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HomeMy WebLinkAboutAgenda - 08-25-1997 - E1a • 1 ORANGE COUNTY BOARD OF COMMISSIONERS Z7 /6z— Item Agenda Item No. ACTION AGENDA ITEM ABSTRACT Meeting Date: August 1997 1S SUBJECT: Community Revitalization Loan Fund DEPARTMENT: Housing and Community Development PUBLIC HEARING: (Y/N) e BUDGET AMENDMENT: (Y/N) ATTACHMENT(S): INFORMATION CONTACT: Program Guidelines Tara L. Fikes TELEPHONE NUMBERS: -- ext. 2490 Hillsborough 732-8181 Chapel Hill 968-4501 Durham 688-7331 Mebane 227-2031 PURPOSE: To approve the operational guidelines for the newly established Community Revitalization Loan Fund. BACKGROUND: A Community Revitalization Loan Fund was created in the 1997-98 Orange County HOME Consortium program design to provide funds to assist low/moderate income families purchase existing housing. This was done in direct response to citizen comments received during the development stage of the program design. Funds can be used for acquiring property, rehabilitating the property, and/or second mortgage assistance. A total of$60,000 has been allocated for this program this year. The attached guidelines have been developed with input from the staff of Carrboro, Chapel Hill and Hillsborough. Orange County serves as the lead administrative entity for the Orange County HOME Consortium and is responsible for implementation of this program. Since this is a new program which has been locally designed, approval of these guidelines is necessary. RECOMMENDATION(S): The Manager recommends approval of the implementation guidelines for the Community Revitalization Loan Fund. r • 2 COMMUNITY REVITALIZATION LOAN FUND PROGRAM GUIDELINES Orange County HOME Program August 1997 3 PURPOSE: To provide funds for the acquisition and rehabilitation of housing in the Chapel Hill-Carrboro area for resale to very low and low income families. OVERVIEW: =:> Funds may be used for acquisition, acquisition and rehabilitation, through the second mortgage assistance. The program will operate in tandem with a local 501 (c)(3)non-profit organization sponsoring, developing, or serving as an advocate for the potential homebuyer. The required period of affordability is 20 years. => All potential homeowners must be first-time homebuyers who live or work in Orange County. 4 The Eligible Property Owner: The prospective property owner must meet three key eligibility criteria. Income Requirements The total annual family income must be 70% or less of the HUD published median income for the Raleigh-Durham-Chapel Hill Metropolitan Statistical Area(MSA). Principal Residence The prospective buyer must use the property as his/her principal residence. This requirement will be incorporated into all program loan documents. The property may not be rented during the 20 year affordability period. Residency Requirement The prospective buyer must live or work in Orange County for at least one year prior to purchasing a home under this program. Eligible Property Types => Single family dwelling(one unit) => Condominium unit => Townhouse 5 Property Standards All prospective property must be inspected for health and safety defects prior to purchase. The initial assessment is the responsibility of the sponsoring non-profit entity. At a minimum, the property must meet the Section 8 Housing Quality Standards(HQS) at the time of initial occupancy. If the dwelling fails to meet Section 8 Housing Quality Standards(HQS) and repairs are necessary, the sponsor is responsible for ensuring that the work is done properly. Progress payments will be processed for rehabilitation work with evidence that the work completed has been done satisfactorily. This certification must be made by the sponsor. Any representative of the Orange County, Carrboro, Chapel Hill and Hillsborough reserves the right to inspect the rehabilitation work in process when partial payments are requested by the sponsor. All HOME funds expended during rehabilitation will be secured by a Deed of Trust and Promissory Note. The final rehabilitation payment will be made when all repair work has been inspected by the appropriate Building Inspections Department to certify conformance with Local Building Codes as well as Minimum Housing Codes. The Orange County Housing and Community Development Department will certify conformity with the Section 8 Housing Quality Standards. After purchase, the buyer will be responsible for maintaining the dwelling unit in good condition throughout the affordability period. This requirement will be incorporated into all program loan documents. Property Values The value of the HOME assisted property to be acquired by a homebuyer must have a value that does not exceed 95% of the area median purchase price for that type of housing. HUD makes these purchase value limits available to all participating jurisdictions each year. Value must be established by: • An appraisal by a qualified appraiser. • Tax assessments may be used to establish value, but only if they are current and can be computed at 100% of market value. • Transfer of property that includes rehabilitation requires an appraisal. If rehabilitation is required, the appraised value of the property after rehabilitation cannot exceed 95% of the median area house value. (Note, the property value-not purchase price- must be equal to or less than 95% of median purchase price.) The after rehabilitation value estimate must be completed prior to the investment of HOME funds. r 6 Recapture/Resale Provisions The HOME funds used to subsidize the acquisition, and/or rehabilitation of dwelling units for the purpose of facilitating affordable homeownership shall be recaptured out of the net proceeds from sale of the property during the period of affordability. If the net proceeds are not sufficient to recapture the full HOME investment plus enable the owner to recover the amount of the owner's down payment, principal payments, and any capital improvement investment (home improvements), recapture provisions for the HOME investment may be reduced. Additionally, the HOME investment amount will be reduced prorata based on the time the owner has owned and occupied the unit measured against the required Period of Affordability. Provided that the owner complies with the Terms of the Deed of Trust and Declaration of Deed Restrictions, and so long as the property is used for affordable housing as defined in 24 CFR 92.254, the HOME investment to be recaptured shall be forgiven at the end of the Period of Affordability. Any proceeds from the sale of the dwelling acquired, constructed and/or rehabilitated will be used to create other eligible HOME projects. Encumbrances The HOME Program Deed of Trust will take a second mortgage position to the first (primary) mortgage. Orange County will not permit any additional encumbrances against the property during the Period of Affordability. Should a family wish to refinance their mortgage, they would be required to repay the second mortgage. Maximum Amount of Subsidy The maximum subsidy a potential buyer may receive is 30% of the house sales price. Responsibilities of the 501 (c)(3)Non-Profit Organization The organization sponsoring, developing, or serving as an advocate for the potential homebuyer must provide: 1. Certification that the buyer meets all eligibility criteria; 2. Evidence that primary financing has been obtained by the homebuyer; 3. Copies of all building inspections reports; and a 4. Statement of property value. The organization must also provide written evidence signed by the homeowner applicant that the program guidelines have explained to the potential homebuyer including, but not limited to, the following documents: Declaration of Deed Restrictions; Deed of Trust; and Promissory Note. No final payments will be disbursed until this information is submitted and reviewed for compliance with the policies established in these guidelines.