HomeMy WebLinkAbout7254RESOLUTION NO. 7254
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 PRESIDENT OF THE
CITY COUNCIL 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 President of the City Council 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 November 8, 1993
BY MICHAEL OCCHIATO
Councilperson
ATTEST:
APPROVED
City Clerk Prr ent o Council
r
RESIDENTIAL REHABILITATION LOAN INTEREST SUBSIDY AGREEMENT
THIS AGREEMENT made and entered this � day of ��/0%, ,
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, 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 and multi- family structures. Such loans shall be made at
an interest rate determined in the manner provided under para-
graphs 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
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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 terms 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 $150,000.00
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.
6. Applicants shall be pre - qualified by City for all
projects submitted for financing 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, or, if the Applicant does not occupy the
property, will execute instruments whereby Applicant promises to
rent the unit to low- and moderate - income persons, (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 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 subsi-
dized interest rehabilitation loan. Bank may require additional
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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
either meet the requirements applicable for single- family or
multi- family improvement loans guaranteed under Title I of the
National Housing Act or meet the requirements of Bank's conven-
tional home improvement loan lending criteria and requirements.
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- 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.
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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 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 notwith-
standing that a greater loan amount may otherwise be permitted
pursuant to 24 CFR §201.10(a). 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 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
loan to market value ratio of 80% or less), then such conventional
rates applicable to this type of loan shall be used as the ceiling
rate, provided such rate is lower than the FHA Title I loan rates,
for the comparable maturity term of the loan. Both Title I and
conventional home improvement ceiling rates shall be subject to
rate reduction by the amount of interest subsidy provided by City
pursuant to this Agreement which subsidy amount 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 10% 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
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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 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 force 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 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 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 Agree-
ment, 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 at its Pueblo branch 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-
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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.
BANK ON , COLORADO SPRINGS, N.A.
ATTEST:
a '
BY LLCM /G�CI�
;?Fy R'chard C. Gillaspie
Title: Chairman of the Board /CEO
CITY OF PUEBLO
ATTEST:
B _
y
Y
Clerk Pres id, t o t PeC i ty Council
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