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HomeMy WebLinkAbout7011RESOLUTION NO. 7 011 RESOLUTION A...,• vIM AN AGREEqENT FOR HOUSING REHABILITATION LOANS BEIWEEN THE CITY OF PUEBLO, A MLNICIPAL CORPORATION AND THE COLORADO N ATIONAL BANK - PUEBLO, INC. AND AUIMRIZING THE CITY L1. TO EXECUTE THE SAM BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, COLORADO, that: SECTION I. The IUM-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 City Manager of the City of Pueblo 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 the same. INTRODUCED October 13, 1992 A IIEST: BY HOW ARD WHITLOCK Councilperson APPROVED 1 7 1's-ident of dbuncil I N a. 10 a k a • a r : a• a. =� THIS AGREUMIT made and entered this 1st day of September , 19912 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 COMRMAY Development Block Grant ("CDBG") and WE Investment Partnership (ME) funds provided through the United States Department of Housing and Urban Dev+elopnent ('HUD"); and MW M, 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 and multi - family structures through grants and loans is an authorized use for CDBG and HCM funds which furthers the aforesaid public and municipal purpose, preserves the viability of neighborhoods, and cost - effectively provides suitable housing; and WHMW, the need in the community for funds for rehabilitation 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 WHE2MS, 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 rehabilitation loans to low and moderate income persons; and WEBS, interest subsidies are necessary in order to make housing rehabilitation loans affordable to many otherwise qualified low and moderate incxme persons or projects and constitute an allowed use of CDBG and HCM 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- =xVied residential property and multi - family structures. Such loans shall be made at an interest rate determined in the manner Provided under paragraphs 12 and 13 of this Agreement which interest rate shall be below the rate normally charged by the Bank for such loans. 1 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 thereof. 3. The use and application of any and all monies paid to Bank by City shall be subject to the terms of this Agreement and all laws and regulations applicable to the use of CDBG and HOME monies, including but not limited to 24 C.F.R. 570.513, Part 570 of 24 C.F.R. and 24 C.F.R. Part 92. Disbursements to Bank by City shall be made with CDBG or HCM funds 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. 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 ccm it the aggregate sum of $ 150,000.0 the purpose of making reduced interest rate housing rehabilitations loans to eligible and qualified applicants referred to Bank and City and who are approved by both the Bank and City in accordance with the procedures set forth below. 6. Applicants shall be pre - qualified by City for all projects submitted for financing 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) not occupy the home but units are now, or will be rented to law and moderate persons (d) have not more than one outstanding mortgage or deed of trust lien against the residence, and (e) present a reasonable credit risk and have sufficient regular incwe 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 improvnts, 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 rehabilitation loan. Upon completion of the foregoing, the applications 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. The type and amount of participation by the City will be the sole discretion of the City, based upon analysis of the project. 7. Bank shall timely review each loan application transmitted by City and supporting documentation, obtain credit reports verifying employment and determine whether it will make a subsidized interest rehabilitations 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 applicant, with a copy of same to City, which shall specify the terms 2 which shall remain irrevocable for 90 days, except upon a substantial and material change in applicant's income, employment or credit risk. 8. Upon receipt of loan commitment from Bank, Owner shall with the assistance of City, select by ccapetitive bid or campetitive 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 or multi - family property improvement loans guaranteed under Title I of the National Housing Act. Additionally, as of closing date on any rehabilitation loan; (a) the inpr+ovements 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 ccuply 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 ccrpletion 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. 11. In connection with its activities as administrator and servicer of the rehabilitation loans, Bank agrees to couply 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 insurance 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 FLuxl 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 be $17,500. All such rehabilitation 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, particular 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 3 ,% or (b) 10 $ APR per annum, and that rate shall be subject to rats 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 shall campute the difference between the aggregate of the borrower's monthly payments fie' 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, which shall be payable at loan closing. Monthly payments by Borrowers on the loans shall c omence 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 applications 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 responsibility as to the quality or quantity of work performed nor guarantee in any manner the work performed by the Contractor. 15. Bank shall maintain, in accordance with generally accepted banking practices, 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. 16. Bank and City agree to use best efforts to close one or more loans hereunder and begin closing of loans and disbursement of interest subsidy payment therefor within 90 days of execution of this Agreement. 17. This Agreement shall be an 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. 18. If, through any cause, the Bank shall fail to fulfill in a timely 4 and proper manner its obligations under this Agreement, or if Bank violates any of the covenants, agreements, or stipulations 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 nor relieve Bank from liability for any misapplication of funds provided by City. 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. As further inducement to Bank to enter into this Agreement, City agrees to deposit with Bank out of any available and unappropriated funds the sum of $ 50,000.00 ( hereinafter "Special Fund ") which shall be maintained by Bank in a special interest- bearing account segregated from all other accounts which may be maintained by City with Bank. The Special Fund shall be invested in certificates of deposit or such other types of investment approved by City's Director of Finance, and shall earn interest at the same rate as deposits of similar maturity and size. The Special Fund shall not be subject to set -off by Bank for any reason, nor shall any disbursements be made from the Special Fund for the purposes of paying the interest subsidy on any rehabilitation loan, nor does the special Fund constitute any collateral for any loan made hereunder. City shall be entitled to pledge moneys in the Special Fund and it shall, at all times, constitute unrestricted reserve funds of City. At any time after the termination of or expiration of the term of this Agreement, City may withdraw all or any portion of the moneys in the Special Fund, in its sole discretion. This Agreement may be renewed or extended only by n itual agreement of the parties, if so authorized by HUD. 21. This Agreement may by renewed or extended only by mutual agreement of the parties, if so authorized by HUD. 22. This Agreement constitutes the entire understanding of the Parties and supersedes all prior discussions, negotiations and agents as to the subject matter hereof. IN WITNESS WBERWF, the parties have executed this Agreement the day and year first above written. 1 64-. 0 — Assistan Cashie B Title: Senior Vice President ATTEST: Ci4 Clerk Ma ian Mead • { �a:. •, By Lewis A. Quigley, C ty anager 5 I. SUMMARY A. Issue: Interest Buy -Dawn Agreement between the City of Pueblo, A Municipal Corporation and the Colorado National Bank - Pueblo, for a joint funding effort to rehab law -and moderate income hcames and continue a community lending program. B. Reccm7 exxdations : Approve the Interest Buy -Dawn Agreement. :•« �� The Department of Housing and CoM unity Development in joint cooperation with Colorado National Bank - Pueblo are renewing their Loan Subsidy Agreement to create a pool of funds available to low -and moderate income families in Pueblo. Community Devolopment Block Grant (CDBG) funds of $50,000 will be leveraged with private funds of $150,000 to obtain below- market interest rate loans to eligible applicants. III. FINANCIAL IMPACT The $50,000 of 1991 -1992 CDBG regular rehab funds will help leverage $150,000 of private funds to capitalize the below market interest rate housing rehab program through Colorado National Bank - Pueblo. The total dollar amount of $273,500 was loaned under the program to date. IV. ALTS NAT= A. The City could adopt the proposed agreement and leverage an additional $150,000 of private funds. B. The City could reject the proposed resolution and continue to use 100% CDBG funds for the loans.