HomeMy WebLinkAbout7230RESOLUTION NO. 7230
A RESOLUTION APPROVING AN AGREEMENT FOR
HOUSING REHABILITATION LOANS BETWEEN THE CITY
OF PUEBLO, A MUNICIPAL CORPORATION AND BANK
ONE, COLORADO SPRINGS N.A. PUEBLO BANKING
CENTER AND AUTHORIZING THE CITY MANAGER TO
EXECUTE THE 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 Bank One, Colorado Springs N.A.
Pueblo Banking Center, 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 September 27, 1993
BY HOWARD WHITLOCK
Councilperson
ATTEST:
APPROV
City Clerk P esident of Council
RESIDENTIAL REHABILITATION LOAN INTEREST SUBSIDY AGREEMENT
THIS AGREEMENT made and entered this 19th day of August, 1993, by and between
the City of Pueblo, a municipal corporation ( "City ") and Bank One, Colorado Springs, N.A.,
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 and multi- family
structures through grants and loans is an authorized use for CDBG and HOME 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 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
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 rehabilitation loans to low- and moderate - income persons; and
WHEREAS, interest subsidies are necessary in order to make housing rehabilitation
loans affordable to many otherwise qualified low- and moderate - income persons or projects
and constitute an allowed use of CDBG and HOME 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 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.
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 HOME 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 commit the aggregate sum of $150,000.00 for the purpose of
making reduced interest rate housing rehabilitation 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 low- and moderate - income 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 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 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 rehabilitaiton 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. 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 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 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.
8. 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 or
multi - family improvement loans guaranteed under Title I of the National Housing Act.
Additionally, 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- ending 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.
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 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 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 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 special rate charged by the Bank for FHA
Title I loans in conjunction with this agreement, hereafter referred to as the "ceiling interest
rate ", shall not exceed the lesser of (a) the prime rate plus 4.00% or (b) 10.00 %. APR per
annum. If applicant qualifies for a conventional home - improvement loan (which has a
debt /market value of 80% or less), then rates applicable to this type of loan shall apply, which
are lower than the FHA Title I loan rates and are determined by the maturity term of the loan
(5, 10 and 15 years). Both Title I and conventional home improvement rates 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 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 by City to Bank, 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 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 and remain in full foce and 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 in a timely 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 funds 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.
21. This Agreement may be 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 agreements as to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
ATTEST: BANK ONE, COLORADO SPRINGS, N.A.
By:
Title:
ATTEST:
CITY OF PUEBLO
B
r
Title: A
D U 0 L�
Q
City of Pueblo
OFFICE OF THE CITY ATTORNEY
127 Thatcher Building
PUEBLO, COLORADO 81003
MEMORANDUM
TO: Tony Berumen, Director of Housing and Community Development
FROM: Thomas J. Florczak, Assistant City Attorney--r6 Z�-
DATE: September 28, 1993
RE: Resolution No. 7230 -
Residential Rehabilitation Loan Interest Subsidy Agreement
It was brought to my attention that City Council last night
approved an Interest Subsidy Agreement between the City and Banc
One by Resolution No. 7230 which erroneously recited that the
Agreement had been approved by the City Attorney.
This office did not and does not approve the Agreement provided to
Council with Resolution No. 7230. By memorandum to Bob Jaber on
July 26, 1993 (copy enclosed), I specifically advised him against
the use of that Agreement because of the numerous omissions and
errors in it and its reference to HOME funds as a funding source
without HOME regulatory requirements being analyzed and addressed.
On August 5, 1993 I met with both you and Bob Jaber and reiterated
in detail my concerns. At that time I also expressly advised you
that HOME funds should not be used unless HOME program
requirements are analyzed and incorporated to the extent necessary
in the Agreement. Based upon our discussions and your concurrence
that HOME funds could not be used without further regulatory
requirements being addressed, I prepared a new Agreement (similar
to a form of Agreement prepared for you on January 14, 1991) which
was suitable for use and approved by this office. I was therefore
quite surprised to see the disapproved form of Agreement presented
to Council with a Resolution representing that it had been
approved by this office.
Please contact me if you wish to discuss this matter further.
TJF
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Enclosure
xc: City Clerk
AW
City of Pueblo
OFFICE OF THE CITY ATTORNEY
127 Thatcher Building
PUEBLO, COLORADO 81003
MEM
TO: Bob Jaber, Department of Housing and Community Dev�pment
FROM: Th as J. Florczak, Assistant City Attorney
DATE: 26, 1993
RI?: Residential Rehabilitation Loan Interest Subsidy Agreement
On July 21, 1993 I received from you a draft Residential
Rehabilitation Loan Interest Subsidy Agreement between Bank One
and the City. In your cover memo, you stated that except for
revision to paragraph 12, the agreement "is almost identical to
what we had with Colorado National Bank."
This office provided a form of agreement for the CNB transaction
on January 14, 1991 (copy enclosed). It provided for operation Of
this program through the use of CDBC funds. The draft agreement
provided with your memorandum differs from the Agreement we
provided in that the draft (1) contains various omissions of
words, sentences or parts of sentences, additions of words which
alter /affect meanings, and other typographical errors, and (2)
indicates I funds are also being used as a funding source for
the program. Because of the errors and ommissions contained in
this draft, I hone it is not the form that had been actually used
with CNB. Moreover, expanding the funding source to include IIOML
funds is a significant change since it subjects the Agreement to
another set of regulatory requirements that must be analyzed and
addressed by the Agreement. Therefore, unless you actually intend
to use HOME funds for this program (and impose IIOME's additional
requirements on all of these subsidized loans), I suggest chat a
ry erence to HOME as a funding source not be added to thv
Agreement.
please let me know how I can assist you and Tony Berumen in
revising the Agreement to conform to your actual program needs.
T J F
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Enclosu