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Home My WebLink AboutR57- Economic Development ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO REQUEST FOR COMMISSION/COUNCIL ACTION FROM: RONALD E. WINKLER SUBJECT: MODIFICATION OF THE Development Director REHABILITATION LOAN POLICIES AND PROCEDURES DATE: September 30, 1998 MANUAL FOR THE SINGLE- p ORI I FAMILY REHABILITATION LOAN PROGRAM ------------------------------------------------------------------------------------------------------------------------------------------- Synopsis of Previous Commission/Council/Committee Action(s): On September 28, 1998,the Redevelopment Committee recommended to the Mayor and Common Council/Community Development Commission the approval of modifications to the Rehabilitation Loan Policies and Procedures Manual related to restructuring loans. ------------------------------------------------------------------------------------------------------------------------------------------- Recommended Motion(s): (Community Development Commission) MOTION: That the Community Development Commission approve the modifications to the Rehabilitation Loan Policies and Procedures Manual related to restructuring loans. ------------------------------------------------------------------------------------------------------------------------------------------- Contact Person(s): Ronald E. Winkler/Norma J.Owens Phone: 5081 Project Area(s): Citywide Ward(s): All Supporting Data Attached:El Staff Report ❑ Resolution(s) ❑ Agreement(s)/Contract(s) ❑ Map(s) ❑ Ltr/Memo FUNDING REQUIREMENTS: Amount: $ -0- Source: N/A Budget Authority: N/A SIGNATURE: GARY AN OSDEL, Exec 've Director RONALD . WINKLER,Director Eco omic Development Agency Developme t ------------------------------------------------------------------------------------------------------------------------------------------- Commission/Council Notes: ------------------------------------------------------------------------------------------------------------------ REW:lag:10-19-02.cdc COMMISSION MEETING AGENDA MEETING DATE: 10/05/1998 Agenda Item Number: �,5� ECONOMIC DEVELOPMENT AGENCY STAFF REPORT ------------------------------------------------------------------------------------------------------------------ Modification of the Rehabilitation Loan Policies and Procedures Manual- For the Single-Family Rehabilitation Loan Program In the last several months, the ability to convene the Housing Loan Committee (HLC) has become increasing difficult because of Agency staff changes. The role of the HLC will be lessening with the increase in the outsourcing of housing program activities, however, the need for HLC approval of all rehabilitation loan restructuring and subordination requests, per the Policies and Procedures Manual, is a burden on both the HLC and clients making such requests. The majority of requests from clients are for loan restructuring and subordination that result in interest rate reductions on new loans with no cash out to the client. Requiring the HLC to convene and approve these simple transactions is often so time consuming that clients have missed the opportunity to obtain the best interest rates on their new loans. This is because operation of the Committee has become subject to provisions of the Brown Act. The best alternative for improving the response time on loan refinancing requests that do not involve cash outs and reducing the need to convene HLC meetings for this type of approval, is to amend the Policies and Procedures Manual to allow the staff to review the requests and the Executive Director to approve the transactions. The Manual would need to be modified as follows to affect these changes: On Page 23 of the Manual, change Section 3 as noted in the underlined portion: 3. EXTENSION/RESTRUCTURING On occasions, an existing loan client may request an extension or restructuring of their loan payment, which must be approved by the HLC. However, if the requested restructuring involves an interest rate reduction only on a first mortgage issued by lending entity other than the Economic Development Agency(y(EDA , the request may be approved by EDA's Executive Director. All other extension/restructuring requests must be approved by the HLC and staff will present all pertinent documentation regarding their request and proposal to the Committee. The extension or restructuring period, interest, if any, will be reviewed on a case-by-case basis. In order to consider the request for approval, the following criteria must apply: A. Client's financial hardship may not consist of excessive revolving debt or new installment debt (i.e., credit card payment, car payments, etc). B. A decrease in household income. ------------------------------------------------------------------------------------------------------------------ REW:Iag:10-19-02.cdc COMMISSION MEETING AGENDA MEETING DATE: 10/05/1998 Agenda Item Number: R 57 Economic Development Agency Staff Report Revisions to Rehabilitation Manual September 28, 1998 Page Number -2- ---------------------------------------------------------------------------------------------------------------------- C. Rehabilitation work was not completed within the specified time due to unforeseen circumstances. D. Client must have a satisfactory payment history or letter of explanation. E. Client's existing mortgages must be current. F. Ownership of the property must be in same name as the deed of trust recorded by Agency. In conjunction with the changes noted in Section 3, the following changes would be required on Page 24, Section 4: 4. SUBORDINATIONS On occasions an existing loan client(i.e., rehabilitation loans and mortgage assistance program (MAP) loans) may request a subordination of the Agency's loan to a senior loan in progress, which must be approved by the HLC. However, if the subordination request is a result of a loan restructuriniz for an interest rate reduction only with no cash out to the borrower or substantial increase in the senior loan, as noted in Section 3, a review of the client request and approval by EDA's Executive Director will be all that is required. All other subordination requests must be approved by the HLC and staff will present all pertinent documentation regarding their request and proposal to the Committee Ai+} on a case-by-case basis. In order to consider the request for approval, the following criteria must apply: A. Client's financial hardship may not consist of excessive revolving debt or new installment debt(i.e., credit card payments, car payments, etc.). B. New mortgage may not have cash-out (i.e., debt consolidations or available cash, etc.) from the loan proceeds. C. Client's existing mortgages, inclusive of the Agency's loan must be current. D. Ownership of the property must be in same name as the deed of trust recorded by Agency. ------------------------------------------------------------------------------------------------------------------ REW:Iag:10-19-02.cdc COMMISSION MEETING AGENDA MEETING DATE: 10/05/1998 Agenda Item Number: 10�s�� 8 Economic Development Agency Staff Report Modifications to Rehabilitation Manual September 28, 1998 Page Number-3- ---------------------------------------------------------------------------------------------------------------------- E. The Agency's loan may not be subordinated to a third trust deed position and the new mortgage may not significantly increase the existing mortgage balance by closing cost. In view of the above, it is requested that the Community Development Commission authorize the modifications to the Rehabilitation Loan Policies and Procedures Manual for the Single-Family Loan Program as noted above. (:Z2:nlI RONALD WINKLER, Direc Development Department ------------------------------------------------------------------------------------------------------------------ REW:1ag:10-19-02.cdc COMMISSION MEETING AGENDA MEETING DATE: 10/05/1998 Agenda Item Number: 1015198