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1996-132-Amending Housing Conversation Program Guidelines Adopted By Resolution 1996-97RESOLUTION 1996 - 132 RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS AMENDING HOUSING CONSERVATION PROGRAM GUIDELINES ADOPTED BY RESOLUTION 1996 -97 WHEREAS, the Town of Los Gatos has a Housing Conservation Program allowing it to provide Community Development Block Grant (CDBG) funded low interest loans and grants to income eligible property owners for home rehabilitation purposes; and WHEREAS, the Town of Los Gatos desires to revise the guidelines which govern the Housing Conservation Program; NOW, THEREFORE, THE TOWN COUNCIL OF THE TOWN OF LOS GATOS DOES HEREBY RESOLVE AS FOLLOWS: (1) adopt the Housing Conservation Program Guidelines attached as Exhibit A; and (2) rescind Resolution 1996 -97. PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos, California, held on the 21 st day of October, 1996, by the following vote: COUNCIL MEMBERS: AYES: Joanne Benjamin, Linda Lubeck, Mayor Randy Attaway. NAYS: None ABSENT: Patrick O'Laughlin ABSTAIN: Steven Blanton SIGNED: MAYOR THE TO OF LOS GATOS LOS GATOS, CALIFORNIA ATTEST P CLERIC OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA TOWN OF LOS GATOS HOUSING CONSERVATION PROGRAM GUIDELINES I. PURPOSE The Town's housing goal is to provide adequate housing for Town citizens, regardless of age, income, race or ethnic background. The Town encourages conservation and construction of housing adequate for future populations and replacement needs consistent with environmental limitations and in proper relationship to community facilities, open space and transportation. The Housing Conservation Program (HCP), managed by the Community Services Department since 1976, contributes to the Town's overall housing goal by providing CDBG funded low interest loans and grants to income eligible property owners for home rehabilitation purposes. In this manner, the Town preserves its existing housing stock and promotes safe housing for Los Gatos residents. Housing conservation is achieved through: 1. Owner Occupied Housing Rehabilitation Loans 2. Rental Housing Rehabilitation Loans 3. Emergency Loans 4. Rehabilitation Grants (Emergency and Safety) The Housing Conservation Program is funded entirely by federal Community Development Block Grant (CDBG) monies. II. GENERAL ELIGIBILITY CRITERIA A. Income Eligibility: The Town's Housing Conservation Program is designed to assist low and very low income residents, i.e., those with annual household incomes not exceeding 80% of the County Median Income (CMI) adjusted for household size as defined by the Federal Department of Housing and Urban Development for the San Jose PMSA. The Town offers 6% rehabilitation loans to qualified applicants with incomes exceeding 80% of the CMI. Very Low Income: Annual household income at or below 50% of CM1. Low Income: Annual household income greater than 50 %, but not exceeding 80 %, of CMI. Moderate Income: Annual household income greater than 80 %, but not exceeding 100°/x, of CMI. Non - profit organizations providing affordable housing or other housing related services to persons at or below 80% of the CMI are eligible for assistance through the Town's HCP pending analysis of direct benefit to Los Gatos residents. B. Eligible Structures: Single - family detached, single - fancily attached, multi - family structures, and mobile horns. Structure must be located within the Town's boundary limits, except as otherwise approved by the Loan Review Committee in instances where the housing writ, located elsewhere in Santa Clara County, serves a housing need benefiting a segment of the Los Gatos population. Structure to be rehabilitated must also be of legal status. C. Hazard Insurance: Prior to disbursement of funds, applicant must provide proof of adequate hazard insurance on the structure, which must be maintained for the life of the loan. The amount of coverage must equal the full replacement cost of the insured structure, and the Town of Los - 1 - Gatos must be named in the policy as a lenders loss payee. Hazard insurance coverage will be monitored by the Town. D. Applications: A Town application must be completed to initiate the process for a rehabilitation loan and grant. Applicants may apply for more than one loan or grant program. In administering the Housing Conservation Program, the Town does not discriminate on the basis of age, sex, color, race, marital status, sexual orientation, ancestry, physical or mental disability, national origin, religion, medical condition, or any other basis prohibited by law. III. LOAN AND GRANT PROGRAMS The cost of rehabilitation materials, labor, permits, credit report, lot book, termite report, loan processing fee, architectural fees, engineering fees, business license fee, and completion of rehabilitation contract specifications may be included in the principal loan/grant amount. A. LOANS - ELIGIBILITY CRITERIA REHAB LOANS OWNER OCCUPIED RENTAL HOUSING EMERGENCY INCOME See Interest Rate below. Applicant must own property to Annual household income ELIGIBILITY be rehabilitated. cannot exceed 80% of CMI Over the life of the loan, only tenants with an annual household income of 80% or less of CMI may occupy rehabilitated units. MAXIMUM $80,000 (Loans over $35,000 Single -Unit: $15,000 $15,000 LOAN require special approval Multi- Units: $25,000 AMOUNT consisting of a secondary review Complex: $100,000 of the Rehab Work Write -Up Inspection List by the Loan Program applicable to structures Review Committee.) with I to 10 rental units only. INTEREST 0 %: Annual household income From 3% to 6% as determined by 3% RATE at or below 50% of CMI Loan Review Committee. (payments may be deferred) Payments may be deferred up to 3 %: Annual household income five years upon Loan Review between 50 % -80% of CMI Committee's approval of owner's (payments may be fully or pro forma outlining improvement partially deferred) costs and expected rental income. 6 %: Annual household income exceeds 80% of CMI LOAN TERM 3 to 20 years depending upon 15 years 3 to 5 years Applicant's financial condition. RESTRICTIONS Over the life of the loan, rent on Emergency condition must rehabilitated unit(s) is restricted to exist (i.e., threat to life and 30% of the household's annual property). gross income. - 2 - LOANS: OTHER CONDITIONS 1. Ability to Repay Applicant must evidence adequate capacity to repay rehabilitation loan(s). 2. Assets Applicant's assets will be considered by the Loan Review Committee during the loan evaluation process. 3. Credit Worthiness Applicant's credit history must be in good standing. A credit report will be obtained by the Town for verification purposes. 4. Elimination of The rehabilitation loan, when combined with other resources, must be sufficient to eliminate 3. Substandard Conditions substandard conditions. 5. Loan to Value Ratio The principal amount of the rehabilitation loan, together with the principal amount of any other 4. Overcrowding debt secured by the property, cannot exceed 90% of the projected post - rehabilitation value of the structure. 6. Documentation HCP loans are evidenced by a Promissory Note, executed by the owner, and secured by a Deed of 5. General Property Trust, satisfactory to the Town. An Owner Participation Agreement outlining HCP loan terms and Improvements conditions is also executed by the owner and Town. 7. Subordination If Borrower's home is refinanced, 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 Borrower's financial status to determine whether or not the loan is due and payable. It is the responsibility of the Borrower to notify the Town in writing of any changes to the Town's loan position. 8. Transfer 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 Tmstor or by the operation of law, which includes but is not limited to transfers resulting from death or otherwise, the obligation evidenced in the Note, irrespective of the maturity date expressed therein, at the sole option of the holder thereof and without demand of notice, shall immediately become due and payable. However, if the property is transferred to a very low or low income household, the Town may allow the loan to be assumed, provided the new owner submits a completed application to the Town. Determination on the transfer will then be made by the Loan Review Committee in accordance with the Town Housing Conservation Program Guidelines in effect at the time the Note was executed by the original client. ELIGIBLE WORK: Eligible repairs are recommended to the Loan Review Committee by the County Rehab Specialist. Repairs must eliminate substandard conditions as they exist throughout the housing unit and address one or more of the following - 3 - I. Code Violation Repairs which correct deficiency violations under applicable Building and Housing codes, including incipient violations. 2. Disabled Access Removal of architectural barriers which help provide for the independent functioning of a disabled household member, or modifications which make the housing unit fully accessible to the disabled household member. 3. Earthquake Repairs or modifications which enhance the structural safety of the housing unit during an earthquake. Safety 4. Overcrowding Rehabilitation or alteration of a housing unit which alleviates conditions creating overcrowding, including expansion of the unit to a size adequate to house the occupants (i.e., eligible repair work may provide for increased bedroom and bathroom space through addition or conversion). 5. General Property General improvements such as landscaping, fence repair, and painting for cosmetic effect, may be Improvements financed only if all substandard conditions (i.e., code violations or deficiencies) are corrected. The purpose of the Housing Conservation Program is to provide loan funds to make needed repairs, not to upgrade the property for resale. - 3 - B. GRANTS - ELIGIBILITY CRITERIA GRANTS EMERGENCY SAFETY: Owner Occupied SAFETY: Rental Housing INCOME Annual household income Amoral household income cannot Annual household income of tenant ELIGIBILITY cannot exceed 80% of exceed 80% of CMI. cannot exceed 80% of CMI. Residential Fire Prevention CMI. gas fixtures and combustibles, removal of hazardous combustibles, the sweeping, inspection, and repair of fireplaces, including installation of spark arrests, etc. Security Improvements For a five year period following Elderly /Disabled Resident Installation of grab bars, wheelchair ramps, accessible door openings, hand -held shower heads, Assistance completion of rehab work, annual household income of tenant(s) occupying rehabilitated rental unit(s) cannot exceed 80% of CMI. ELIGIBLE Only owner occupied Program applicable to structures HOUSING housing is eligible. with I to 10 rental units only. MAXIMUM $3,000 Up to $10,000 Up to $3,000 per unit within any five GRANT AMT year period. CONDITIONS Emergency condition must • Owner approval required. exist (i.e., threat to life • For a five year period following and property). completion of rehab work, rent on rehabilitated units is restricted to 30% of the household's annual gross income. ELIGIBLE Limited to housing code Limited to that which- Limited to that which: WORK violations. Resources • Allows a structure to meet • Helps prevent residential fires must be sufficient to minimum health and safety through fire prevention eliminate emergency requirements. mechanisms. substandard condition. • Provides minimum (non- • Provides security improvements. engineered) earthquake retrofitting. • Improves accessibility for elderly • Helps prevent residential fires and disabled residents. through fire prevention mechanisms • Provides security improvements. • Improves accessibility for elderly and disabled residents. Examples of Eligible Work: Minimum Health /Safety Concealing exposed wires or junctions, installing stair or porch railings, correcting unsanitary Requirements conditions, grounding electrical systems. Earthquake Retrofitting Fastening floor framing (mudsills) to foundations, installing plywood (shear) panels as required to prevent lateral movement at walls during earthquakes, strapping /securing gas fixtures (water heaters or clothes dryers), replacing rigid gas connectors with flexible type to prevent gas leaks during or after earthquakes, etc. Residential Fire Prevention Installation of smoke alarms and fire extinguishers, correction of inadequate clearances between gas fixtures and combustibles, removal of hazardous combustibles, the sweeping, inspection, and repair of fireplaces, including installation of spark arrests, etc. Security Improvements Deadbolts on exterior doors, window locks, motion sensor controlled exterior lighting, etc. Elderly /Disabled Resident Installation of grab bars, wheelchair ramps, accessible door openings, hand -held shower heads, Assistance etc. 4 - IV. PROGRAM RESPONSIBILITIES A. Community Services Department The Community Services Program Coordinator: - administers the Housing Conservation Program; - conducts program marketing and outreach; - conducts initial interviews, processes applications and determines eligibility; - conducts preliminary housing surveys; - presents applications and projects to the Loan Review Committee; - prepares and executes loan and other necessary documents; - coordinates rehabilitation projects with the Rehabilitation Specialist; - mediates disputes between homeowners and contractors; - processes progress and final payments; - monitors monthly loan payments, payoffs, foreclosures, and program incomes for loan portfolio; and, - prepares quarterly and annual rehab reports for County of Santa Clara's Community and Housing Development Program. B. Loan Review Committee: The Loan Review Committee is appointed by the Town Manager. The Committee interprets and applies Housing Conservation Program quidelines in evaluating and determining loans, grants, subordination requests, and issues arising from transfer of property, establishes terms and conditions for loans and grants, and assures the appropriate use of funds. It also recommends policy and procedural changes and advises the Program Coordinator on housing related issues. C. Town Manager: The Town Manager is authorized to sign various program documents, including owner participation agreements, payment authorization forms, bank agreements, and requests for full reconveyance. An applicant denied a loan or grant by the Loan Review Committee may appeal to the Town Manager, who shall make the final determination as to the applicant's eligibility and appropriate use of housing conservation program funds. Appeal procedures are defined in Section V below. D. Finance Department: The Finance Department performs various loan management functions: it tracks HCP loan transactions through the Town's accounts receivable system, collects and deposits monthly loan payments, approves payment authorization forms, and generates monthly aged invoice reports for loan monitoring purposes. E. Urban County Housing and Community Development Program: The County Rehabilitation Specialist surveys property to determine extent of rehabilitation work; establishes project work scope with Client and Program Coordinator; prepares construction and bid specifications; assists property owner and contractor(s) in negotiating construction contracts; inspects construction work in progress and approves change orders; approves payments to contractor(s) as appropriate; resolves conflicts; conducts progress and final inspections, and; performs tasks relating to project close out. County Staff reviews rehab quarterly and annual reports and monitors program administration. 5 - V. APPEAL PROCEDURES A. An applicant who believes s /he is aggrieved by a determination of the Loan Review Committee may elect to have his/her application reviewed by the Town Manager. B. If the Loan Review Committee denies or refuses to approve an HCP loan or grant, it shall provide a written explanation of the determination and the basis therefore to the applicant within two weeks following the determination. The written explanation shall also inform the applicant of procedures for obtaining review of the decision. C. The applicant may request a meeting with the Town Manager by submitting a written request to the Town within ten days following receipt of notice of determination by the Loan Review Committee. The applicant's written request for appeal should include any statement of fact within the applicant's knowledge or belief or other material which may have bearing on the appeal. The Town Manager shall afford the applicant the opportunity for a meeting within fifteen days following receipt of the written request. D. The Town Manager has the authority to revise the initial determination of the HCP loan or grant application. E. The Town shall prepare a summary of the matters discussed in the meeting to be included as part of the applicant's file. F. The Town Manager shall review and reconsider the initial determination of the applicant's case in light of: 1. All material upon which the Town based its original determination, including all applicable rules and regulations; 2. The reasons given by the applicant for requesting review and reconsideration of the application; 3. Any additional written or relevant documentary material submitted by the applicant; and 4. Any further information which the Town, in its discretion, obtains by request, investigation, or research to ensure fair and full review of the application. G. The determination on review by the Town Manager shall include, but is not limited to, the Town's decision or reconsideration of the application, and the factual and legal basis upon which the decision rests, including any pertinent explanation or rationale. The determination shall be in writing with a copy provided the applicant and Loan Review Committee no later than four weeks following the applicant's meeting with the Town Manager. C SD: c:bcb \hcp \GUIDELNS.R V 3 (Last Rev. October 4, 1996) - 6 -