SR-6-K (66)
CouncIl Meetmg November 28. 1995 Santa Momca. Cahfoffim 6K
RM H&R JM PM JG share el1grpt srf
NOV 2 8 1995
TO Mayor and CIty CouncIl
FROM CIty Staff
SUBJECT ModIfIcation of Shared AppreCIatIOn Loan Program GUldelmes
INTRODUCTIOK
ThIS report transrmts mformatlon and recommendanons regardmg a proposed modlflcanon of the
Shared ApprecIatIOn Loan Program GUldelmes funded by the Tenant OwnershIp RIghts Charter
Amendment (TORCA) The report recommends that the Clt}' CounCIl (1) approve the
mOdIfication to the Program GUldelmes to ITIlprove the program's operatIon and aSSIst addItIOnal
households to purchase theIr homes, and (2) allocate 25 % of the funds currently avaIlable for
loans to apphcants ehglble under the eXIstmg loan program gmdelmes and who resIde m urnts
undergomg a TORCA conversIon
BACKGROlJ'XD
The Tenant OwnershIp R1ghts Charter Amendment (TORCA) was adopted at a speCIal muruclpal
elecnon June 5. 1984. and amended on November 6, 1984. June 7, 1988, November 6. 1990, and
June 2. 1992 The TORCA reqUIres that the CIty llllplernent an ownershIp aSSIstance program
for low and moderate lUcorne households purchasmg theu umts eIther as condornmmffi,
commumty apartments. stock cooperatlves. cooperatIve aSSOClatlOns. or hmlted eqUlty stock
cooperatIves under TORCA ProposItlon K. adopted June 1992, reqmred that the Clly 1ll1plernent
a program whereby the CIty would receive a share of the appreCIated value of the umt at resale,
and that the loan program funds be equally allocated between low Income households and
1 6K
NOV 2 8 1995
moderate lUcorne households
Under TORCA. low mcome households are defined as households whose mcomes do not exceed
80% of medIan gross mcome for Los Angeles County. adjusted for famIly SIZe Moderate lUcorne
households are defined as households whose lUcomes do not exceed 120% of med1an gross mcorne
for Los Angeles County, adjusted for famIly SIze
The Cuy CouncIl adopted Program GUldelmes for operatJon of the program on September 14,
1993, and as authorIZed by Councd, the CIty entered mto an agreement wnh FITst Federal Bank:
under whIch the bank processes and underwntes loan applIcatJons for the program InformatIon
regardrng me program was maIled to all tenants of TORCA propertIes that had completed or were
close to completmg the TORCA process m December. 1993, and FITst Federal Bank began
acceptrng loan applIcatIOns
To date, the bank has processed and the elly has approved and funded eIght loans. totalmg
S440,740. under the program As of September 30. 1995. $2,708.762 IS avaIlable for loans
under thIS program Based on tins expenence and dISCUSSIOns regardmg the program's loan terms
and reqUIrements WIth many mterested persons. staff has adopted several modIficatJons to the
program's AdmmlStratJve GUldelmes ill order to llllprove the program's operatIon and to aSSIst
addmonal households to purchase theIr homes In conjunctIon WIth First Federal Bank. the CIty
has maIled mformatIon regardmg the program to tenants of TORCA bUIldmgs on several
occaSIOns However. there stIll appears to be a need to modIfy the terms and reqll1rements of the
program to encourage broader partICIpatIOn
2
DISCGSSION
Staff analysts mdIcated that the Program Gmddmes should be amended In order to Increase the
number of low and moderate mcome households that are served through thIS program Staff
beheves that the number of persons who have been served to date through the program has been
hmlted by several factors. mcludmg the lmmatlon on the ehglbIhty to parttclpatIllg tenants whIch
caused "mIsmatches" between umt pnces and affordabIhty for such tenants and "mIsmatches"
between urnt SIZes and tenant needs for such Uillts Addmonally. III some cases, there was a lack
of clear economIC benefit to tenants of purchasmg theIr umt rather than contmumg to rent the umt
Staff proposes to modIfy the borrower elIgIbIlIty reqUIrements as contamed m the reVIsed Program
GUidelInes (attached) Currently. the Program GUIdelInes proVIde (ill part) that applIcants must
have reSIded III a UllIt III a bmldmg undergomg Tenant PartlcIpatmg ConversIOns at the date of the
approval by the Planmng CommISSIon of the Tenant ParllClpatmg ConverSIOn apphcauon. or by
the City CouncIl If the applIcatlOn IS appealed. m order to be elIgIble for a Shared AppreCIatIOn
Loan These tenants are defmed as "partlClpatmg tenants- under TORCA The proposed
modIficatlOll to the Program GUldelmes would allow low and moderate mcome households
resldmg III a umt III a buddmg whIch has undergone a Tenant PartiCIpatIng ConverSIOn to be
ehgIble for a Shared AppreCIatIOn Loan WIthOut regard to thelT length of occupancy of the urnt
(m addItIon to partICIpatmg tenants who are now elIgIble under the program) ImmedIate relauves
of the seller of the umt would be excluded from eligIbIlIty
Staff belIeves that the reVISIOns wIll increase demand for the program by provldmg a larger pool
of potentralloan applIcants and allowmg applIcants more chOIce III the umt they may purchase
3
under the program Although the Charter allows program funds to be used to assIst any tenant
lIvmg m the Ullit at the tnne of the loan applIcatIOn, staff recommended limItmg elIgIbIlIty m thIS
manner when the GUIdehnes were first adopted because of uncertamty regardmg the demand for
the funds Based on the program's operatmg expenence to date, however. staff feels that thIS
11lmtatIOn IS no longer warranted Other eXIstmg ehgIblhty reqUIrements would remaIn
unchanged
In dISCUSSIons between staff and mterested partIes regardmg the program's operatIons, there has
been general support for such broader elIgIbIlIty reqmrements Several owners of TORCA
bmldmgs and converters who parucIpated m a publIc meetmg sponsored by the CIty to receIve
feedback on the operatIon of the program requested that the CIty consIder opemng elIgIbIlity to
persons whom eIther reSIded mother TORCA bUIldmgs or elsewhere m the CIty, WIthout regard
to reSIdency wIthm the umt WhICh IS proposed for purchase WillIe staff bebeves that the Charter
Amendment reqmres actual reSIdency m the umt. It does not speCIfy a partIcular length of
reSIdency Therefore. the proposed change would proVIde fleXIbIlIty to the extent pernllssIble
under TORCA
It IS expected that thIS broader elIgIbIlIty provlSlon WIll Increase the demand for program funds
The TORCA process can take from 18 to 36 months to complete and tenants cannot access the
Loan Program WIthout the final TORCA subdIVIsIOn III place In order to assure that program
funds remarn avaIlable to households who reSIde m uruts undergomg a TORCA converSIOn, staff
recommends that 25 % of the funds currently aVallable be allocated for such households These
funds would be set aSIde ill equal amounts for use by low and moderate Income households Staff
4
beheves tins would help assure that tenants III bmldmgs currently undergomg converSIOn, have
access to funds once these converSIOns are completed The balance of the total program funds
would be made avaIlable to households who qualIfy under thIS revIsed elIgIbIlIty reqUIrement.
regardless of theIr length of occupancy
The Housmg ComrmSSIOn revIewed. dIscussed. and voted to recommend the proposed changes
to the TORCA Loan Program at therr August 17 and September 21 meetmgs
ADj\UNISTRA TION
Staff wIll work WIth First Federal Bank, whIch IS processmg loan applIcatIons under thIS program,
to publIcIze the program's expanded ehgIblhty provlSlons to mterested persons In conJunctton
With FIrst Federal Bank. mformanon regardmg changes to the program gmdelmes wIll be maIled
to current tenants, owners. and converters Staff WIll contmue to morutor program loan actIVIty
FINANCIAL/BUDGET ARY IMP ACT
It IS antICIpated that tlus modIficatlOll wIll allow for greater UtllIzatIOn of exIStmg loan program
funds 1'\0 other fmancml or budgetary ImpaCts are expected
RECOMl\fENDATIO"XS
It IS recommended that the CIty CouncIl
(1) Approve the modIfICatIOn to the Program GUIdelmes for the condommmm
component of the Tenant OwnershIp RIghts Chaner Amendment Shared
AppreCIatIOn Loan Program presented III thIS report
5
(2) Authonze the City Manager to establIsh a set aSIde of 25 % of the funds currently
avaIlable under the program ($677,190) from aVaIlable TORCA converSIOn tax
revenue for borrowers who reSIded m theIr UDlt at the tIme of Plarunng
ComrmssIOn approval of a Tenant Parnclpanng ConversIOn, Of CIty CouncIl
approval where appl1cable
Prepared by Jeff Mathieu, Resource Management DIrector
Johanna GUllICk, SeDlOf Admlillstratlve Analyst
Attachment TORCA GUidelInes
st3ffrpt\ehgrpt stf
6
TORCA SHARED APPRECIATION LOAN PROGRAM
GUIDELINES
The TORCA Shared ApprecIatIon loan Program was established by the Tenant
Ownership Rights Charter Amendment (TORCA) and amended by ProPOSition K adopted
In 1992, In order to assist low and moderate Income households purchasmg theIr Units as
condominiums under TORCA Under the program, the City may make Shared
Appreciation I:.oansloatis to persons liVing In apartments which are being converted to
condominiums who could not otherwise afford to purchase their Units
The amount of the loan avaIlable from the CIty Will depend on y'':;ui~Qij$eho'd
mcome and the size and price of the Unit No payments need to-be paid on the City loan
until Y0urthe unit IS sold or otherwise transferred, or there IS a default on the loan Upon
sale or transfer, the owner repays the loan and Will share any Increase In the value of the
property With the City, In proportion to the amount of the City's Investment
Shared Ap~reciation Loan Program
Shared AppreciatIon Loans are Intended to make homeownershlphom~own~$hip
pOSSible for buyers who
(1) have adequate Incomes to support a mortgage, but do not have the funds
available to pay the necessary dO'v.mpaymentdown paytpemt or clOSing costs, or
(2) have Incomes which are too low to qualify for the mortgage they would need for
the umt bemg purchased
The maxImum loan amount WIll be based upon the applIcant's borrOWing
capacity, assets available for downpa'fmentdownpayment, and the Unit size The loan
amount shall be no more than IS necessary to enable a Borrower (1) obtammg
maximum affordable private fmanclng, and (2) utiliZing personal assets, to purchase the
ASSisted Unit In no case shall loans exceed 60% of the purchase pnce The follOWing
maximum amounts per Unit size also apply
StudiO or effiCIency $50,000
One Bedroom Umt $60,000
Two Bedroom or larger Umt $75,000
1 October 6, 1995
---
The minimum loan IS $5,000
All loans will be available only to eligible borrowers whose borrowing capacity
IS determined to be Insufficient to purchase their units on their own All loans will be
secured by a Deed of Trust recorded against the Assisted Unit The City'S Deed of Trust
may be subordInated to a pnvate lender's FIrst Deed of Trust and CIty approved seller
fmanclng
Eligibility Requirements
Borrowers
Low and Mud~.atz :iiC;:;i1iZ H;:;i..is~Ii;:;:dsmoderate Income households who are
currently residing In a i..iiiit iii ::'i..ii:diiigS uiidz.Quiiigbuildingwhrchhasundergonf!' Tenant
Participating r"'__. .---.--- I,nr"'\ -~ ~L.._ ..J_~_ _.& ~L.._ ___~_.._I ..... ~..._ nl_~_.__ 1""___.__.__
......VII" '-', ~IVII~ \ I 1 ....../ en 1I.e ....cue v' 1I1.... CttJtJl """QI ..,y ~llo;;; 1 ICt' Illlll~ UVIIIIIII>:>~I""'I
--' ~...- ,----~ n_....._.__~.__ l""onverSJon ^ ~~I.-_~._~ __ ..... ....._ r"'.~. r"'_. .~_.I .t: ___1.__...__ ._
VJ ~II"" . v, Ja. Ii-I alll\..o'tJCI W j~ ...... I"'\ppll....CU.VI I, Vj V Y 1I,.... ......Ill uv....' '...... .. ~tJl-'''wClLJV' I ,,;I
appealed(TpG)
Borrowers may not currently own another residence Members of the City Council,
persons employed by the City's Resource Management Division, City Manager's Office,
CIty Council, or famIly members of such persons are not eligible to partiCipate In the
program
~~_H'_"_ I _n. __..J ~._..J___.._ 1_____ 1_.._1_ ___ "'_..__"'_I..J _.__ _~_ _,,~___~I..__
IVIOAIII I....U II L..V1lV eu IU IVIUU\,;r1 ClLOV II U....UIII't:P U;;;;:V..t;;FI~ t..n:=-L . IVU~'I;;IIUJU ..:1'1L.v QL C \",l".Il L'l;;il H.'1 a~
f;:;::C....iS.
LJ_. ._~..._1..... C"._~ ~~_,.._.._ ^ __. ._1 1_____
I 'VUoi:JI~II\JIU vlL."iJ IVIClAU I LUIII ru IIIUo.l LII\.l'Vlllv
I _... .~____ ~ ._..J___~_ 1_ ____
L..VVV II Ii \..IV I I 1'1;:. IVIVUC:I (:IL~ .. n.....vll.-v
... 1l'.,""7 r\l::n Il'A., ':Il::n
, \VG.I lV'tJV 'fo""""'T"--..........v
2 31,900 48,4CC
3 ? t= nil.., t::A At::n
"""'v,vvv ......"""'T,-r"""v
.A -:In nnn an t::nn
"T 1J~lvVV VV,VUV
r "':I -Inn aE= -:It::n
v "'v,IVV VV,4J-.JV
6 -<'3,38::> 70,200
7 49,500 ""7 t= nnn
'v,vvv
8 52,650 ""7t"\ ol:n
r..;r,u......v
u---
~....~
ACqi..ii3itiCiii (iiidudiiig d;:;Wiijjo}/iiic;;t oSSistCiiiccThe-inirnedlate r~tative~of1ne
seller of lheunit, inclVding the spouserchildrenipafent~, grandparents, broth~r.~ister,
father In-taw, mother-in-law, son-ItT-"law,daughter -in-law r aunt.uQcte.,niece, l1e,phew, sister';'
jn~raw, andbrother-in../aw, arenotelrgibleJo participate in th~ prog{arrt
2 October 6, 1995
Maximum low and moderatejncome leVels per hou$ehpl~sizef6r 1995~r~:~
foHows:
H()us~hdJd Size> 'Maximllm~nuaJ Ihcome
low income Mod~ratelncon;le
(8G%) 020%)
1 $28.150 $43.1g0
2 ~Z, 150 49,250
3 36i200 55,40Q>
4 40,200 61;550
5 43,400 66,450
6 46,650 71,400
7 49~850 76,300
8 53,050 81~250
.J
Uses:
Acq(jisilion (ilJpluding down paymentassistahcealJqehgibleclo~i~g coS,tSJbf th~
Borrower's unitinbu i1dingshO(;tergoing a Tenant Participafing~ Conversloll'>fb
condominium ownership. Eligible clOSing costs Include tYPical escrow and title
Insurance fees and reasonable flnancmg fees for private loans
Costs of necessary repairs to the property, If any, may not be paid from loan proceeds
All repairs reqUired under the TORCA approval or by lender must be completed prior to
close of escrow unless otherwIse allowed under the Charter Amendment
loan Terms
Term The term of a Shared AppreCiation Loan wIll be a maXimum of tvventy years, but no
longer than the term of all other flnancmg, Includmg seller finanCing and pnvate institutional
lender finanCing Upon request by the Borrower, the City may, at rts sole dIscretion,
provide one ten year extension of the term of the loan to borrowers whose Incomes do not
exceed 120% percent of the medIan Income one year prior to the date the loan matures
DownpaymentDoWn payment The Borrower must make a dO'v'mpaymentdownp~yment
equal to at
least five percent (5%) of the ASSisted Umt's purchase pnce In addltlon, the Borrower
must pay clOSing costs-,wl1ere thefBorrowerhas fulidsavailablerforthis PlJrpbs~.{Where
such funds are not available,eliglble closmg costs may be included intheantoul1tofthe
City!oan)
Repayment The principal amount of the City's loan IS due and payable on the earlier of
3 October 6, 1995
twenty years, or upon resale or other transfer In addition, the Borrower must pay to the
City, as contIngent Interest, a share of the appreciation of the umt equal to the amount of
the City loan dIvided by the Onglnal Purchase Pnce, multiplied by the Appreciation of the
unit Transfers to a Borrower's spouse, transfer of title In conjunction with divorce, and
transfers of title by a Borrower's death to a surviving JOint tenant shall not be requIre
repayment so long as the Borrower's successor assumes the loan and all loan terms
The pnnclpal amount of the City's loan shall be due and payable even In the event that
there IS no apprecIation rn the Unit, or the appreciation IS negatIve
Restrictio ns:
1 The Borrower shall occupy the Assisted Unit as their pnmary residence A Unit
shall not be rented, or used pnmarlly for commercial purposes
2 The Borrower shall not pledge the Assisted Unit as security without the pnor wntten
consent of the City
4 Units shall be resold at no less than 95% of fair market value The Borrower shall
provide an appraIsal at time of resale to document fair market value, If so reqUired
by the City
5 The Borrower may make any Improvements to the Assisted Umt they wish
However, only the value of documented, permanent capItal real estate or fIxture
Improvements to the property for which the Borrower received pnor City approval
under thIS program shall be deducted from the Resale Price of the Assisted Umt for
the purpose of calculating appreciation The value of capital Improvements shall be
determined by the City
6 Loans are not assumable, except in cases of transfer to a spouse or domestic
partner, transfer to a spouse or former spouse In conjunction wIth a divorce, or
transfer of title by a Borrower's death to a survIVing JOint tenant
7 In order to deter speculation, In the event that the umt IS sold wlthm three years of
the date of purchase, Borrower WIll be reqUired to pay an additional portion of the
umt's appreciation ThIS amount shall be equal to 10% of the apprecIation In the
event that the unit IS sold Within three years, 20% of the appreciation In the event
the unit IS sold Within two years, and 30% of the appreciatIon In the event that the
Unit IS sold Within one year of purchase ThIS amount shall be In addition 1Q the
contmgent mterest due on the loan However, In no circumstance shall the total
amount due to the CIty as contingent Interest and under thIS proVIsion exceed 100%
of the apprecIation of the unit
The Director of the Resource Management Department shall develop cntena under
4 October 6, 1995
whIch the CIty may waive thIs provIsIon due to hardship
Underwriting Guidelines
Borrowers shall demonstrate that they do not have suffICient assets
avaIlable to purchase the unIt wIthout CIty financIal assIstance
A Borrower shall be determined to be unable to acquire the umt
wIthout CIty fInancIal assistance If
1 the monthly cost for payment of principal, mterest, taxes, homeowner aSSOCiation
fees and msurance of the combIned loans being obtamed by the Borrower from
a private financIal institutIon and/or the seller would exceed twenty-eIght (28%)
of the household's gross monthly Income, and
2- the household's assets do not exceed the total of the
follOWing
- (a) the amount necessary to pay the estimated c10smg costs and
downpaymentdownpayment for the unrt to be purchased,
(b) the amount necessary to pay SIX (6) months of the monthly
housing costs (pnnclpal, Interest, taxes, Insurance and homeowner
aSsocIation fees) associated wIth the unIt to be purchased, and
(c) -five thousand dollars ($5,000)
These underwritIng guidelines may be adjusted to conform wIth the
underwntlng standards utIlized by the private InstitutIonal lender whIch IS provldmg
fInancing to a Borrower under thiS Program
Assets For the purposes of the Program, "assetsasset" means the value
of a household's savmgs and any equIty In stocks, bonds, real
property, or other forms of capital Investment "AssetsAsset" does not
Include Items reasonably necessary for the personal use of the
. household, such as personal effects, furnIture, appliances,
automobIles, and real or personal property used In a bUSiness or
undertaking whIch IS the primary source of lIvelihood for the
household Assets also does not Include the value of life Insurance, penSIons, IRA
accounts, or other retIrement funds (although Income received from such sources may be
consIdered as Income)
Loan to vall,.le ratio The total amount of all loans secured by the
ASSisted Unit, includIng the City's loan, shall not exceed 95% of
the appraIsed value of the ASSisted UnIt An appraIsal of the
5 October 6, 1995
Assisted Unit shall be provided by the Borrower and shall be
subject to City approval Wherever feasible, the City shall
utilize appraisals prepared by or for private lendmg Instltutlons
provldmg financing for the Assisted Unit
Creditworthiness The City may, In ItS sole discretion, decline an application for a loan
where staff havehas reasonably determined that the Borrower's mcome, employment
history. or creditworthiness is not sufficient to ensure repayment of all proposed loans
being sought for the Assisted Unit
Semor Fmanclng The City reserves the right to review and approve or disapprove the
terms of all senior financing If the TORCA loan IS to be subordinate to a vanable
payment or adjustable rate loan, the Borrower must submit a schedule showmg the
maXimum possible Increase In debt servIce per year and the proposed means for
meetmg the debt service requirements Vanable payment or adjustable rate loans
shall not be allowed unless the Borrower's abIlity to meet such payments can be
demonstrated to the satIsfaction of the City Vanable payment loans With negatIve
amortization shall not be allowed
Price Test The pnce of an AssIsted Unit must be comparable to or
below the price of similar units In the same bUilding The Borrower must take advantage
of seller discounts whenever feasible
Seller Financing The City shall reView seller financing proposals on an IndiVidual basIs
The City reserves the right to reject a loan application If staff reasonably determmes that
the terms of the seller financing would adversely to the CIty's mterests
RefinanCing of Senior Financing If the Borrower desires to refinance the primary debt, or
borrow any additional funds after the Initial purchase of the ASSisted Unit, the City shall
review and approve the terms and conditions of the proposed loan and the proposed use
of the proceeds The City reserves the right to prohibit such refinanCing -If -staff
reasonably determine that It Will adversely affect the City'S Interests In no case shall the
Borrower be allowed to Increase the amount of total debt on the Assisted Unit
Prepayment of the City Loan Borrowers may prepay the City loan at any time However,
upon prepayment the Borrower must pay to the City the prinCipal and contmgent Interest,
as well as any applicable mterest due under the anti-speculatIOn proVIsion of these
GUidelines
Definitions
Appraiser- A . holder of a valid . Real Estate Appraiser Certificate ftomthestate<of
California.
6 October 6, 1995
Appreciation -tfteThe Resale Price minus closing costs, real estate commiSSions, and any
other normal and customary costs Incurred by the Borrower In selling the Assisted Unit,
minus .......~ ^_._.-~I n..__...._~_ n~.__ _~ ......- .._.... __..J _____1 __..J _.._...____. _I_~.__ ___..._
",lly ""-'11~lIlal' UI\,.r'lc;;I~~ I .Iv~ VI Lllv UIIIl QIIU tlUllllQI CUIU vU~LVllla.y ""'IV~III:::::J lIvV.;:I".;;;JI
Incurred b'f the Original Purchase Price of the unit and normal andco$:lomaryctosing
costs incurred by the Borrower in purchasing of the unit, minus the value of any capital
Improvements for which the Borrower received pnor City approval under this Program
Assisted Unit A unIt for which the City provides a City Loan
Borrower That person or persons who have title to and occupy the Assisted Umt and
enters Into a Shared AppreciatIon Loan With the City
City Loan A loan made pursuant to the TORCA Charter Amendment and these gUIdelines,
Including any amendments made thereto
Ehalble Borrower Low and ~1..:J'::'::;iCit.::; :ii\:.:Jiii'::; :-:G'-i5.::;h<:i:':::; i'::;5idiiig iii Ci '-iiiit iii b;.;;:diiig
und6~--'-- T____.. n_~.~.__...__ f"'__.,_~_.~__ tTnf"'_\ _... ......._ ..J_.~ ~~...I.._ ~____.._I 1.... ......_
I ~VII'l::l ''''''01 II I 01 ll....'tJoIII ,~ \,,#VII V"" ~I'-'II~ \ I I """"1 "'. u ,<;;; \.IC'll'W VI 1I1'W 01-'1-" V yQI U Y L1''''
rlsiiiiilig Cuiii~i3:;iujj vf t~6 ia;io.iit rCirtiC:p~t~~g C~;--;'v.6i~ivii At:ip:lcatiCiii, v~ ~,. t~:; C~tJ'
f"'~. .__.1 .~ ~__I.__....~_ ._ _____I_..J Dvii<:i;;';\:i5 iiiCiY iii)tmoderate income hqqsenpt(js who
\,,#'-'UII...." II "'tJtJll...."'L1UII ,~ OtJtJ'WCl''WU are currently vv'iil Ciiivthei" i'::;5ideiiceresi:ding in a building which has lli1dergone Tenant
PartiCipating Conversion (TPC). Membersofthe City CouncilipersonsemplQyed by the
City's Resource Management Division. City Manag~r's OfficE(Clty Council, or family
members of such persons are not eligible toparticipateifl:the program MembersThe
Immediate relatives of the City Cv'-iii\:il, i=i'::;i5.:Jii5 '::;iiiplc.y.::;d bY3ell~r.of the City's Resource
Management Dl'ilslonunlt;. including the spouse,chHdren, City ~..~ar.Ci~'::;i'5 Off;c.::;, City
r'~. '--"parents. grandparents< brother M .r~_.... ~~_I-._- -~ -. .-.... ~~--~-~""ister. father-in
VVUI ,.....u i - .-: :. ._.. , VI 1c;l.IIIUY 111~IIILI'It;;;;1 ~ VI .::I.....""'.. p~1 ~VIII;JI~ .~:~. _ __~
law, mother-in-law, son:lo-:-ll:Iw. daugl1ter-in~Jaw, aunt, uncle, nje:9~;nephew, siSter-ind~w.
andbrother.:..in-Iaw, are not eligible to particIpate In the program -
Low I ncome Household Persons and famIlies whose Income does not exceed eighty
percent (80%) of the median gross Income for Los Angeles County, adjusted for family
SiZe, as determined by the Secretary of HOUSing and Urban Development and under
Section 8(f)(3) of the United State HOUSing act of 1937, as amended, or If programs under
Section 8(f)(3) are terminated, eIghty percent (80%) of the median gross Income
determined under the method used by the Secretary pnor to such termination
Moderate Income Household Persons and families whose Income does not exceed one
hundred twenty percent (120%) of the median gross Income for Los Angeles County,
adjusted for family Size, as determined by the Secretary of HOUSing and Urban
Development and under Section 8(f)(3) of the Umted State HOUSing act of 1937, as
amended, or If programs under Section 8(f)(3) are terminated, one hundred twenty percent
(120%) of the median gross Income determined under the method used by the Secretary
pnor to such termination
7 October 6, 1995
Onglnal Purchase Price The amount paid by the Borrower to purchase the unit, not
mcludmg fees such as title fees, escrow fees, loan onglnatlon fees and other closmg costs
Prog ram The Shared Appreciation Loan Program adopted by the City pursuant to the
TORCA Charter Amendment
Re$<;1le Price The amount for which the Assisted Unit IS sold by the Borrower In the case
of a matured loan or a loan prepayment (where there has been no transfer or sale), the
Resale Pnce shall be equal to the appraised value of the property To determine the fair
market value of the Property for thiS purpose, the City and the Borrower shall endeavor to
agree upon an Appraiser If the parties are unable to agree Within ten (10) days the Lender
shall have an appraisal made by an Appral3erappraiser of ItS chOice to estabhsh the fair
market value The Borrower may also, at Borrower's expense, have an appraisal made
by an Apprai3crappraiser of the Borrower's choice to establish the market value If
agreement cannot be reached, the average of the two appraisals shall be deemed to be
the market value
Tenant Partlcloatma Conversion Any conversIOn to tenant ownership Implemented
under Section 2000 et seq of the Santa MOnica City Charter
Umt Housing unit being converted through the TORCA process which IS currently
occupied by applicant and Intended for purchase as a condominium
Application Submittal and Review Procedures
Application Submittal and Review Process
1 Eligible Borrowers may pick up an Information packet at any lime before or dunng
the processing of their bUlldmg's Tenant Participating Conversion application
Housmg DIVISion staff or a deSignated lender(s) Will be available at deSignated
times to answer questions about the TORCA Shared Appreciation Loan Program
and application procedures Staff or the deSignated lender Will also explain how
Borrower eligibility and maximum potential private loan amounts are estimated
However, City staff do not provide legal or finanCial counselmg and applicants are
encouraged to seek their own adVisors regarding their deCISion to buy
2 Applicants may submIt applications for assistance only jf their building has
received final map approval from the City
3 A complete application wlJllnclude
- Completed application form
- Copy of Purchase Agreement
- EVIdence of the bUlldmg's TPC approval
-- Venflcatlon of Income (most recent W2 form or acceptable
8 October 6, 1995
verification from an employer)
- - Two prevIous years' federal and state Income tax returns
- - A copy of the completed application to the pnvate lender
(required after step 6 below)
4 Applications for City loans shall be submitted to private lenders designated by the
City, who will review the application and package the loan request for approval by
the City The lender shall request that the City provide the lender With verification
of the status of the Tenant Partlclpatmg Conversion application CIty staff Will
proVide written venficatlon of the status after consultation With the Planmng and
ZOning DiVision and the Department of Real Estate
5 Completed applications Will be submitted by the designated lender(s) to the City and
will be conSidered on a first come - first served basIs, however, City loan funds Will
be allocated between low mcome Borrowers and moderate Income Borrowers as
required by the City Charter ;..
In additicm,a total of tvfflIlty-five percehtof the TOf{CA funds.Willbe sef:;asideJor
households who residedirl'~.unitin a building undergoing COil version at the li~of
Planning CommissIon approval (or City CouncilapprovalWhere applicable)~ Halfef
these funds, (or125% of the total fundsavaHabte)shalJ be seta~jde.for loWhicome
households meeting thiS criterion, and half of these, funds (or 14.5% ofthe total
funds avallabte) shall beset aside for moderate Income hOll$eholds rneetingtbis
criterion.
In the eventthat adequ~te fund.s are notavaifaJ:'}teto fund afFl9~n application~;.
priority shall be giverito_~ousel1olds who residedjD.:a::bulrdingunderSdmg
conversion at the time of PlanningCornmisslonapprova~ (or Gity~pproYalWhere
applitable}oHhe application for.TenantParticipating Conver$ro[1~
6 If the Borrower IS eligible to receive a TORCA loan, a notification letter WIll be
prepared by the Housing DIVISion staff and reviewed and Signed by the Director
of the Resource Management Department The letter shall state the maximum
Program assistance amount reserved for the Borrower, and a list of additional
conditions, documents and steps that must be completed by the Borrower In order
to close the loan
7 Upon fulfillment of all conditions, the lender deSignated by the City shall prepare
loan documents for execution
8 The Director of the Resource Management Department shall authonze release of
the TORCA loan funds mto the escrow account established for the loan clOSing
With Instructions for disbursement
9 October 6, 1995
9 All Borrowers shall be requIred to provide the City wIth title Insurance In a form and
substance acceptable to the CIty and shall name the CIty as addItionally Insured
on hazard Insurance policies, which shall be In amounts acceptable to the
City
Further Information
Further mformatlon regardmg the City of Santa Monica's TORCA Shared Appreciation
Loan Program can be obtamed by callmg the Housing and RectElyelopment DIVIsIon of
the Resource Management Department at (310) 458-8702
8 2 D40ctober 6~1995
10 October 6, 1995
EXAMPLE OF SHARED APrRECATIONAPPRJ:CIATrO~ MORTGAGE
Assumptions
Family Income $30 I 000
Family Size 4 persons
Property 2 bedrooms
Price $150,000
Calculation of Affordable Mortgage
Family's monthly Income $2,500
Affordable hOUSing cost 700
Affordable payment 500
MaXimum mortgage, based on an 80;'0 Interest rate and
a 30 year amortization $68,100
Sources of Funds for Purchase
Down paymentDown ~paymen,t $7,500
Conventional loan (1st Trust Deed) 68,100
City Shared AppreCiation Loan (2nd Trust Deed) 74.400
TOTAL FUNDS $150,000
City Share of Appreciation
Resale Price $200 ,000
MinUS EligIble Selling Costs 15,000
Minus Approved Capital Improvements 0
MinUS. Ongmal Purchase Price 150.000
Equals. T atal AppreciatIon $35,000
TORCA Loan Amount $74,400
TORCA Loan/Ongmal Purchase Price 496%
"CONTINGENT INTEREST" due to City $17,360
11 October 6, 1995
Principal of TORCA Loan due to City $74.400
TOTAL AMOUNT DUE TO CITY ON SALE $91,760
NET APPRECfA TIONTO BORROWER ON SAtE $17Ji40
. - - -.. ....-. ~
. ~ . .
12 October 6, 1995
COMPARISON OF HOUSING COSTS
UNDER TORCA SHAREDAPPRE~IATION L.OANP~OGRANI
Example: 2 Bedroom Unit costing $150,000
Without Shared With Shared
ApprecationAppreciatj Appreciation
on Mortgage Mortgage
DO'vVnpaymentDown (20%) $30,000 7,500{5%)$7~500
payment
Bank Loan 120,000 68,100
CIty Loan 0 74,400
Monthly Payment* $880 $500
* Assumes a thirty year loan at 8% interest
13 October 6, 1995
TORCA SHARED APPRECIATION LOAN PROGRAM
GUIDELINES
The TORCA Shared Appreciation Loan Program was established by the Tenant
Ownership Rights Charter Amendment (TORCA) and amended by Proposition K adopted
In 1992, In order to assist low and moderate Income households purchasrng their unrts as
condominiums under TORCA Under the program, the City may make Shared
Appreciation loans to persons living In apartments which are being converted to
condominiums who could not otherwise afford to purchase their unrts
The amount of the loan avaIlable from the City WIll depend on household Income
and the size and price of the Unit No payments need be paId on the City loan until the umt
IS sold or otherwise transferred, or there IS a default on the loan Upon sale or transfer, the
owner repays the loan and Will share any Increase In the value of the property with the City,
In proportion to the amount of the City's Investment
Shared Appreciation Loan Program
Shared Appreciation Loans are rntended to make home ownership possible for
buyers who
(1) have adequate Incomes to support a mortgage, but do not have the funds
available to pay the necessary down payment or clOSing costs, or
(2) have Incomes which are too low to qualify for the mortgage they would need for
the Unit being purchased
The maximum loan amount Will be based upon the applicant's borrowmg
capacIty, assets avaIlable for down payment, and the unit sIze The loan amount shall
be no more than IS necessary to enable a Borrower (1) obtaining maximum affordable
private flnancmg, and (2) utilizing personal assets, to purchase the ASSisted Umt In no
case shall loans exceed 60% of the purchase pnce The follOWing maximum amounts
per unit size also apply
Studio or effiCiency $50,000
One Bedroom Unit $60,000
Two Bedroom or larger Umt $75,000
1 October 6, 1995
The minimum loan IS $5,000
All loans will be available only to eligIble borrowers whose borrowing capacity
IS determined to be Insufficient to purchase their units on their own All loans will be
secured by a Deed of Trust recorded against the Assisted Umt The City'S Deed of Trust
may be subordinated to a pnvate lender's First Deed of Trust and City approved seller
financing
Eliaibilitv Reauirements
- - -
Borrowers
Low and moderate Income households who are currently resIding In a bUilding which
has undergone Tenant Participating Conversion (TPC)
Borrowers may not currently own another reSidence Members of the City CounCil,
persons employed by the CIty's Resource Management DIVISion, City Manager's Office,
CIty CounCil, or family members of such persons are not eligIble to participate In the
program The ImmedIate relatives of the seller of the umt, Including the spouse, chIldren,
parents, grandparents, brother, Sister, father In-law, mother-In-law, son-In-law, daughter-In-
law, aunt, uncle, ntece, nephew, sister-In-law, and brother-In-law, are not eligible to
participate In the program
MaxImum low and moderate Income levels per household size for 1995 are as
follows
Household Size Maximum Annual Income
Low Income Moderate 1 ncome
(80%) (120%)
1 $28,150 $43,100
2 32,150 49,250
3 36,200 55,400
4 40,200 61,550
5 43,400 66,450
6 46,650 71,400
7 49,850 76,300
8 53,050 81,250
Uses
AcqUisition (Including down payment assistance and eligible closing costs) of the
Borrower's Unit In bUildIngs undergOing a Tenant Participating Conversion to
condomlnlum ownership Eligible clOSing costs Include tYPical escrow and title
2 October 6, 1995
Insurance fees and reasonable financing fees for pnvate loans
Costs of necessary repairs to the property, If any, may not be paId from loan
proceeds All repaIrs reqUired under the TORCA approval or by lender must be completed
prior to close of escrow unless otherwise allowed under the Charter Amendment
Loan Terms
Term The term of a Shared Appreciation Loan will be a maximum of twenty years, but no
longer than the term of all other finanCing, Includmg seller finanCing and pnvate Institutional
lender finanCing Upon request by the Borrower, the City may, at Its sole discretion,
provide one ten year extension of the term of the loan to borrowers whose Incomes do not
exceed 120% percent of the medIan Income one year prror to the date the loan matures
Down payment The Borrower must make a down payment equal to at least five
percent (5%) of the ASSisted Unit's purchase pnce In addItIOn, the Borrower must pay
c10smg costs, where the Borrower has funds available for thiS purpose (Where such funds
are not available, eligible clOSing costs may be Included In the amount of the City loan)
Repayment The prrnclpal amount of the CIty's loan IS due and payable on the earlier of
twenty years, or upon resale or other transfer In addition, the Borrower must pay to the
City. as contingent Interest, a share of the appreciation of the umt equal to the amount of
the City loan divided by the Ongmal Purchase Pnce, multiplied by the Appreciation of the
Unit Transfers to a Borrower's spouse, transfer of title In conjunction With divorce, and
transfers of title by a Borrower's death to a survlvmg JOint tenant shall not be require
repayment so long as the Borrower's successor assumes the loan and all loan terms
The prinCipal amount of the City's loan shall be due and payable even In the event that
there IS no appreciation In the umt, or the appreciation IS negative
Restrictions:
1 The Borrower shall occupy the ASSisted Unit as their pnmary residence A unit
shall not be rented, or used primarily for commercial purposes
2 The Borrower shall not pledge the ASSisted Umt as secunty WIthout the pnor written
consent of the CIty
4 Umts shall be resold at no less than 95% of fair market value The Borrower shall
provide an appraisal at time of resale to document fair market value, If so reqUired
by the City
5 The Borrower may make any Improvements to the ASSisted Unit they Wish
However, only the value of documented, permanent capItal real estate or fIxture
3 October 6, 1995
Improvements to the property for which the Borrower received pnor City approval
under this program shall be deducted from the Resale Price of the Assisted Unit for
the purpose of calculating appreciation The value of capital Improvements shall be
determined by the City
6 Loans are not assumable, except In cases of transfer to a spouse or domestic
partner, transfer to a spouse or former spouse m conjunction With a divorce, or
transfer of title by a Borrower's death to a surviving jOint tenant
7 In order to deter speculation, In the event that the Unit IS sold WithIn three years of
the date of purchase. Borrower wIll be reqUIred to pay an additional portion of the
Unit's apprecIation ThIS amount shall be equal to 10% of the appreCIation In the
event that the umt IS sold wlthm three years, 20% of the appreCiatIon In the event
the Unit IS sold wlthm two years, and 30% of the appreCiation In the event that the
unrt IS sold Within one year of purchase ThiS amount shall be In ad(;iltlon :tQ the
conttngent Interest due on the loan However, In no circumstance shall the total
amount due to the City as contingent Interest and under thiS proVIsion exceed 100%
of the appreCiation of the umt
The Director of the Resource Management Department shall develop cntena under
which the City may waIve thiS proVIsion due to hardshIp
Underwritina Guidelines
Borrowers shall demonstrate that they do not have suffICIent assets avaIlable to purchase
the umt Without CIty financial assistance A Borrower shall be determIned to be unable
to acqUire the Unit Without CIty financial assIstance If
1 the monthly cost for payment of pnnclpal, mterest, taxes, homeowner aSSOciatIon
fees and Insurance of the combined loans being obtained by the Borrower from
a private financial institutIOn and/or the seller would exceed twenty-eight (28%)
of the household's gross monthly Income, and
2 the household's assets do not exceed the total of the following
(a) the amount necessary to pay the estimated clOSIng costs and down payment
for the Unit to be purchased,
(b) the amount necessary to pay SIX (6) months of the monthly hOUSing
costs (pnnclpal, mterest, taxes, Insurance and homeowner assocIation fees)
associated With the unit to be purchased, and
(c) five thousand dollars ($5,000)
4 October 6. 1995
These underwntlng gUidelines may be adjusted to conform with the underwntlng
standards utilized by the pnvate Institutional lender which IS proViding financing to a
Borrower under this Program
Assets For the purposes of the Program, "asset" means the value of a household's
savings and any equity In stocks, bonds, real property, or other forms of capital
Investment "Asset" does not Include Items reasonably necessary for the personal use
of the household, such as personal effects, furniture, appliances, automobiles, and
real or personal property used In a busmess or undertaking which IS the pnmary
source of livelihood for the household Assets also does not include the value of life
Insurance, penSions, IRA accounts, or other retirement funds (although Income received
from such sources may be conSidered as Income)
Loan :tQ value ratro The total amount of all loans secured by the ASSisted Umt, Including
the City's loan, shall not exceed 95% of the appraised value of the ASSisted Umt An
appraisal of the ASSisted Unrt shall be prOVided by the Borrower and shall be subject
to CIty approval Wherever feaSible, the City shall utilize appraisals prepared by or for
pnvate lendmg institutions proViding finanCIng for the ASSisted Umt
Credltworthmess The CIty may, In Its sole dIscretIon, decline an applIcatIon for a loan
where staff has reasonably determined that the Borrower's Income, employment hiStOry,
or credltworthmess IS not suffiCient to ensure repayment of all proposed loans being
sought for the ASSisted Unit
Senior FinanCing The City reserves the right to review and approve or disapprove the
terms of all senror finanCing If the TORCA loan IS to be subordinate to a variable
payment or adjustable rate loan, the Borrower must submIt a schedule shOWing the
maxImum pOSSIble Increase In debt service per year and the proposed means for
meetrng the debt service requirements Variable payment or adjustable rate loans
shall not be allowed unless the Borrower's ability to meet such payments can be
demonstrated to the satIsfaction of the City Variable payment loans With negative
amortization shall not be allowed
Price Test The price of an ASSIsted Unit must be comparable to or below the price of
SimIlar unrts In the same bUilding The Borrower must take advantage of seller discounts
whenever feaSible
Seller FinanCing The City shall review seller finanCing proposals on an IndiVIdual baSIS
The City reserves the right to reject a loan application If staff reasonably determines that
the terms of the seller finanCing would adversely to the City's Interests
RefinanCing of Senior FinanCing If the Borrower deSIres to refinance the primary debt, or
borrow any additional funds after the Inrtlal purchase of the ASSisted Unit, the CIty shall
review and approve the terms and conditions of the proposed loan and the proposed use
5 October 6, 1995
of the proceeds The City reserves the right to prohibIt such refinancing If staff reasonably
determine that It will adversely affect the City's mterests In no case shalf the Borrower
be allowed to Increase the amount of total debt on the ASSisted Unit
Prepayment of the City Loan Borrowers may prepay the City loan at any time However,
upon prepayment the Borrower must pay to the City the pnnclpal and contingent Interest,
as well as any applicable Interest due under the anti-speculation proVIsion of these
GUidelines
Definitions
Aooralser A holder of a valid Real Estate Appraiser Certificate from the state of
California
AppreCiation The Resale Pnce minus clOSing costs, real estate commiSSions, and any
other normal and customary costs Incurred by the Borrower In selling the ASSisted Unrt,
minus the Onglnal Purchase Pnce of the Unit and normal and customary clOSing costs
Incurred by the Borrower In purchasing of the Unit, mmus the value of any capital
Improvements for which the Borrower receIved pnor City approval under thiS Program
ASSisted Unit A Unit for which the CIty provides a City Loan
Borrower That person or persons who have title to and occupy the ASSisted Unit and
enters mto a Shared AppreCiation Loan With the City
City Loan A loan made pursuant to the TORCA Charter Amendment and these gUIdelines,
including any amendments made thereto
Eligible Borrower Low and moderate Income households who are currently reSiding In a
bUilding which has undergone Tenant Participating Conversion (TPC) Members of the
City CounCIl, persons employed by the City's Resource Management DIVISIon, City
Manager's Office, City CounCil, or family members of such persons are not eligible to
participate In the program The Immediate relatives of the seller of the Unit, Including the
spouse, chJldren. parents, grandparents, brother, Sister, father-In-Jaw, mother-In-law, son-
In-law, daughter-m-law, aunt. uncle, niece, nephew, sister-in-law, and brother-In-law, are
not eligible to participate In the program
Low Income Household Persons and families whose Income does not exceed eighty
percent (80%) of the median gross Income for Los Angeles County, adjusted for family
SIze, as determIned by the Secretary of Housmg and Urban Development and under
Section 8(f)(3) of the Umted State HOUSing act of 1937, as amended, or If programs under
Section 8(f)(3) are terminated, eighty percent (80%) of the median gross income
determmed under the method used by the Secretary prior to such termmatlon
6 October 6, 1995
Moderate Income Household Persons and families whose Income does not exceed one
hundred twenty percent (120%) of the medIan gross Income for Los Angeles County,
adjusted for family Size, as determined by the Secretary of Housing and Urban
Development and under SectIon 8(1)(3) of the UnIted State Housmg act of 1937, as
amended, or If programs under Section 8(f)(3) are terminated, one hundred twenty percent
(120%) of the median gross Income determmed under the method used by the Secretary
pnor to such termmatlon
Onglnal Purchase Pnce The amount paid by the Borrower to purchase the unrt, not
Including fees such as title fees, escrow fees, loan onglnatlon fees and other closing costs
Program The Shared Appreciation Loan Program adopted by the CIty pursuant to the
TORCA Charter Amendment
Resale Price The amount for which the Assisted Unrt IS sold by the Borrower In the case
of a matured loan or a loan prepayment (where there has been no transfer or sale), the
Resale Pnce shall be equal to the appraised value of the property To determine the fair
market value of the Property for thiS purpose, the City and the Borrower shall endeavor to
agree upon an Appraiser If the parties are unable to agree within ten (10) days the Lender
shall have an appraisal made by an appraiser of Its chOice to establish the faIr market
value The Borrower may also, at Borrower's expense, have an appraisal made by an
appraiser of the Borrower's chOice to establish the market value If agreement cannot be
reached, the average of the two appraisals shall be deemed to be the market value
Tenant PartlclOatlna Converslon Any conversIon to tenant ownershIp Implemented
under Section 2000 et seq of the Santa Momca City Charter
Unit Housing umt being converted through the TORCA process which IS currently
occupied by applIcant and mtended for purchase as a condommlum
Application Submittal and Review Procedures
ApplicatIon SubmIttal and RevIew Process
1 ElIgible Borrowers may pIck up an InformatIon packet at any time before or dUring
the processmg of their bUlldmg's Tenant Participating Conversion application
Housing DIVISion staff or a designated lender(s) Will be available at desIgnated
times to answer questions about the TORCA Shared Appreciation Loan Program
and application procedures Staff or the designated lender Will also explain how
Borrower eligibility and maximum potential private loan amounts are estimated
However, CIty staff do not prOVide legal or finanCial counseling and applicants are
encouraged to seek their own adVisors regardmg their deCISIon to buy
2 Applicants may submit applications for assistance only If their bUilding has
7 October 6. 1995
receIved fmal map approval from the CIty
3 A complete appllcatron will Include
- Completed appllcatron form
- Copy of Purchase Agreement
- EVidence of the buildlng's TPC approval
- Verification of Income (most recent W2 form or acceptable venficatlon from
an employer)
- Two prevIous years' federal and state Income tax returns
- A copy of the completed application to the private lender (reqUired after step 6
below)
4 Applications for City loans shall be submitted to private lenders deSignated by the
City, who Will review the application and package the loan request for approval by
the City The lender shall request that the City proVide the lender With venflcatlon
of the status of the Tenant Participating Conversion application City staff Will
proVIde wntten verification of the status after consultation With the Planning and
Zomng DIVISIon and the Department of Real Estate
5 Completed applications Will be submitted by the deSignated lender(s) to the City and
Will be conSidered on a first come - first served baSIS, however, City loan funds Will
be allocated between low Income Borrowers and moderate mcome Borrowers as
required by the City Charter
In additIon, a total of twenty-five percent of the TORCA funds Will be set aSide for
households who reSided In a umt In a bUlldmg undergOing conversIon at the time of
Plannrng CommIssIon approval (or CIty CouncIl approval where applIcable) Half of
these funds, (or 125% of the total funds available) shall be set aSide for low Income
households meeting thiS criterion, and half of these funds (or 125% of the total
funds available) shall be set aSide for moderate Income households meetmg thIS
cnterlon
In the event that adequate funds are not available to fund all loan applications,
priority shall be given to households who reSided m a bUilding undergOing
conversIon at the time of Plannmg CommiSSion approval (or City approval where
applicable) of the application for Tenant Participating Conversion
6 If the Borrower IS eligible to receive a TORCA loan, a notification letter Will be
prepared by the HOUSing DIVISion staff and reViewed and Signed by the Director
of the Resource Management Department The letter shall state the maximum
Program assIstance amount reserved for the Borrower, and a list of additional
conditions, documents and steps that must be completed by the Borrower In order
to close the loan
8 October 6. 1995
7 Upon fulfillment of all conditions, the lender designated by the City shall prepare
loan documents for execution
8 The Director of the Resource Management Department shall authorize release of
the TORCA loan funds Into the escrow account established for the loan clOSing
With instructions for disbursement
9 All Borrowers shall be required to provIde the City With title Insurance In a form and
substance acceptable to the City and shall name the City as additIonally Insured
on hazard Insurance policIes, which shaH be In amounts acceptable to the
City
Further Information
Further Information regarding the City of Santa Monica's TORCA Shared Appreciation
Loan Program can be obtained by calling the HOUSing and Redevelopment DIVISion of
the Resource Management Department at (310) 458-8702
July 13, 1995
9 October 6. 1995
EXAMPLE OF SHARED APPRECIATION MORTGAGE
Assumptions
F am Ily Income $30,000
Family Size 4 persons
Property 2 bedrooms
Price $150,000
Calculation of Affordable Mortgage
Family's monthly Income $2,500
Affordable housing cost 700
Affordable payment 500
Maximum mortgage, based on an 8% Interest rate and
a 30 year amortIzation $68,100
Sources of Funds for Purchase
Down payment $7,500
Conventional loan (1 st Trust Deed) 68,100
City Shared Appreciation Loan (2nd Trust Deed) 74.400
TOTAL FUNDS $150,000
City Share of Appreciation
Resale Price $200,000
Minus' Eligible Selling Costs 15,000
Mmus Approved Capital Improvements 0
Minus Ongmal Purchase Pnce 150.000
Equals Total Appreciation $35,000
TORCA Loan Amount $74,400
TORCA Loan/Onginal Purchase Price 49 6010
"CONTINGENT INTEREST' due to City $17,360
Principal of TORCA Loan due to City $74.400
TOTAL AMOUNT DUE TO CITY ON SALE $91,760
10 October 6, 1995
NET APPRECIATION TO BORROWER ON SALE $17,640
11 October e, 1995
COMPARISON OF HOUSING COSTS
UNDER TORCA SHARED APPRECIATION LOAN PROGRAM
Example: 2 Bedroom Unit costing $150,000
Without Shared With Shared
Appreciation ApprecIation
Mortgage Mortgage
Down payment (20%) $30,000 (5%) $7,500
Bank Loan 120,000 68,100
City Loan 0 74,400
Monthly Payment* $880 $500
*Assumes a thirty year loan at 8% Interest
12 October 6, 1995