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HomeMy WebLinkAboutCity of Huntington Beach First-Time Homebuyers Downpayment A Council/Agency Meeting Held: Deferred/Continued to: 4 A ro ed ❑ ondition Ily A rov d ❑ Denie Ci le s ignatu e Council Meeting Date: 7/6/2009 Department ID Number: ED 09-33 CITY OF HUNTINGTON BEACH REQUEST FOR REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE CHAIRMAN AND REDEVELOPMENT AGENCY MEMBERS SUBMITTED BY: FRED A. WILSON, Executive Dir PREPARED BY: STANLEY SMALEWITZ, Deputy#Eecutive Director SUBJECT: Approval of First-Time Homebuyers Down Payment Assistance Program jEatem:e:n:to:f Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s) Statement of Issue: Approval of initiating steps which will allow the Redevelopment Agency to use Set-Aside Funds and Neighborhood Stabilization Program (NSP) Funds to initiate a first-time homebuyers program to help moderate income households who live or work in Huntington Beach to purchase a home in the City. Funding Source: Redevelopment Housing Set-Aside Funds (account 30680301.89250) in an amount not to exceed $1,050,000 already budgeted. $411,123 in NSP Funds not anticipated in the original budget, to be used for down payment assistance to eligible moderate income home buyers. Recommended Action: Motion to: 1. Rescind the Purchase Foreclosures Program that was approved by City Council on December 15th, 2008. 1. 2. Adopt and approve the City of Huntington Beach First-Time Homebuyers Down Payment Assistance Program. 3. Authorize the Agency Executive Director and Chairperson to take any action and execute al T Agency Counsel :approved documents and agreements necessary to implement the First-Time Homebuyers Down Payment Assistance Program. REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: 7/6/2009 DEPARTMENT ID NUMBER: ED 09-33 Alternative Action(s): 1. Do not approve the proposed First-Time Homebuyers Down Payment Assistance Program, as prepared; or 2. Continue this item for additional review. Analysis: On December 15th, 2008; the City Council approved the implementation of the Purchase Foreclosures Program. One of the reasons the program was proposed was that it could be the conduit for any Federal Stimulus funds that came to the City to use for affordable housing. After further study and review, staff concluded that a First-Time Homebuyers Down Payment Assistance Program was in line with the City's Affordable Housing Strategy approved by Council on December 17th, 2007; as well as the price of housing and the less than anticipated impacts of foreclosures in Huntington Beach. The City of Huntington Beach, like most coastal communities, continues to have higher than average housing costs in spite of the recent downturn. For the most recent reporting period of February 2009 to April 2009, the median sales price in Huntington Beach was $539,000. That is not much of a decrease from 2004 when it was $544,250. The Program is designed to assist Low to Moderate Income Eligible Households who, based on institutional underwriting criteria, are unable to qualify for and/or afford to purchase a home and make the necessary mortgage payments without Agency financial assistance. Qualifying properties must be single family homes, condominiums, or townhomes located within the City of Huntington Beach and purchased for owner occupancy at an Affordable Housing Cost. The Program is funded by the Huntington Beach Redevelopment Agency through its Low and Moderate Income Housing Fund ("Housing Fund") established by the Agency to increase, improve, and preserve the community's supply of Low and Moderate Income housing available at an Affordable Housing Cost. Additional funding may come from the Federal Government's Neighborhood Stabilization Program (NSP) funds specifically provided to purchase vacant, foreclosed homes in qualified census tracts. Agency Loan funds are combined with the funds of participating Low to Moderate Income home buyers to enable the households to qualify for a First Trust Deed Loan and to achieve affordable home ownership. Other criteria include: • Participating homebuyers must qualify for a "First Trust Deed Loan"; a fixed rate, level payment, 30-year first mortgage loan with an institutional lender approved by the Affordable Clearinghouse. • The maximum loan amount will be established by the Agency on an annual basis by property type, but will, in no case exceed $100,000. Proposed limits would be -2- 6/23/2009 2:40 PM REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: 7/6/2009 DEPARTMENT ID NUMBER: ED 09-33 $50,000 for 1 Bedroom, $75,000 for 2 bedrooms, $100,000 for 3+ bedrooms. • Minimum Underwriting Criteria Include: ♦ No minimum credit score ♦ No credit accounts past due at time loan is recorded ♦ No outstanding unpaid judgments or involuntary liens ♦ No bankruptcies • In order to qualify for Program assistance, an applicant must be a Low to Moderate Income Household, in which household's total combined gross household income cannot exceed one hundred twenty percent (120%) of area median income for Orange County. • Priority for current Huntington Beach residents or person employed with a business located in the City. Formula Table for Equity Share portion: Year Percentage of Equity Share Payment 1-7 100% 8-12 75% 13-17 50% 18-22 25% 22-30 10% 30+ Equity Share and Interest Eliminated (Original loan amount still to be repaid). • Zero percent interest rate for Down Payment Loan per Fannie Mae guidelines for Community seconds. No deed restriction on property due to equity share payment. • Refinancing with approval of Program Director. No cash out unless participant agrees to pay off the Agency loan. NSP funds can only be used to purchase foreclosed homes within 5 eligible CDBG Target Areas that have experienced multiple foreclosed properties. The funds can only be used for Down Payment Assistance and the City will not be a part of the purchase process except that financial assistance. The City has selected the Affordable Clearinghouse to be the Administrator of the Program. They currently administer similar programs for the Counties of Orange, Los Angeles, and Riverside. Potential applicants will need to follow the following steps: -3- 6/23/2009 4:29 PM REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: 7/6/2009 DEPARTMENT ID NUMBER: ED 09-33 • Step 1: Applicant Contacts Administrator • Step 2: First Mortgage Lender Pre-Approves Applicant . • Step 3: Applicant Completes Homebuyer Education Seminar • Step 4: City Pre-Approves Homebuyer Assistance Program Application • Step 5: Applicant Identifies Property to Purchase • Step 6: First Mortgage Lender Completes Process for Final Approval • Step 7: Program Administrator Reviews Final Application Package • Step 8: City Provides Final Approval on Homebuyer Assistance Program Loan Application; Loan Documents Are Prepared • Step 9: Program Administrator Sends Documents and Instructions to Escrow • Step 10: Review Documents From Escrow/Prepare for Closing • Step 11: City Authorizes Loan Funding • Step 12: City and Lender Fund Loan to Homebuyer • Step 13: City Monitors and Follows Up Documents to be used in implementing the Program will be prepared and approved by the City Attorney before use. The scarcity of land and high cost of construction make the development of affordable housing a very difficult endeavor, especially affordable housing units suitable for families. The Agency is required to spend 20% of the tax increment received on low and moderate income housing. Redevelopment law also requires that housing funds be spent on low- income households in proportion to the number of households with members 65 years of age and under to the number of low-income households with members 65 years of age and older. The most current Housing Implementation Plan Update indicated that the Agency allocated 30% of the Agency's Housing Set-Aside and Home Partnership (HOME) Program Funds to senior housing projects. Subsequently, the Agency is anticipated to fulfill the required age restricted housing expenditure test and new expenditures should focus on projects for households under 65 years of age to obtain the required proportionality. The former housing market created extreme challenges to low and moderate income household trying to purchase a home in Huntington Beach. The Program will allow the purchase of single family detached homes as well as condominiums and townhouses. A -4- 6/23/2009 2:37 PM REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: 7/6/2009 DEPARTMENT ID NUMBER: ED 09-33 property would only be purchased if a price could be negotiated that would yield an affordable unit, as required with the use of Housing Set-Aside Funds. The selection of applicants will be on a first-come, first serve basis however the City will give priority to current residents and/or employees that are working in Huntington Beach. Additional weight would be given to public service workers such as Police officers, Firefighters, Nurses and school teachers in the event more applications are received than allocated funding. Marketing of program will include contacting residents on the wait list created for the Purchase Foreclosure program, creating a dedicated page on the Economic Development website, including information in employees paychecks and informing the community via the Community Newsletter and prepared fliers. Implementation of the First-time Homebuyer Down Payment Assistance Program will require the initial appropriation of $1,050,000 of Redevelopment Low-Income Housing Set-Aside Funds for down payment assistance loans to eligible low to moderate income home buyer applicants. Additional funds may become eligible from State or Federal generated initiatives and will be folded into this program. The funds appropriated for use with the Program will function as a revolving fund into which all Program revenues, net proceeds and loan payoffs are re-deposited for use in funding additional purchases, minor rehabilitation, and/or down payment assistance loans to low and moderate income households. Strategic Plain Coal: Maintain, improve and obtain funding for public improvements. Environmental Status: Categorically excluded under the National Environmental Protection Act (NEPA). Categorically exempt under the California Environmental Quality Act (CEQA), Section 15061 (b) (3). Attachment(s): Nium'berRA o ® - te 1. Proposed City of Huntington Beach Down Payment Assistance Program 2. Step by Step Administration Process 3. NSP Funds Eligible Target Areas Map -5- 6/23/2009 2:37 PM ATTAC HMENT # 1 HOMEBUYER DOWNPAYMENT ASSISTANCE PROGRAM PROGRAM GUIDELINES HUNTINGTON BEACH REDEVELOPMENT AGENCY GUIDELINES FOR HOMEBUYER DOWNPAYMENT ASSISTANCE PROGRAM AGENCY LOANS, INCLUDING EQUITY SHARING PAYMENTS I. INTRODUCTION A. Encourage Homeownership in City. The Huntington Beach Homebuyer Assistance Program ("Program") has been established to encourage home ownership in the City of Huntington Beach by providing financial assistance to eligible homebuyers to purchase qualifying Property at an Affordable Housing Cost. The Program is designed to assist Low to Moderate Income Eligible Households who, based on institutional underwriting criteria, are unable to qualify for and/or afford to purchase a home and make the necessary mortgage payments without Agency financial assistance. Qualifying properties must be single family homes, condominiums, or townhomes located within the City of Huntington Beach and purchased for owner occupancy at an Affordable Housing Cost. The Program is funded by the Huntington Beach Redevelopment Agency, City of Huntington Beach, California, a public body corporate and politic, ("Agency") through its Low and Moderate Income Housing Fund ("Housing Fund") established by the Agency to increase, improve, and preserve the community's supply of Low and Moderate Income housing available at an Affordable Housing Cost. Additional funding may come from the Federal Government's Neighborhood Stabilization Program (NSP) funds specifically provided to purchase vacant, foreclosed homes in qualified census tracts. Agency Loan funds are combined with the funds of participating Low to Moderate Income home buyers to enable the households to qualify for a First Trust Deed Loan and to achieve affordable home ownership. The Program is carried out and supervised by the Agency's Program Director and implemented on a day to day basis by the Program Administrator in cooperation with participating private institutional lender(s). B. Basic Structure. The basic structure of Program is as follows: 1. First Trust Deed Loan. Participating homebuyers must qualify for a "First Trust Deed Loan", i.e., a fixed rate, level payment, 30year first mortgage loan with an institutional lender approved by the Agency's Program Administrator: Affordable Clearinghouse. a. Refinancing. Refinancing of the First Trust Deed Loan will be permitted only upon express written approval by the Program Director, which preapproval is and shall be a material prerequisite to any type of refinancing or modification of the First Trust Deed Loan and which approval shall be within the sole discretion of the Program Director and subject to the terms of the Agency Loan (i.e., payments commence in 1 year 30.) An approved refinancing does/will not trigger repayment of the Agency Loan, including principal and Equity Sharing Payment. b. Restrictions on Terms of Refinancing. The structure of an approved refinancing of the First Trust Deed Loan may for a term less than 30 years, but the following business terms or structure for any proposed refinancing are strictly enforced by Program Director: (i) no increase in the principal (except by the amount of reasonable closing costs for one pre approved refinancing as determined by Program Director); (ii) first mortgage remains and continues fully amortizing; (iii) no cash/equity withdrawal; (iv) no variable interest rate; (v) no negative amortization in connection with such proposed refinancing; (vi) no interest only payment structure; and (vii) no subordination of the Agency Loan below second lien position. 2. Agency Loan. The Agency Loan will be provided pursuant to the terms and conditions of the Agency's standard form Loan Agreement and shall be evidenced by a Promissory Note and secured by a Second Deed of Trust, including other Agency Loan Documents implementing the Program. The maximum loan amount will be established by the Agency on an annual basis by property type, but will, in no case exceed $100,000. The loan can be used for down payment purposes only. Underwriting decisions by the first mortgage lender(credit, debt ratios,etc.)apply. At time second mortgage loan is recorded: o No credit accounts past due at time loan is recorded ®No outstanding unpaid judgments or involuntary liens ®No bankruptcies The principal amount disbursed under the Promissory Note for Participant's purchase of the Property will accrue zero (0%) interest. The Agency Loan shall be repaid and due upon the following: a. the principal (and Equity Sharing Payment) shall be due in full upon the earlier to occur of: (i) first resale, full or partial transfer or conveyance, or refinancing without the express consent of Program Director (inclusive of the transfer/conveyance of the Property upon or in connection with death(s) of[both] Participant(s) through a trust, will, or other estate planning or probate event), or (ii) default by Participant on the Agency Loan; and/or, as applicable; b. if the Agency Loan has not repaid by the 30th anniversary of the Recordation Date based on the occurrence of (a)(i) or (ii) in the preceding subsections, then the principal shall become fully amortized and fixed, level monthly payments shall commence and be due and payable on the first of each month with amortization 2 based on fifteen years remaining on the Term of the Agency Loan; and/or, as applicable, c. except in the case of refinance as stated in I13(1), if the First Trust Deed Loan is paid off by Participant sooner than the 30th anniversary of the Recordation Date, then after the First Trust Deed Loan is repaid commencing with the next following anniversary of the Recordation Date and continuing through to the end of the 45year Term of the Agency Loan the principal shall become fully amortized and fixed, level monthly payments shall commence and be due and payable on the first of each month with amortization based on years remaining between payoff of the First Trust Deed Loan (prior to such 30th anniversary) and the end of the 45 year Term of the Agency Loan. The Equity Sharing Payment due hereunder shall be due and payable as provided in the following section. 3. Equity Sharing Payment, In addition to the principal amount disbursed under the Promissory Note for Participant's purchase of the Property, which shall be due and payable as described in the above paragraph, each Participant shall pay to the Agency an Equity Sharing Payment, if any, which amount is equivalent to a percentage share of the appreciation in the value of the Property based upon the proportionate share of the Agency Loan to the original purchase price for the Property. The Equity Sharing Payment shall be due in full upon the following: a. the earlier to occur during the 45year Term of the Agency Loan of either: (i) first resale, full or partial transfer or conveyance, or refinancing without the express consent of Program Director; or (ii) default by Participant on the Agency Loan; and/or, as applicable b. if the Equity Sharing Payment did not become due and repaid by the 30th anniversary of the Recordation Date due to the occurrence of(a)(i) or (ii) in the preceding subsections, then commencing on the 30th anniversary of the Recordation Date and continuing for the remaining fifteen (15) years on the 45-year Term of the Agency Loan, the Equity Sharing Payment will be discharged and forgiven, such that in the event Participant owns and occupies the Property for the first 30 years of the full 45year Term of the Agency Loan, then the terms and conditions of the obligation to make the Equity Sharing Payment will have been fulfilled and the Equity Sharing Payment obligation will be have been fully discharged and forgiven. The principal amount remaining on the Agency Loan will still be payable. C. Definitions. The capitalized terms set forth in these Program Guidelines shall have the following meanings: 1. "Affordability Period"or "Term of Agency Loan"or "Term"all have the same meaning and shall mean that period commencing upon the Recordation Date of the Agency Loan and terminating on the earlier to occur of(i) full repayment of the 3 Agency Loan, including the principal and the Equity Sharing Payment, due upon the first resale, full or partial transfer or conveyance, or refinancing without the express consent of Program Director, or (ii) default and full repayment of the Agency Loan, including the principal and Equity Sharing Payment; or (iii) the 45tn anniversary of the Recordation Date. 2. "Affordable Housing Cost"shall mean and be as defined in Health & Safety Code Section 50052.5 (or any amendment or successor statute thereto) and implementing regulations thereto in Title 25 of the California Code of Regulations. The term monthly housing cost means all of the following associated with the Property: (i) principal and interest payments on a mortgage loan, and any loan insurance fees associated therewith; (ii) property taxes and assessments; (iii) fire and casualty insurance covering replacement value of property improvements; (iv) homeowner association fees, if any; and (v) a reasonable utility allowance. As of the date of the Guidelines Affordable Housing Cost for Low to Moderate Income Households is defined by statute as follows: a. Moderate Income Household. Minimum housing cost cannot be less than twenty- eight (28%) of the gross income of the household nor exceed the product of thirty- five percent (35%) times one hundred ten percent (110%) of area median income adjusted for family size appropriate for the unit. b. Lower Income Household. Maximum housing costs cannot exceed thirty percent (30%) times seventy percent (70%) of the area median income adjusted for family size appropriate for the unit. c. Very Low Income Household. Maximum housing costs cannot exceed thirty percent (30%) times fifty percent (50%) of the area median income adjusted for family size appropriate for the unit. d. Adjusted for family size appropriate to the unit means the following: Studio = One person household One bedroom = Two person household Two bedrooms = Three person household Three bedrooms = Four person household Four bedrooms = Five person household 3. "Agency"means the Huntington Beach Redevelopment Agency, City of Huntington Beach, California, a public body, corporate and politic created pursuant to and exercising powers conferred by the Redevelopment Law. 4. "Agency Loan"means the homebuyer assistance and shared appreciation loan by the Agency to the Participant, which in no event shall exceed a principal amount of$100,000 plus the lien for the Equity Sharing Payment, and is more fully defined and described in Section 1.B.2. above. 5. "Agency Loan Documents"means those documents evidencing, securing, and implementing the Agency Loan. 4 6. "Applicant Affidavit"means an affidavit substantially in the form attached to this Manual as Exhibit "E" required to be completed by each household applying to participate in the Program. Each Applicant Affidavit shall be signed by the applicant (all persons who will hold title to the Property) under oath and subject to penalty of perjury. The Applicant Affidavit serves as the initial application to the Program and is a representation regarding each and all members who comprise the Low to Moderate Income Household applying for an Agency Loan. Each Applicant Affidavit shall be considered representations and warranties by the applicant as to the current status and makeup of their household, their Gross Household Income, their liquid assets, their prior ownership of real property history, etc. and each such fact or informational item affirmed shall be considered an ongoing representation and warranty and if the applicant's status changes, or any information provided is incorrect or requires update, then the applicant shall inform Program Director and Program Administrator in writing of any material change pertaining to any matters set forth or referenced in the Applicant Affidavit. 7. "Buyer"means the person or entity to which the Participant will sell, transfer, or otherwise convey the Property upon the first resale or full or partial transfer or conveyance of the Property. 8. "City"means the City of Huntington Beach, a California municipal corporation. 9. "Declaration of Covenants, Conditions & Restrictions"or "Declaration"or "CCRs"all have the same meaning and shall mean the Declaration of Covenants, Conditions & Restrictions which sets forth certain covenants with respect to the use, owner occupancy, and maintenance of the Property during the Term of the Agency Loan, which will be recorded against the Property in connection with the Agency Loan. 10. "Deed of Trust"or "Agency Deed of Trust"have the same meaning and shall mean the Deed of Trust and Rider thereto to be executed by Participant as Trustor in favor of the Agency to be recorded as a second lien against the Property securing the Promissory Note for the Agency Loan, including the principal of the Agency Loan and the Equity Sharing Payment. 11. "Eligible Households"or "Eligible Applicants"means persons or Households whose Gross Household Income does not exceed 120% of area median income for Orange County, adjusted for family size, and meet the criteria for participation in the Program, and who are in the process of securing a First Trust Deed Loan to purchase an eligible Property. 12. "Equity Sharing Payment"is defined in Section I.B.3. above. 13. "First Trust Deed Loan"is defined in Section 1.B.1. above. 14. "Gross Household Income"means the income of all (i) members of the Eligible Household over the age of eighteen (18) and (ii) persons who will hold title to the Property. Gross Household Income shall be calculated in accordance with Title 25 5 Cal. Code of Regulations Section 6914, as more fully set forth in Exhibit B, Determination of Gross Household Income. 15. "Gross Income"means the anticipated income of a person or family for the 12 month period following the date of determination of Gross Household Income, as more fully set forth in Exhibit B, Determination of Gross Household Income. 16. "Household"means all persons who will occupy the dwelling unit located on the Property whether it be a single family, one person living alone, two or more families living together, or any other group of related or unrelated persons who share living arrangements provided that all the terms and conditions of the Program are met. 17. "HQS Occupancy Standard"or "HQS occupancy standard"means the maximum number of occupants who may reside at the Property at any time during the Term of the Agency Loan, which in no event shall exceed two (2) persons per each living and sleeping area of the Property (excluding kitchen, bathroom(s), hallways, other nonliving/ sleeping areas.) For example, a house with two bedrooms and a living room (but no family room/den) would be limited to occupancy by six persons; a house with three bedrooms, a separate living room, and a separate family room/den would be limited to occupancy by ten persons, etc. The HQS occupancy standard is set forth in and established by United States Department of Housing and Urban Development (HUD) and as of the date of these Guidelines the current HQS occupancy standard is two (2) persons per each living and sleeping area in a home/dwelling. 18. "Lender"means the private lender approved by the Program Administrator and that provides the First Trust Deed Loan. Each Lender shall be a federally regulated and insured financial lending institution or a licensed mortgage broker with a current and valid license from the California Department of Real Estate that meets all of the requirements established by the Agency to participate as a Lender in the Program and has entered into a Lender Participation Agreement acceptable to the Agency. 19. "Loan Agreement"means the Homebuyer Assistance Program Loan Agreement by and between the Agency and the Participant. 20. "Low Income Household"or "Lower Income Household"shall mean lower income households as defined in Health & Safety Code Section 50079.5 and include a person, family, or household earning not greater than eighty percent (80%) of Orange County median income adjusted for family size as determined by HCD and in conformity with Redevelopment Law. Lower Income Households include very low income households, as defined in Health & Safety Code Section 50105, and extremely low income households, as defined in Health & Safety Code Section 50106. 21. "Low to Moderate Income Household"shall mean a person, family, or household earning not greater than that percentage of Orange County area median income (generally 120%), adjusted for household size, which is set forth by regulation of the California Department of Housing and Community Development (HCD) pursuant to Health and Safety Code Section 50093. The term Low to 6 Moderate Income Household is inclusive of a Moderate Income Household, a Lower Income Household, and a Very Low Income Household. 22. "Moderate Income Household"shall mean a person, family, or household earning not greater than one hundred and twenty percent (120%) of Orange County area median income, adjusted for household size appropriate to the unit, which is set forth by regulation of the California Department of Housing and Community Development (HCD) pursuant to Health and Safety Code Section 50093. 23. "Note Amount"means both the principal amount loaned by the Agency to Participant as the homebuyer assistance loan, which amount shall in no event exceed $100,000, and the Equity Sharing Payment amount due under such the Note evidencing the Agency Loan. 24. "Owner Occupant"or "Owner Occupancy"means occupancy of the Property by the original person(s) who comprise the Participant. There shall be no change in persons named as Participant and who are the party(ies) to the Program documents, including without limitation the Loan Agreement, without the prior express written consent of Program Director in his/her sole discretion. 25. "Ownership Interest"means an ownership interest in the Property, as follows: a. Types of Ownership Interests. The Low to Moderate Income Household that becomes a Participant in the Program and receives an Agency Loan shall own and occupy the Property. Title to the Property shall vest with Participant upon concurrent closing of the First Trust Deed Loan and Agency Loan and Participant shall hold title in one of the following forms a. or b., and not in the form of c. below: (i) Fee simple: Fee simple interest in Property, as Participant's (a) sole and separate property; or (b) community property; (c)joint tenants; or (d) tenants in common; or (e) as trustors and beneficiaries of a family trust, subject to the requirements in the following subsections. (1) if the Property is to be held as an asset of a family trust established for estate planning purposes, then the Eligible Applicant shall be required as a part of the application process to submit true and correct copies of the trust agreement that evidences to the reasonable satisfaction of Program Administrator the authority to encumber the Property with the Agency Loan (and First Trust Deed Loan), including: (A) that the Eligible Applicant is/are parties to the trust agreement, the Property will be owned in fee by the trust; (B) that trustors will be the Owner Occupants of the Property; and (C) that the Eligible Applicant has/have full power and authority to acquire the Property, to encumber the Property, to enter into the First Trust Deed Loan and Agency Loan, to sign the Applicant Affidavit and all Agency Loan Documents, and 7 fully obligate the Eligible Applicant to participate in the Program. (ii) Leased Land. Fee simple interest in the improvements (dwelling) and leasehold interest under a long term ground lease for the land upon which the improvements are constructed and exist, i.e., as a lessee of a long term ground lease. Eligible Applicants who propose to buy a Property with fee ownership of improvements and situated on leased land (versus fee simple ownership of land and improvements) are not disqualified from application, and such application may be considered, so long as the remaining term of the ground lease for the leased land upon which the improvements (dwelling) are situated is for a term that is not less than one and one half (1'/2) times longer than the term of the First Trust Deed mortgage. (iii) Excluded Types of OwnershipNesting. Ownership of the Property shall not and does not include a remainder interest, a lease with or without an option to purchase, an expectancy to inherit an interest in real property or any interest acquired upon the execution of a purchase contract. 26. "Participant"means the participating homebuyer that purchases the Property and obtains an Agency Loan from the Agency through this Program. 27. "Program"means the Huntington Beach Downpayment Assistance Program adopted by the Agency on , 2009. 28. "Program Administrator"means the Agency staff person or an independent contractor hired by the Agency, if any, charged with the day-to-day administration, implementation, and enforcement of the Program. 29. "Program Director"means the Agency's Executive Director or his/her authorized designee, including by this designation and delegation the City's Neighborhood Improvement Manager. The Program Director is charged with supervision, management, and overall decision-making authority to implement the Program, including making nonmaterial interpretations, waivers, amendments, modifications, and corrections to Program documents, so long as no such decision substantively modifies the Program and its business points and structure as approved by the Agency Board. 30. "Program Guidelines"or "Guidelines"have the same meaning and shall mean these Huntington Beach Homebuyer Assistance Program Guidelines approved by the Agency and implemented by the Program Director, Program Administrator, and other Agency and City staff, including any and all amendments by the Agency Board thereto and any authorized modifications by the Program Director that are within the scope of his/her authority to so modify. 31. "Promissory Note"or "Note" have the same meaning and shall mean the Agency Loan and Equity Sharing Payment Promissory Note evidencing the Agency Loan, which shall in no event, exceed an original principal amount of$100,000 and the obligation to pay the Equity Sharing Payment. 8 32. "Property"means the real property, including land and improvements, located at in the City of Huntington Beach, County of Orange, State of California that Participant purchases and for which Participant obtains a First Trust Deed Loan and Agency Loan pursuant to this Program (and, as applicable, a SFRGLP loan.) Each Property is required to be an eligible single-family residence, as further described herein. 33. "Purchase Price"means the original purchase price paid by the Participant to the Seller for Seller's interest in the Property, exclusive of escrow fees, title insurance costs, broker's commission, loan fees or any other closing or transaction costs. 34. "Recordation Date"means the date of recording in the Official Records of the County of Orange, California of the Deed of Trust securing the Agency Loan. 35. "Redevelopment Lave"means the California Community Redevelopment Law, Health & Safety Code Sections 33000, et seq. as the same now exist or may hereafter be amended. 36. "Sales Price"means the price to be paid by the Buyer of the Property to Participant for Participant's interest in the Property, exclusive of reasonable escrow fees, title insurance costs, broker's commissions, loan fees or any other closing or transaction costs. In the event the Agency Loan becomes due and payable due to an event other than resale of the Property to a Buyer (for example due to a non- approved refinancing or default under the Agency Loan), then the Sales Price shall be the appraised value of the Property as of such date of acceleration and due date of the Agency Loan, as determined by a qualified independent appraiser paid for by the Participant. The Sales Price (or appraised value of the Property) is used in the formula for calculation of the amount of the Equity Sharing Payment due during the Term of the Agency Loan. 37. "Seller"means the person or entity from which the Participant originally purchased the Property. 38. "Very Low Income Household"shall mean a household earning not greater than that percentage of Orange County area median income (generally 50%), adjusted for household size, which is set forth by regulation of the California Department of Housing and Community Development, pursuant to Health and Safety Code Section50103. II. ELIGIBILITY CRITERIA A. Eligible Households and Eligible Participants 1. Income Limits. In order to qualify for Program assistance, an applicant must be a Low to Moderate Income Household, which household's total combined gross household income cannot exceed one hundred twenty percent (120%) of area median income for Orange County adjusted for family size as set forth in Exhibit "A" attached hereto. Income limits are published by the California Department of 9 Housing and Community Development and are adjusted and promulgated annually. Ownership of other real property disqualifies an applicant for participation in the Program. Gross Household Income shall be calculated in accordance with Title 25 of the California Code of Regulations Section 6914, as set forth in Exhibit "B" attached hereto. 2. Eligible Homebuyer Status. Eligible Households may apply to participate in the Program and shall include Low to Moderate Income households who have not owned a present ownership interest in residential property excluding mobilehomes on rented/leased land during the last three (3) years. In addition, Displaced Households and Displaced Homemakers (defined in next paragraph) who meet the income eligibility criteria may participate in the Program without regard to previous home ownership. For purposes of the Program, a "Displaced Household" is one who is relocated by the Agency as part of a redevelopment project. A "Displaced Homemaker" is an individual who (a) is an adult; (b) has not worked fulltime, full-year in the labor force for a number of years but has, during such years, worked primarily without remuneration to care for the home and family; and (c) may be unemployed or underemployed and experiencing difficulty in obtaining or upgrading employment. 3. Liquid Assets. Eligible Households who apply to participate in the Program shall meet the Agency's liquid asset requirements. Household assets cannot exceed 50% of the purchase price of the home. 4. Credit Worthiness. Eligible Households for participation in the Program shall have (i) an acceptable credit "score" and a minimum credit rating of"fair" as defined by the Program Administrator and (ii) sufficient credit worthiness to qualify for and obtain First Trust Deed financing as determined by the participating institutional lender. 5. Legal Residency. Eligible Households who apply to participate in the Program must evidence to Program Administrator that the household lawfully resides in the United States. All selected Participants for the Program must legally reside in the United States. 6. Consignor(s) on Agency Loan Prohibited. Each applicant to the Program shall qualify and meet underwriting criteria based on the applicant Low to Moderate Income Household's income and assets and not based on the income, assets, gift, or other remuneration provided by any relative, friend, or other third party. 7. General Eligibility. No member of the governing board of the City or the Agency and no other official, employee, or agent of the City or Agency who exercises any policy or decision making function in connection with the Program shall directly or indirectly be eligible for Program assistance. 8. Nonparticipation in Other City Program(s). Participants receiving an Agency Loan under the Program are ineligible to participate in another, if any, City or Agency homebuyer assistance program. Applicants to the Program who have already 10 participated in, or received funding from, another City or Agency homebuyer or housing loan assistance program, are not eligible to apply for the Program. B. Eligible Property 1. Type of Single-Family Residence a. Eligible Residence. Program assistance will be available to purchase a Property at an Affordable Housing Cost that is a single family detached house, condominium, or townhome. Only single family houses, condominiums, and townhouses are eligible residences under this Program. b. Ineligible Residence. Duplexes or multifamily apartments property are excluded. Mobile homes whether affixed or not affixed to a permanent foundation, manufactured houses, and recreational vehicles, campers, or similar vehicles are not considered residential property and are ineligible for the Program. 2. Location. Program assistance is available only in connection with the purchase of eligible residential properties located in the City of Huntington Beach (excluding unincorporated areas). 3. Property Condition; Correction of Deficiencies. Each Property selected for the Program by a Participant prior to the close of escrow must be inspected by an independent, certified third-party home inspector at Participant's or Seller's expense (and such expense shall not be a loan expense or Agency expense.) The condition of the Property as reported by such independent home inspector must satisfy the standards of the institutional lender funding the First Trust Deed loan. In addition, any serious building or other local code violation(s) or other health and safety deficiency(ies) reported by such home inspector must be corrected as a condition precedent to funding the Agency Loan. The determination of whether a condition is a serious violation or a health and safety deficiency shall be and remain in the discretion of the Program Director. 4. Concurrent Application to and Participation in Agency's Single Family Rehabilitation Grant and Loan Program. Agency also has adopted and in place the Huntington Beach Single Family Rehabilitation Grant and Loan Program ("SFRGLP"), which provides financial assistance for rehabilitation improvements to eligible single-family owner-occupied properties. The primary objectives of the SFRGLP are to correct nonconforming uses, remedy code violations, and generally repair and improve deteriorating properties in an effort to provide decent housing and a suitable living environment for Low to Moderate Income Households. a. Timing and Maximum Agency Loan Amount. In connection with the inspection and evaluation of the condition of the Property for which an Agency Loan may be provided under this Program, applicants may concurrently or within six (6) months of acquisition of the Property apply to and participate in the SFRGLP. As a part of this Program, an applicant may request, apply to, and participate in the SFRGLP, subject to compliance with all of the SFRGLP's policies and procedures. In no event shall the cumulative amount of funds loaned by Agency (or City) under the Program for the Agency Loan and under the SFRGLP for rehabilitation of the Property exceed a 11 total of$125,000. Therefore, in the event a Participant anticipates it may wish to apply for participation in both this Program and in the SFRGLP, then Participant shall reasonably consider the type of Property to be acquired and cumulative funds that Participant may desire to borrow through the Program and the SFRGLP because in no event shall the cumulative principal amount loaned through both this Program and the SFRGLP exceed $125,000. b. Lien Priority. Further, in the event Participant applies to and obtains a SFRGLP loan, then the lien priority of such SFRGLP loan shall be third position, junior and subordinate to the Agency Loan (second lien) and the First Trust Deed Loan (first lien). c. Coordination and Oversight of SFRGLP through Program Director. The scope of the rehabilitation improvements approved under the SFRGLP and the disbursements from both this Program for acquisition of the Property and from the SFRGLP for rehabilitation shall be coordinated and overseen by the Program Director. 5. Purchase Price. Subject to all other Program requirements, in particular that Participant meet the Affordable Housing Cost requirement for monthly housing cost, the maximum purchase price for an eligible Property shall be adjusted annually each September based on and corresponding to the median purchase price for single family houses in the City of Huntington Beach as published by Stewart Title Company (or another comparable, reputable index) based on median values for the last three months of the prior calendar year (As of September 2008, the maximum purchase price for an eligible Property is $540,000, but this number will be subject to adjustment annually). 6. Ownership Interest in Property. The Low to Moderate Income Household that becomes a Participant in the Program and receives an Agency Loan shall own and occupy the Property. Title to the Property shall vest with Participant upon concurrent closing of the First Trust Deed Loan and Agency Loan and Participant shall hold and continue to hold title during the Term of the Agency Loan in one the approved Ownership Interest categories defined above. Participant shall not change the vesting of the Property or names of Participant who hold title to the Property during the Term of the Agency Loan without first obtaining the express written consent of Program Director, which consent may or may not be provided in his/her sole discretion. Rental of property may, in cases of hardship, be approved with prior consent of Program Director. Approved renter must meet income requirements and limits of Down payment Assistance program. III. AFFORDABLE HOUSING COST. California Redevelopment Law establishes the maximum allowable amount qualified Participants may pay for housing related expenses (including principal, interest, taxes, insurance, homeowner association dues, and a reasonable utility allowance) to qualify and participate in the Program. Affordable Housing Cost shall be as defined in Health & Safety Code Section 50052.5 (or any amendment or successor statute thereto) and implementing regulations thereto in Title 25 of the California Code of Regulations. 12 IV. COVENANTS AND RESTRICTIONS. Agency Loans are made subject to the Declaration of Covenants, Conditions & Restrictions, which include obligations and provisions relating to ongoing maintenance of the Property, owner-occupancy, prohibited uses and restrictions on criminal activity, nuisance, etc., and affordability covenants. The Declaration is recorded against each Property purchased by a Participant with Program funds, and the Declaration remains in effect for the Term of the Agency Loan. A. Maintenance and Prohibition of Criminal Activity Covenants. The Declaration includes covenants imposing ongoing maintenance and upkeep of the Property, generally requiring each Participant to maintain the Property, both land and improvements, and the exterior and interior, in good physical condition. Further the Declaration imposes covenants prohibiting criminal activities at the Property, including keeping the Property free from gang or drug-related activities, other felonious criminal activity, and public or private nuisances. These covenants run for the Term of the Agency Loan. B. Owner-Occupancy Covenant. Every Participant in the Program is required to own and occupy, and to continue to own and occupy, the Property as their principal, permanent residence. Program Participants are required to submit an annual affidavit of occupancy and continuing Program compliance as a part of the Agency Loan implementation. 1. HQS Occupancy Standard. Further, in connection with Participant's occupancy of the Property Participant shall comply with and continue to comply with the HQS standard, which standard establishes a maximum occupancy of persons living at the Property for the Term of the Agency Loan. C. Term of Declaration. During the Term of the Agency Loan and Affordability Period of the Declaration, a Participant may pay off the Agency Loan and "buyout" and cause release of the Declaration in order to (i) rent the Property without restriction to a prospective renter/lessee, or (ii) sell the Property without restriction to a prospective buyer, or (iii) refinance the First Trust Deed in a manner not approved by the Program Director, or (iv) incur additional debt, such as a line of credit, third or fourth trust deed, or other encumbrance, or (v) otherwise exit out the Program as a Participant, expressly subject to and so long as Participant pays in full both (i) the principal amount of the Agency Loan, and (ii) the Equity Sharing Payment, which is a percentage share of the appreciation in the Property (if any) to the Agency. D. Calculation of Equity Sharing Payment. The Equity Sharing Payment due shall be and shall be calculated as a percentage share of the appreciation in the value of the Property determined by the proportionate share of the Agency Loan to the original purchase price paid Seller in accordance with the following formula: If during the forty-five (45) years of the Agency Loan, the property is sold or transferred for a price in excess of the then applicable affordable housing cost and/or to persons whose income exceeds one hundred and twenty percent (120%) of the Orange County area median income and/or the Agency Loan is 13 accelerated because of default, the Participant shall pay to the Agency (in addition to principal) a percentage share of the net appreciation in the value of the property, as follows. Agency Loan - The loan provided by the Agency for Down Payment assistance. Appreciation — The difference in value accrued between the sales price and the purchase price. Purchase Price- The original sales price of the home. Sales Price— The amount a buyer is willing to pay for a home. The Equity Sharing formula is the following: (Agency Loan/Purchase Price) x (Sales Price—Purchase Price—Capital Improvements) Year Percentage of Equity Share Payment 1-7 100% 8-12 75% 13-17 50% 18-22 25% 22-30 10% 30+ Equity Share and Interest Eliminated (Original loan amount still to be repaid). Example: If the amount of the Agency loan equals $100,000 and the Participant's purchase price was $500,000, the Equity Share percentage is 20% ($100,000 / $500,000). If in five years the Participant sells the home for $750,000, appreciation is $250,000. Equity share would be 100% of the 20% equity share of the appreciation or $50,000. If the same sale was made eleven years after the purchase, the equity share would be 75% of the 20% equity share, or $37,500. If the same sale was made twenty four years after the purchase, the equity share would be 10% of the 20% equity share or $5,000. In both cases the equity share plus any deferred interest, plus the principal balance of the Agency Loan is due at time of sale. Year 5 Year 11 Year 34 Sale Price $750,000 $750,000 $750,000 Payoff First Loan ($400,000) ($400,000) ($400,000) Payoff Agency Loan ($100,000) ($100,000) ($100,000) Return of Down ($25,000) ($25,000) ($25.000) Payment Closing Costs ($5,000) ($5,000) ($5,000) Gross Proceeds $220,000 $220,000 $220,000 14 Equity Share ($50,000) ($37,000) $00 calculation Net Proceeds after $170,000 $183,000 $220,000 Equity calculation V. FINANCING FOR AGENCY LOAN A. Minimum Downpayment Contribution by Participant. All Participants in the Program shall contribute a down payment of not less than three percent (3%) and not more than twenty percent (20%) of the Purchase Price of the Property, plus closing costs. All Participants must obtain a First Trust Deed Loan. A Participant's 3% contribution shall not be derived from the proceeds of a loan or a gift. The availability of funds must be evidenced by a checking or savings account statement and verified through the liquid assets requirements set forth herein. B. First Deed of Trust Loan. All Program Participants must obtain a First Trust Deed Loan from a private lending institution approved by Program Administrator. This initial first mortgage must be a 30-year fixed rate, level payment mortgage. Each Participant shall obtain the maximum First Trust Deed Loan amount that can be supported by and in conformity with the.definition of Affordable Housing Cost. The Lender for the First Trust Deed Loan shall determine the amount and terms of the first mortgage based on its own underwriting criteria. The financial criteria used by the Lender may be different and possibly more stringent than the asset test and underwriting criteria used by Program Administrator. C. Second Deed of Trust (Agency Loan). Maximum Agency Loan Amount. The maximum principal amount of the Agency Loan to assist Participant to purchase of Property at an Affordable Housing Cost shall in no event exceed is $100,000. In order to allow Eligible Households meeting all other Program criteria to participate in the Program, the Program Administrator, with approval of Program Director, may permit the Agency Loan to finance all or a portion of the nonrecurring closing costs, subject to the approval by the Lender for the First Trust Deed Loan and so long as the maximum Agency Loan amount does not exceed $100,000, and combined loan to value (CLTV) does not exceed 100%. 1. Principal Repayment. The Agency Loan shall be repaid and due upon the following: (1) the principal (and Equity Sharing Payment) shall be due in full upon the earlier to occur of: (a) first resale, full or partial transfer or conveyance, or refinancing without the express consent of Program Director, or, (b) default by Participant on the Agency Loan; and/or, as applicable, (2) if the Agency Loan has not repaid by the 30th anniversary of the Recordation Date based on the occurrence of(1)(a) or (b) in the preceding clause, then the principal shall become fully amortized and fixed, level monthly payments shall commence and be due and payable on the first of each month with amortization based on fifteen years remaining on the Terris of the Agency Loan; and/or, as applicable, (3) if the First Trust Deed Loan is paid off by Participant sooner than the 30th anniversary of the Recordation Date, then after the First Trust Deed Loan is repaid commencing with the next following anniversary of the 15 Recordation Date and continuing through to the end of the 45-year Term of the Agency Loan the principal shall become fully amortized and fixed, level monthly payments shall commence and be due and payable on the first of each month with amortization based on years remaining between payoff of the First Trust Deed Loan (prior to such 30th anniversary) and the end of the 45-year Term of the Agency Loan. 2. Equity Sharing Payment. The Second Deed of Trust securing the Agency Loan shall include the lien for the Equity Sharing Payment due under the Note, subject to the "forgiveness" of such amount commencing in year 30 of the Term of the Agency Loan. The Equity Sharing Payment shall be due in full upon the following: (1) the earlier to occur during the 45year Term of the Agency Loan of either: (a) first resale, full or partial transfer or conveyance, or refinancing without the express consent of Program Director, or, (b) default by Participant on the Agency Loan; and/or, as applicable, (2) if the Equity Sharing Payment did not become due and repaid by the 30th anniversary of the Recordation Date due to the occurrence of (1)(a) or (b) in the preceding clause, then commencing on the 30th anniversary of the Recordation Date and continuing for the remaining fifteen (15) years on the 45-year Term of the Agency Loan, the Equity Sharing Payment will be discharged and forgiven, such that in the event Participant owns and occupies the Property for the first 30 years of the full 45-year Term of the Agency Loan, then the terms and conditions of the obligation to make the Equity Sharing Payment will have been fulfilled and the Equity Sharing Payment obligation will be have been fully discharged and forgiven. The principal amount of the Agency Loan will still be payable. 4. No Assignment and No Assumption of Agency Loan. The Agency Loan is not assumable or assignable. 5. Default. Each of the following is an event of"default" under the Agency Loan: (a) failure to occupy the Property as Participant's permanent, principal residence; (b) noncompliance with the Declaration; (c) refinancing without express preapproval of Program Director; (d) nonperformance or default under any other Agency Loan Documents; (e) defaults in payments on the First Trust Deed Loan, including failure to pay property taxes and/or hazard insurance. Any default under any Agency Loan Documents or the First Trust Deed Loan shall cause acceleration of the Agency Loan and may result in foreclosure. a. Exception: Participants may request temporary waiver of the principal residence requirement in situations involving extreme hardship as determined by the Program Director in his/her sole and absolute discretion. Extreme hardship shall be satisfactorily evidenced by Participant to Program Director and may consist of a transfer of career location, loss of job or unexpected expenses which force a move to a less expensive arrangement or other events of this nature, as such extreme hardship is determined in Program Director's sole and absolute discretion. However, rental of the Property shall be prohibited without the express written consent of the 16 Program Director and such rental shall not exceed the term determined by the Program Director at the time of Participant's request and in no event to exceed five (5) years. If allowed, rental shall be permitted only to Low or Moderate Income persons at affordable rent pursuant to Health & Safety Code Section 50053 (or amended or successor statute thereto) depending upon the income category of the Participant, the Participant's monthly housing cost and applicable market rents. 6. Refinancing; Subordination; Reaffirmation of Subordination:Acceleration and Resale. The Agency Loan will be subordinate to the Lender's First Trust Deed Loan, and Agency will reaffirm its subordinate, second lien position to the Lender for the First Trust Deed Loan upon a refinancing preapproved by the Program Director. Refinancing of the First Trust Deed Loan will be permitted only upon express written approval by the Program Director, which preapproval is and shall be a material prerequisite to any type of refinancing or modification of the First Trust Deed Loan and which approval shall be within the sole discretion of the Program Director. The structure of an approved refinancing of the First Trust Deed Loan may for a term less than 30 years, but the following business terms or structure for any proposed refinancing are strictly prohibited and will not be approved by Program Director: (a) no increase in the principal (except by the amount of reasonable closing costs for one preapproved refinancing as determined by Program Director); (b) first mortgage remains and continues fully amortizing, (c) no cash/equity withdrawal; (d) no variable interest rate; (e) no negative amortization in connection with such proposed refinancing; (F) no interest-only payment structure, and (g) no subordination of the Agency Loan below second lien position. The Agency will not subordinate below second lien position. Participant is expressly prohibited from placing any subordinate lien(s) or encumbrances on the Property, such as third trust deed (except an approved lien for Participant's SFRGLP loan) or fourth trust deeds, equity line(s) of credit, or other financing products that encumber or cloud title to the Property. Participant allowing, causing, or otherwise incurring any other lien on the Property (other than the First Trust Deed Loan and the Agency Loan) shall be a default and basis to accelerate full repayment of the Agency Loan and the Equity Sharing Payment, if any. In all other cases, refinancing shall cause acceleration and full repayment of the Agency Loan together with the Equity Sharing Payment, if any, as specified in the Agency Loan documents. In connection with a refinancing that triggers acceleration and payment of the Agency Loan and Equity Sharing Payment, an appraisal by an Agency-approved appraiser shall be conducted, at Participant's expense, to establish the market rate value of the Property in order to calculate the "Sales Price" for application of the formula and determination of the amount of the Equity Sharing Payment, if any, due under the Agency Loan documents. Properties acquired with Program funds shall not be sold for less than the sum of the existing First Trust Deed Loan and the Agency Loan (and SFRGLP loan, if any), encumbrances, and interest, including property tax liability, without the express written consent of the Program Director. In other words, any "short sale" of the Property is expressly prohibited except as approved by the first trust deed lender. VI. NSP Funding The majority of the City's program will be funded with monies from the Redevelopment Agency set-aside fund. However, additional monies may become 17 available under the Neighborhood Stabilization Program (NSP). Loans funded with NSP monies must additionally adhere to the following guidelines: • Property Requirements Vacant, foreclosed property only within eligible census tracts in Huntington Beach; fee simple title; single unit; Single Family Home, condominium or townhouse; meet all city code and zoning standards. Please contact the City's Housing Manager for further details. VII. PROGRAM INFORMATION SHALL BE FACTUAL, TRUTHFUL AND PROVIDED UNDER PENALTY OF PERJURY A. Complete and Accurate Submittals. Each and all applications, supplemental materials, facts relating to and copies of personal financial information, and any other information provided by an applicant, an Eligible Applicant, and/or a Participant in connection with the Program shall be true and correct to the best information and actual knowledge of such applicant, Eligible Applicant, and/or Participant. B. Penalties. If any applicant, Eligible Applicant, and/or Participant willfully and knowingly makes a false statement or representation, or knowingly fails to disclose a material fact for the purpose of application to and qualifying for the Program, or, in completing certifications, affidavits, or recertification documents he/she/they will be subject to any and all legal remedies available under federal, state, and local laws, including applicable criminal and civil laws and regulations. 1. When completing any Program document, each applicant, Eligible Applicant, and Participant shall be aware that by completing, submitting, and/or signing any Program document he/she/they are acknowledging that any material misstatement, material omission, or fraud, in any such document is and will be made under penalty of perjury and subject each applicant, each Eligible Applicant, and each Participant to legal remedies available under applicable criminal and civil statutes. VII. PROGRAM IMPLEMENTATION A. Applicant Affidavits; Evaluation; Program Reservation; Processing. The Program is administered on a "first-come, first-serve" basis to interested persons who have attended a homebuyer seminar sponsored by Agency. There are no application cycles or deadlines, but no applicant affidavit will be considered until complete, as determined by the Program Administrator. The Program Administrator will review all applicant affidavits submitted and will notify all persons in writing of their eligibility or ineligibility. Each applicant affidavit will reflect the time and date received. Only complete applicant affidavits will be evaluated. All information and data on the applicant affidavit shall be verified and verifiable. The applicant affidavit, together with other materials relating to eligibility will be maintained in an active file for each Eligible Household that applies to the Program. Applicants shall be required to provide federal and state. income tax returns, bank statements, and related 18 financial information for the previous three years and verification of current Gross Household Income and liquid assets all related to evidencing and documenting eligibility for the Program. B. Underwriting; Evaluation by Program Administrator. If the Lender for the First Trust Deed Loan approves such loan and applicant is able to enter into a purchase/sale agreement to acquire an eligible Property at an Affordable Housing Cost, Program Administrator will conduct a final review of the Agency Loan Documents package to ensure compliance with Program requirements. Upon final approval by the Program Administrator, Agency Loan documents will be prepared and submitted into escrow. C. Housing Counseling. As an express condition precedent to obtaining an Agency Loan all Applicants are required to enroll, attend, and participate in one-on-one housing counseling session(s) with Agency staff designated by Program Director who will provide more specific information on the Program and Agency Loan. Applicants to the Program are informed that the housing counseling session(s) may be attended by one or more staff designated by Program Director and participation, attendance, and scope of the presentation for such session(s) may be more fully documented as a part of the Agency Loan application processing and Program files for each Eligible Applicant who becomes a Program Participant. Further, any housing counseling session(s) may be recorded by Program Director's designated staff(or caused to recorded) through audio and/or video reproduction, such as tape recorded, videotaped, creation of a CD or DVD, or any other electronic or technology method to record and document housing counseling session(s). Each Applicant (all persons who comprise Applicant) may be required to sign an acknowledgement of their attendance at, participation in, and understanding of the housing counseling session(s), which form of acknowledgement will be prepared by Program Director. D. Funding Approval. Final approval to participate in the Program is subject to the satisfaction of all required conditions and Program compliance. A minimum 45-day escrow is required for all Agency Loans under the Program. E. Program Manual. Agency staff will maintain a Program Manual that further implements the Program and these Guidelines. In the event of an inconsistency between the Program Manual and these Guidelines, the Guidelines shall prevail. F. Agency Board Delegation of Program Implementation to Program Director. Program Director shall maintain day-to-day administration of the Program and oversight of the Program Administrator. Agency delegates to Program Director the right to submit to the Agency Board consideration, input, and approval or disapproval of any applicant affidavit, or Program Reservation, and.or Agency Loan, as Program Director reasonably considers necessary. EXHIBIT A 2008 INCOME LIMITS Income limits for Orange County pursuant to Section 6932 of Title 25 of the California Code of Regulations: 19 Income Level 1 person 2 person 3 person 4 person 5 person 6 person 7 person 8 person household household household household household household household household Extremely Low $19,550 $22,300 $25,100 $27,900 $30,150 $32,350 $34,600 $36,850 Very Low $32,550 $37,200 $41,850 $46,500 $50,200 $53,950 $57,650 $61,400 Low $52,100 $59,500 $66,950 $74,400 $80,350 $86,300 $92,250 $98,200 Median $58,900 $67,300 $75,700 $84,100 $90,800 $97,600 $104,300 $111,000 Moderate $70,600 $80,700 $90,800 $100,900 $109,000 $117,000 $125,100 $133,200 1 income limits are subject to change, generally annually. 1 Income limits are subject to change, generally annually. EXHIBIT B DETERMINATION OF GROSS HOUSEHOLD INCOME Gross household income shall be calculated in accordance with Section 6914 of Title 25 of the California Code of Regulations and as generally set forth herein. "Gross income" shall mean the anticipated income of a person or family for the 12-month period following the date of determination of income. If the circumstances are such that it is not reasonably feasible to anticipate a level of income over a 12-month period may be used subject to a redetermination at the end of such period. "Income" shall consist of the following: (a) Except as provided in subdivision (b), all payments from all sources received by the family head (even if temporarily absent) and each additional member of the household who is not a minor and who share the same dwelling unit or share in the ownership of the unit, whether in cash or in kind, shall be included in the annual income of a family. Income shall include, but not be limited to: (1) The gross amount, before any payroll deductions, of wages and salaries, overtime pay, commissions, fees, tips, and bonuses; (2) The net income from operation of a business or profession, or from rental of real or personal property (for this purpose, expenditures for business expansion or amortization of capital indebtedness shall not be deducted to determine the net income from a business); (3) Interest and dividends; (4) The full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts; (5) Payment in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay, subject to (b)(3)., below (NOTE: Such payments may be excluded by the lending institution providing the first mortgage for purposes of underwriting, but shall be included in eligibility determinations for this Program); (6) Public assistance; if the public assistance payment includes an amount specifically designated for shelter and utilities which is subject to adjustment by the 20 public assistance agency in accordance with the actual cost of shelter and utilities, the amount of public assistance income to be included as income shall consist of: A. The amount of the allowance or grant exclusive of the amount specifically designated for shelter and utilities, plus B. The maximum amount which the public assistance agency could in fact allow for the family for shelter and utilities; (7) Periodic and determinable allowances, such as alimony and child support payments, and regular contributions or gifts received from persons not residing in the dwelling; (8) All regular pay, special pay, and allowances of a member of the Armed Forces (whether or not living in the dwelling) who is head of the family, spouse, or other person whose dependents are residing in the unit subject to 2.e., below; Where the applicant household has net family assets in excess of$5000, income shall include the actual amount of income, if any, derived from all of the net family assets or 10 percent of the value of all such assets, whichever is greater. For purposes of the Program, the following shall be considered net family assets: (1) cash savings; (2) marketable securities, stocks, bonds, and other forms of capital investment, including tax exempt securities other than Individual Retirement or KEOGH plans; (3) inheritance, lump sum insurance payments, already received; (4) settlements for personal or property damage already received; (5) equity in real property other than household's full time residence; and (6) other personal property which is readily convertible into cash, exclusive of the value of necessary items such as ordinary household effects, including furniture, fixtures, and automobiles used for personal use. (b) The following shall not be considered as income: (1) casual, sporadic, or irregular gifts; (2) amounts that are specifically for, or in reimbursement of, the cost of medical expenses; (3) lump sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker's compensation), capital gains, and settlement for personal or property losses; (4) amounts of educational scholarships paid directly to the student or to the educational institution, and amounts paid by the government to veterans for use in 21 meeting the costs of tuition, fees, books, and equipment; any amounts of such scholarships, or payments to veterans not used for the above purposes of which are available for subsistence are to be included in income; (5) special pay to a serviceman head of household away from home and exposed to hostile fire; (6) relocation payments made pursuant to federal, state, or local relocation law; (7) foster child care payments; (8) the value of coupon allotments for the purchase of food pursuant to the Food Stamp Act of 1964 which is in excess of the amount actually charged the eligible household; (9) payments received pursuant to participation in the following volunteer programs under the ACTION Agency: A. National Volunteer Antipoverty Programs which include VISTA, Service Learning Programs and Special Volunteer Programs. B. National Older American Volunteer Programs for persons aged 60 and over which include Retired Senior Volunteer Programs, Foster Grandparent Program, Older American Community Services Program, and National Volunteer Program to Assist Small Business Experience, Service Corps of Retired Executive (SCORE) and Active Corps of Executives (ACE). 22 . ATTACH ME NT *,z Application Processing Procedures for City of Huntington Beach Homebuyer Assistance Program Step 1: Applicant Contacts Administrator The applicant contacts the Program Administrator (Affordable Housing Clearinghouse - AHC) for information about Program and to determine eligibility. Applicant completes Homebuyer Assistance Program Application and submits information requested in Items Required for MAP Application. Program Administrator determines applicant's eligibility based on income guidelines and first-time homebuyer requirements. Program Administrator assists applicant in initiating pre-approval process with first mortgage lender. Step 2: First Mortgage Lender Pre-Approves Applicant The applicant completes the pre-approval process for the first mortgage loan with a participating lender. Lender ensures that all necessary financial documentation has been obtained from the applicants to determine eligibility under the first mortgage lender's and City's criteria. Lender orders credit reports and verifications as necessary. Lender determines that loan size does not exceed the lender's maximum loan amount, the borrowers have sufficient funds to enter into the transaction, and the borrower's credit and income demonstrate an ability to make the loan payments. Participating lender approves or denies applicant based on lender's underwriting guidelines and CalHome and City guidelines. Lender submits copy package to Program Administrator for pre-approval of Homebuyer Assistance Program application. Step 3: Applicant Completes Homebuyer Education Seminar Applicant completes mandatory homebuyer education seminar provided by City-approved homebuyer education provider, Affordable Housing Clearinghouse. Step 4: City Pre-Approves Homebuyer Assistance Program.Application After first mortgage loan is pre-approved, Program Administrator prepares application for review by City. City approves or denies application based on Program guidelines. Program Administrator reviews loan terms offered by lender to confirm that interest rate is not more than current market rate and fees are consistent with usual and customary market fees and charges for such financing. Program Administrator notifies applicant of pre-approval. Following pre-approval, applicant has 30 days to identify a property to purchase and open escrow. If a property is not identified during this time period, the applicant's approval must be extended subject to available funds. Approval is valid as long as there are no changes that would affect the eligibility of the applicant. Step 5: Applicant Identifies Property to Purchase Pre-approved applicant begins search for home to purchase in eligible area that is within pre-approved purchase price. Program Administrator assists applicant in identifying eligible properties. The applicant is instructed to allow additional time in the escrow period for the City to process and fund the Homebuyer Assistance Program loan. The applicant also is asked to obtain a home inspection report. Once a purchase agreement is accepted and executed by all parties, escrow is opened. 1 Revised 04/27/2009 Step 6: First Mortgage Lender Completes Process for Final Approval After escrow is opened, applicant contacts lender to satisfy conditions of pre-approval and to complete approval process. Lender coordinates with borrowers, escrow and title companies, appraisers, and realtors to obtain any additional information necessary to close the loan. Lender obtains fully executed purchase agreement, escrow instructions, preliminary title report, appraisal report, pest inspection report, home inspection report, any updated information, and all other items necessary for final loan approval. Lender generates disclosures and loan documents for the homebuyers review and approval in accordance with state and federal regulations. Program Administrator and lender work closely together to coordinate loan process and ensure that loan applications are processed in a timely manner. Lender submits final copy package to Program Administrator for Homebuyer Assistance Program final loan approval. Step 7: Program Administrator Reviews Final Application Package First mortgage lender provides final application package to Program Administrator for review. Program Administrator ensures that the loan package is complete and meets the City's criteria. Program Administrator reviews first mortgage lender's Good Faith Estimate to confirm that interest rate, fees, and charges are consistent with usual and customary market fees and charges for such financing. Program Administrator verifies that homebuyers'vesting is same for all mortgage loans. Step 8: City Provides Final Approval on Homebuyer Assistance Program Loan Application; Loan Documents Are Prepared After the package has been reviewed by Program Administrator, City provides final approval. Participating lender prepares loan documents on first mortgage loan. Program Administrator prepares Homebuyer Assistance Program Promissory Note, Deed of Trust, Request for Notice of Default, Borrower Disclosure Statement, and instructions to the escrow agent for funding Homebuyer Assistance Program loan. Program Administrator ensures that borrower's name, vesting, and property address are correct. City reviews Homebuyer Assistance Program loan documents and file for final approval. City provides notarized signature on Request for Notice of Default and approves loan documents as to form prior to sending to escrow agent for execution by the borrower. City approval process may take 5 business days. Step 9: Program Administrator Sends Documents and Instructions to Escrow After City provides final approval, Program Administrator sends Homebuyer Assistance Program loan closing instructions accompanied by approved Promissory Note, Deed of Trust, executed and notarized Request for Copy of Notice of Default or Sale, Borrower Disclosure Statement, and instructions for funding Homebuyer Assistance Program loan to escrow agent. Escrow agent is instructed to ensure that borrower does not receive loan funds from escrow, coordinate execution of loan documents, provide copies of policies for Lender's ALTA, hazard insurance and flood insurance, if applicable, return original executed Promissory Note and Borrower Disclosure Statement, provide copy of executed Deed of Trust, provide copies of all loan documents from other lender(s), record the Deed of Trust and Notice of Default, and provide certified copy of HUD-1 Settlement Statement after closing. Program Administrator obtains signed acknowledgment of escrow instructions from escrow agent. Step 10: Review Documents From Escrow/Prepare for Closing After escrow agent returns all requested items, City Project Manager and Program Administrator review executed loan documents for accuracy, verify receipt of items required for funding and complete Authorization to Release Funds for Homebuyer Assistance Program form. Borrower's name, vesting, and property address must be accurate and exactly the same for all loan documents. Release of funds must be coordinated with escrow agent. Upon receipt of insurance policies, Program Administrator reviews to determine that City is shown as second mortgagee (loss payee). Program Administrator reviews estimated closing cost statement to 2 Revised 03/22/2007 Confirm that fees and charges are consistent with usual and customary market fees and charges for such financing. Verify that unallowable fees were not charged to the homebuyer • Verify that homebuyer did not receive any unallowable cash back. ® Ensure that property tax and insurance amounts accurate. Step 11: City Authorizes Loan Funding When all documentation has been received, City provides authorization to fund loan for Homebuyer Assistance Program. Step 12: City and Lender Fund Loan to Homebuyer When first mortgage lender and borrower(s) are ready, City funds loan. The City wires funds to escrow account according to escrow agent's wire instructions. Approximately working days should be allowed for processing funding request. After all conditions of escrow have been satisfied, loans are funded and liens are recorded. Program Administrator follows up with the lender and the escrow company to ensure that the loan is properly funded and recorded. Step 13: City Monitors and Follows Up Program Administrator and City verify receipt of certified HUD-1 Settlement Statements. Program Administrator reviews settlement statement. 3 Revised 03/22/2007 LT .' .� __ 7 l i i Bolsi- ve. .-.. l € I 2 s ° CID .. #A Talbert o 49 i � I j p City of Huntington Beach NSP Funding Eligble ,a 1 o Target Areas `a�.,� -_Atlanta_9�e m a as ; j City of Huntington MAJOR NAMES Beach HARBOR . 4 7-- - r ...rr._R , .. Map produced by informat ion contained in the City of CID BG AREAS(CDBGAreaNm) ° Q A c Huntington Beach Information Services Department _ J Geographic Information S ystem.Information warranted for. Adams '1 City use only.Huntington Beach does not guarantee its Washington - completeness or accuracy. Goldenwesk y Map Produced on 5/27/2009 Oakview r N ewland ti Balsa Chica-Heil 3u; Garfield �v e Yorktown 1 u CErn 5 TRACTS ° 0 S 6266 12532 h' PIER One inch equals 6266 feet RCA ROUTING SHEET INITIATING DEPARTMENT: Economic Development Department SUBJECT: Approval First-Time Homebuyers Downpayment Assistance Program COUNCIL MEETING DATE: July 6, 2009 � RC� �4TTACI°°°IIVIENTS. . STATUS'': Ordinance (w/exhibits & legislative draft if applicable) Attached ❑ -� � Not Applicable Resolution (w/exhibits & legislative draft if applicable)_'m s'� Attached ❑ Not Applicable Tract Map, Location Map and/or other Exhibits , Attached El`V"'., ��09 Not Applicable Contract/Agreement (w/exhibits if applicable`) 6;Y_NcaA I Attached ❑ (Signed in full by the City Attorney) Not Applicable Subleases, Third Party Agreements, etc. Attached ❑ (Approved as to form by City Attorney) Not Applicable Certificates of Insurance (Approved by the.City Attomey) Attached ❑ Not Applicable Fiscal Impact Statement (Unbudgeted, over $5,000) Attached ❑ Not Applicable Bonds (If applicable) ached El Nott Applicable Staff Report (If applicable) Attached t Applicable p Commission, Board or Committee Report (If applicable) Attached ❑ Not Applicable Findings/Conditions for Approval and/or Denial Attached ❑ Not Applicable EKPLAHATIOH FOR �DSSHO ATTQCC�v EMT REVIEWED RETURNED�' FO. BED Administrative Staff ( ) ( ) Deputy City Administrator (Initial) ( ) City Administrator (initial) ( ) City Clerk ( ) EXPLANATION,FOR RETURWOF ITEM: RCA Author: Sidney Stone