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HomeMy WebLinkAboutMINUTES - 03211989 - IO.3 TO: BOARD OF SUPERVISORS 1 . 0. 3 SEL _ Contra aE.• 'c s. FROM: INTERNAL OPERATIONS COMMITTEE Costa M. -is o= March 13 , 1989 County DATE: COs' rq couKT'{ _ SUBJECT: Use of Revenue Bonds to Assist Foster Parents SPECIFIC REOUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATIONS: 1 . Request the Director of Community Development, in cooperation with the Social Services Director, to develop a more detailed and specific mortgage revenue bond financing program which might be used to assist couples wishing to become foster parents to purchase a home which will both meet the couple ' s family needs and which could be used as a foster home, and report back to our Committee on June 12, 1989. This report should also include the possible use of the County' s rehabilitation programs to remodel or enlarge an existing home to be used as a foster home. 2 . Pending completion and approval of such a program, request the Community Development Department staff to incorporate in the proposed 1989 mortgage revenue bond financing program a specific set-aside for foster parents which can be used to implement the program being prepared in response to recommendation #1. 3 . Leave this matter on referral to our Committee. BACKGROUND: On December 20, 1988, the Board of Supervisors referred to our Committee the possibility of somehow using the mortgage revenue bond financing program to assist foster parents who wish to purchase a home. Community Development Department staff were asked to report back to our Committee by March 1, 1989. CONTINUED ON ATTACHMENT: X YES SIGNATURE: __T RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION F BOARD COMMITTEE _ APPROVE THER SIGNATURES. 'OM Power Sunne Wright McPeak ACTION OF BOARD ON March 21 , 1989 APPROVED AS RECOMMENDED X OTHER VOTE OF SUPERVISORS _ I HEREBY CERTIFY THAT THIS IS A TRUE X UNANIMOUS(ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN AYES- NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. CC: County Administrator , � a/ /9P9 Director, Community Development ATTESTED Social Services Director PHIL BATCHELOR,CLERK OF THE BOARD OF Jim Kennedy, Redevelopment, CDD SUPERVISORS AND COUNTY ADMINISTRATOR az,44— M382 (10/88) BY DEPUTY i Page 2 On March 13 , 1989, 'our Committee reviewed the attached report with staff from the Community Development Department. There are a number of limitations on the ability to use mortgage revenue bond financing to help foster parents. There are limits on the price of the home which can be purchased, income limits, and a requirement that the foster family qualify in regard to credit worthiness. It is, however, possible to set aside a portion of the proposed 1989 mortgage revenue bond financing program until staff are able to develop a more detailed and .specific program and a mechanism to market it to foster parents. There is also the possibility of using some of the housing rehabilitation programs to assist in enlarging or remodeling an existing home to make - it more suitable for foster children. we would like to see what Community Development and Social Services staff can put together in the next three months and have, therefore, asked that they develop such a program and report it back to our Committee in June. -Community Contra Harvey E. BDirector of Community Development Development Costa Department County Administration Building County 651 Pine Street 4th Floor, North Wing Martinez, California 94553-0095 Phone: TO: INTERNAL OPERATIONS COMMITTEE DATE: March 8, 1989 Supervisor Tom Powers Supervisor Sunne McPeak FROM: Janet Anderson �� N�`� Senior Housing Panner SUBJECT: Mortgage Revenue Bond Financing for Foster Parents This memorandum responds to the Board of Supervisors' request that the Community Development Department provide further information to the Internal Operations Committee on the possibility of providing tax exempt bond financing to assist foster parents in purchasing home's. In a December 5, 1988 memo to you regarding available mechanisms to assist foster parents in providing housing, the possibility of utilizing below market rate financing which is available to first time home buyers within certain income ranges was discussed. Attachment A provides the current eligibility criteria for participants in the tax exempt mortgage revenue bond program based on state and federal requirements. In addition, buyers must be able to meet underwriting standards for credit worthiness and sufficient income and be able to provide the downpayment and other closing costs in order to purchase a home through the program. In the County's past mortgage revenue bond programs, the County has secured a portion of its bond allocation to provide financing for public purpose programs. The County is currently structuring a 1989 tax exemptbondissue which may have such an allocation as part of the total issue, pending approval from the Board of Supervisors and subsequent allocation from the state. Funds from both the past bond programs and the proposed 1989 bond program could be available for a specific set-aside for foster parents. Community Development staff explored with the Department of Social Services the merits of such a proposal in assisting foster parents with their housing needs. While the Department of Social Services is preparing a comprehensive report to the Internal Operations Committee on mechanisms to encourage and retain participation in the foster parent program, the following discussion focuses on mortgage revenue bond financing specifically. Of the 427 licensed foster care homes in the County, it is not known how many would want or would qualify for bond financing. An assessment of current and prospective foster parents' housing needs would be critical in developing mechanisms to encourage foster parents to participate in the foster parent program or to assist them with housing limitations such as number of bedrooms or barriers to handicapped accessibility. Unfortunately, relevant information on foster parents (such as income, household size, renter vs. homeowner status, current housing size,. current housing costs, and needs for handicapped accessibility) is not available at this time. Department of Social Services does expect to have a computerized database of client information in the near future. Since tax exempt bond financing is available almost exclusively for first time home buyers, effectively this program would only assist foster parents who are currently renters. Based on Department of Social Services estimates of typical household incomes for foster parents, the program's maximum allowed income levels would not be prohibitive but actual incomes may be too low to qualify for financing without substantial financial assistance. For example, foster parents on AFDC would not be candidates for bond financing. The Department of Social Services has indicated that the needs of the foster parents program related to housing are for inducements to encourage new foster parents to participate, rather than incentives for foster parents to remain in the program. A May, 1988 report on foster homes throughout the Bay Area, the Foster Home Retention Survey by the San Francisco-based Community Task Force on Homes for Children, indicates that 26% of foster parents drop out of the program within the first year of being licensed. Of the reasons listed for dropping out of the program, financial considerations were less important than problems with the foster care system, demands of the children, intention to participate for only a limited period of time, and personal reasons; in other words, housing did not appear to be a major factor. In contrast, housing does appear to be a barrier to foster parent recruitment. According to the Department of Social Services, housing considerations such as fire/safety standards and living space requirements prevent many otherwise eligible foster parents from being licensed. Tax exempt bond financing could be made available to new foster parents to assist them in purchasing a home with adequate living space to accommodate an expanded family size. However, a couple of troubling issues emerged in the initial discussions with Department of Social Services on this concept. Because of the substantial financial benefits resulting from obtaining tax exempt bond financing at 2-3 points below market-rate fixed-rate financing, the County might want some assurance that prospective foster parents were primarily motivated by a desire to assist foster children, and not by the opportunity to purchase real estate. A condition of providing foster parent care for a minimum period of time could be a minimum eligibility requirement for obtaining this set aside bond financing. Typically a certain percentage of new foster parents drop out of the program within a short period of time after taking a foster child into their home. These foster parents discover that being a foster parent is too difficult or unsatisfactory for a number of reasons. For the foster children's sake, it is best that these parents not continue in the program. Because it could be counterproductive for the program to require that the -2- parents continue in the program, the prospect of providing mortgage financing on the basis of continued foster parent status is problematic. Bond financing could be made available to prospective or current foster parents referred from Department of Social Services. While some foster parents may subsequently drop out of the program, they would at least have met the income and first time homebuyer standards which apply to all other buyers in the program. So that, besides providing homeownership opportunities to firt time homebuyers, the added public purpose could be achieved of providing for the unique housing needs of some foster parents so that more foster children could be served. Based on the fact that the average foster home takes in several foster children, frequently in addition to the parents' own children (427 licensed homes provide 1,117 licensed beds) , it appears that foster parents need a large number of bedrooms to accommodate their large households. Of the foster parents who are continuing in the program, the availability of a larger unit may allow them to take in more children than their current housing allows. Because of the concerns expressed by the Department of Social Services, the Community Development Department recommends that bond financing be tentatively set-aside for foster parents for a period of time, say six months. During that time the program can be structured and marketed by the Department of Social Services to prospective foster parents. The Community Development Department will provide the Department of Social Services with information about the bond financing and work with Department of Social Services in structuring a program. In summary: o Mortgage revenue bond financing for first-time homebuyers can be made available for foster parents. o Not all foster parents will be interested in or qualify for the financing. o The provision of home purchase financing is likely to be most attractive to prospective foster parents. o Department of Social Services is concerned about prospective foster parents getting bond financing and not staying on as foster parents. o A set-aside of the bond financing can be provided and Community Development Department and Department of Social Services staff can develop program structure and marketing. JA/JK:cg cjal/mrbfstr.ltr -3- ATTACHMENT A Summary of Program Parameters Single-Family Mortgage Revenue Bond Program Limits I . Purchase Price Limit Maximum permitted by Federal Law. Presently in non-target areas, these limits are: - Newly constructed housing $152,100 - Existing housing $138,870 II . Income Limits Maximum permitted by Federal and State Law. Presently, in non- targeted areas, these limits are: - Newly constructed housing 1 .& 2 person household $45,000 3+ person household $51,750 - Existing 1 & 2 person household $45,000 3+ person household $48,900 (50% of mortgages reserved for buyers with incomes of $39,120 or less irrespective $39,120 of family size. ) III. Mortgagor Requirements At least 95% of the mortgage must be utilized by first- time homebuyers. IV. Mortgage Loan Features Fixed-rate 30-year loans; interest rate to be determined at time of bond sale. Standard hazard and FHA insurance (or VA guarantee) will be required on all loans. JK/jb cjal/sumpgpra.ata