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Home My WebLink AboutSECURITY PACIFIC NATIONAL BANK - 1982-02-16 qP . ITS OF HUNTINGTON 2000 MAIN STREET CALIFORNIA 92648, OFFICE OF THE CITY CLERK February 18, 1982 Security Pacific National Bank 8141 2nd Street, Suite 330 P. 0. Box 4430 Downey, CA. 90241 Attn: Phil Long, Vice President I The City Council of the City of Huntington Beach at its regular meeting held Tuesday, February 16, 1982, approved an Oporating Agreement with your bank for the purpose of providing approval and collection services for loans processed and funded by the Housing Rehabilitation element of the Neighborhood Enhancement Program. Enclosed -is a duly executed copy of said agreement -for your files. If you have any questions, please contact Tom Tinnier, Business and Industrial Director, 536-5582. Alicia M. Wentworth City Clerk MIW:CB:bt CC: Jim Palin, Development Services Director Judy John, Finance Charles Thompson, City Administrator ti (Telephone:714-536-5227) r m•.`.uw.:1.Yuma=Y4r+wa ...._!—_ . :. REQUESTObR CITY COUNCIL &TION Gate February_. r"1 GLTY GCUNG%L� Submitted to: Hong�abl e Mayor and City Cou:ici 1 e^ Aug '0'VA Submitted by: Charles W. Thompson, City Administraco �xi Prepared by: Department of Development Services, HCD Division ��--- T f,LEEY Subject: RECOMMENDED APPROVAL OF OPERATING AGREEMENT N CURITY PACIFIC NATIONAL BARK - SERVICING OF ROUSING REHABILITATION LOANS MADE THROUGH NEIGHBORHOOD ENHANCEMENT PROGRAM Statement of Issue, Recommendation,Analysis, Funding Source,Alternative Actions, Attachments: 2✓ STATEMENT OF ISSUE: Attached is a proposed Operating Agreement with Security Pacific National B..nk to provide approval and collection services for loans processed and funded by the Housing Rehabilitation element of the Neighborhood Enhancement Program. Formal execution of said agreement is necessary to implement and administer the Direct Home Improvement Loan Program as approved by City Council on July 20, 1982. RECOMMENDATION: Approve and authorize the City Clerk to execute the recommended Operating Agree- ment with Security Pacific National Bank as attached. ANALYSIS: Housing and Community Development staff have contacted numerous local lending in- stitutiens to ascertain available servicing of the Direct Hone Improvement Loan Program. Of the numerous institutions contacted, responses from the following institutions came close to meetiny the needs of the Program: Imperial Savings and Loan, Great Western Savings and Loan, and Security Pacific Natio,lal Bank. Of the three noted institutions, Security Pacific National Bank provides the most extensive ran of services, including the following: loan approval , credit check, employment/income verification, lot book reports, collections, monthly reports, and pursuit of delinquencies,. it should be noted that the services provided by Security Pacific National Bank are mare costly than those of the other two institutions. On a comparative basis, annual costs assessed by each institcit*,un are estimated as follows, utilizing total Below Market Rate Interest Loaris funded to date ($371,507): Security Pacific National Bank $3,71C.07 Imperial Savings and Loan $3,168.00 Great Western Savings and Loan $2,528.00 LA cost comparison o5� the tnree� institutions is not reflective of the varying provided nor "hidde:i" costs and savings. For instance, imperial Savings will assess the $25.00 credit check fee for each applicant processed, re- of eventual approval or rejection. Should the City opt for Great Western and Loan to provide their limit_ d service of collections and monthly report- City would pay for credit checks and lot book reports from other institutions whether or not applicants participate to completion. Security Pacific National Bank, however, will charge the City a flat 1% annual fee for only those parti- cipants funded. )t should be furthermore noted that Security *,'acific National Bank is one of the most active lending institutions in the field of Community Development and is, therefore, well qualified to expeditiously provide a wider range of services to the Neighborhood Enhancement Program. As per contractu;_i agreement, Security Pacific will provide the necessary services to approve or reject program appli- cants within f ve days. If the City were to procure services from the other institutions, the burden would be on the City to undertake the time-consuming and legal complexities of approving loans. Upon approval of the proposed Operating Agreement, HCD funds presently on deposit with Security Pacific National Bank in a 54% passbook account may be transferred as follows with Security Pacific to maximize earnings and flexibility of said f_ funds: 30 day high yield account (approximately 13 3/8%*) $100,000 interest Bearing checking account (approximately 5%*) $158,178 (*Note: Interest rates and account balances subject to change on a daily basis. Rates and balances noted herein are effective February 4, 1982) FUNDING SOURCE: U.S. Department of Housing and Urban Development; Housing and Community Develop- ment Block Grant Program. ALTERNATIVE ACTIONS: t 1. The City may direct staff to further solicit lending institutions as to loan servicing, however, it should be noted that many applicants have been awaiting assistance of the Neighborhood Enhancement Program for up to two years. (Note: As the proposed agreement with Security Pacific National Bank includes a 30-day cancellation clause, other options could easily be implemented as the Direct Home Improvement Lending Program progresses.) CWT:PND:jb OPERATING AGREEMENT APPROVAL AND COLLECTION SERVICES THIS AGREEMENT is entered into this A day of Va4e4e%r,7 --' 1982, between THE CITY OF HUNTINGTON BEACH, hereinafter referred to as "City", and4 SECURITY PACIFIC NATIONAL BANK, herein .fter referred to as "Bank". RECITALS WHEREAS, City is carrying out a Neighborhood Preservation Program as a part of City's Community Development Block Grant Program under the United States Housing and Community Development Act of 1974, which was reauthorized in 1980; and WHEREAS, City desires Bank to act as its servicing agent for purposes of approving and collecting loans made at the direction of City from funds to be de- posited hereafter with Bank from time to time; and WHEREAS, Bank is prepared to act as such servicing agent on the terms and conditions of this Agreement; NOW, THEREFORE, City and Bank hereby agree as follows: I. ACCOUNT City shall establish with Bank a demand deposit account (hereinafter referred to as "Account") into which it shall deposit funds received under the aforementioned Program. The Account established hereunder shall be governed by all applicable banking laws, customs and cieariny house regulations and this Agreement. II. LOAN APPLICATION PACKAGE City shall refer all persons desiring credit under this Agreement to Bank by forwarding to Bank a loan app'iication package consisting of at least the follow- ing documents and materials: (a) Letter of introduction from City; (b) Loan application; application supplement and State of California fair lending notice; I u ' (c) Construction contract or bids or description of work with cost esti- mate; and (d) Applicant authorization of confidential disclosure. III. LOAN DOCUMENTATION Within five (5) days of receipt; of the loan application package, Bank shall aavise City of approval/disapproval of application. IV. COLLECTION OF FUNDS Bank shall hold copies of all loan documentation and shall collect all monthly payments made on account of loans originated under this loan program. There shall be no additional charge to the obligor or City for servicing of loans. All proceeds collected hereunder shall be deposited by Bank to Account. V. DEPOSIT OF CITY FUNDS AND PAYMENT OF SERVICING FEE 1. City shall deposit its Housing and Community Development Block Grant funds alloc7ted to the program with Bank in an interest bearing account. Such funds shall earn interest at the market rate offered to the general public for deposits of simi- lar size and maturity established by federal regulation. All such earned interest shall be useo to furth_r fund the Housing Rehabilitation Program. 2. City shall maintain sufficient funds throughout the term of this Agree- rient to meet its .servicing fee obligations. Bank is authorized to debit City's account the servicing fee due on loans •Funded from time to time. 3. Initial amount of deposit shall be $258,000, with additional deposits 1 made as authorized by City throughout the term of this Agreement. VI. DEFAULT Bank shall advise City of any loan made hereunder which shall be in default more than thirty (30) days because of nonpayment of any sum of money due to the terms of the loan. Notwithstanding default, Bank shall perform its customary col- lection procedures with respect to each loan antil such loan shall be ninety (90) -2- days in default at which time Bank shall return all loan documentation to City. Bank may accept delinquent payments, partial payments oY amounts due and payments by check, draft or other similar instrument and may forward such instrument for collection in the sa-, manner and subject to the same rights and liabilities as are attached to checks deposited with Bank. VII. INDEMNIFICATION City hereby agrees to hold Bank harmless from any acts of City's employees in the course of the loan process that may be in violation of state and/or federal credit granting statutes and r€gulations. Bank shall not be " cle to City or any other person in any manner relat--d to a loan made hereund Bank agrees to indemnify, defend and hold harmless City, its officers, agents, employees and representatives against loss, damage or expense by reason of any suits, claims, demands and ,judgments caused by the wrongful acts of Bank, its employees or agents arising out of the performance of this Agreement. VIII. FEE For its services provided hereunder, Bank shall be entitled to an annual servicing fee o` one percent (1%) of the original amount financed payable on the anniversary of the loan. IX. TERMINATION The term of this Agreement shall be ongoing from the date of arecution by City and Bank. This Agreement may be amended so long as such amendment is in writ- ing and agreed upon by both City and Bank. Termination of this Agreement may be made by either City or Bank so long as written notice of intent to terminate is given to the other party at least thirty (30) days prior to the terrination date. Upon termination, any loan documentation in the possession of the Bank shall be returned to City. -3- X. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of California and the terms and provisions contained herein shall be subject to the provisions governing lump sum drawdowns for property rehabilitation, 24 CFR Section 570.513 of the United States Department of H.U.D. regulations on Community Development Blank Grants. IN WITNESS WHEREOF, the parties have hereto caused this Agreement to be executed by their respective officers. CITY OF HUNTINGTON BEACH, a municipal corporation ay Mayor ATTEST: APPROVED AS TO FORM: ��- - r�.— A,,-�' City Clerk ity A t orn REVIEWED AND APPROVED: INITIATED AND APPROVED: w City Administrator Director, Business and Industrial Enterprise SECURITY PACIFIC NATIONAL BANK N1 Lang VICE. President, 1 . -4-