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Home My WebLink AboutR33-Economic Development Agency 4 CITY OF SAN BERNARDINO ORIGINAL ECONOMIC DEVELOPMENT AGENCY FROM: Emil A.Marzullo SUBJECT: Homebuyer Assistance Program Fiscal Year Interim Executive Director 2008-2009 Annual Report DATE: December 8,2009 ------------------------------------------------- Synopsis of Previous Commission/Council/Committee Action(s): At the Adjourned Redevelopment Committee meeting on December 3,2009, Redevelopment Committee Members Johnson, Brinker and alternate Shorett unanimously voted to recommend that the Mayor and Common Council and the Community Development Commission consider this action for approval. -------------------------------------------------------------------------------------------------------------------------------------------------------------- ----------------------------------- Recommended Motion(s): (Community Development Commission) MOTION: That the Community Development Commission of the City of San Bernardino receive and file the annual update of Homebuyer Assistance Program for the Redevelopment Agency of the City of San Bernardino. Contact Person(s): Lisa Connor Phone: (909)663-1044 Project Area(s): All Ward(s): All Supporting Data Attached: 0 Staff Report❑Resolution(s)❑Agreement(s)/Contract(s) Q Map(s) ❑ Letter(s) FUNDING REQUIREMENTS: Amount: $ -0- Source: N/A Budget Authority: N/A i Signature: Fiscal Review: z, Emil A.Marzullo,Interim Executive Director ss eJesus, eri dministrative Services !Director ------------------------------ ----------------------------- ---------------------------------------------------------------- ------------------------- --------- Commission/Council Notes: ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- P:\Agendas\Comm Dev Commission\CDC 2009\12-21-09 HAP Program Annual Report SR.doc COMMISSION MEETING AGENDA Meeting Date: 12/21/2009 Agenda Item Number: P-✓3 ECONOMIC DEVELOPMENT AGENCY STAFF REPORT HOMEBUYER ASSISTANCE PROGRAM FISCAL YEAR 2008-2009 ANNUAL REPORT BACKGROUND: On October 17, 1994, the Community Development Commission of the City of San Bernardino ("Commission") approved the Mortgage Assistance Program ("MAP") which made available a limited number of deferred payment second mortgages, in amounts up to 10% of the purchase price for single- family detached homes as assistance towards down payments for income qualified homebuyers. On October 5, 1998, the Commission authorized the modification of the MAP to allow the Executive Director, under extenuating circumstances, the authority to approve up to 20% in mortgage assistance. Also, there was confusion with the MAP name. The general public had the perception that this program was to provide first mortgages rather than down payment assistance; therefore, the name was changed to the Homebuyer Assistance Program("HAP"). In 2007, the average median sales price of a single-family residence in the City of San Bernardino was $375,000. The increase in home sale prices made it extremely difficult for low- to moderate-income buyers to purchase a home at an affordable housing cost as required by State law. Therefore, on June 4, 2007, the Commission authorized down payment assistance for an amount up to a maximum of 30% of the purchase price to fill the gap under extenuating circumstances and on a case-by-case basis. Soon after this approved increase, the San Bernardino housing market experienced an extensive correction. In many neighborhoods, housing prices plummeted by as much as 60% of their value. At its core,the significant drop in property values was fueled by low-interest rates, subprime loans and the rampant speculation this caused in the housing market. In essence, there was too much money chasing too few deals causing otherwise suspect financings to be done. It could be argued that no one, not even the federal government, could have stopped this wave of excessive speculation once it started and had reached its height. In fact, the only thing that could stop this activity was the market itself with the eventual implosion of the overall housing market that caused values to fall once again to historically low levels. In almost all instances, Agency-assisted home buyers who bought their properties with conventional 30-year mortgages that were underwritten very conservatively, sold these properties in subsequent years to buyers at much more expensive prices. However, these properties tended to stay relatively affordable to subsequent home buyers because the monthly mortgage payments were kept artificially low, based on the underlying loan structure that often allowed for negative amortization and other non- traditional payment schemes. In retrospect, the reason the housing market bubble was allowed to exist for so long, was because of the existence of these low-cost-of-capital sub-prime loans. ----------------------- - --------------------------------------- - -------------------------- ---- P:\Agendas\Comm Dev Commission\CDC 2009\12-21-09 HAP Program Annual Report SR.doc COMMISSION MEETING AGENDA Meeting Date: 12/21/2009 Agenda Item Number: 933 Economic Development Agency Staff Report HAP Program Annual Report Page 2 CURRENT ISSUE: Currently, the Agency has a total of 14 approved lenders who have been trained by Agency Staff to determine program eligibility and work with the borrowers as they qualify for their first mortgage. This list is updated annually to add new lenders or to remove those lenders who do not perform. On November 6, 2009, the Agency held a workshop for lenders wishing to participate and administer the Agency's HAP Program. A total of 8 lenders participated in the training. The 8 new lenders will be added to the approved lenders list. The HAP Program is marketed by the Agency, its approved lenders and through Neighborhood Housing Services of the Inland Empire ("NHSIE"). NHSIE is also the non-profit agency which administers the homebuyer education and financial fitness components of the HAP Program. NHSIE markets the HAP Program at its homebuyer education courses as well as community resource fairs throughout the Inland Empire. In the month of October, NHSIE participated in 2 area resource fairs wherein information was provided to the public regarding the HAP Program. One fair was located in the City of Rancho Cucamonga where over 150 people attended as well as an open house event in San Bernardino where over 60 people attended. Information regarding the Agency's HAP Program is also available on their website. During FY 2008-2009, the Agency expended $3,100,044 in low/mod housing funds and $449,950 in HOME funds for its Homebuyer Assistance Program for a total HAP expenditure of$3,549,994. The total private investment which includes borrower cash investment and first mortgage loan was $12,053,226. A total of 77 first-time homebuyers utilized HAP assistance to purchase homes throughout the City. Of the 77 homes purchased by first-time homebuyers, 49 were bank-owned units or 64% of the total. On average, the household utilizing the HAP Program has the following characteristics: HAP PROGRAM AVERAGES Household Size Household Income Sales Price HAP Assistance 3 $53,300 $195,618 $46,000 The following table identifies the project areas and wards where the HAP activity has occurred (see attached maps): HAP PROGRAM LOCATIONS BY PROJECT AREA Project Area # of Units HAP Amount % of Total Central City East 1 $97,500 3% State College 5 $231,500 7% Northwest 2 $108,270 3% 40' Street 8 $465,395 13% Outside Project Area 61 $2,647,329 74% Total 77 $3,549,994 100% ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- P:\Agendas\Comm Dev Commission\CDC 2009\12-21-09 HAP Program Annual Report SR.doc COMMISSION MEETING AGENDA Meeting Date: 12/21/2009 Agenda Item Number: 933 Economic Development Agency Staff Report HAP Program Annual Report Page 3 HAP PROGRAM LOCATIONS BY Ward Wards # of Units HAP Amount % of Total 1 3 $161,500 5% 2 3 $124,950 4% 3 10 $348,375 10% 4 19 $986,295 28% 5 19 $979,060 27% 6 5 $190,370 5% 7 18 $759,444 21% Total 77 $3,549,994 100% The HAP program has seen a significant increase in the amount of borrowers participating in its program and for the first time the Agency exhausted all its HAP funding 2 months prior to the end of the fiscal year. The increase in HAP Program participants is due in part to the high volume of foreclosures and the affordability of single-family residences. According to the California Association of Realtors, the median price of an existing, single-family detached home in San Bernardino during September 2009 was $75,000, a 40% decrease from the revised $125,000 median for September 2008. The County median price of an existing, single-family detached home for September 2009 is $150,000, a 26.8% decrease from September 2008 levels of$205,000. In managing the Agency's HAP program, Agency Staff often reviews similar programs in other cities. This is done to gauge whether the Agency's program is competitive with those of other cities and conversely to determine if the Agency's program is too generous relative to what other jurisdictions are providing. It also serves to provide Agency Staff with feedback on how to best market the Agency's program and to better understand the motivations that lead prospective home buyers to purchase in San Bernardino. The following is a brief survey of the down payment assistance programs offered by nearby jurisdictions. City % of Down Payment Highland 10% Fontana 10%maximum$35,000 Ontario 6% Upland 30%maximum $129,675 Victorville $20,000 maximum San Bernardino County Range between 7%to 9%(Income Based) Based on current market conditions, the Agency has administratively reduced the amount of down payment assistance back to the original program amount of 10%. During the recent transitional period from 20% down to 10%, the Executive Director, under extenuating circumstances, had the authority to approve applications back to 20% in HAP assistance. Extenuating circumstances were considered by the Interim Executive Director on a case-by-case basis and included situations when additional down payment was required in order to qualify for a first mortgage as was the case with the recent housing boom. Other examples included situations where State inclusionary housing requirements mandate --- ----------------------------------------------------------------------------------------------------------------------------- PAAgendas\Comm Dev Commission\CDC 2009\12-21-09 HAP Program Annual Report SR.doc COMMISSION MEETING AGENDA Meeting Date: 12/21/2009 Agenda Item Number: 9-' 3 Economic Development Agency Staff Report HAP Program Annual Report Page 4 that developers set-aside a certain number of units for purchase by lower income households who often need a greater amount of down payment in order to qualify for a first mortgage. This was the case with the last phase of a recent single-family housing development that had applicants who initially applied and were approved for a 20% down payment subsidy, but actually closed their transactions during the new 10%program cap period. It is anticipated that for the remainder of the fiscal year, the 10% cap will be sufficient to close transactions and that no further discretionary actions will be required of the Interim Executive Director. Furthermore, the need for future down payment assistance cap adjustments will be monitored by Agency Staff with recommendations brought before the Commission should the market change and a great or lesser amount of Agency subsidy can be demonstrated. ENVIRONMENTAL IMPACT: This item does not meet the definition of a "project" under Section 15378 of the California Environmental Quality Act(CEQA) and therefore there is no environmental impact. FISCAL IMPACT: There is no impact to the City's General Fund. The Agency's approved FY 2009-2010 Budget calls for an allocation of$3,490,000 in housing set-aside funds to support HAP activities. RECOMMENDATION: That the Community Development Commission adopt the Motion. Emil A. Marzullo,Interim Executive Director ----------------------------------------------------------------------------------------------------------------------------------------------------------- --- P:\Agendas\Comm Dev Commission\CDC 2009\12-21-09 HAP Program Annual Report SR.doc COMMISSION MEETING AGENDA Meeting Date: 12r/�21/2009 Agenda Item Number: `'33 City of Bernardino Hornebuyer Assistance Sites • Homebuyer Assistance Sites DD-CENTRAL CITY-EAST r___ t 3 1_--�_-�-_' County Areas E-STATE COLLEGE City Limits F-NORTHWEST Project L_ G-TRI-CITY A-CENTRAL CITY-MEADOWBROOK H-SOUTH VALLE B-CENTRAL CITY-NORTH J-UPTOWN BB-CENTRAL CITY-SOUTH K-MT VERNON [_ C-SOUTHEAST L-40TH STREET D-CENTRAL CITY-WEST Y ON YCN LEVEE , > {Co t d th Warr 1 A a y_ 3 D AV ✓ H OGDEN ST F- t LE z 00 y� >- z 6TH ¢ Coun y 4� 33 U. v DARBY ST Ca, ty --` a� w 21 .�� ---. . a _ w t 259 2 s 21 4 CL 16TH Count IF T 10L U) y U'a I T !w BA r S o Am > d Q 'BASELINE RD .... __ - Z ._..�.__. SELINE S a... OG., 9T._ + � 'A FOOTHILL BLVD s-� .,. ._ _ g un sa 5TH ST E RIALTO AVE` • z y I MERRILL AVE Y t W rd 2 w W W_. .. CENTRAL IQ ' m O� , z Gp�' t6R Ward Number MAP Amount Project Number MAP Amount 1 3 $161,500.00 z 2 3 $124,950.00 61 $2,647,329.00 'cn� 3 10 $348,375.00 DD-CENTRAL CITY-EAST 1 $97,500.00 �r c 4 19 $986,295.00 F-STATE COLLEGE 5 $231,500.00 r-° ¢ ' "` °" S 19 $979,060.00 .NORTHWEST 2 $108,270.00 m 6 5 $190,370.00 L-40TH STREET 8 $465,395.00 = 7 18 1 $759,444.00 Total 77 $3,549,994.00 �^ Total 1 77 1 $3,549,994.00