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HomeMy WebLinkAboutRDA 04 AMEND SHEA HOME 04-01-96AGENDA . I r 'ter-Com RDA NO. 4 4-1-96, DATE: TO: FROM' SUBJECT: April 1, 1996 WILLIAM A. HUSTON, CITY MANAGER CHRISTINE A. SHINGLETON, ASSISTANT CITY MANAGER AMENDMENT TO SHEA HOMES DDA Recommendation It is recommended that the Redevelopment Agency approve Amendment No. 1 to the Disposition and Development Agreement (DDA) between the Tustin Community Redevelopment Agency and Shea Homes Limited Partnership, subject to any minor modifications made with approval by the City AttOrney. ' Fiscal Impact Affordability cOvenants in the original Shea Homes DDA would be subordinated as authorized by state law. No additional Agency financial commitments would be needed for the project, but in the event of foreclosure, Agency's equity position on affordable units would be subordinated. Background and Discussion The Federal National 'Mortgage Association (FNMA) and Federal Housing Authority (FHA) have recently raised a significant issue in connection with the Redevelopment Agency DDA requirements at the Tustin Homes project being developed by Shea .Homes, namely, the release of Agency affordability requirements in the event of foreclosure. The DDA and deeds require that 21 affordable units be maintained in the project. The covenants are binding on successors-in-interest to the original purchaser. The concern is that if a lender either forecloses or accepts a deed in lieu of foreclosure, the lender will need to resell the property at the first available opportunity, irrespective of whether the prospective buyer is a moderate, Iow or very Iow income buyer. The City Attorney has confirmed that the Agency can subordinate its affordability covenants pursuant to Health and Safety Code Section 33334.14(a). There are also a number of additional minor modifications to DDA loan documents that may be necessary to satisfy FNMA and Federal Housing and Urban Development (HUD) requirements. City Council Report April 1, 1996 Page Two The City Attorney has prepared an amendment to the Shea Homes DDA in order to accommodate changes on the affordability covenants and the Agency's loan documents, so as to conform the documents with FNMA and HUD requirements. The Amendment is necessarily broad since the City Attorney's office has not concluded negotiations with FNMA. The areas in addition to the subordination issue still being negotiated include the fact that Agency subsidy loans do not require borrowers to make interest payments and the possibility that the equity share formula in the DDA may not conform to FNMA requirements. FNMA provisions do provide for certain waivers which are still being explored by Shea. As a result, the City Attorney has designed the'" Amendment to avoid the need to further address each individual issue which may still. arise in connection with FNMA or HUD guidelines. Shea Homes is motivated to have the Agency expeditiously amend the DDA and have the Agency come up with new documents that will satisfy-FNMA and HUD requirements. However, neither Shea Homes nor their attorney have had an opportunity to review the Amendment. To avoid further delays, it would be best for the Agency to provide that the Amendment be in substantially the same terms as those in the' attached draft, subject to any modifications necessary in further negotiations with FNMA and HUD subject to the approval of the City Attorney. AMENDMENT NO. 1 TO DISPOSITION AND DEVELOPMENT AGREEMENT by and between THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY, as Agency, and SHEA HOMES LIMITED PARTNERSHIP, a California Limited Partnership, as Developer AMENDMENT NO. 1 TO DISPOSITION AND DEVELOPMENT AGREEMENT This Amendment is entered into by and between the Tustin Community Redevelopment Agency, a California community redevelopment agency ("Agency"), and Shea Homes Limited Partnership, a California limited partnership ("Developer"), with reference to the following facts: A. On December 27, 1995, Agency and Developer entered into a Disposition and Development Agreement (the "DDA") with regard to the development of a 145-unit single family, owner occupied project as more fully described therein and currently known as Tustin Grove (the "Project"). B. Under the provisions of the DDA, Developer is required to sell 21 of the units at the Project to moderate, Iow and very Iow income buyers, as more specifically provided in the DDA (the "Affordable Units"). In addition, the DDA requires that Developer's deeds to the buyers of the Affordable Units contain certain occupancy and resale restrictions which are covenants running with the land ("Agency's CC&R's"). Also, the DDA requires that Agency shall provide, to the buyers of the Affordable Units, certain financing in the form of notes and deeds of trust ("Agency's Loan Documents"). The deeds of trust shall be subordinate to the deeds of trust of certain third-party lenders. C. Developer has completed construction of some of the units at the Project and is ready to complete sales of those units. D. Developer and its mortgage broker wish to have the Project approved by the Federal National Mortgage Association ("FNMA") and the United States Department of Housing and Urban Development ("HUD"). This enhances the mortgage broker's ability to broker loans for the Affordable Units and enhances potential sales of the Affordable Units. Certain provisions of the DDA involving Agency's CC&Rs and Agency's Loan Documents may need to be modified t.o satisfy FNMA and/or HUD. E. Pursuant to the'authority in Health and Safety Code Section 33334.14 Agency finds that no economically feasible alternative method of financing, refinancing, or assisting the Affordable Units at the Project on substantially comparable terms and conditions is reasonably available without the subordination of Agency's CC&R's and Loan Documents to meet FNMA and/or HUD approval. F. Developer has a need to offer a full range of purchaser financing at the Project, so that it can sell Affordable Units more expeditiously. G. Agency has an interest in having the Affordable Units at the Project sold, 1101-00002 26562_1 in order to increase the pool of affordable housing in the City of Tustin. NOW, THEREFORE, the parties hereto agree as follows: 1. Agency agrees to address, in good faith, FNMA and/or HUD requirements regarding certain provisions of Agency's CC&R's and Agency's Loan Documents and to use its best efforts to negotiate changes thereto that satisfy both the requirements of FNMA and/or HUD and the needs of Agency in its redevelopment efforts and that conform to redevelopment law. Such changes may include not only revised language in Agency's CC&R's and in Agency's Loan Documents, but also subordination agreements, rights of first refusal, and/or similar documents ("Additional Protections") designed to protect Agency interests on foreclosure' (or deed-in-lieu) by the holders of the first deeds of trust. 2. Agency shall notify Developer as soon as practicable after having completed the negotiations and inform Developer of any changes. 3 If Agency negotiates changes to Agency's CC&R's, Agency shall provide Developer with new CC&R's (the "Amended CC&R's") which Developer shall include in the deeds to the buyers of the Affordable Units in lieu of Agency's CC&R's. The Amended CC&R's shall replace and supersede any conflicting language contained in section 611 of the DDA. 4. If Agency negotiates changes to Agency's Loan Documents, Agency shall provide Developer with copies of the revised Agency loan documents (the "Amended Loan Documents"). The Amended Loan Documents shall replace and supersede Attachments 8, 9, 10, 11, 12, 13, 14, and 15 of the DDA, as applicable. In addition, sections 404-407, 411-414, and 418-422 of the DDA shall be superseded to the extent of any conflict with the Amended Loan Documents. Agency shall remain obligated to make loans, in the amounts provided in sections 408, 415 and 422 of the DDA, to the buyers of the Iow and very-low income Affordable Units. In addition, it shall remain a requirement that buyers of moderate income units execute notes and deeds of trust in the amount provided in section 404 of the DDA. 5. If Agency negotiates any Additional Protections, Agency shall provide Developer with copies of the same. 6. The standard form closing documents, the standard form escrow instructions, and the escrow procedures agreed upon by the parties shall be revised as necessary to accommodate the effective use and/or recordation of (a) deeds containing the Amended CC&R's, (b) the Amended Loan Documents, and (c) any Additional Protections negotiated by Agency. To the extent of any conflict between Attachment 3 (the Scope of Development) and Attachment 4 (the Schedule of Performance) to the DDA and the terms of this Amendment, the terms of this Amendment shall prevail. 1101-00002 26562_1 7. Except as expressly amended herein, the DDA shall remain in full force and effect. 8. The effective date of this Amendment shall be the date when it shall have been signed by Agency. IN WITNESS WHEREOF, Agency and Developer have signed this Amendment on the respective dates set forth below. "Agency" Dated: TUSTIN COMMUNITY REDEVELOPMENT AGENCY, a California community redevelopment agency APPROVED AS TO FORM: By: Jim Potts, Chairman By: Lois E. Jeffrey, Agency Counsel ATTEST: Recording Secretary Dated: "Developer" SHEA HOMES LIMITED PARTNERSHIP, a California limited partnership By: J.F. Shea Co., Inc., a Nevada corporation, its general partner By: Les Thomas, its Vice President 1101-00002 26562_1