HomeMy WebLinkAbout6237RESOLUTION NO. 6237
A RESOLUTION APPROVING AN AGREEMENT FOR HOUSING
REHABILITATION LOANS BETWEEN PUEBLO, A MUNICIPAL CORPORATION
AND COLORADO NATIONAL BANK - PUEBLO, INC. AND AUTHORIZING THE
PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAME
BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, COLORADO, that:
SECTION I.
The Lump Sum Draw Down and Interest Subsidy Agreement between Pueblo, a
Municipal Corporation and Colorado National Bank - Pueblo, a copy of which is attached
hereto and incorporated herein, having been approved by the City Attorney, is hereby
approved. The President of the City Council is authorized and directed to execute the
Agreement for and on behalf of the City and the City Clerk is directed to affix the seal
of the City thereto and attest same.
INTRODUCED Julv 25, 1988
ATTEST:
i
T y Clerk
BY MICHAEL OCCHIATO
Councilman
APPROV
r sident of Council
LUMP SUM DRAWDOWN AND INTEREST SUBSIDY AGREEMENT
THIS AGREEMENT made and entered this 22nd day of July ,
1988 by and between the City of Pueblo, a municipal corporation
( "City ") and Colorado National Bank - Pueblo, a federally chartered
national bank ( "Bank ").
WHEREAS, City is recipient of certain Community Development
Block Grant ( "CDBG ") funds provided through the United States
Department of Housing and Urban Development ( "HUD "); and
WHEREAS, the elimination of substandard housing and provision
of suff icient decent, safe and sanitary housing for low and
moderate income persons serves municipal and public purposes; and
WHEREAS, the rehabilitation of existing owner occupied
dwellings through grants and loans is an authorized use for CDBG
funds which furthers the aforesaid public and municipal purpose,
preserves the viability of neighborhoods, and cost - effectively
provides suitable housing; and
WHEREAS, the need in the community for funds for rehabilita-
tion of owner occupied dwellings for low and moderate income
families cannot be satisfied by the City and may be better met
through the application of private as well as public funds; and
WHEREAS, Bank is a private financial institution approved for
participation in programs under Title I of the National Housing
Act and is willing to make funds available for housing rehabilita-
tion loans to low and moderate income persons; and
WHEREAS, interest subsidies are necessary in order to make
housing rehabilitation loans affordable to many otherwise quali-
fied low and moderate income persons and constitute an allowed use
of CDBG monies; NOW, THEREFORE,
The parties hereto, for and in consideration of the above
recitals and the covenants and conditions set forth herein and
below, hereby agree as follows:
1. A rehabilitation interest subsidy fund, hereinafter
called "Fund ", shall be established at Bank by City with CDBG
funds drawn down in a lump sum from the City's letter of credit
from HUD. The amount of drawdown shall be in the initial sum of
$60,000.00, and shall be maintained by Bank in a special interest
bearing account segregated from all other accounts which may be
maintained by City with Bank. Interest shall accrue on the amount
in the Fund at the market rate for deposits of similar maturity
and size, and shall be credited to the Fund and accounted for as
provided herein. The parties agree that, in any event, market
rate interest shall not be less than four points below the average
of the interest rates on one year Treasury obligations sold during
the most recent preceding calendar year period; and nothwithstand-
ing the foregoing, interest shall, in any event, accrue at a rate
not less than 5 -1/4% per annum simple interest compounded quarter-
ly. The use and application of any and all monies in Fund shall
be subject to the terms of this Agreement and all laws and
regulations applicable to the use of CDBG monies and the Fund,
including but not limited to 24 C.F.R. 570.513 and Part 570 of 24
C.F.R.
2. The City may, but shall not be obligated to, deposit
additional City or CDBG monies in the Fund. The Fund may, during
the term of this Agreement upon direction by the City, also be
credited with the unearned portion of interest subsidy (calculated
on a pro -rata basis) on loans repaid before maturity and the
unearned amount of interest subsidy recovered upon loan default
and acceleration.
3. Disbursements from the Fund shall be made only for the
purpose of payment of interest subsidies on housing rehabilitation
loans made during the term of this Agreement by Bank with private
funds, said disbursements to be made only upon specific written
authorization of each disbursement by City.
4. Bank agrees to commit the aggregate sum of $180,000.00
for the purpose of making reduced interest rate housing rehabili-
tation loans to eligible and qualified applicants referred to Bank
by City and who are approved by both Bank and City in accordance
with the procedures set forth below.
5. Applicants shall be pre - qualified by City for interest
subsidy assistance and must (a) have owned and occupied the home
for not less than 90 days prior to program participation and loan
application, (b) meet applicable income guidelines for a low or
moderate income household, (c) have not more than one outstanding
mortgage or deed of trust lien against the residence, and (d)
present a reasonable credit risk and have sufficient regular
income to be able to repay any subsidized rehabilitation loan.
Upon initial prequalification of applicants, City shall consult
with applicant and prepare a detailed scope of work necessary and
desirable in order to correct housing code violations, make other
needed repairs and improvements, and otherwise render the resi-
dence decent, safe and sanitary. Based upon such scope of work,
City shall prepare an estimate of the cost of the rehabilitation
work, and prepare a preliminary analysis of applicant's ability to
repay a rehabilitation loan. Upon completion of the foregoing,
the application of pre - qualified applicants, together with the
information provided by applicant, scope of work, work cost
estimate and preliminary loan analysis shall be transmitted to
Bank.
6. Bank shall timely review each loan application trans-
mitted by City and supporting documentation, obtain credit
reports verifying employment and determine whether it will make a
subsidized interest rehabilitation loan. Bank may require
additional relevant information from applicant or City prior to
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making a loan commitment. If Bank approves the application it
shall promptly issue its loan commitment verbally or in writing to
applicant, with a copy of same to City, which shall specify the
terms which shall remain irrevocable for 90 days, except upon a
substantial and material change in applicant's income, employment
or credit risk.
7. Upon receipt of loan commitment from Bank, Owner shall
with the assistance of City, select by competitive bid or
competitive negotiation process acceptable to City, a licensed
contractor to perform the rehabilitation work described in the
loan application for a sum not to exceed the amount of loan
commitment. Thereupon, Bank shall close the loan, at its offices
or other place as may be agreeable to City and Bank, in accordance
with the terms of its commitment, and authorize the borrower to
execute a construction contract with the selected contractor on
forms of contract acceptable to City and Bank. No interest shall
accrue on the loan until actual disbursement of loan proceeds is
made by Bank.
8. Loans made by Bank to qualified and approved applicants
shall be secured by mortgage or deed of trust lien and shall meet
the requirements applicable for single family property improvement
loans guaranteed under Title I of the National Housing Act. Addi-
tionally, as of closing date on any rehabilitation loan:
(a) the improvements on the real property subject to
the loan will be covered by a valid and subsisting hazard
insurance policy with loss payee clause in favor of Bank;
(b) no delinquent tax or delinquent assessment lien
shall exist against the property;
(c) there shall be no mechanic's liens for work, labor
or material affecting the property;
(d) the Bank shall provide all disclosures and comply
with the Federal Truth -in- Lending Act and any similar laws.
(e) the documents required to be filed to create a
valid lien upon the property have been duly executed and recorded;
(f) the borrowers have duly executed a promissory note
and other instruments acceptable to Bank and City which will
create a valid and enforceable obligation to repay the loan. Such
note and instruments shall provide for acceleration of the balance
of the loan and accrued interest in the event of default or if the
borrower leases, rents, grants an option to purchase, conveys or
transfers the property at any time within a period of 5 years from
and after completion of the rehabilitation work.
9. Bank shall service and administer the rehabilitation
loans made hereunder and shall have full power and authority,
acting alone, to do any and all things in connection with such
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servicing and administration which it may deem necessary or
desirable.
10. In connection with its activities as administrator and
servicer of the rehabilitation loans, Bank agrees to comply with
any requirements imposed by any insurers of such loans and with
all relevant state and federal laws and to timely and properly
present claims against all such insurers and take such reasonable
action as shall be necessary to permit recovery under all insur-
ance policies. Upon recovery under any such policy, Bank shall
compute the unearned portion of the interest subsidy, notify City
of same, and, at the direction of City, either credit such amount
to the Fund or pay such amount to the City for application in
accordance with HUD regulations.
11. The maximum amount of any one rehabilitation loan made
by Bank under this Agreement shall be $17,500. All such rehabili-
tation loans shall be repaid monthly for a period not to exceed
120 months; except that upon consent of both City and Bank, and
where necessary for the loan to be affordable to applicant, par-
ticular loans may be repaid monthly over a period of not more than
180 months. The ceiling interest rate chargeable by Bank on such
loans shall not exceed 12% APR per annum, and shall be subject to
further rate reduction by the amount of interest subsidy which
will be determined for each loan and which will reduce the net
effective interest rate to the borrower (provided the loan is
repaid according to its terms) by an amount equivalent to between
1% and 6% per annum.
12. At closing of each rehabilitation loan made hereunder,
City and Bank shall compute the difference between the aggregate
of the borrower's monthly payments under the loan at the City
approved net effective interest rate (as subsidized) and the
aggregate of the amount such payments would be were interest on
the loan to accrue at the agreed ceiling rate, and Bank shall
discount said difference to present value at loan closing by
applying a discount rate of 12% per annum. The present value
computed as indicated shall be the amount of interest subsidy to
be paid from the Fund to Bank in one lump sum, which shall be
payable at loan closing. Monthly payments by Borrowers on the
loans shall commence not later than 45 days after final
disbursement of loan proceeds.
13. No disbursements from the Fund shall be made until and
unless approved in writing by City's designated representative.
14. Bank shall disburse loan proceeds directly to the
borrower upon presentation of invoices or payment applications
approved by City. Bank and City shall verify that the rehabilita-
tion work has been performed prior to disbursement of funds;
however, neither Bank nor City shall have any responsibility as to
the quality or quantity of work performed nor guarantee in any
manner the work performed by the Contractor.
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15. Bank shall maintain, in accordance with generally
accepted banking practices, records of Fund, all deposits and
credits thereto and all disbursements therefrom. Bank shall also
maintain all necessary and customary records on loans made
pursuant to this Agreement and shall maintain a loan servicing
sheet on each loan in form acceptable to City. The City and
representatives of HUD shall have the right to inspect and copy
all such records during reasonable business hours during the term
of this Agreement and for 3 years thereafter; except that as to
any loan which has been made, such right of inspection shall
continue until 3 years after such loan has been repaid, and that
as to records of Fund, such right shall continue until 3 years
after the Fund account has been closed.
16. Bank and City agree to use best efforts to close one or
more loans hereunder and begin disbursement of interest subsidy
payments therefrom within 45 days of the establishment of Fund by
drawdown from the letter of credit. Bank acknowledges the right
of HUD to require return of all or part of such monies deposited
to Fund in the event use of such monies deposited to Fund does not
commence within said 45 days. In the event of exercise of such
right by HUD, this Agreement shall automatically terminate except
with respect to loans which had already been closed.
17. This Agreement shall be and remain in full force and
effect for a period of 24 months of the date first above written,
unless sooner terminated for cause or convenience. Upon termina-
tion, the entire balance remaining in Fund shall be paid by Bank
to City or paid out as directed by City.
18. If, through any cause, the Bank shall fail to fulfill in
a timely and proper manner its obligations under this Agreement,
or if Bank violates any of the covenants, agreements, or stipula-
tions of this Agreement, the City shall have the right to
terminate this Agreement by giving 20 days written notice to Bank
of such termination. Such termination shall not effect loans
closed prior to such termination date.
19. Either party may at any time terminate this Agreement by
giving 60 days prior written notice to the other party of such
termination which shall state the effective date of termination.
Such termination shall not affect the rights of the parties or
Borrowers with respect to those loans closed prior to such date.
20. This Agreement may be renewed or extended only by mutual
agreement of the parties, if so authorized by HUD.
21. This Agreement constitutes the entire understanding of
the parties and supersedes all prior discussions, negotiations and
agreements as to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
the day and year first above written.
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COLORADO NATIONAL BANK
ATTEST:
sy- De'�t�s -b�1�
Title: Assistant Vice President
CITY OF PUEBLO
ATTEST:
� / - a A- By i
C y C er Pre ident of the City Council
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