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HomeMy WebLinkAboutAgenda - 04-04-2000-9bORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: Apri14, 2000 Action Agenda Item No. __ 9 - 6 SUBJECT: Community Revitalization Program DEPARTMENT: Housing/Comm. Development PUBLIC HEARING: (Y/1~ No ATTACHMENT(S): Revised Guidelines Program Expenditure Summary INFORMATION CONTACT: Tara L. Fikes, ext. 2490 TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968-4501 Durham 68$-7331 Mebane 336-227-2031 PURPOSE: To approve revised operational guidelines for the Community Revitalization Loan Program. BACKGROUND: A Community Revitalization Loan Program was created in the 1997-98 Orange County HOME program design to provide funds to assist low/moderate income families purchase existing housing for first-time homeownership. Funds can be used for the acquisition, property rehabilitation, or as direct second mortgage assistance. In late October 1999, approximately two years since inception of the program, the HOME Program Council, comprised of a staff representative from Carrboro, Chapel Hill, Hillsborough, and Orange County, determined the need to re-examine the guidelines for this program to ensure compliance with all federal regulations, smooth program operations, and to incorporate "lessons learned". Specifically, the review would review: rehabilitation costs; property appraisals; property inspections; rehabilitation findings; and environmental requirements. On February 14, 2000, the revised Program Guidelines for the Community Revitalization Loan Program were presented to the Board for adoption. At that time, the Board requested review and/or modification of certain guidelines. Specifically, the Boazd discussed the following: 1. Consideration of allowing refinancing/assumptions if due to lower interest rates; 2. Consideration of the county costs associated with refinancing; 3. Incorporate deconstruction; green building principles; and generally review environmental requirements of the program; and 4. Provide a list of non-profit organizations that have received funding under this program with expenditure detail; These comments have been incorporated into the review of the program guidelines that define and clarify the following items: Eligible activities; Loan Requirements; Recapture/Resale Provisions; Environmental Requirements; Appraisal requirements; and Submission Requirements. The revisions are indicated by bold print. FINANCIAL IMPACT: A total of $60,000 was allocated in the 1997-98 fiscal year for this program and $210,000 was allocated in the 1998-99 fiscal year. To date, approximately, $242,557 of the HOME dollars has been expended for this program leaving an available balance of $27,443. Further, this program is also an eligible program activity under the County Housing Bond Program. RECOMMENDATION(S): The Manager recommends approval of the Revised Operational Guidelines for the Community Revitalization Loan Program. S;QMMUNITY LOAN FUND PROGRAM__G_UIDELINE~ Purpose: To provide funds for the acquisition and/or rehabilitation of existing housing in Orange County for resale to very low and low=income families. 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. Eligible Activities: Funds appropriated under this program may be used for the acquisition and/or residential property rehabilitation of existing dwelling units situated within Orange County suitable for resale to low and moderate income families qualifying under the provisions of this program. The property must have an anticipated life of at least 20 years after rehabilitation. The acquisitian of property must not cause displacement of any resident family. Also, if federal money is used for the property acquisition will be considered a voluntary transaction and the seller must waive their rights under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA). The seller will provide a waiver form for signature. 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). Total annual family income shall be defined in accordance with the current HUD Section 8 Existing Housing Program definition of annual income. • 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. Further, the prospective buyer must be residing in the property to be rehabilitated, or if purchased or constructed, occupy the property when the acquisition/rehabilitation is complete. Eligible Property Types: Single family dwelling (one unit) Condominium unit Townhouse 4 Loan Limitations All loans provided under this program should not exceed 30% of the house sales price. The loan shall be either a deferred payment loan or an amortized loan over a period of twenty years. The loan shall be secured by a Deed of Trust and Promissory Note subordinate only to the first mortgage loan. Primarily, loan refinancing to lower interest rates and for home improvements will be reviewed by the County. Refinancing for debt consolidation will not be permitted. The loan may not be refinanced or assumed without the prior consent of the County. There should be no additional encumbrances against the property during the term of the Loan without the prior consent of the County. ~ecaRture/Resale Provisions All financial contributions provided by the County will be provided as a deferred second loan secured by a forty (40) year Deed of Trust and Promissory Note, forgivable at the end of 40 years. This Deed of Trust and Promissory Note shall constitute a lien on the Property; subordinate only to private construction financing or permanent first mortgage financing. The period of affordability will be 99 years and each individual housing unit will be secured by a Declaration of Restrictive Covenants that will incorporate a right of First refusal that may be exercised by a sponsoring non-profit organization and/or Orange County. The non-profit organization and/or the County as applicable retains full responsibility for compliance with the affordability requirement for assisted units throughout the term of affordability, unless affordability restrictions are terminated due to the sale of the Property to anon-qualified buyer. If the buyer no longer uses the Property as a principal residence or is unable to continue ownership, then the buyer must sell, transfer, or otherwise dispose of their interest in the Property only to a qualified homebuyer, i.e., aloes-income household, one whose combined income does not exceed SO% of the area median household income by family size, as determined by the U.S. Department of Housing and Urban Development at the time of the transfer, to use as their principal residence. However, if the property is sold during the term of affordability to anon-qualified homebuyer to be used as their principal residence, the net sales proceeds (sales price less selling costs and 1°` mortgage payoff) or "equity", after repayment, if required by the Note and Deed of Trust, of the initial County contribution, will be divided 50/SO by the seller of the Property and the County. If the initial County contribution does not have to be repaid because the sale occurs more than forty years after the County contribution is made, then the seller of the Property and the County will divide the entire equity realized from the sale. 5 At the time of resale of the subject property during the forty year affordability period, loan funds will be recaptured in full plus a 50/SO share of appreciation realized from the sale of the property. At the end of the twenty-year affordability period, a deferred loan may be re-negotiated with the property owner for au additional twenty year period or paid in full. If the loan is made as an amortized Ioan, the loan commitment will be fulfilled at the end of twenty years. Any proceeds from the recapture of funds under this provision will be used to facilitate the acquisition, construction, and/or rehabilitation of housing for the purposes of promoting affordable housing. Proper 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 HUD Section 8 Housing Quality Standazds (HQS) at the time of initial occupancy. If the dwelling fails to meet Section 8 Housing Quality Standazds (HQS) and repairs aze necessary; the sponsor is responsible for ensuring that the work is done properly. If the residential property rehabilitation is financed by the loan, progress payments will be processed for rehabilitation work with evidence that the work completed has been done satisfactorily. The sponsor must make this certification. In the event that the work certified as complete required the sponsor to obtain a building permit, certification must include evidence that the applicable Building Inspections Department has approved the work. Any representative of Orange County, Carrboro, Chapel Hill, or Hillsborough reserves the right to inspect the rehabilitation work in process when the sponsor requests partial payments. 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 and minimum housing codes. The Orange County Housing and Community Development Department will certify conformity with the Section 8 Housing Quality Standards. In the event that property rehabilitation is not necessary, the sponsor will certify that the dwelling meets Section 8 Housing Quality Standards (HQS) prior to the disbursement of loan funds. Environmental Requirements Environmental review will begin at the time that the initial request for loan funds is submitted to the County. 6 Developers/Sponsors of acquisition-rehabilitation projects will be encouraged to create environmentally sound and resource efficient residential buildings using an integrated approach known as "green building". Green buildings promote resource conservation, including energy efficiency, renewable energy, and water conservation features. Further, HUD requires that all prospective property and proposed rehabilitation work must be assessed to determine any potential environmental impacts to the community. Specifically, each property must be assessed to determine historic significance by collaborating with the local Historic Property Commission or the State Department of Cultural History. If the property is of historic significance, the applicable guidelines of the local ar state governments must be followed in the acquisition rehabilitation project. The County will have primary responsibility for completing this task but may solicit the assistance of the sponsor as necessary. Property_ Values The value of identified 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. H[JD makes purchase value limits available to all participating jurisdictions each year. The before and after rehabilitation value must be established by: • An appraisal by a qualified independent appraiser; • Tax assessments may be used to establish value, but only if they aze current and can be computed at 100% of mazket value. • Transfer of property that includes rehabilitation requires an appraisal. Values established will be reviewed by qualified review appraiser at the expense of the County. If the review appraiser does not accept an appraisal, it will be necessary to obtain a second full appraisal. The property sales price cannot exceed the established property value. R - r fit r a iz The organization sponsoring, developing, or serving as an advocate for the potential homebuyer must provide: 1. A detailed description of the loan fund request; 2. Certification that the buyer meets all eligibility criteria;* 3. Evidence that primary financing has been obtained by the homebuyer; 4. A Certification signed by the sponsor and the homebuyer applicant that the program guidelines have been fully explained; 5. Copies of all building inspection reports; 6. Statement of property value; 7 7. If applicable, a Development Budget identifying the sources and use of all funds in the project; S. An Opinion on Title of the security property from an attorney licensed to practice law in the State of North Carolina; and an 9. Estimated Settlement Statement. In the event property is acquired for rehabilitation and resale without identifying a prospective homebuyer, the non-profit sponsor must agree to identify a qualified buyer and complete the sell of the property to the homebuyer within one hundred twenty days (120) days of the date of acquisition of the property. No facsimiles of submitted documentation will be accepted. To receive preliminary commitment, the following information must be submitted in original form. 1. A detailed description of the loan fund request; 2. Certification that the buyer meets all eligibility criteria; 3. Evidence that primary financing has been obtained by the homebuyer; 4. Results of the initial building assessment;. S. Statement of property value; and 6. If applicable, a Development Budget identifying the sources and use of all funds in the project. Upon receipt and favorable review of these documents, the County will begin the environmental review process and request the review appraisal at this time. The sponsor will be notified that this process has begun and will be given an estimated time of completion. Once this process is complete and the County has determined that the project is eligible for loan funding, the County may issue a preliminary commitment with final commitment issued upon receipt and review of the all of the items identified above under the Submission requirements. 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