the Neighborhood Housing Services of Orange County s or a comparable Homebuyer Education Seminar STEP 2. APPLICANT SUBMITS APPLICATION Upon receipt of completed application, the City determines if household and property is eligible based on application and other supporting documentation. STEP 3. APPLICANT APPROVAL/DENIAL Once eligibility is determined, Staff will notify the applicant in writing of his approval or denial: 1. If applicant does not satisfy the program requirement, City sends notice of ineligibility to applicant documenting the reasons for ineligibility. 2. If applicant is deemed eligible, City mails the applicant a conditional approval letter and the following attachments: (1) Addendum to Purchase and Sales Agreement including: A Seller Acquisition Notice which will contain the following items: i. The purchaser has no power of eminent domain and, therefore, will not acquire the property if negotiations fail to result in an amicable agreement; and ii. A statement that the purchase is based on an appraisal obtained as a iii. part of the transaction; and If the acquisition notice is not provided prior to the purchase offer, the seller may withdraw from the agreement within three (3) days after this information is provided. (2) The Property Inspection Request form. (3) First Mortgage Lender Memorandum entitled Submittal of Package for City Firsttime Home Buyer Funding that explains how to request: (a) final City approval, and (b) City funds for escrow including: i. 2-page First Mortgage Lender s Certification of Applicant Eligibility and First Mortgage Loan Approval form. STEP 4. APPROVED APPLICANT APPLIES FOR FIRST MORTGAGE LOAN The City approval letter will direct the Applicant to contact a first mortgage lender that is willing and able to process a first mortgage loan. The first mortgage lender will review the income and other program criteria to ensure that the Applicant is eligible for City assistance as well as determine whether they can qualify for a first mortgage loan. STEP 5. APPLICANT FINDS A HOME TO PURCHASE WITHIN THE CITY Once the Applicant has been pre-qualified by the first mortgage lender for a first mortgage loan and the first mortgage lender has confirmed the applicant eligibility for City assistance, the first mortgage lender will direct the Applicant to find a home within the purchase amount he/she has been pre-qualified for Buena Park FTHB 2014 Guideline

17 STEP 6. APPLICANT ENTERS INTO A PURCHASE AND SALES AGREEMENT WITH THE SELLER OF A PROPERTY WITHIN THE CITY AND OPENS ESCROW Once the Applicant finds a home, the Applicant must enter into a purchase and sales agreement, which includes providing the seller with the City s Addendum to Purchase Agreement. Once the seller accepts the purchase and sales agreement, the Applicant and seller enter into escrow. The escrow should be no less than 60 days. STEP 7. APPLICANT PROVIDES CITY WITH COPY OF PURCHASE AND SALES AGREEMENT, SELLER LEAD-BASED PAINT DISCLOSURE, CITY ADDENDUM TO PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS Once escrow is open, the Applicant will submit to the City: (1) a copy of the purchase and sales agreement signed by both the Applicant and the seller, (2) copy of Seller Lead-based Paint Disclosure, (3) City Addendum to Purchase Agreement, and (4) certified escrow instructions. STEP 8. REQUEST FOR INITIAL PROPERTY INSPECTION The Applicant, Seller or their respective real estate agent must submit by facsimile or otherwise deliver the Initial Property Inspection Request form to the City. STEP 9. INITIAL PROPERTY INSPECTION & INSPECTION REPORT Within 10 working days from the receipt of the Initial Inspection Request, the City will conduct a physical inspection of the property as follows: a. The City s Housing Inspector or Building inspector contacts the person identified in the Inspection Request form to arrange for the site inspection. b. City s Housing Inspector or Building Inspector inspects the property to ensure: 1. The property meets the Uniform Building Code, Uniform Plumbing Code and National Electrical Code, and required Health and Safety and local City codes; and 2. Homes constructed before 1978 will be inspected for defective paint surfaces; 3. If defective paint surfaces are found in homes constructed before 1978, the Housing Inspector will require that a Certified Lead-Paint Risk Assessor conduct an assessment of the paint within 5 working days of the Housing Inspector s inspection of the property. c. Within 5 working days of the inspection (where the home was constructed prior to 1978 and defective paint surfaces were not found), the person identified on the Inspection Request form is provided with an inspection report identifying repair items that are required to be made prior to close of escrow/time of purchase. d. Within 10 working days of the inspection (where the home was constructed prior to 1978 and defective paint surfaces were found), the person identified on the Inspection Request form is provided with: (1) an inspection report identifying repair items, and (2) results of the lead-paint risk assessment including any requirements to abate lead-paint surfaces. e. All repairs identified by the Housing Inspector or Building Inspector and Lead Paint Risk Assessor must be addressed prior to close of escrow/time of purchase. STEP 10. CITY FINAL PROPERTY INSPECTION Once all repair items have been completed, the Seller or his agent submits a Final Inspection Request. A Final inspection of the property will be conducted. Once the inspection has been completed, the applicant will be notified of confirmation that the property passed inspection or the property requires additional repairs Buena Park FTHB 2014 Guideline

18 This inspection must take place before Step 11 (Request for Final Funding) can take place. Lead-based Paint Clearance - In the event lead paint abatement was required, the City must be provided with a lead paint clearance by the Lead Paint Risk Assessor prior to close of escrow. STEP 11. REQUEST FOR FINAL FUNDING (LENDER CERTIFICATION OF APPLICANT ELIGIBILITY) This is the final approval phase that is required for all loans. The purpose is to evaluate the first mortgage lender information to ascertain the Applicant is eligible under the City's regulations and to determine the exact amount of City required assistance. At this stage, the first mortgage lender/broker must submit a lender s package that includes the following: "LENDER CERTIFICATION OF APPLICANT ELIGIBILITY FORM" that MUST include the following backup documentation: a. Copy of bank application and all supporting bank documents for the first mortgage ("copy package") including the signed conventional Underwriting 1003 and 1008 forms (both must be signed by UNDERWRITER), property appraisal, lender application, and income documentation, preliminary title report, proof of hazard insurance with City listed as additionally insured and any other documentation requested by the City. b. Estimated closing cost statement (HUD-1). NOTE: Funding cannot be requested until the property passes the Final Inspection. If the property does not pass the Final Inspection funding will be delayed (see Step 10) STEP 12. APPROVAL/PREPARATION OF WIRE REQUEST/FUNDS FROM FINANCE DEPARTMENT Upon review of the Lender Certification and Lender s package identified in Step 11, and if the Applicant is approved (no other information was required of the lender), the following are prepared by staff and transmitted to the City Manager with the applicant file: 1. Approval memorandum to the City Manager. 2. Wire request memorandum to the Finance Department. Once the City Manager reviews the above documents and the applicant file and provides final loan approval, a wire request form is prepared by Staff and submitted to the City s Finance Department. STEP 13. PREPARATION OF CITY LOAN DOCUMENTS AND STATE FORMS City staff will prepare the following City loan documents to be dated the same as the date as the City approval: 1. City of Buena Park Escrow Instructions 2. Deed of Trust 3. Promissory Note 4. Truth-in-Lending Statement 5. Fair Lending Statement At this time, staff will transmit the above documents to the City Manager or his designee for Buena Park FTHB 2014 Guideline

19 signatures, STEP 14. RELEASE OF CITY LOAN DOCUMENTS AND FUNDS TO ESCROW Once the City loan documents are complete City staff will call the escrow or title company and request them to pick up the following documents: 1. City of Buena Park Escrow Instructions 2. Deed of Trust 3. Promissory Note (loan agreement) 4. Truth-in-Lending Statement 5. Fair Lending Statement Only an authorized representative from the escrow or title company will be permitted to pick up the City documents and return the City documents once executed. STEP 15. DELIVERY OF CITY LOAN DOCUMENTS TO COUNTY RECORDER OR CITY Once the City loan documents are signed in escrow, the escrow company or title company will: (1) record the deed of trust; and (2) return the following City documents to the Economic Development Department: a. the original, fully executed escrow instructions; b. the original, fully executed promissory note (plus one certified copy); (loan agreement) c. one certified copy of the fully executed deed of trust; d. the original, fully executed Truth-in-Lending Statement plus one certified copy; and e. the original, fully executed Fair Lending Notice (plus one certified copy). STEP 16. SUBMITTAL HOME PROGRAM FORMS TO HCD/CITY REIMBURSEMENT OF FUNDS FROM STATE Once escrow closes, City staff submits, as applicable, on the following HOME Program forms: 1. Transmittal Letter, signed 2. Completed Mortgage Assistance Draw Request signed by Authorized Signatory or designee. Complete Mortgage Assistance Borrower Summary, (one for each individual HOME) signed by the program administrator with the following attached to each in the following order. Setup/Completion Report Final HUD-1 Settlement Statement Project Drawdown Request STEP 17. CITY REIMBURSEMENT OF FUNDS FROM STATE Within 4-6 weeks (providing there is an approved state budget) from the submittal of the documents listed in Step 16 to the HOME Program, the City Finance Department will deposit funds received to the account from which City funds were advanced to fund the loan. If an advance of 25% is requested, then that amount will be deposited into the City funds for the program and will be drawn down as the loans are processed. STEP 18. MAINTENANCE OF PROPERTY BY HOMEOWNER The Homeowner must maintain the property and meet the Uniform Building Code, Uniform Buena Park FTHB 2014 Guideline

20 Plumbing Code and National Electrical Code, and required Health and Safety and local City codes standards for no less than five years from the transfer of ownership of the property. VIII. PENALTIES Strict penalties may be imposed on any Applicant making a material misstatement, misrepresentation or committing a fraudulent act on documents submitted to purchase a housing unit through the First-time Homebuyer Program. Any person making a negligent or fraudulent material misstatement or misrepresentation in any affidavit or certification made in connection with the application for or the issuance of a down payment assistance loan shall be subject to all State and Federal applicable fines and penalties. At the discretion of the City Manager, the second mortgage may be immediately due and payable. IX. GRIEVANCE PROCEDURE Appeals by any Applicant or other person who believes their interest is or has been adversely affected by any determination or requirement of the City staff in regards to the rules and requirements of this program may appeal to the City Manager. The appeal must prove that the guidelines, rules and regulations of this program are not being met, or are arbitrary or capricious, or that these rules and regulations are being capriciously or not properly applied. Such appeal must be filed in writing to the City of Buena Park Economic Development Department. The City Manager s determination shall be final. X. RECAPUTRE PERIOD/PERIOD OF AFFORDABILITY/FINANCIAL/ACCOUNTING REQUIREMENTS All repayments of HOME loan principal and interest received by the City shall be deposited into a separate Reuse account. The reuse account shall be an interest bearing account into which all earned interest shall be deposited. All funds deposited into the reuse account shall be the property of the City. A line item for reuse of HOME funds will be inserted into the City s fiscal year budget allocating and approving use of funds for HOME eligible activities. All HOME reuse funds shall be expended in accordance with HOME Regulations and the Standard Agreement between the City and HCD. Reuse funds may be used for the following: 1. Additional HOME mortgage assistance and/or Owner Occupied Rehabilitation 2. Costs of homebuyer education for each first time homebuyer receiving mortgage assistance from the reuse account. 3. HOME loan processing activity delivery fees as applicable costs (up to 5% of reuse funds deposited) of loan servicing by the City or cost of loan servicing contracted by the City. The City shall allow HCD full access to the reuse account records for the purpose of determining City s compliance with HOME regulations. All loan repayments shall be documented in our database naming the borrower, reference number, grant year, loan and interest amounts paid. The City s minimum period/period of affordability is the minimum amount of time that the owner/borrower must remain in the house to satisfy the HOME regulations for affordability. Based on the City s proposed loan amount of $60,000, the minimum period of affordability is 15 years Buena Park FTHB 2014 Guideline

21 ATTACHMENT A MEDIAN HOME PRICE FOR ORANGE COUNTY CAN NOT EXCEED 95% CURRENT MEDIAN OF THE AREA SINGLE FAMILY HOME New Single Family Home $560,000 Existing Single Family Home $466,000 80% of AMI 2015 MEDIAN FAMILY INCOME FOR ORANGE COUNTY* 6/1/2015 Number of Persons in Household $52,500 $60,000 $67,500 $74,950 $80,950 $86,950 $92,950 $98,950 *Income limits will be adjusted annually as HCD provides new information Buena Park FTHB 2014 Guideline

22 Attachment B Disclosure to Seller with Voluntary, Arm's Length Purchase Offer DECLARATION This is to inform you that (name of buyers) 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 Buyer Date Date Form continues on next page with Seller s Acknowledgment Buena Park FTHB 2014 Guideline