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1989-223-Adopting The Housing Conservation Program GuidelinesRESOLUTION 1989 - 223 RESOLUTION OF THE TOWN OF LOS GATOS ADOPTING THE HOUSING CONSERVATION PROGRAM GUIDELINES RESOLVED, BY THE TOWN COUNCIL OF THE TOWN OF LOS GATOS, that the Town Council hereby repeals Resolution 1988 -91 and adopts the attached Housing Conservation Program Guidelines. PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos held on the 20th day of November, 1989, by the following vote: AYES: COUNCIL MEMBERS NAYES: COUNCIL MEMBERS ABSENT: COUNCIL MEMBERS ABSTAIN: COUNCIL MEMBERS: SIGNED: ATTEST: CLERK OF THE TOWN OF LOS GAT/bS A: \AES0S \CS112089.R12 Joanne Benjamin, Eric D. Carlson Robert L. Hamilton, Brent N. Ventura Mayor Thomas J. Ferrito NONE NONE NONE COUNCIL AGENDA DATE: NOVEMBER 20,1989 ITEM NO: TOWN OF LOS GATOS COUNCIL AGENDA REPORT DATE: November 15, 1989 TO: MAYOR AND TOWN COUNCIL FROM: DEBORAH A. ACOSTA, TOWN MANAGEK(� SUBJECT: ADOPTION OF THE REVISED HOUSING CONSERVATION PROGRAM GUIDELINES RECOMMENDATION: That Council approve the attached Resolution adopting revised Housing Conservation Program Guidelines. BACKGROUND: The Housing Conservation Program (HCP) policy guidelines were originally adopted by Council on June 1, 1981; several amendments have been made to the guidelines since the document's adoption. During the past program year, it has become apparent that the financial restrictions to loans and emergency grants have not kept pace with increased housing rehabilitation costs as reflected in applications and the scope of work to be performed on houses in Los Gatos and throughout the County. It is recommended that Council adopt the attached Resolution which would result in the adoption of the guidelines as rewritten. The Discussion section below outlines the specific changes from the existing guidelines. (Continued on page 2) PREPARED BY: Regina A. Falkner, Mangr Community Services Div n. RAF:dr A: \CNCLRPTS \HCPREV.89 Reviewed by: Attorney TOWN COUNCIL ACTION DIRECTED TO: ACTION OF COUNCIL: PAGE TWO MAYOR AND TOWN COUNCIL ADOPTION OF THE REVISED HOUSING CONSERVATION PROGRAM GUIDELINES NOVEMBER 20, 1989 DISCUSSION: GUIDELINE REVISIONS: A summary of the Housing Conservation Program (HCP) Guideline changes follows: 1. The large loan formula is being discontinued. Since May of 1988 this formula has been utilized to approve or reject requests by applicants for housing rehabilitation loans above $25,000. The large loan formula was devised at a time when the majority of rehabilitation work to be completed on single family residences in Santa Clara County could be accomplished for under $25,000. Since 1988 the average cost of rehabilitation per residence in Santa Clara County has risen to a range of $30,000 - $40,000. The first quarter average of loans approved in FY 1989 -90 was $34,000 per loan originated. Prior to and since the inception of the large loan formula an underlying assumption has been in operation that homeowners in need of additional financing beyond $25,000 would be eligible for and seek conventional loans to make up any difference beyond what the Town was able to loan. In practice that has not been the case. The majority of applicants to the Housing Conservation Program are senior citizens on fixed incomes. The only viable loans available to this elderly population in low income brackets who are "land rich and cash poor" are the reverse annuity plans; many low income homeowners are skeptical of these plans for they are fearful of decreasing their equity by more than $30,000 - $50,000. Resultingly, a loan by the Housing Conservation Program for these applicants is needed for the total amount of rehabilitation work to be completed. On November 8, 1989, the Housing Conservation Program Loan Review Committee recommended that a cap of $35,000 per loan be set with the stipulation that all loans of $25,000 and above receive, prior to loan approval, an in- depth secondary review of the rehabilitation work write - up inspection list. 2. The current limit on emergency grants is $3,000. Provi- sions for earthquake related grants - up to $6,000 - have been added to the Emergency Grant category. Application and determination of assistance eligibility by FEMA (Federal Emergency Management Agency) is a requirement PAGE THREE MAYOR AND TOWN COUNCIL ADOPTION OF THE REVISED HOUSING CONSERVATION PROGRAM GUIDELINES NOVEMBER 20, 1989 and prerequisite for approval of a Town earthquake related emergency grant. The earthquake related grants application period is November 7, 1989, through June 30, 1990. Staff anticipates providing Housing Rehabilitation Loans to residents whose homes were damaged by the recent earthquake in addition to the emergency grants. CONCLUSION: Adoption of the revised guidelines, attached, will provide staff a more effective tool for implementing the Housing Conservation Program. FISCAL IMPACT• No fiscal impact upon the Town's General Fund Operating Budget. The HCP is funded completely with Community Development Block Grant monies received as a grant from the Federal Government. EXHIBIT• 1. Draft Resolution and Revised Housing Conservation Guidelines DISTRIBUTION• Charlie Chew, Santa Clara County, Housing and Community Development Housing Conservation Loan Committee RESOLUTION 1989 - 223 RESOLUTION OF THE TOWN OF LOS GATOS ADOPTING THE HOUSING CONSERVATION PROGRAM GUIDELINES RESOLVED, BY THE TOWN COUNCIL OF THE TOWN OF LOS GATOS, that the Town Council hereby repeals Resolution 1988 -91 and adopts the attached Housing Conservation Program Guidelines. PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos held on the 20th day of November, 1989, by the following vote: AYES: COUNCIL MEMBERS NAYES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS ABSTAIN: COUNCIL MEMBERS SIGNED: ATTEST: /s/ Marian V. Cosgrove CLERK OF THE TOWN OF LOS GATOS A: \RES05\CS112089.R12 Joanne Benjamin, Eric D. Carlson Robert L. Hamilton, Brent N. Ventura Mayor Thomas J. Ferrito NONE NONE NONE /s/ Thomas J. Ferrito MAYOR OF THE TOWN OF LOS GATOS HOUSING CONSERVATION PROGRAM GUIDELINES I. PURPOSE The Town of Los Gatos Housing Conservation Program is funded with Com- munity Development Block Grant funds made available through the Housing and Community Development Act of 1974. The aim of the program is to conserve and improve the quality and safety of the existing housing stock in the Town. This will be achieved in four ways: A. Owner occupied housing loans B. Rental Rehab loans C. Emergency grants D. Home Safety grant II. PROGRAM ELIGIBILITY CRITERIA A. Structure located within Town's boundary agreement area. B. Must evidence adequate capacity to repay. C. Rehab loan in combination with private resources must be suffi- III. HOUSING CONSERVATION PROGRAMS A. Rehab Loans 1. Owner Occupied Housing Loans - 0% interest rate: client's income under 50% County Median In- come - payments may be deferred. - 3% interest rate: client's income 50% - 80% County Median In- come. - 3 - 20 year term (Loan Review Committee determines term of loan based on financial condition). - Maximum loan amount is $35,000. Any loans over $25,000 re- quire special approval which consists of an indepth secondary review of the rehabilitation work write -up inspection list by the Loan Review Committee. cient to eliminate substandard condition. D. Structure must be of legal status. E. Sum of mortgages (including rehab loan) not to exceed 90% of appraised value. F. Clients may apply for one or more of the available programs. G. Client's income to debt ratio not to exceed 50% gross income (including rehab loan debt). H. Client can't own other real estate (exception: Rental rehab loans). I. Eligible work determined by County. J. Eligible structures: single family homes, duplexes, approved mo- bile homes (exception: Rental rehab loans). K. Must have evidence of adequate fire insurance. III. HOUSING CONSERVATION PROGRAMS A. Rehab Loans 1. Owner Occupied Housing Loans - 0% interest rate: client's income under 50% County Median In- come - payments may be deferred. - 3% interest rate: client's income 50% - 80% County Median In- come. - 3 - 20 year term (Loan Review Committee determines term of loan based on financial condition). - Maximum loan amount is $35,000. Any loans over $25,000 re- quire special approval which consists of an indepth secondary review of the rehabilitation work write -up inspection list by the Loan Review Committee. 2. Rental Rehab Loans - 518 of units must be rented to tenants whose income is under 808 County Median Income. 15 year term. Maximum loan per unit $15,000 for single unit; $25,000 multi -unit. Maximum loan of $100,000. Eligible structures 1 - 10 unit dwellings. Payments may be deferred up to five years, upon request of applicant, upon the approval of the Loan Review Committee based on the pro forma submitted by the applicant stating costs of the improvements and the expected return of rental income. Rent restrictions apply for life of loan - not to exceed Fair Market Rent Schedule established by HUD for the Section 8 Housing Assistance Program. Rent restrictions apply only to those 518 of the units occupied by low- moderate income tenants. 3. Emergency Loans Income not to exceed 1008 County Median Income. Maximum loan - $15,000 Eligible work - only A rated housing code items. 68 interest rate. 3 - 5 year term. Owner- occupied housing only. - Emergency condition (threat of life and property) exists. B. Rehab Grants 1. Emergency Grants - Income under 808 of County Median Income. - < Maximum emergency grant - up to $3,000. Emergency earthquake related grants - up to $6,000-, applica- tion and determination of assistance eligibility by FEMA (Federal Emergency Management Agency) required Earthquake related grants application period - November 17 1989 through March 17, 1990.> - Eligible work - only A rated housing code violations. Resources must be sufficient to eliminate substandard conditions. - Owner occupied housing only. - Emergency condition (threat of life and property) exists. IV. GENERAL GUIDELINES A. Guidelines For Loan Approval 1. Credit worthiness verified by credit report mortgage verifi- cation 2. Income to debt ratio not to exceed 50 %. 3. Income verified by most recent IRS 1040 Form or other appro- priate means, such as, but not limited to, recent pay stubs, social security verfication, and income verification. B. Subordination If a client refinances their home moving the Town's position down, the loan is due and payable, with the exception of Reverse Annuity Mortgage loans. If the Town's position remains the same or is moved up, the Loan Review Committee reserves the right to review the client's financial status to determine whether or not the loan is due and payable. C. Rental of Property Owners receiving owner occupied rehab loans are not permitted to lease, rent, sublet, or otherwise assign their interests in the property, except that the property may be leased for limited periods of time when the owner is required to live elsewhere and expects to return within one year. Tenants will be limited to persons qualified under the Section 8 income limits. D. Due on Sale Clause In the event the property described in the Deed of Trust or any part thereof is sold, agreed to be sold, conveyed or alienated by the Trustor or by the operation of law which includes but is not limited to transfers resulting from death or otherwise, the obli- gation evidenced in the Note, irrespective of the maturity date expressed herein at the option of the holder thereof and without demand of notice, shall immediately become due and payable. E. Delinquencies and Default A loan is delinquent when it is 30 days or more in arrears. A loan is in default when it is 60 days or more in arrears, or the Loan Review Committee determines default has occurred because the loan is more than 30 days in arrears in consideration of the pay- ment history of the debtor. The Town Attorney is to take all lawful measures at his /her discretion to collect amount due. These measures include the ex- ercise of the power of sale and civil litigation. If, in the Town Attorney's opinion, there is a question about the adequacy of se- curity or collectability of a judgment, he /she reports the matter to the Town Council. V. RESPONSIBILITIES A. Community Services Division 1. Community Services Coordinator - locates eligible clients, determines eligibility, verifies income data, compiles loan package for Loan Review Committee, and makes recommendations for loan approval. Monitors payments on a monthly basis. 2. Community Service Manager - supervises Community Services Coordinator and serves on Loan Review Committee. B. Loan Review Committee - consists of Director of Planning, Director of Building Services, Community Services Division Manager. They recommend policy changes and determine loan approval. Loan Review Committee reviews eligible work recommended for each project. C. Town Manager is authorized to sign payment authorization forms, bank agreements, and other pertinent documents. D. Treasurer - sign payment authorization forms; can transfer funds within accounts to maximize interest payments received from bank. E. County 1. Rehab Specialist - surveys property to determine work neces- sary; puts the job out to bid and makes progress and final inspections of all work done. 2. County Staff - reviews quarterly reports, monitors program. F. Bank (or its designee) - collects the installment loan payments. CSD:HSCONSERPR DELETE EXHIBIT A LARGE LOAN FORMULA hdeermine ts if an applicant should be granted a loan which would b is el outanding loan balance over $25,000, the following formul be so ed for LL t: 4- LLt = B - max (SL,, Lt) -� Li where i =t +1 t = current quarter LL - large loans; those with a outstanding lance over $25,000 B budget; funds available for thZamount mainder of the year, t through 4th quarter. t estimated loaSL small loans; anding balance of ss than $25,00a i� That is, the tal amount of large loans made in any quarter ' If cannot be greater han the budget available for the remainder of the yea "B" minus the sm loans made during quarter "SL If or the total loans expected o be mad during the quarter "Lt'° whichever is less; and, minus the small loan xpected to be made the remainder of the year. " November 20, 1989 Los Gatos, California SIGNAL /AUDIO PEDESTRIAN /LOS GATOS BLVD/VAN METER SCHOOL Motion by Mrs. Benjamin, seconded by Mr. Ventura, that Council approve the installation of an audio pedestrian signal on Los Gatos Boulevard at the Van Meter School. Carried unanimously. SOUTH SANTA CRUZ AVE 22 /CRIDER /NOTICE OF COMPLETION Motion by Mrs. Benjamin, seconded by Mr. Ventura, that Council authorize the Mayor to execute and the Town Clerk to record a Certificate of Acceptance and Notice of Completion for 22 South Santa Cruz Avenue. Carried unanimously. PARKING /DOWNTOWN DISTRICT /LOTS #4 AND #9 /NOTICE OF BID OPENING Informational report to Council advising plans and specifications for Lots #4 and #9 of the Downtown Parking District are available for contractors as of November 17, 1989 and bids will be opened on December 20, 1989 at 3:00 p.m. FORRESTER RD 204 /REVOCABLE ENCROACHMENT /SINGH /RESOLUTION 1989 -221 Motion by Mrs. Benjamin, seconded by Mr. Ventura, that Council adopt Resolution 1989 -221 entitled, RESOLUTION OF THE TOWN OF LOS GATOS AUTHORIZING TOWN ENGINEER TO ISSUE A REVOCABLE ENCROACHMENT PERMIT FOR AN EXISTING FENCE IN PUBLIC RIGHT -OF -WAY ALONG 204 FORRESTER ROAD. Carried unanimously. EMERGENCY LOCAL /EXTENSION OF /RESOLUTION 1989 -222 Motion by Mrs. Benjamin, seconded by Mr. Ventura, that Council adopt Resolution 1989 -222 entitled, RESOLUTION OF THE TOWN OF LOS GATOS EXTENDING THE EXISTENCE OF A LOCAL EMERGENCY approving the extension of emergency in the Town of Los Gatos. Carried unanimously. HOUSING CONSERVATION PROGRAM /REVISED GUIDELINES /RESOLUTION 1989 -223 Motion by Mrs. Benjamin, seconded by Mr. Ventura, that Council adopt Resolution 1989 -223 entitled, RESOLUTION OF THE TOWN OF LOS GATOS ADOPTING THE HOUSING CONSERVATION PROGRAM GUIDELINES amending original guidelines adopted June 1, 1981. Carried unanimously. BOONE LANE /PARKING DISTRICT / CILKER SMITH /GRANT DEED /RESOLUTION 1989 -224 Motion by Mrs. Benjamin, seconded by Mr. Ventura, that Council adopt Resolution 1989 -224 entitled, RESOLUTION OF THE TOWN OF LOS GATOS APPROVING RIGHT OF WAY AGREEMENT BETWEEN THE TOWN AND HAZEL CILKER SMITH AND AUTHORIZING THE TOWN MANAGER TO EXECUTE SAID AGREEMENT and authorizing acceptance of grant deed by the Town Engineer and recordation by the Town Clerk. Carried by a vote of 3 ayes. Mr. Hamilton and Mayor Ferrito abstained due to possible conflict of interest. NEW YORK AVE /INTENT TO VACATE /MARIA'S BERRY FARM /RESOLUTION 1989 -225 Motion by Mrs. Benjamin, seconded by Mr. Ventura, that Council adopt Resolution 1989 -225 entitled, RESOLUTION OF THE TOWN OF LOS GATOS ORDERING VACATION OF A PORTION OF PUBLIC RIGHT -OF -WAY CALLED NEW YORK AVENUE (FROM THE STATE RIGHT -OF -WAY FENCE TO 230 FEET SOUTHEASTERLY), for the purpose of siting the buildings of Maria's Berry farm for Public Use, and set a Public Hearing for December 18, 1989. Carried unanimously.