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HomeMy WebLinkAbout02 SUBORDINATION AGREEMENT PROCESSING FEE1TY O AGENDA REPORI MEETING DATE TO: FROM: SUBJECT: SUMMARY JUNE 4, 2013 JEFFREY C. PARKER, CITY MANAGER TUSTIN HOUSING AUTHORITY Agenda Item 2 Reviewed. City Manager Finance Director SUBORDINATION AGREEMENT PROCESSING FEE City Council approval is requested for the Housing Authority ( "Authority ") to collect a Subordination Agreement Processing Fee of $280 from City of Tustin Affordable Housing Program homeowners seeking to refinance their first mortgage. RECOMMENDATION It is recommended that the City Council 1. Open and, after public testimony, close the public hearing; and 2. Adopt Resolution No.13 -47 adopting the subordination agreement processing fee FISCAL IMPACT The State of California Department of Finance ( "DoF ") has taken the position during the Dissolution of Redevelopment that entities electing to retain the authority to perform housing functions previously performed by a redevelopment agency are responsible for the costs associated with these functions. The funding from redevelopment tax increment to provide services to our affordable homeowners, including the preparation of subordination documents, is no longer available. The proposed fee will reimburse the City for the staff time associated with the preparation of subordination documents. BACKGROUND During the citywide Fee Analysis, NBS prepared a Subordination Fee (attached) to be charged when affordable housing program homeowners refinance their first mortgage, which requires the Housing Authority to approve the refinance, prepare a Subordination Agreement, submit to the City Attorney for review, and coordinate with Escrow in the recording of the required documents. The "Subordination Fee ", $280 rounded, is inclusive of all materials and supplies, indirect costs and citywide indirect costs (City Agenda Report June 4, 2013 Page 2 Council, City Manager, City Attorney, Finance, etc.). The Fee uses an hourly rate, $160, and is based on 1.75 hours of staff time. NBS calculated the blended hourly rate so that it is interchangeable for any Successor Agency staff member. While the fee captures citywide indirect costs, including the City Attorney, it does not include the City Attorney's direct costs in reviewing documents. The fee would increase by $388 if the City Attorney's average time of reviewing, 2 hours, was included in the proposed fee. While the current Recognized Obligation Payment Schedule (ROPS: January — June 2013) provides funding for housing staff, the DoF did not approve housing staff funding for ROPS 13 -14A. Their denial of funding was based on their interpretation that the Dissolution Law requires the entity assuming the housing responsibilities of the former redevelopment agency to be responsible for funding the staff and operations. With the loss of funding for housing services, the Authority has limited funding sources while the demand for services from our affordable homeowners has increased due to lower interest rates and rising home values. The Authority has been processing a large number of Subordinations and could recover some of these costs by charging a fee. In FY 2012 -2013, we have received over 30 applications and have been notified by one of our lenders that they have approximately another 50 homeowners interested in refinancing their home. In the past, there was funding for housing services; therefore, we did not think it was necessary to charge for processing Subordinations. In approving a Subordination Fee, Tustin would be one of only a few cities that have such a fee. It appears there are two Orange County cities currently collecting a Subordination Fee: Huntington Beach - $250; and Fountain Valley - $110. Huntington Beach with its 366 affordable ownership units is the most comparable Orange County city to Tustin, 305 affordable units, in the number of affordable ownership units. Most cities have significantly fewer affordable ownership units, which are the most staff intensive. According to the AB 987 report each city is required to post on their website, the number of ownership units in Brea is 138; Anaheim — 99; Fullerton — 45; Costa Mesa — 28; Fountain Valley — 65; and Garden Grove — 5. Irvine only has affordable rental units. While these cities are not local, they are similar in being responsible for a large number of affordable ownership units. Fremont has 121 affordable ownership units and charges a $250 Subordination Fee. San Jose has approximately 1,600 units and charges a $280 Subordination Fee. Although not large, Redondo Beach is taking forward a $250 Subordination Fee recommendation to their City Council. In order to alleviate potential concerns about charging a fee to our affordable homeowners, the Council could require the fee to be paid only if the loan closes. Many homeowners avoid putting in their own funds by rolling all escrow fees into the loan. Agenda Report June 4, 2013 Page 3 Once the loan closes, escrow would issue the City a check. This would do the following: 1. Homeowners would not have to put up funds they might not have. 2. Homeowners would not lose money if the Subordination is not approved. Typically this occurs when the Lender is not willing to follow the process required by our City Attorney. 3. Homeowners could choose to include the fee in the loan or pay it themselves at closing. If this is not a concern of the Council, we will collect the fee like all other fees, at the time of application. City Council direction is sought as to whether we collect the fee upfront or at the time of closing. Staff is available for any questions the City Council may have. 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Ir { \ \\ \\ � ; - oo2, �% { {)® ° § j))\ $ § � § � 2 U m 0 0 z 0 0 U LL LL Q 0 Z U) O 2 } U 0 a K O O U) U D N R k N M 3 3 � N � Y LL O Y/j 7 C W N E A > � � w C � U C a � N A LL V N M w Q N = W > O v w A E A w C c Q W w Q U 0 a w E E 00 N w > Q a T CO U '5 _ m '> � � m m `o `o T T.L.. U E m o o > m o 5 o m T a w =° g LL w T O _ - d d o O E L O O U Q o � O - w a O s Ncn Q m Imo n F ^ oo o. } � J � O 7 C7 O x R k N M 3 3 RESOLUTION N6.13-47 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN ADOPTING THE SUBORDINATION AGREEMENT PROCESSING FEE AND INCORPORATING THE FEE INTO RESOLUTION NO. 08 -60, THE COMPREHENSIVE SCHEDULE OF FEES The City Council of the City of Tustin hereby finds, determines and declares as follows: A. The Tustin Community Redevelopment Agency ( "Agency ") was a community redevelopment agency organized and existing under the California Community Redevelopment Law, Health and Safety Code Sections 33000, et seq. ( "CRL ") and had been authorized to transact business and exercise the powers of a redevelopment agency pursuant to action of the City Council ( "City Council ") of the City of Tustin ( "City'); and B. The City of Tustin is a municipal corporation of the State of California ( "City'); and C. On December 29, 2011, in California Redevelopment Association v. Matosantos, Case No. S194861, the California Supreme Court upheld AB X1 26, which dissolves all of the redevelopment agencies in California, and invalidated AB X1 27 that had allowed redevelopment agencies to remain in existence if the opted in to the "Voluntary Alternative Redevelopment Program" ( "Program "); and D. Previously the City had opted into the Program by ordinance(s) soon after the passage of AB X1 26 and by resolution the City elected to become the Successor Agency of the Agency; and E. On January 17, 2012, City Council adopted Resolution No. 12 -08 declining to assume the housing assets and functions of the former Tustin Community Redevelopment Agency and the Tustin Housing Authority ( "Housing Authority') adopted Resolution HA No. 12 -01 agreeing to assume all housing assets and functions; and F. The Housing Authority Executive Director was authorized to take all actions necessary to implement the assumption of assets and functions on behalf of the Housing Authority; and G. On August 1, 2012, pursuant to Assembly Bill 1484, the Housing Authority submitted the Housing Assets List to the California Department of Finance Resolution 13-47 Page 1 of 3 and received confirmation on September 13, 2012; and H. On September 2, 2008, the City Council adopted Resolution No. 08 -60, amending the City -wide Comprehensive Schedule of Fees; and It is not the Council's intention to repeal previously adopted fees but to incorporate the Subordination Agreement fee into Resolution No. 08 -60's Comprehensive Schedule of Fees; and J. A Public Hearing regarding the Subordination Agreement Processing Fee was held on June 4, 2013 in accordance with Section 66016 of the California Government Code, at which oral or written presentations could be made, as part of the regularly scheduled meeting and a Notice of the Public Hearing was published pursuant to Government Code Section 6062(a). Il. The City Council hereby does resolve as follows: A. The Subordination Agreement Processing Fee is adopted and incorporated into Resolution No. 08 -60's Comprehensive Schedule of Fees and shall be levied until further resolution of this Council. B. This Resolution shall be effective immediately upon adoption and the City Clerk shall certify to the adoption of this Resolution. PASSED AND ADOPTED at a regular meeting of the City Council of the City of Tustin held on the 4th day of June, 2013. ELWYN A. MURRAY Mayor ATTEST: JEFFREY C. PARKER City Clerk Resolution 13-47 Page 2 of 3 Resolution No. 13 -47 Page 3 STATE OF CALIFORNIA ) ORANGE COUNTY ) CITY OF TUSTIN ) I, Jeffrey C. Parker, City Clerk and ex- officio Clerk of the City Council of the City of Tustin, California, do hereby certify that the whole number of the members of the City Council of the City of Tustin is five; that the above and forgoing Resolution No. 13 -47 was duly passed and adopted at a regular meeting of the City Council of the City of Tustin, held on June 4, 2013, by the following vote: BOARDMEMBER AYES: BOARDMEMBER NOES: BOARDMEMBER ABSTAINED: BOARDMEMBER ABSENT: JEFFREY C. PARKER CITY CLERK Resolution 11 -73 Page 3 of 3