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HomeMy WebLinkAboutRPT 4 HCD REHAB LOANS 01-16-84DATE: January 16, 1984 REPORTS NO. 4 1-16-84 Inter-Corn FROH: SUBJECT: Honorable Mayor & City Council Members Community Development Department NCD Rehab Loans Discussion At the December 5, 1983 meeting the Council directed staff to formulate a strategy plan for disseminating information on the HCD Home Improvement Program. Enclosed for your information is a copy of "Basic Facts on Home Improvement Program" and "Nome Improvement Program Procedures Manual". These two documents explain what kind of loans and grants are available and who is eligible to receive them. The money is now available from the'Eigth Year Application ($50,000.00) and next month the money from the Ninth Year Application ($75,000.00) will be available. Staff has .compiled the following list of suggested ways to inform City residents of th~ availability of the money: 1.1Press releases to the Tustin News. J 2. Quarterly reports in the "Tustln Today". i 3.~Water billing message (see attached example). 4. Flyers and cards available at Chamber of Commerce. 5. Paid ads in the Tustin News, Pennysaver, Apartment Owners Association Magazine. ,/6.]~Distribute flyers through community groups and/or by volunteers such as Boy Scouts or Girl Scouts to rehab areas. Recommendation Direct staff to implement the above measures as soon as possible. Associate Planner MAC:ih Attachment Si'A'~EMEN1 FOR CITY OF 1USTiN UTILITY SERVICE AT: FOwn a home or apartment building in Tustin? Does your property need repair l or remodeling? The City of Tustin has a low interest loan program to help. Phone ***-**** for information. ! CITY OF TUSTIN Tustin, California 92680 Telephone: 544-88g0 ..... so, TOTAL KEEP THIS PORTION FOR YOUR RECORDS RETURN THIS STU~, WITH PAYMENT BASIC FACTS ON HOME IMPROVEMENT PROGRAM I. PURPOSES OF HOME IMPROVEMENT PROGRAM II. TYPES OF REHABILITATION ASSISTANCE III. ELIGIBILITY REQUIREMENTS IV. PROCESSING AND TIME INVOLVED V. TECHNICAL ASSISTANCE VI. AREAS PRESENTLY ELIGIBLE Based on Policy Manual Approved by the Board of Supervisors on May 10, 1983 I. PURPOSE ' OF PROGIIA~ The Home Improvement Program provides below market interest rate loans and grants to rehabilitate residential properties throughout unincorporated areas of Orange County, and in particular areas designated by the Housing and Community Development Program Office (H/CD) and approved by the U.S. Department of Housing and Urban Development (HUD). The primary objectives are to upgrade and preserve viable urban communities to principally benefit persons of iow/ moderate income. II. TYPES OF ASSISTANCE Assistance will be through various types of rehabilitation loans and technical assistance from County H/CD staff. A. Types of Loans: 3% Interest Loans (income limitations) 6% Interest Loans (income limitations) 9% Interest Loans Spot Rehabilitation Loans (income limitations) Deferred Payment Loans (income limitations) · Rehabilitation Grants (income limitations) County's Investor-Owner Program Rental Rehabilitation Demonstration Program B. Loan/Grant Maximum Amount For structures of 1-4 units: Mobile Home: Rehabilitation Grant: Up to $45,500 loan Up to $10,000 loan Up to $ 8,000 for single family units Up to $ 5,000 for mobile home Up to $ 3,000 for minor rehabilitation in approved target areas Note: Ail grants may have a 20% supplement for materials and labor to low-income owner-occupants. III. ELIGIBILITY REQUIREMENTS A. For Low Interest Loans 1. Must be residential structures. 2. Owner must have ability to repay the loan. 3. Owner must be of legal age and have good credit. 4. Three interest rates are offered under the Home Improvement Program: three (3), six (6), and nine (9) percent. a. Three (3) Percent Interest Loan Priority shall be given to applicants whose annual income is within' the low/moderate income limitations prescribed by HUD. -1- This incomeis equivalent to 80 percent of the median income for the Anaheim-Garden Grove-Santa Aha Standard Metropolitan Statistical Area (SMSA). The median income for the SMSA area is updated periodically by HUD. This income limitation shall not apply to investor-owners par- ticipating in the Rental Rehabilitation Demonstration Program. The County H/CD Program has identified by formal application to HUD specific target areas for concentrated use of Housing and Community Development funds. Applicants, who live within the designated target area and whose incomes are at or below these limits are eligible to apply for three (3) percent loans. Interest rates for Spot Rehabilitation loans made outside of an approved target area shall also be three (3) percent for homeowners who meet the 80 percent median income criteria. The H/CD Manager may raise these income limits by 20 percent upon staff confirmation of the existence of a health and safety hazard. b. Six (6) Percent Interest Loan Since the County's goal is to improve the. entire neighborhood within a designated target area, property Owners whose income exceeds the 80 percent median income criteria, but is less than or at 100 percent of the median income, are eligible to apply for a six (6) percent loan provided they live in a designated target area. c. Nine (9) Percent Interest Loan For the same purpose citied above, property owners whose in- come exceeds 100 percent of the median income are eligible to apply for a nine (9) percent loan provided they live in a designated target area. No loans or grants shall be made to property owners whose net assets exceed $75,000. Excluded from the calculation of net assets will be the principal place of residence, household items and the value of an ownership interest in a small business. This provision does not apply to landlords applying for rehabilitation of rental property. e If property to be rehabilitated is a rental unit, the owner must agree to keep the rent affordable, to not displace the renter, and that the renter be low/moderate income. B. Spot Rehabilitation Loans 1. Spot rehabilitation can be made to an owner-occupant in any unin- corporated area and in any area of a contracting city if the -2- homeowner is low/moderate income. The loan must be to correct code deficiencies and/or to install energy related items. Low/moderate income is defined by HUD as of March, 1983, as follows:  Median om. 50% 80% 1 $11,800 $18,200 2 13,500 20,800 3 15,150 23,400 4 16,850 26,000 5 18,200 27,600 6 19,550 29,250 7 20,900'. 50,850 8 22,250 32,500 Same requirements as III A (1) (2) (3) (5). No general property improvements are permitted under the spot reha- bilitation program. Spot rehabilitation loans are generally made at 3% interest rate to low/moderate income owner occupants. For Deferred Payment Loans (DPL) Income limited to 80% or below the County median income: 1. Generally made to homeowners who have no substantial resources to make needed improvements and/or monthly loan payments. 2. DPL funds may be used to finance cost and installation of energy conversation materials and to correct code deficiencies. 3. No general property improvements are permitted. -3- VI, 4. Owner must maintain fire and hazard insurance on property and keep taxes current durin$ term of DPL. 5. Owner must must have sufficient equity to cover loan amount. 6. DPL becomes due and payable upon sale or transfer of property. D. For Rehabilitation Grants Income limited to 80~ or below County median income. 1. Used only to rectify emergency health or safety hazards in the applicant's home and/or to provide energy conservation. 2.Up to $8,000 for single family units Up to $5,000 for mobile homes Up to $3,000 for minor rehabilitation 3, 100% of grant amount must be returned to County if owner(s) sells or transfers property within one year; 50% if property is sold or transferred after one year, but before ~wo years. LOAN PROCESSING PROCEDUKES/TLME INVOLVED Application package to be filled out by applicants. Staff to review application package, determine eligibility and type of loan. C. If elisible, application will be sent to bank for credit appraisal review, D. If credit is approved,' bank will process loan. E. Staff ~omake preliminary inspection of residential structure, outline work to be done and provide owner (s) with a cost estimate. F. Hehabilitation activities to begin. G. Time estimate from application to loan approval: 4-5 weeks, if application is complete when submitted to H/CD office. STAFF TECHNICAL ASSISTANC~ A. If loan is approved, staff will assist owner(s) in selecting contractor. B. Staff will assist owner(s) in monitoring contractor's performance and arrange for partial payments until total work is complete. AREAS PRESENTLY ELIGIBLE FOR LOANS All County unincorporate~ areas and designated target areas in the Cities of Cypress, Laguna Beach, Los Alamitos, Stanton, San Clemente, Seal Beach, Tustin, and Yorba Linda. -4- fIOME IMPP. OVEMENT PROGRAM PP. OCEDUKES MANUAL COUNTY OF ORANGE ENVIRONMENTAL MANAGEMENT AGENCY HOUSING/COMMUNITY DEVELOPMENT PROGRAM OFFICE 1200 N. Main Street, Suite 600 Santa Aha, California 92701 Field Office 7801Katella Avenue Stanton, California 90680 PART 1. ROME IMPROVEMENT PROGRAM PROCEDURES MANUAL Table of Contents Page Introduction Section 1 Section 2 Section 3 Section 4 LO~ INTEREST LOANS 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 Low Interest Loans Eligibility Requirements Applicant's Income FHA Title I Insurance Eligible Improvements and Costs Temporary Relocation Assistance Processing Low Interest Loans Truth-In-Lending Requirements DEFERRED PAYMENT LOANS 2.01 2.02 2.03 2.04 2.05 2.06 2.07 Deferred Payment Loans Approval of Deferred Payment Loans Eligibility Requirements Applicant's Income Eligible Improvements and Costs Temporary Relocation Assistance Pro~esslng Deferred PaYment Loans SPOT 3.01 3.02 REHABILITATION LOANS Spot Rehabilitation Loans Processing of Spot Rehabilitation Loans REHABILITATION GRANTS 4.01 Rehabilitation Grants 4.02 Processing Rehabilitation Grants 1 2 5 6 7 8 9 13 14 14 15 15 15 17 17 18 18 19 19 APPENDIX A PROPERTY REHABILITATION STANDARDS 20 PART 1 HOME IMPROVEMENT PROGRAM Introduction The Home Improvement Program provides below market interest loans and grants to rehabilitate residential properties throughout unincorporated areas of Orange County, and in particular areas designated by the Housing/ Community Development (H/CD) Application. These areas include the Cities of Stanton, Los Alamitos, Cypress, San Clemente, Laguna Beach, and Yorba Llnda; The unincorporated areas are Colonia Independencia, E1 Modena, Olive Island, Picadilly, Superior Triange, Midway City, Cypress Islands, Tustin Islands and Anaheim Islands. New areas may be added in future H/CD funding years. The major funding source for the Program is the Community Development Block Grant (CDBG) Act as amended, a Federal program. The primary objective is to develop viable urban communities principally for persons of low and moderate income. The rehabilitation and preservation of housing is one of the key eligible activities permitted and encouraged by the CDBG Act. The County Board of Supervisors, in keeping with the intent of the legislation, has authorized a significant portion of its annual CDBG funds to be used for a Home Improvement Program (HIP). The Board of Superviso~s has approved an agree- mentCs) with Security Pacific National Bank whereby the Bank will make low interest loans to home,wrier and multi-family residential applicants meeting program requirements and approved by the County. An agreement with Mercury Savings and Loan has also been approved for the provision of loan funds for mobile home rehabilitation. Both agreements provide leveraged dollars at a ratio of approximately 2.5 to 1 depending on money market conditions. Additional funding sources may include, but are not limited to, the U.S. Department of Housing and Urban Development's Section 312 loans program, State of California's Housing Finance.Agency program, and private funds which may result from leveraging. Wherever necessary, one or more funding source may be used to cover the entire cost of rehabilitating a particular housing unit(s). The Director of EMA is responsible for the County Home Improvement Program. The Manager of EMA's Housing and Community Development Program Office has been delegated by the Director to be responsible for the Home Improvement Program. The Home Improvement Section Chief may act on any part(s) on behalf of the Manager, H/CD if so designated by the Manager. The following sections outline the guidelines and procedures under which the County Home Improvement Program will operate. Section 570.202 is the specific provision of the Housing and Community Development Act which authorizes the County to make CDBG funds available for home improvement purposes. Whenever the use of funds and/or activity under this program is in doubt, Section 570.202 shall prevail. -i- This Procedures Manual supersedes the Home Improvement Program Procedures Manual and all amendments and revisions previously approved. This Manual becomes effective i-~ediately upon approval bY the County of Oranse Board of Supervisors SECTION 1, LOW INTEREST LOANS Section 1o01 Low Interest Loans Through the leveraging of-CDBG dollars, the County makes available loan dollars at a ratio of 2.5:1 depending on money market conditions. Security Pacific National Bank is the current contract financial institution for single-family residential and multi-family properties. Mercury Savings and Loan Association underwrites mobile home loans. A. Approval A rehabilitation loan may be approved only when the following conditions exist: An executed Grant Agreement exists between the County of Orange and the U.S. Department of Housing and Urban Development under Title 1 of the Housing and Community Development Act of 1974 and subsequently amended. There exists an executed Agreement between a financial institu- tion and the County of Orange to provide rehabilitation loans to property owners, or 3. Provisions have been made with other State or Federal Agencies to make Section 312, 235 or CHFA loans available in the County. B. Restrictions on Notifying Applicant of Loan Approval Although a loan application has been accepted for processing by the County of Orange, approval by the County must await notification by the financial institution in Section 1.01A.2 or A.3 above before the applicant is advised by County that his or her loan application has been approved. The County of Orange will note in its files the means and date of notification to the applicant of loan approval. No work is to be performed prior to this notice unless such notice is waived by the Director in such cases as emergency (Health and Safety) condition exists. C. Restrictions on Number of Loans The number of low interest or deferred payment rehabilitation loans which may be made to any property owner under the Home Improvement Program is one (1). This restriction may be waived in writing by the Director, Environmental Management Agency. Requests for a waiver of this restriction shall be made by the loan applicant, in writing, to the Director. Requests to the Director must be accompanied by a recommendation of the H/CD Home Improvement Program for approval or disapproval of the request for a waiver. -1- If a request for a waiver of this restriction is denied by Director, loan applicant may appeal decision to Orange County Board of Super- visors, D. Applicability of Other Hanuals Taile all rehabilitation loans are subject to the requirements of this manual, there are special provisions and limitations on the making of rehabilitation loans depending on the type of project or program area. Consequently, in addition to the provisions of this procedures manual, rehabilitation loans made on property under this program are subject to the rules and regulations of the Community Development Block Grant Program as amended from time to time by the U.S. Department of Housing and Urban Development, and regulations governing the use(s) of other funds which may become available. E. Application Files The County of Orange and the financial institution shall maintain an appli~ation file for each application that it processes. The file maintained at the financial institution shall be separate from, and tn addition to, any other file maintained by the County of Orange. Copies of the file shall be made available to the County of Orange, U. S. Department of Housing and Urban Development, or state officials upon an appropriate request. Section 1.02 Eligibility Requirements A. General Terms and Conditions This section sets forth eligibility requirements as to the property and the applicant for a rehabilitation loan. B. Property Eligibility Requirements A rehabilitation loan may be made to properties located within tarset areas designated in the County of Orange Housing and Community Development Block Grant Application. The property must need rehabili- tation to comply w/th the Property Rehabilitation Standards adopted by the Board of Supervisors as amended (Appendix A). Eligible prop- erties must be residential structures of one or more dwelling units. Rental properties may be eligible but only if the owner assures the County in writing that no displacement of renters will occur, and that a majority of current renters are low/moderate income, and that the owner makes an acceptable effort(s) to obtain rental assistance for tenants as may be available from time to time through the Orange County Housing Authority or a similar such rental assistance agency. Hanager will make determination of acceptability of this effort(s). Applicant may appeal to Director negative finding(s). Owner must also agree to maintain rents and rent increases in accor- dance with Federal Section 8 Existing Fair Market Rent Program in the event no other rental assistance is available. This requirement shall be in the form of a deed restriction for the term of the loan. -2- C, Applicant Eligibility Requirements. To be eligible for a housing rehabilitation low interest loan, the applicant must demonstrate adequate ability to repay the loan, be of legal age, and meet the eligibility guidelines. A rehabilitation loan rill not be approved by the financial institution if the appli- cant's record shows a disregard for former obligations, or if there is a clear indication of inability to make the payment chat viii be required. A loan applicant must be the owner-occupant of the property, the absentee owner of the property or the purchaser of the property under a land sales contract or any similar contractual agreement. for the purchase of real property. An applicant having a lease for a fixed term expiring not less than six calendar months after the maturity of the loan may, with the owner's consent, apply for a loan. An applicant for a rehabilitation loan who may be eligible for any other form of housing assistance (e.g. CDC's Co.unity Improvement Project, Section 8 assistance) will be advised and assisted in ap- plying for any other form of assistance, in addition to this rehabili- tation loan. D. Income Limits The Housing and Co. unity Development Act of 1974 and subsequent amendments requires that the programs it authorizes be oriented principally for persons of low and moderate income. The County Of Orange, in keeping with the intent of the legislation, has established requirements for participation in the program that are consistent with these Federal guidelines Two interest rates have been established, one race at 3 percent and the other at 9 percent. 1. 3% Interest Loan Priority shall be given to persons whose annual income is within the limitations prescribed by the Section 8 Housing Assistance Payment Program. This is equivalent to 801 of the median income for the Anaheim-Garden Grove-Santa Ann SMSA. Listed below are the current income limits as established by HUD for this ares. Number of Persons Per Household Income Limits $12,900 $14,700 $16,550 $18,400 $19,550 $20,700 $21,850 $23,000 -3- The County has identified by formal application to HUD certain service areas for concentrated use of Housing and Community Development funds. Those persons whose incomes are at or below these limits are eligible for a 31 loan within the service area. Interest rate for loans made outside of an approved service area shall be 31 for hOmeowner(s) who meet the low/moderate income requirements at provided above. Income limits are subject to change. HUD issues periodic updates of income guidelines. Upon staff confirmation of the existence of a health and safety condition, the Director may exceed these income limits by Written approval must be given by the Manager in each case. Additionally, 70% of rehabilitation funds available under the annual CDBG Application will be made available to persons whose incomes fall within the above listed limits. Grants and DPL's, which are covered under separate sections, may also constitute all or a portion of this 70I requirement. This distribution may not be waived. 2. 9% Loan Since the County's goal is to improve the entire designated target area(s), property owners whose income exceeds the low/ moderate income limits may qualify for a 9% loan. However, only 30% of ~ehabilitation funds for loans may be used for this purpose. E. Property Limitations Low interest loans will be made available only to owner-occupant applicant(s) whose gross assets excluding principal residence and personal property are less than $50,000. This provision will not apply to rental property. F. Loan Amount The maximum for all loans made shall be consistent with the U.S. Department of Housing and Urban Development's Section 312 Program. Effective February 1981, this maximum will be $33,500 for structures of one to four units. For five or more units in single structure, the maximum loan shall not exceed $15,000 per unit or that set by Section 312, whichever is higher. The maximum may change upon official notice in the Federal Register. Mobile home rehabilitation loans. however, may not exceed $5,000 without Director approval. G. Interest Subsidy Payment of the interest subsidy required by the County to yield the financial institution the current market rate for loans of this nature may change from time to time. Change in the discount rate charged the County must be preceded by written notice to the County by the financial institution. -4- H. Refinance As permitted by Section 570.202(c)(2)(ii)(8) of the Housing and Community Development regulation, if necessary to finance the rehabili- tation work for low/moderate income applicants, refinancing may be originated subject to the same loan limits described in Section 1o02 E. above, The property must be owner occupied. Section 1.03 Applicant's Income A. General This section sets forth the method of establishing an applicant's income for the purposes of a rehabilitation loan on a residential property and takes into account the variations between different types of applicants and properties. The applicant's income shall be related to the program's income limits for a family of the same size as the applicant's B. Type of Applicant In order to make determinations with respect to eligibility for a rehabilitation loan an applicant is identified as having either low/moderate income or above low/moderate income. C. Sources of Funds and Amounts Comprising Applicant's Income The following is a listing of the elements comprising income, for purposes of a rehabilitation loan. Allowances to reduce gross in- come are.stated in paragraph D. Exclusions from income applicable in special circumstances are stated in paragraph E. Income of an applicant includes the gross income of the applicant and his/her family. The applicant's family includes the applicant and any other person or persons related by blood, marriage, or operation of law, who share the same dwelling unit and/or has ownership interest in the property. An applicant's income must be established on an annual basis for the preceeding two years at the time Of applying for a rehabilitation loan, and may include, but is not limited to: 1. The applicant's gross earnings. Spouse's gross earnings, and earnings of all other members of the family who share the household, if the employment of the spouse or other family member is a definite characteristic of family life. 3. Other income regularly received by the applicant or his/her family from any source. Income from assets including savings, stocks, bonds, vacant land, etc. 5. Income from real estate including rental units on the property to be rehabilitated based on: -5- a. Cross rental income, less be On the basis of an average of experience for two or more years, expenditures for mortga§e principal and interest, mortgage insurance premium, service charges, hazard insurance, real estate taxes, special assessments, maintenance and repairs, heating and utilities, ground rent, and other cash expendi- tures for the property such as advertising vacancies shall be calculated and deducted to obtain net income amount. If the applicant has not owned the property for two or more years, the County of Orange shall estimate the income and expenditures on the available experience. 6. Business income. D. Allowances Cross income of the applicant (o~ner-occupant) shall be reduced by the following allowances when applicable. Supporting documentation must be available for a major permanent illness or chronic condition. 1. Medical expenses for'a major illness or chronic condition which are not covered by insurance. Unusual expenses or a~ounts paid for the care of minors under 18 years of age or for the care of disabled or handicapped family household members, but only where such care is necessary to en- able a family member to be gainfully employed. The amount allow- able as unusual expenses shall not exceed the amount of income from such employment. E. Exclusions from Income The following exclusions apply to an applicant's income (owner-occupant) in connection with a rehabilitation loan on residential property. Children's income for purposes of establishing the amount of the applicant's income that is relevant to the program's income limits shall be excluded. The child must be a dependent as de- fined by the U.S. Internal Revenue Service. 2e Excluded is the income of an adult family member, other than the applicant and spouse, who does not have an ownership interest in the property, but included are any funds contributed or paid to the family by an excluded adult family member. The excluded family member in this case must not reside with the applicant. Section 1.04 FHA Title I Insurance Whenever possible, loans will be processed by the financial institution for FHA Title I insurance. -6- Section 1o05 Eligible Improvements and Costs Ao General This section sets forth, but does not limit, examples of eligible and mandatory improvements under the rehabilitation program as well as ineligible improvements. Where the eligibility of a proposed Improvement is challenged, Section 5?0.202 of the Housing and Community Development Act as revised from time to time is the final authority. Whenever possible, the most current guidelines for proportionality as set by the U.S. Department of Housing and Urban Development Section 312 program for general property improvements (i0%) versus code items (601) will be used~ B. Eligible Improvements Additions and alterations to increase the livability or usefulness of existing structures, such as rooms, porches, stairways, closets, bathrooms, and entrances are eligible. 2. Exterior work to help preserve or protect structures such as paint- ing, roofing and siding, is eligible. 3. Interior work to make a structure more livable, such as painting, papering, plastering, new flooring and tile work is eligible. Also eligible are repairs, restoration or replacement of important parts of structures such as heating systems, plumbing repairs, and built-in kitchen appliances in residential structures of owner occupants. Clearance and site preparation where a unit is determined not suitable for rehabilitation and a replacement house plan has been approved and funded. C. Mandatory Improvements Hazardous conditions which are a direct threat to the health, safety and general welfare of occupants as defined in the Uniform Housing Code, Substandard Buildings as defined by Appendix A, must be corrected. D. Ineligible Improvements The following improvements are not eligible, barbeque pits, bathhouses, burglar alarms, burglar protection bars, dumbwaiters, fire extinguishers, flower boxes, greenhouses, airplane hangars, kennels, kitchen appliances which are designed and manufactured to be freestanding and are not built-in and permanently affixed as an integral part of the kitchen in a residential structure, outdoor fireplaces or hearths, penthguses, photomurals, radiator covers or enclosures, stands, steam cleaning of exterior surfaces, swimming pools, television antennae, tennis courts, tree surgery, valance or cornice boards, waterproofing a structure by pumping or Injecting any substance in the earth adjacent to or beneath the basement or foundation or floors. -7- Section 1.06 Temporary Relocatisn Assistance A, General This section sets forth a description of temporary relocation benefits to be made available to persons and families who are displaced from their homes as a result of the County's Home Improvement Program. Costs will be shared by the County and the displaced person or family. B. Conditions Requiring Temporary Relocation If any of the following causes or coodt£tons occur as · result of the Home Improvement Program, it may be necessary for the persons or fam- ilies to relocate to another dwelling on a temporary basis: 1. Water system is shut off for any extended period of days for plumbing repairs, Electrical service becomes non-operable to make repairs to wiring. 3. Repairs would create dust and other conditions which would aggra- vate allergic condition of occupant(s). 4. Structure(s) are to be fumigated for termite control and infest- etlon. 5. Hazardous living conditions would result from structural changes during construction. 6. Sanitation facilities, e.g. tub, wash basin, toilet are to be moved and/or become non-operable. 7. Contractor required relocation of people to perform repairs on time at agreed upon price. C. Eligibility Requirements Persons or families of low/moderate income who have occupied the prop- erty for more than ninety (90) days and who must find temporary commercial accommodations, are eligible for relocation benefits. Per- sons or families must actually secure and occupy alternative dwelling unit in order to receive payment. D. Amount of Assistance Benefits will be made available for a period determined by the Director but not to exceed this contract term. County will pay two-thirds of the cost of the temporary commercial accomodations up to a daily maximum amount listed on the following schedule: -8- Number of Persons per Household Maximum Daily Allowance 14.00 16.00 18.00 20.00 30.00 32.00 34.00 36.00 Depending upon the number of persons permitted to occupy one room, the schedule may be adjusted to reflect actual cost. Procedures for Securing Relocation Benefits Contractor must submit letter to county requesting vacating of unit and specifying amount of time unit must remain vacant. Request for vacating of premises must be approved, in writing by rehabilitation staff and authorized by Manager of H/CD or his designee. Displacees present quote from commercial accommodation to rehab- ilitation staff. Staff will then verify that displacees occupy unit and will also verify a~ount of quote. Rehabilitation staff will present claim form to Auditor-Controller with a request for advance payment. Advance payment will be made payable, Jointly, to displace, and commercial acco~odation. 4. Advance payment will be delivered to displacee by rehabilitation staff. Section 1.07 Processing Low Interest Loans A. General This section sets forth the steps which are to be followed in the pro- cessing of a rehabilitation loan. B. Processing 1. Initial Contact Marketing effort/strategy includes but is not limited to flyers, phone communication, door to door contacts by Rehabilitation staff. Upon initial contact, an application will be delivered to the ap- plicant. Upon return of the application and completion of credit report, an appointment will be scheduled with the homeowner or property owner for an inspection by the Rehabilitation Specialist. At this preliminary inspection work items will be identified. 2. Loan Application Loan application will be explained to homeowner by financial counselor who will also assist in completing necessary forms. -9- Preliminary Approval of Funding Authority Completed loan application will be forwarded financial institution and/or the state or federal agency which has funding approval authority to: Verify program eligibility of the applicant. b. Verify that applicant is owner of property to be improved. Verify applicant's income and employment. In the event that applicant is self-employed, the income tax returns for the pre- vious two years will be obtained. d. Complete credit investigation. e. Advise county and homeo~rr~r in writing of approval/disapproval. Items a through d may be required to be performed by the County prior to submittal to state or federal funding agencies when appropriate. 4. Termite Inspection A free termite inspection will be scheduled by the county for the homeo~rner or property owner applying for a rehabilitation loan. The termite company will submit the inspection results to the rehabilitation specialist for inclusion in the work write-up and cost estimate. 5. Work Write-up/Cost Estimate A work write-up/cost estimate will be compiled based on the initial inspection and results of the termite inspection report. Homeowner will be given a copy of work write-up for approval and will be advised of amount of loan necessary to complete rehabili- tation work. Installation of a smoke detector will be mandatory and will be made available at no charge to all applicants who receive a rehabilitation loan. 6. Bid Process When required by regulation or determined prudent by the Section Chief, and the homeowner does not elect to conduct his own bid process, bid packages will be prepared and, if possible, bids obtained from at least three (3) qualified contractors. "Qualified" means those contractors who are licensed by the State of California, who have applied to participate in the County's Home Improvement Program and who have received written approval of their participation in the program from the H/CD Home Improvement Office. All bids must be returned within twenty (20) calendar days. Upon receipt of bids, the Home Improvement Section Chief or his designee will review and recommend a contractor. However, responsibility for -10- selection of a contractor rests with the homeowner and the home- owner is under no obligation to abide by rehabilitation staff's recommendation. Homeowner must, however, have a qualified contractor. Where a11 or part of the work is to be performed by the homeowner, then homeowner-shall submit to the rehabilitation specialist a list of the materials, approximate cost for these items, and a schedule for completion by homeowner. Only material will be re- imbursable, not the labor of homeowner or any assistant. This list will be submitted to Home Improvement Office prior to prepara- tion of bid package. Homeowner may act on his own behalf to hire contractor(s) to com- plete various portion(s) of the work listed in the work write-up. Homeowners will identify the contractor(s) and the work items which contractor(s) will perform. For any work which homeowner com- pletes, only material costs will be reimbursable, not the labor of the homeowner or any assistant. Homeowner shall prove to sa:is- faction of rehabilitation staff that he/she has the ability to perform tasks to be undertaken including coordination of con- tractor(s) and under the same time schedule as a qualified general contractor Failure by property owner to comply with the above requirement will terminate this application 7. Contract Execution As a requirement for funding, a contract(s) or agreement(s) must be executed. Three contracts or agreements may be used. The first is the Property Owner's Agreement which is executed by County and Homeowner and used in conjunction with the prime construction con- tract. The second is the Prime Construction Contract between homeowner and contractor. The third is the owner-builder agreement which is executed between the County and the property owner. All contracts must also be approved in writing by the Manager of the Housing/ Community Development Division or his designee. In the event Homeowner wishes to provide improvements over and above eligible work provided for, or perform a portion(s) of the work himself, the contract(s) or agreement(s) must reflect the total cost of work to be done, what the prime and/or subcontractor's responsibilities are, and work he will perform himself. Evidence of availability of the additional funds required must be verified and available prior to funding of loan. 8. Executed Contracts County will forward executed Contract(s) or Agreement(s) to the approved financial institution or appropriate funding agency with request for loan documents. Approved financial institution(s) will prepare and forward loan documents at rate previously deter- mined with County and advise County of interest subsidy due if -11- appropriate. Payments will be in equal monthly installments the first installment payment being due thirty (30) calendar days from note date. County obtain's borrower's signature on loan documents and returns all documents to the financial institution(s). 9. Interest Subsidy Financial institution will bill County for pre-payment of interest subsidies as appropriate. 10. Notice to Proceed Property owner will be assisted in issuing notice to proceed for construction/rehabilitation work. 11. Loan Disbursement Financial institution(s) will forward to County, loan proceeds in a form prescribed by the institution or agency. Disburse- ments will be made only after completion of inspection by re- habilitation specialist and verification of billings by Loan Counselor. Proceeds will be disbursed by one of the following methods: 1.) Progress Payments (draws) Contractor may not receive less than three progress pay- ments. The progress payments shall not exceed 90~ of the cost of such work items determined by the bid breakdown. Progress payments due Contractor shall be paid after County approval of receipt and verification of contractor's in- voice(s) and satisfactory Release of Liens, or claims for Liens, by contractor, subcontractors, laborers and material suppliers for work completed and.materials installed. A 10~ retention will be disbursed to contractor at expira- tion of lien filing period, thirty-five (35) days after filing of Notice of Completion. This retention may increase or decrease depending on funding source 2) One Lump Sum Payment may be made in one lump sum upon completion - less 10% retention. Completion consists of passing final in- spection and filing required release forms. Retention will be disbursed to contractor at expiration of lien filing period, thirty-five (35) days after filing of Notice of Completion. 3) Homeowner Advancements Upon approval of the loan the borrower (if the borrower is performing the work himself) may receive advancements to cover an agreed upon portion of the costs of materials consistent with the schedule provided in cost estimate and work write-up. Additional advancements may bc made -12- when work financed by prior advancements has been completed tO the satisfaction of rehabilitation staff. b. Fund Control 12. Depending upon the type and level of rehabilitation work to be conducted and the amount of loan, the County and lender have the option of utilizing a fund contro! for the disburse- merit of monies to the contractor and/or, material suppliers to cover the costs of labor and materials. Loan Delinquencies Depending on the requirements of the funding source, the lender will provide County with a weekly, monthly, or quarterly list of delinquent borrowers. Rehabilitation staff will contact the borrowers. After contact with the borrower, the County will com- plete a counseling worksheet indicating the nature of the problem and recommended solution. A copy of this form will be forwarded to the Cen=er. 13. Appeal A loan application which is disapproved may be resubmitted for a Deferred Loan or Grant described in Section II and Section III below. Subsequent rejection may be appealed under Section 2.02B. Section 1.08 Truth in Lending Requirements The County will provide in a format required by the lender that ~he pro- visions of both state and federal truth in lending legislation are met. -13- SECTION 2. DEFERItED PAYHENT LOANS Section 2.01 Deferred Paymment Loans A Deferred Payment Loan (DPL) is a sero percent (0%) interest loan. The loan becomes due and payable in a lump sum upon sale or transfer of the property by any means, instrument or probate proceedings whichever re- suits in the shortest time for repayment. The DPL may not exceed loan limits set by the U.S. Department of Housing and Urban Development's Section 312 program which is currently $33,500. Applicants provide security for the loan in the form of a lien and a promissory note, Funding the DPL's is through the Community Development Block Grant Program and the State of California. Funds are loaned directly by the County to eligible o~mer-occupants without the involvement of a private lending in- stitution. Deferred loans are also made in special inter agency efforts to rehabilitate publicly owned residential units. DPL's are intended to assist those low/moderate income persons who have no other means of financing rehabilitation work or occupying the unit(s) without this assistance. Section 2.02 Approval of Deferred Payment Loans Rehabilitation staff with concurrence by the Hanager H/CD makes a determination that applicant is low/moderate income and with prudent financial management will be unable to maintain a loan repaymen: plan. Staff will also make determination that improvements are necessary for the health and safety of the client. B. Approval Authority DPL will be approved or disapproved in writing by the Manager or his designee. The County will notice applicant of results, An applicant whose application for a DPL has been disapproved may appeal to the Board of Supervisors for a final decision, C. Restrictions on Number of Loans The number of DPL's which may be made to any property owner under the Home Improvement Program is one (1), Waiver of limitation may be granted by the Director. D. Applicability of Ocher Manuals While all DPL loans are made subject to the requirements of this manual, there are special provisions and limitations on the making of rehabilitation loans depending on the type of project or program area. Consequently, in addition to the provisions of this procedures manual, rehabilitation loans made are subject to the rules and regu- lations of the Community Development Block Grant Program as established by the U.S. Department of Housing end Urban Development, Section 2.03 A. Eligibility Requirements Property Requirements Owner-occupied single family units are the only qualifying non-public units. The Director may waive this requirement in cooperative housing rehabilitation projects with quasi-governmental or nonprofit organi- zations, i.e., Orange County Housing Authority. B. Applicant Elisibility Requirements DPL is intended to avoid the displacement of homeowners who have no other means of financing repairs and improvements which must be made to their homes. DPL shall be made only to homeowners who have no substantial resources to make needed improvements and substantive evidence is on file to make such determination. In the case of a quasi-governmental or nonprofit organization, at least 75~ of the rental units must be guaranteed to receive assistance for the term of the loan. C. Income Limits The income limitations are those set by Section 1.03 D.1. D. Waivers Waiver of one or more of the above eligibility requirements may be approved in writing by the Director. Section 2.01 Applicant's Income Hethod of determining applicant's income will be that noted in Section 1.03. Section 2.05 Eligible Improvements and Costs General This section sets forth examples of improvements and costs to be financed with a D?L B. Eligible Improvements and Costs A DPL may be used to finance the cost of repairs and improvements to comply with the Property Rehabilitation Standards approved by the Board of Supervisors as amended (Appendix A) and incipient violations of these standards. DPL funds may also be used to finance the cost and installation of energy conservation materials. No other general property improvements are permitted. Hobile homes are not eligible for DPL's. Mandatory Improvements Hazardous conditions which are a direct threat to the health, safety and general welfare of occupants as defined in the Uniform Housin~ Code, Dangerous Buildings, must be corrected. -15- D. Inelisible Improvements DPL may not provide for~ lo New construction or expansion of the size of a structure, except for a bedroom and/or bath where family size warrants. 2. Haterials, fixtures or equipment of a type or quality, which exceeds that customarily used in properties of the same general type as the property to he rehabilitated° Insurance and Property Taxes The applicant shall maintain adequate fire and hazard insurance on the property~ as required by Home Improvement Programs and keep taxes current during term of DPLo F. Program Fees 1. Recording fees The cost of recording the deed of trust and other pertinen~ documents shall be paid by the borrower out of proceeds from the loan. 2. Policy of Title Insurance A policy of title insurance covering the amount of the DPL shall be obtained for the borrower and the cost paid from the loan pro- ceeds. 3. Tax Service Co. Home Improvement Program may utilize services of a Tax Service Company. Cost shall be paid from loan proceeds. Haximum loan of ~33,500 may be made and is subject to the same conditions set by Section 1.02 E. of this manual. H. Escrow of Rehabilitation Funds The applicant shall agree to permit the County of Orange, its agents or designees, to act as escrow agents of funds loaned through a DPL and to permit the County of Orange, its agents or desi§nees, to disburse such funds to the applican£/borrower and the contractor in the manner set forth in the contract between the applicant/borrower and the contractor or in the contract between applicant/borrower and County in the case of an O~ner/Builder~ to insure the proper disburse- ment o£ such funds. The "borrower" shall be construed to be any person or other legal entity who holds title to the property being rehabilitated with the assistance of a DPL and who is legally respon- sible for repayment of the loan. In the case of multiple o~nership, the signature of every titleholder will be required on all documents where the signature of the applican~/borrower is necessary. -16- Section 2.06 Temporary Relocation Assistance Temporary relocation benefits that are available to applicant receiving a DPL are those described in Section 1.06 of this manual, Section 2.07 Processing Deferred Payment Loans Processing Procedures The processing of a DPL shall be the same as that of a subsidized, lov interest loan as noted in Section 1.07 of this procedures manual except as follows: 1. Determination of Preliminary Eligibility Rehabilitation staff will develop necessary documentation to make determination of applicant eligibility for a deferred loan. 2. Obtain Preliminary Title Report/Appraisal Staff will obtain and reviev preliminary title report and appraisal. 3. Determination of Final Eligibility After receiving pre-liminary title report staff will make a final recor~mendation regarding applicant's eligibility for a DPL. Recommendation will be submitted to Director, EMA or his designee for approval. Applicant will be advised, in writing, of final determination. 4. Execution of Documents If eligible, applicant will execute note and trust deed. Addi- tionally, applicant will execute DPL agreement. Once all docu- ments are executed, trust deed will be recorded, note will be held by GSA Real Estate Division and rehabilitation staff will request delivery of title insurance policy covering amount of loan from title company. 5. Notification of Loan Amount Upon receipt of title insurance policy by Home Improvement Pro- gram staff, staff will advise EMA accounting of amount needed to fund DPL and rehabilitation process will continue. Truth In-Lending Requirements Truth-in-lending requirements as noted in Section 1.08 of this manual, apply to all DPL's -17- SECTION 3. SPOT REHABILITATION LOANS Section 3.01 Spot Rehabilitation Loans The Board of Supervisors has approved the spot rehabilitation loan com- ponent of the Home Improvement Program. Low interest loans are avail- able to owner-occupants of low and moderate income living in any contract city and county unincorporated area. Investor-owners participating in the Section 8 Hoderate Rehabilitation Program may also qualify. Section 3.02 Processing of Spot Rehabilitation Loans Requirements for approval of spot rehabilitation loans are those noted in Section 1 of this manual except: Eligibility Requirements 1. Property Eligibility Requirements A rehabilitation loan may be made to any residential property located in unincorporated area of the County of Orange. A rehabilitation loan may be made to any residential property located in a city if the city participates with the County of Orange in the urban'county application for federal block grant funds. Additionally, the city and county must have executed an agreement permitting county operation of the spot rehabilitation program within the city's jurisdiction. 2. Income Limits Interest rate for spot rehabilitation loans to low/moderate income persons shall be subject to Section 1.02 D.1 for 3% loans. If rental property, the owner must agree to requirements of Section 1.02 D.2, and the interest rate shall be 9~. 3. Eligible Improvements and Costs A spot rehabilitation loan may be used to finance the cost of re- pairs and improvements as required to bring the property into com- pliance with the Property Rehabilitation Standards approved by the Board of Supervisors as amended. Spot rehabilitation loans may also be used to finance the cost of repairs of incipient violations of these standards. No general property improvements are permitted. -18- SECTION &. REHABILITATION GRANTS Section &.Ol Rehabilitation Grants In order to provide a full range of financing mechanisms for the county's Home Improvement Program, a grant program has been established. This program provides a grant of up to $6,000.00 with a 20~ supplement' for ma- terials and labor to low income owner-occupants. The goal of the pr.sram is to rectify emergency health or safety hazards in the applicant's home and to provide energy conservation. Section 1.02 Processing Rehabilitation Grant A. A rehabilitation grant may be approved'subject to the same provisions as set forth in Section 2' except as noted below: Applicant Eligibility Requirements Applicant must execute Property O~ner Grant Agreement which pro- vides that the o~ner returns 100~ of the cost of materials to County if property is sold or title transferred within one year of agree- ment execution and 50~ if property is sold or title transferred between one and two years after the execution of the agreement. e ' A rehabilitation grant may be used to finance the cost of repairs and improvements to comply with the Property Rehabilitation Standards approved by the Board of Supervisors and incipient violations of these standards. Grant funds may also be used to finance the cost and installation of energy conservation materials. Minor repairs or improvements may be permitted if Director has approved a specific service area street(s) for mini-grants, The maximum amount of a rehabilitation grant may not exceed the lowest amount determined by the application of the following limi- tations. a. $6,000.00 for conventional single family units and $5,000 for mobile homes be Where conditions warrant, the Director may increase the grant amount, not to exceed Twenty percent (20~ - $1,200.00) of $6,000.00, for in~ninent hazard to the health and safety of the applicant or the community. c. $1,000.00 for minor rehabilitation (mini-grants) in approved target area Be The Director may waive in writing the income requirements and resale restriction 4.02A.1 provided that a staff determination has been made, and the Director concurs that by providing small, minor repair/ maintenance rehabilitation grants to an entire low/moderate income neighborhood street, further deteriorating condition of the street will be retarded and the value of private and public investment made under this program in the area will be preserved. MM:dlcl169(2) -19- 2-17-81