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HomeMy WebLinkAboutMINUTES - 03312009 - C.74NSP Activity #1 PURCHASE AND REHABILITATION PROGRAM PROGRAM SPECIFICATIONS Program Description The Purchase and Rehabilitation Program enables approved developers (“Developers”) to purchase and rehabilitate vacant foreclosed homes in certain areas of Contra Costa County that have been devastated by foreclosures (“Activity 1A”). Under the program, the County, through its Deputy Director of Redevelopment, may also provide homebuyer assistance to the buyers of the houses renovated under the program (“Activity 1B”). Once rehabilitated, the houses are sold to low, moderate, or middle income (LMMI) households that satisfy income parameters established by NSP (“Eligible Purchasers”). NSP funds are available to Developers and Eligible Purchasers in the form of loans. Documentation To carry out the Purchase and Rehabilitation Program, the Deputy Director – Redevelopment, or his designee, is authorized to execute or accept the following documents, in a form approved by County Counsel: A. In connection with loans to the Developer 1. Program Agreement, which sets forth the terms of program implementation and access to NSP funds. 2. Loan Agreement, which sets forth the amount of a loan, the manner in which the funds are available to the borrower, and the terms of repayment. 3. Promissory Note, which provides evidence of the borrower’s promise to repay the loan in accordance with the terms of the loan agreement. 4. Deed of Trust, giving the County a security interest in the house being renovated. 5. Subordination Agreement, under which the County subordinates its security interest in the subject property to that of the mortgage lender. 6. Other ancillary ministerial documents, such as escrow instructions and estoppel certificates. B. In connection with loans to the Eligible Purchaser 1. Promissory Note, which provides evidence of the borrower’s promise to repay the loan. 2. Deed of Trust, giving the County a security interest in the house being acquired. 3. Subordination Agreement, under which the County subordinates its security interest in the subject property to that of the first mortgage lender, provided: a. All of the proceeds of the senior loan, less any transaction costs, are used to provide acquisition, construction and/or permanent financing for the subject property. b. The proposed lender is a state or federally chartered financial institution, a nonprofit corporation, a charitable foundation, or a public entity that is not affiliated with the developer or any of developer’s affiliates, other than as a depositor or a lender. c. The developer, or Eligible Purchaser, as the case may be, demonstrates that adequate financing is not available without the proposed subordination. d. The subordination agreement minimizes the risk that the County’s security interest in the property would be extinguished as a result of a foreclosure by the NSP Program Specifications – Activity #1 (Page 2) senior lender or other holder of the senior loan. The condition is satisfied if the County has adequate rights to cure any borrower default. e. The subordination agreement does not limit the effect of the County’s Deed of Trust before a foreclosure and does not require the consent of the holder of the senior loan before the County can exercise any of its remedies under the loan documents. 4. Other ancillary ministerial documents, such as a borrower disclosure statement, a loan commitment letter, and escrow instructions. Implementation Criteria To carry out the Purchase and Rehabilitation Program, the Deputy Director – Redevelopment, or his designee, is authorized to perform the following duties: 1. Permit houses to be included in the program that meet the following criteria: a. The house is vacant and foreclosed. b. The house is located in Bay Point, Oakley, Montalvin Manor/Tara Hills/Bayview, Rollingwood, North Richmond, Rodeo or San Pablo. c. The house is a single-family residence. d. The acquisition price of the house and the estimated cost of rehabilitation, including developer fees and other ancillary costs, is $200,000 or less. e. The renovation is expected to be complete within 6 months, but in no event later than February 28, 2013. 2. Make NSP funds available to a Developer in the form of a loan for the acquisition of a specific house (a “Loan”), provided: a. The amount of the Loan does not exceed $150,000. b. The amount of the Loan does not exceed 85% of the appraised value of the house. 3. Make NSP funds made available to a Developer in the form of a loan for the renovation of a specific house (a “Loan”), provided: a. The amount of the Loan does not exceed $150,000. b. The amount of the Loan does not exceed 150% of the purchase price of the house. 4. Permit the sale of a renovated house, provided: a. The house is sold for a price that is equal to or less than the total cost of development, including acquisition, rehabilitation, developer fees and soft costs. b. The house is sold for a price equal to or less than its fair market value, as determined by an independent appraisal. 5. Upon the sale of a renovated house to an Eligible Purchaser, deem the loan made to the Developer to be paid in full if: a. The loan is paid in full from the proceeds of the sale of the house; or b. The proceeds from the sale of the house are less than the cost of acquiring and rehabilitating the house and the Developer receives from the proceeds of the sale (together with the holder of the first mortgage, if applicable) only an amount equal to (i) NSP Program Specifications – Activity #1 (Page 3) the Developer’s contribution to the purchase price of the house plus (ii) a development fee equal to $30,000. 6. Make NSP funds available to an Eligible Purchaser in the form of a deferred second mortgage, provided: a. The deferred second mortgage is necessary to assist an Eligible Purchaser fill the gap between (i) the purchase price of the renovated house, and (ii) the amount of the first mortgage for which the eligible purchaser qualifies plus the Eligible Purchaser’s available down payment. b. The deferred second mortgage does not exceed 15% of the purchase price. c. The Eligible Purchaser deposits a minimum down payment equal to 3% of the purchase price. d. The loan principal plus, if applicable, a proportionate share of the increased value of the house, is due on the sale or transfer of the house by the Eligible Purchaser. e. The acquisition is expected to be completed by February 28, 2013. f. The Eligible Purchaser’s housing costs do not exceed 40% of the household income. g. The Eligible Purchaser satisfies the income limitations established by the NSP, as demonstrated by satisfactory evidence. h. The Eligible Purchaser obtains a fixed rate first mortgage. i. The Eligible Purchaser will occupy the house as his/her primary place of residence. j. The buyer completes a minimum of 8 hours of pre-purchase counseling through a HUD- certified housing counseling agency. k. The County’s security interest in the subject property is second only to that of one mortgage lender; provided, however, the County’s security interest in the subject property may also be subordinate to certain state or federal loan programs, such as those provided by the California Housing Finance Authority (CalHFA), which require senior lien positions.