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HomeMy WebLinkAbout6683RESOLUTION NO. 66 A RESOLUTION APPROVING AN AGREEMENT FOR HOUSING REHABILITATION LOANS BEIWEEN THE CITY OF PUEBLO, A MUNICIPAL CORPORATION AND THE COLORADO NATIONAL BANK - PUEBLO, INC. AND AUTHORIZING THE CITY MANAGER TO EXECUTE THE SAME BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, COLORADO, that: SECTION I. The LLm p -Sun 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 City Manager of the City of Pueblo is authorized and directed to execute the Agreement for and on hehalf of the City and the City Clerk is directed to affix, the seal of the City thereto and attest the same. PRODUCED February 11, 1991 BY KENNETH HUNTER Councilperson ATTEST: yt APPROVED City Clerk esident of Council RES IDENTIAL, REHABILITATION LOAN INTEREST SU AG THIS AGREEMENT made and entered this day of ..(�Itc'ul Y , 1991 by and between the City of Pueblo, a municipal corpora n ( "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 sufficient 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, including single and multi - family structures, 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. Pursuant to this Agreement, Bank agrees, out of its own funds or funds otherwise available to it for such purposes, to make interest subsidized secured loans to qualified applicants for the purpose of rehabilitation of owner - occupied residential property. Such loans shall be made at an interest rate determined in the manner provided under paragraphs 12 and 13 of this Agree- ment, which interest rate shall be below the rate normally charged by the Bank fir such loans. 2. With respect to each loan approved by City under this Agreement, City shall pay Bank an interest subsidy equal to the discounted present value of the difference between the net effective interest rate of the loan to borrower and the ceiling rate, to be calculated and paid as provided in paragraphs 12 and 13 hereof 3. The use and application of any and all monies paid to Bank by City shall be subject to the Lerms of this Agreement and all laws and regulations applicable to the use of CDBG monies, including but not limited to 24 C.F.R. 570.513 and Part 570 of 24 C.F.R. Disbursements to Bank by City shall be made with CDBG funds only for the purpose of payment of interest subsidies on housing rehabilitation loans made during the term of this Agree- ment by Bank with private funds. 4. Bank shall return and remit to City the unearned portion of interest subsidy (calculated on a pro -rata basis) on loans repaid or collected before maturity and the unearned amount of interest subsidy recovered upon loan default and acceleration. Such repayment shall be made by Bank within 30 days of any such loan repayment or collection. 5. Bank agrees to commit the aggregate sum of $_1_1_1` CuG, OCR 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. 6. Applicants shall be pre- qualified by City for interest subsidy assistance and must (a) have owned and occupied the home or a dwelling unit in a multi - family structure 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 prequali!fication 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 improve- ments, and otherwise render_ the residence 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 rehabili- tation 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. 7. 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 making a loan commitment. If Bank approves the application it shall promptly issue its loan commitment verbally or in writing to -2- applicant, with a copy of same to City, which shall specify the terms which shall remain irrevocable [or 90 days, except upon a substantial. and material change in applicant's income, employment or credit risk. B. 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. 9. 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. 10. 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 servicing and administration which it may deem necessary or desirable. -3- 11. 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. 12. The maximum amount of any one rehabilitation loan made by Bank under this Agreement shall not exceed $17,500 or the maximum amount permitted by 24 CFR §201.10(a). 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 rate normally charged by the Bank for such loans, hereafter referred to as the "ceiling interest rate ", shall not exceed the lesser of (a) the prime rate plus a ,�p % or (b) 10,0 APR per annum, and that rate shall. be subject to 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. 13. At closing of each rehabilitation loan made hereunder, City and Bank shalt 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 by City to Bank out of CDBG funds, 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. 14. Bank shall disburse loan proceeds directly to the borrower_ only upon presentation of invoices or payment applica- tions approved by City. Bank and City shall verify that the rehabilitation work has been performed prior to disbursement of funds; however, neither Bank nor_ City shall. have any responsibili- ty as to the cuality or quantity of work performed nor guarantee in any manner the work performed by the Contractor. 15. Hank shell maintain, in accordance with generally accepted bank ing pracl: i ces, all nece!3 :3ary and customary records on loans made pursuant tee this Agr.eemont and shall maintain a loan -4- servicing shoot 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 businesr, hours during thy• term of this Agreement and for 3 years thereafter; except that 1" to any loan which has been made, such right of inspection shall continue until 3 years after such lean has been repaid. 16. Bank and City agree to use best efforts to close one rl more loans hereunder and begin closing of loans and disbursement of interest subsidy payment therefor. within 90 days of executioT of this Agreement. 17. This Agreement shall be and remain in full force an effect for a period of 12 months of the date first above written unless sooner terminated for cause or convenience. 18. If, through any cause, the Bank shall fail to fulfill ,:I a timely and proper manner its obligations under this Agreement or if Bank violates any of the covenants, agreements, or stipuL; tions of this Agreement, the City shall have the right t` terminate this Agreement by giving 20 days written notice to Bail! of such termination. Such termination shall not effect loaW` closed prior to such termination date nor relieve Bank froll liability for any misapplication of funds provided by City. 19. Either party may at any time terminate this Agreement t'V giving 60 days prior written notice to the other party of su,'tt termination which shall state the effective date of terminatioll- Such termination shall not affect the rights of the parties r Borrowers with respect to those loans closed prior to such date. 20. As further inducement to Bank to enter into this Agrc' ment, City agrees to deposit with Bank out or any available a'ld unappropriated funds the sum of $ SQ ( ' ? GOC',C , 0 (hereinafter "Specti,1 Fund ") which shall be maintained by Bank in a special inter(-.t bearing account segregated from all other accounts which may maintained by City with Bank. The Special Fund shall be invest in certificates of deposit or such other types of investm(—t. approved by City's Director of Finance, and shall earn interest •�t. the same rate as deposits of similar maturity and size. Special Fund shall not be subject to set -off by Bank for XIV reason, nor shall any disbursements be made from the Special Fwd for the purposes of paying the interest subsidy on any rehabili tation loan, nor does the Special Fund constitute any collate for any loan made hereunder. City shall be entitled to moneys in the Special Fund and it shall, at ail times, constit��t unrestricted reserve funds of City. At any time after termination of or expiration of the term of this Agreement, C,ty may withdraw all or any portion of the moneys in the Special in its sole discretion. 21. This Agreement may be renewed or ext�,ndcd only by rout it agreement of the parties, if so authorized b/ HUM. - 5 - 1 22. This Agr.eemenL constitutes the entire understanding of the parties and supo r.sedes all prior, discussions, negotiations and agreements as to the :subject. matter 1wreol. IN WITNESS WIIKREOP, the JMI LiO', have executed Lhis Agreement the day and year first above written. ATTEST: COLORADO NATIONAL [SANK- PUEBLO l _ I Title: CITY OF PUEBLO ATTEST: %I�G lG2� By Cit, Clerk Ci y Manager TV 42.21 -6-