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Item 22 Staff Report Adopt Resolution Authorizing the Town Manager to Assume Loan Servicing Functions for the Housing Conservation Program Loan PortfolioCOUNCIL AGENDA DATE: 11-18-91 ITEM NO. 7 2 TOWN OF LOS GATOS COUNCIL AGENDA REPORT DATE: November 8, 1991 TO: MAYOR AND TOWN COUNC L FROM: TOWN MANAGER SUBJECT: ADOPT RESOLUTION AUTHORIZING THE TOWN MANAGER TO ASSUME LOAN SERVICING FUNCTIONS FOR THE HOUSING CONSERVATION PROGRAM LOAN PORTFOLIO RECOMMENDATION: Adopt resolution authorizing the Town Manager to assume loan servicing function for the Housing Conservation Program loan portfolio. BACKGROUND: Since 1982, the Town has had an agreement with the Bank of the West for loan servicing of the CDBG Housing Conservation Program loan portfolio account. In August 1989, the Bank of the West transferred its on -going monthly loan servicing functions to FNRS Financial Corporation (FNRS) in Monrovia, California. The Bank had not charged the Town for installment services; however, in May of 1989 FNRS imposed a monthly service fee of $6.00 per individual loan to be serviced and other miscellaneous and penalty fees. Those fees have since risen to $7,50 - $8.75 with an additional annual increase anticipated for January 1992. The services of FNRS are no longer required after December 31, 1991. With the purchase of the new accounts receivable software system, the Town staff has the ability to generate repetitive statements and track individual loans. DISCUSSION: Community Service and Finance staff have re-evaluated all loans. It is not an efficient use of staff resources to process smaller payment amounts which exist for many of the accounts. Currently, the HCP loan portfolio is comprised of 29 installment payment loans and 14 deferred loans. Annual program income for these accounts is $34,852. These monies are not deposited into the general fund but are reflected as program income within the CDBG program. Of the payment loans, 19 accounts have monthly payments of $100 or less. In analyzing the HCP loan portfolio staff considered three alternatives: PREPARED BY: Regina A. F Communit Director RAF:CC:dr ='"� 11/8/91 11:15 am CSD03:A:\CNCLRPTS\HCPLOAN.SER File # ATTACHMENTS: See Page 2 for List of Attachments. DISTRIBUTION: See Page 2 for Distribution Lis Reviewed by: 4\ , Attorney Clerk COUNCIL ACTION/ACTION DIRECTED TO: finance Treasurer PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT RESOLUTION AUTHORIZING THE TOWN MANAGER TO ASSUME LOAN SERVICING FUNCTIONS FOR THE HOUSING CONSERVATION PROGRAM LOAN PORTFOLIO November 13, 1991 1 Status Quo - composition of payment and deferred loans remain the same (29 installment and 14 deferred). Annual program income - $34,852. 2. Payments Below $50 to Be Deferred - composition of payment and deferred loans would be 16 payment and 27 deferred. Annual program income - $31,730. 3. Payments Below $100 to Be Deferred - composition of payment and deferred loans would be 10 payment and 33 deferred. Annual program income - $27,348. It is recommended that alternative #3 be implemented; loans of less than $100 will be deferred. This will result in a portfolio of 10 payment and 33 deferred loans. Annual program income will be $27,348. This choice results in minimal payment processing for Finance. With deferred loans, the loan balance, plus interest, is still due and payable, only at a later date. The payoffs on deferred loans occur at the sale, transfer or refinancing of the property or the end of the twenty year term of the loan. Alternatives #1 and #2 are not recommended; they require considerable more payment processing by Finance without a significant increase of annual program income. Borrowers whose loans could be deferred under Alternative #3 will be given the option of the deferring the loan; the deferral process will not be mandatory, but it is anticipated that most borrowers will exercise the deferral option. In addition, those borrowers selecting the deferral option will be permitted to make an annual payment if they choose to do so. Starting January 1, 1992, Finance will receive monthly payments on installment loans from payers. The Housing Conservation Program will continue to use all the other services provided to date by Bank of the West. CONCLUSION: The Town will continue to use the services of FNRS through the calendar year to allow borrowers to receive year end interest reports from only one source. To provide a smooth transition of services, staff will inform HCP borrowers of the upcoming change in late November. Borrowers will be instructed not to make their standard payments in December and to verify their principal balances to Finance prior to the change over. Eligible accounts will be transferred to the deferred loan status. On January 1, 1992, Finance will assume all the services currently provided by FNRS. The Housing Conservation Program will continue to use the services of Bank of the West. Upon Council's approval of the Staff recommendation, any new agreement with Bank of the West will be submitted for Council approval. FISCAL IMPACT: The Town will charge the borrower a $50.00 initiation fee for each new Housing Conservation Program loan account established, plus $8.50 per individual account per month for the loan payment processing services will continue to be charged to CDBG program funds. Account set-up fees, on older accounts, had been paid with CDBG program funds. ATTACHMENTS: 1. Draft Resolution 2. Boilerplate letter to clients confirming loan balance. 3. Boilerplate letter to clients deferring loan. DISTRIBUTION: Mr. Dick Irion, Bank of the West, P. 0. Box 277, Los Gatos, California, 95031. Mr. Charlie Chew, Program Manager, County of Santa Clara, Housing and Community Devdopllert, 1735 N. First Street, Suite 265, San Jose, California 95112 ATTACHMENT 1 RESOLUTION RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS AUTHORIZING THE TOWN MANAGER TO ASSUME LOAN SERVICING FUNCTIONS FOR THE HOUSING CONSERVATION PROGRAM LOAN PORTFOLIO BE IT RESOLVED by the Town of Los Gatos that the Town authorize the Town Manager to assume loan servicing functions for the Housing Conservation Program. PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos, California, held on the 18th day of November, 1991, by the following vote: COUNCIL MEMBERS: AYES: NAYES: ABSENT: ABSTAIN: SIGNED: ATTEST: CLERK OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA CSD08:A:\RESOS\CSI11891.R02 MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA -1- Letter 1 ATTACHMENT 2 Date: Name: LOAN NUMBER: This letter is to inform you that effective January 1, 1992, the Town of Los Gatos, instead of FNRS Corporation (FN Realty), will receive monthly installment payments for Housing Conservation Program loans. To accomplish this it is necessary for you to take the following three steps: 1. It is requested that you do not make a payment in December 1991, but make two payments in January 1992 to Town of Los Gatos, Attention Finance, P.O. Box 949, Los Gatos, CA 95031. 2. Submit the enclosed copy of this letter confirming your end of the year loan balance (for December 31, 1991) which will be the same as your November 30, 1991, as you will not be making a payment in December. 3. Starting January 1, 1992, payments should be mailed to the Town of Los Gatos, (Attention: Finance), P. 0. Box 949, Los Gatos, California 95031. Finance will be providing courtesy invoices for payments due; however, it is your responsibility to make the required payment in the event that you do not receive an invoice. Please be advised that payment books are no longer required and resultingly, will not be provided. All payments will now be due by the loth of each month. Late notices will no longer be provided; however, delinquent accounts will be referred to the Town's collection agency. If you have any questions regarding the three steps above, please feel free to contact me at 354-6820 before November 26 or during the week of December 2 - 6. For the purpose of obtaining confirmation of installment payment loans, we are asking you to confirm the following information shown by our records of notes to be receivable from you at December 31, 1991, directly to the Town of Los Gatos, Attention: Finance, P.O. Box 949, Los Gatos, CA 95031. DATE TO WHICH INTEREST ORIGINAL INTEREST MONTHLY HAD BEEN PAID AT LOAN UNPAID DUE DATE RATE PAYMENT DATE OF CONFIRMATION AMOUNT BALANCE After comparing the above information with your records, please sign the confirmation below (after noting exceptions, if any) and return to Town of Los Gatos in the enclosed envelope. Your prompt attention to this request will be appreciated. Very truly yours, Celia M. Callender Program Coordinator Community Services Department CONFIRMATION TOWN OF LOS GATOS: The above information is correct, except as noted below: Date: By: CSD04:A:\letters\townof.lg Letter 2 ATTACHMENT 3 Date: Name: LOAN NUMBER: This letter is to inform you that effective January 1, 1992, the Town of Los Gatos, instead of FNRS Corporation (FN Realty), will receive monthly installment payments for Housing Conservation Program loans. To accomplish this it is necessary for you to take the following three steps: 1. It is requested that you do not make a payment in December 1991, but make two payments in January 1992 to the Town of Los Gatos, Attention: Finance, P.O. Box 949, Los Gatos, CA 95031. 2. Submit the enclosed copy of this letter confirming your end of the year loan balance (for December 31, 1991) which will be the same as your November 30, 1991, as you will not be making a payment in December. 3. As your total HCP loan(s) monthly payment is less than $100, please be advised that you have the option of deferring your loan. If you defer your loan, the balance in full, plus accrued interest would be due upon the sale, transfer or refinancing of your home or twenty years from the date of the loan, whichever occurs first. Deferring your loan means that you would not be required to make monthly payments. You will be given the option of making a payment once a year prior to November 30 of each year. Please mark yes or no on the next sheet.We will be contacting you in January to modify your promissory note, if you choose to defer your loan. If you have any questions regarding the three steps above, please feel free to contact me at 354-6820 before November 26 or during the week of December 2 - 6. For the purpose of obtaining confirmation of installment payment loans, we are asking you to confirm the following information shown by our records of notes to be receivable from you at December 31, 1991, directly to the Town of Los Gatos, Attention: Finance, P.O. Box 949, Los Gatos, CA 95031. DATE TO WHICH INTEREST ORIGINAL INTEREST MONTHLY HAD BEEN PAID AT LOAN UNPAID DUE DATE RATE PAYMENT DATE OF CONFIRMATION AMOUNT BALANCE After comparing the above information with your records, please sign the confirmation below (after noting exceptions, if any) and return to Town of Los Gatos in the enclosed envelope. Your prompt attention to this request will be appreciated. Very truly yours, Celia M. Callender Program Coordinator Community Services Department CONFIRMATION TOWN OF LOS GATOS: The above information is correct, except as noted below: I choose to have my loan deferred: yes no Date: By: RESOLUTION 1991-251 RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS AUTHORIZING THE TOWN MANAGER TO ASSUME LOAN SERVICING FUNCTIONS FOR THE HOUSING CONSERVATION PROGRAM LOAN PORTFOLIO BE IT RESOLVED by the Town of Los Gatos that the Town authorize the Town Manager to assume loan servicing functions for the Housing Conservation Program. PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos, California, held on the 18th day of November, 1991, by the following vote: COUNCIL MEMBERS: AYES: Randy Attaway, Steven Blanton, Eric D. Carlson Brent N. Ventura NAYES: None ABSENT: None ABSTAIN: Joanne Benjamin SIGNED: /s/ Eric D. Carlson ATTEST: /s/ Marian V. Cosgrove CLERK OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA CSD08:A:\RESOS\CS111891.251 MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA -1- November 18, 1991 Los Gatos, California DOWNTOWN BUSINESS DISTRICT/STEAM CLEAN SIDEWALKS Motion by Mr. Blanton, seconded by Mrs. Benjamin, that Council approve a report authorizing the Town Manager to expend funds to steam clean sidewalks in the Downtown Business District. Carried unanimously. SANTA CLARA COUNTY TRANSPORTATION AGENCY/NEIGHBORHOOD CENTER USE RESOLUTION 1991-248 Motion by Mr. Blanton, seconded by Mrs. Benjamin, that Council adopt Resolution 1991-248 entitled, RESOLUTION OF THE TOWN OF LOS GATE REGARDING USE OF NEIGHBORHOOD CENTER BY SANTA CLARA COUNTY TRANSPORTATION AGENCY, Carried unanimously. ENVIRONMENTAL SCIENCE ASSOCIATES/ENVIRONMENTAL IMPACT REPORT AGREEMENTS/RESOLUTION 1991-249 Motion by Mr. Blanton, seconded by Mrs. Benjamin, that Council adopt Resolution 1991-249 entitled, RESOLUTION OF THE TOWN OF LOS GATOS AUTHORIZING AGREEMENTS TO PREPARE ENVIRONMENTAL IMPACT REPORTS FOR A NINE -LOT SHANNON ROAD SUBDIVISION AND A 27-LOT SHADY LANE SUBDIVISION, Carried unanimously. MUSEUM ASSOCIATION/LEASE AGREEMENT/RESOLUTION 1991-250 Motion by Mr. Blanton, seconded by Mrs. Benjamin, that Council adopt Resolution 1991-250 entitled, RESOLUTION OF THE TOWN OF LOS GATOS AUTHORIZING THE TOWN MANAGER TO EXECUTE AN AMENDMENT TO THE LEASE AGREEMENT BETWEEN THE TOWN OF LOS GATOS AND THE LOS GATOS MUSEUM ASSOCIATION. Carried unanimously. HOUSING CONSERVATION/PROGRAM LOAN PORTFOLIO/LOAN SERVICING RESOLUTION 1991-251 Motion by Mr. Blanton, seconded by Mrs. Benjamin, that Council adopt Resolution 1991-251 entitled, RESOLUTION OF THE TOWN OF LOS GATOS AUTHORIZING THE TOWN MANAGER TO ASSUME LOAN SERVICING FUNCTIONS FOR THE HOUSING CONSERVATION PROGRAM LOAN PORTFOLIO, Carried unanimously: LOS GATOS-SARATOGA HIGH SCHOOL/HANDICAP ACCESSIBILITY AGREEMENT/RESOLUTION 1991-252 that Council adopt Resolution 1991-252 Motion by Mr. Blanton, seconded by Mrs. Benjamin, entitled, RESOLUTION OF THE TOWN OF LOS GATOS APPROVING AGREEMENT WITH THE LOS GATOS-BABAS GA GATOSHIGH H HIGH SCHOODISTRICT L Carried by0 a voteRPROVIDE 4 HANDICAPyesM ACCESSIBILITY AT LO rs. Benjamin abstained. FIESTA WAY 17/PURCHASE AGREEMENT AMENDMENT/RESOLUTION 1991-253 Motion by Mr. Blanton, OF THE by OOWN OF LOS GATOSmin, that ouncil adopt MODIFYING ResolutionHEPURCHASE entitled, RESOLUTION OF AGREEMENT FOR 17 FIESTA WAY. Carried unanimously. 4 TC:D2:MM111891