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Home My WebLink About08.C- Economic Development Agency i DOC ID. 1438 CITY OF SAN BERNARDINO—REQUEST FOR COUNCIL ACTION Report/Information From: Emil A. Marzullo M/CC Meeting Date: 12/19/2011 Prepared by: Sheree Meier, (909) 663-1044 Dept: Economic Development Agency Ward(s): All Subject: Homebuyer Assistance Program Report for the Quarter Ending September 30, 2011 Financial Impact: There is no impact to the City's General Fund. The Agency's approved HAP budget for FY2011-2012 has been reduced to $500,000 to better reflect the need and demand for HAP lending. The reduction for the new fiscal year allows the Agency to reallocate resources for projects and programs in greater need of capitalization. The pending acquisition of 1265 Kendall Drive#2012 in the amount of$68,000 will be financed with funds already allocated to AHS. It is anticipated this investment will be recouped through rental income and/or resale proceeds derived from the property. Motion: Receive and file the Quarterly Report of the Homebuyer Assistance Program activities for the quarter ending September 30,2011 for the Redevelopment Agency of the City of San Bernardino. Synopsis of Previous Council Action: On November 17, 2011, Redevelopment Committee Members Marquez and Brinker unanimously voted to recommend that the Community Development Commission consider this action for approval. Back round: 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. Certain operational definitions were also clarified. 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"), which it is presently known. Updated: 12/14/2011 by Linda Sutherland 1438 In 2007, the median sales price of a single-family residence in the City of San Bernardino ("City") was $375,000. At the time, 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 defined by California Community Redevelopment Law ("CRL"). 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 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. As a result the City is currently dealing with the aftermath of this major housing correction and the economic dislocation it has caused. This correction in the housing market has been ongoing since 2007 and, based on certain estimates, may take an additional five to seven years to stabilize. On March 3, 2011, the Commission authorized the transfer of all City redevelopment housing activities to Affordable Housing Solutions of San Bernardino ("AHS"), a non-profit 501(c)(3) organization initially created and sponsored by the City and its Redevelopment Agency ("Agency") to design and implement the Federally funded Neighborhood Stabilization Program ("NSP"). This transfer was meant to counteract the potentially damaging effects of the j elimination of redevelopment imposed by the State Legislature. Currently, the HAP makes available a limited number of deferred payment (principal and interest) second mortgages, not-to-exceed ten percent (10%) of the maximum purchase price of $250,000. This Program is specifically designed to provide income qualified families with down payment/closing costs monies necessary to secure financing towards the purchase of single family detached homes in the City. CURRENT ISSUE: For the reporting period ending September 30, 2011, the Agency expended $6,000 in low and moderate income housing funds ("Low-Mod Funds") for its Homebuyer Assistance Program. The total private lender funding for this purchase was $80,895. This is equivalent to a private investment of over$13.00 for every$1 invested by the Agency. One eligible homebuyer utilized HAP assistance to purchase a home in the City during the reporting period. Based on data collected from this single home buyer, the participants' relevant statistical information is as follows: HAP PROGRAM STATISTICS Household Size I Household Income I Household AMI Sales Price HAP Assistance 5 1 $40,830 80% $83,000 $6,000 The following table identifies the Council Ward where HAP activity has occurred: HAP PROGRAM LOCATIONS BY Ward Updated: 12/14/2011 by Linda Sutherland Packet Pg. 313 1438 Wards #of Units HAP Amount % of Total 1 0 $0 0% ... 2 0 $0 0% 3 0 $0 0% 4 0 $0 0% 5 10 1 $0 0% 6 1 $6,000 100% 7 0 $0 0% Total 3 $6,000 100% The above chart reflects the 1 HAP loan made this reporting period which was secured by a home participating in the Neighborhood Stabilization Program ("NSP"). The layering of Federal and Local resources continues to be a focus of AHS to ensure broader and more sustainable neighborhood revitalization is achieved. Furthermore, the focus of the homebuyer assistance program has changed to better target AHS owned properties. Given recent budgetary constraints within the Low-Mod Fund, staff has made the strategic move to align its remaining resources for this calendar year (2011) with AHS owned properties and suspend its broader non-NSP HAP loans until there is an understanding at the state level concerning the future of redevelopment and the final disposition of Low-Mod Funds. While this programmatic shift reduces the amount of money available for non-NSP HAP activities it does allow the Agency, through AHS, to continue to assist homebuyers purchase homes within the City. Moreover, in order to better facilitate the loan process, adjust to recent changes governing redevelopment and to align the overall City policy direction relative to the administration of housing funds, staff has successfully worked with Agency counsel to amend all HAP loan documents to reflect AHS as the lender of record. During the previous reporting cycle (period ending June 30, 2011) AHS described its efforts to minimize the Agency's loss of both loan funds and affordability covenants by exercising its option to acquire a property in default which was facing either a short sale or foreclosure. In the case of 1265 Kendall Drive #2012, the homeowner purchased the property for $240,000 on July 17, 2007 at the height of the real estate market. The homeowner obtained a first mortgage in the amount of $191,920 and down payment assistance through the Cal State San Bernardino homebuyer assistance program in the amount of$47,980. Presently the home is in foreclosure and the homeowner is attempting to short sale the property to AHS for $68,000. If AHS is successful in purchasing the property it will have furthered its loss mitigation strategy by preserving the affordability covenants and recouping a portion of the initial investment plus any added cost to rehabilitate the property by renting the home to an income eligible tenant while awaiting for final property disposition in the future. As this proposed acquisition progresses to completion and AHS ultimately becomes the owner of record, a follow-up report will be provided regarding its rehabilitation,maintenance and eventual disposition. Updated: 12/14/2011 by Linda Sutherland Packet Pg. 314 1438 ENVIRONMENTAL IMPACT: This item does not meet the definition of a "project" under Section 15378 of the California Environmental Quality Act ("CEQA"), which states that a "Project" means the whole of an action, which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. Sunnortin2 Documents: 12-19-11 hap quarterly map 9 30 11 CDC (PDF) Updated: 12/14/2011 by Linda Sutherland Packet Pg.315