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SR-11-C (14) I II-C SEP 1 7 '!IS C/ED:HSG:AS:MM:jt CIty CouncIl MeetIng: 9/10/85 Santa MonIca, CalIfornIa To: Mayor and City CouncIl From: CIty Staff SubJect: Tenant OwnershIp RIghts Charter Anlendnlent Homeownershlp AssIstance Program INTRODUCTION ThIS report transnlI ts Infornlatlon and reconlnlendatlons on the adoptIon and lItlplernentation of the operatIng gUIdelInes for the Tenant Ownership RIghts Charter Anlendnlent (TORCA) Homeownershlp AssIstance Program. The report reconlIllends that the CI ty CouncIl (1) approve the operatIng gUIdelInes for the LImIted EqUIty CooperatIve component of the loan program, and (2) adopt the necessary resolutIon to submIt an applIcatIon for an allocatIon to Issue mortgage revenue bonds In support of the CondomInIum component of the loan progranl. BACKGROUND The Tenant OwnershIp RIghts Charter Amendment (TORCA) reqUIres that the CIty Implement an ownershIp assIstance program for low and moderate Income households purchaSIng theIr unIts as eIther condomInIums or lImIted equIty cooperatIves under TORCA. On AprIl 23, 1985 the CIty CounCIl approved the assIstance program desIgns 10 concept and dIrected staff to prepare operatIng II-C. SEP 1 7 1995 - 1 - . ~ gUIdelInes for CouncIl reVIew and approval. The operating gUIde- lInes for the two progranl components, the Llnllted EqUIty Coopera- tl ve conLponent and the Comdoml nI um Loan prog ram, have been pre- pared separately because of the sIgnIfIcant dIfferences In the two types of loans. The gUIdelInes for the LImIted EqUIty CooperatIve component are presented WIth thIS report. The gUIde- lInes for the Condoml nl um component WIll be completed af ter re- VIew by menlbers of a bond progranl team, upon CI ty CouncIl approv- al of the recomnlenda t I on to Include a IILortgage revenue bond Issue as part of this program component. It IS antICIpated that the Condoml nI UIlL prog ram gUIdell nes wIll be presented to the CouncIl for approval WIthIn SIX months. In the past four nLonths staff ha s worked WI th other citIes, hous- I n9 experts and I nterested COmmunI ty members to develop prograIlL gUIdelInes for these assistance programs. The following sectIons deser Ibe (l) the Ilia] or features of the L Iml ted EqUI ty Coopera tl ve loan program operatIng gUIdelInes, and (2) the potentIal use of S Ingle-farlllly mortgage revenue bonds as part of the Condom I nI UIlL prog ranL. DISCOSSION (I) LImIted EqUIty CooperatIve Loan Program TORCA aSSIstance to low and moderate Income households In lImIted equl ty cooperatI ves WIll be 1 n the fornl of deferred payment loans structured to ensure the contInued affordablll ty of deSIgnated unIts WIthIn the cooperatIve. The antount of the loan WIll be - 2 - '. . based on the number of unIts occupIed by, and deSIgnated as af- fordable to, low and ITLoderate InconLe households. Repayment WIll be deferred durIng the fIrst three years and then WIll be based on abIlIty to pay keyed to Increases In Income. The ITlaJor fea- tures of the loan are dIscussed below: Loan Structure: The TORCA loan WIll be made In the sanLe form as the fIrst loan on the property. If the first loan IS made as a blanket loan to the cooperatIve corporatIon the prograrrl loan WIll be made as a blanket loan. If the fIrst lender makes share loans to IndI VIdual coopera t I ve men.ber s the CI ty WIll make share loans also. By adoptIng thIS POlICY, the City can ensure that Its underwr I tIng standards and cred I t POllC les are conSI stent WI th those of the prIvate lenders. MaXlmunl Loan Amount: The progranl WIll lend up to $35,0'0"0' per deSIgnated affordable unIt. Units may be Included In the cal- culatIon of the maXImum loan amount If (1) they are occupIed at the tIme of loan applIcatIon by an elIgIble low or moderate In- come household that has executed an Intent To Purchase form and WIll partICIpate in the cooperatIve, or (2) they are occupied at the tIme of conversion by low or moderate Inconle households or senIor CItIzens who do not WIsh to JOIn the cooperatIve, and the unIt WIll be deSIgnated for subsequent sale to low or moderate Income co-op member households when vacated by the current tenants. Interest Rate: As establIshed In the program deSIgn, an afford- able rate of SImple Interest, fIve percent (5%) per year, WIll be - 3 - -, ' charged on the outstandIng balance. In order to allow the cooperatIve to establish adequate reserves prIor to makIng pay- nlents, In teres t charges wIll be deferred for the fIrst three years and wIll begIn accruIng the fIrst day followIng the thIrd annIversary of the note date. Secur 1 ty: A Deed of Trust and Pron]I ssory Note WI th terms sInlIl ar to such documents currently used WI th other CI ty housIng ass 1 s- tance programs WIll be used to secure payment on the loan~ A Regulatory Agreement wIll be used to ensure that the cooperative nleets the following progranl requIrenlents: (1) MaIntaIns a desIgnated number of affordable unIts for occupancy by low and moderate Inconle households for the ternl of the loan. (Affordable unI ts shall be defIned as unl ts wIth carrYIng charges equal to or less than 30% of the gross Income of a household earnIng elghty percent (80%) of medIan I ncome for the La s Angeles County area. "Car rYIng charges II are the cooperat I ve member s' equIvalent of rent or filar tgage paynlents) . (2) LIITlI ts ga Ins on resale to ten percent (1@%) of the value of the menlber ShIP share (1 TIl t 1 al 1 nvestment) per year sImple Interest, as requIred by state law~ (3) MaIntaIns adequate nlaIntenance and replacement reserves as approved by the fIrst lender and the CIty. (4) Nanles the Ci ty as reCIpIent of resIdual equI ty should the cooperatIve dIssolve before the end of the loan term. - 4 - (5) Establl shes non-dl scr Iml natory selectIon POll CIes for future member s. Repayment: Payments of prInCIpal and Interest WIll be deferred for the first three years. The cooperatIve WIll begIn makIng annual paYIT~nts towards Interest and prInCIpal begInnIng on the fIrst day of the month followIng the thIrd anniversary of the note date, based on a calculatIon of "reSIdual receIpts" as descrIbed below. WIthIn thIrty days of the start of Year 4, the cooperatIve shall submIt an audIt report for Year 3, showIng the actual operating expenses and status of reserves of the cooperatIve. The cooperatIve shall also submIt a budget for Year 4 showIng proJected Increases In expenses. If the prImary loan from a prIvate lender Included provIsIons for varIable mortgage payments, the cooperatIve shall also submIt caples of any notIces from the lender IndIcatIng Increases In mortgage paynlents due In Year 4, If any. The HousIng DIVISIon staff WIll analyze thIS InformatIon and determIne the approvable operatIng budget for the cooperatIve for Year 4. ThIS lnfornlatlon shall be used to determIne the resldual receipts to be paId to the TORCA fund, as follows: (A) In order to key Increases In payments to Increases In Income, the staff shall calculate the total amount paId by nlenlbers and renters for nlonthly carrying charges and rents at the tIITLe the loan was Inade. This amount shall be the "gross InItIal carrYing charges~. The percentage increase or - 5 - decrease In the Index for Urban Wage Earners and ClerIcal Workers, U.S. CIty Average, as publIshed by the U.S. Bureau of Labor StatIstIcs, front the fIrst day of Year 3 to the fIrst day of Year 4 shall be multiplIed by the gross InItIal carrYIng charges to determI ne the current carryIng charges that the cooperatIve can afford to pay. In order to avoId a large jump In paynLents that could be detrImental to the fInanCIal stabIlIty of the cooperatIve, only the Increase between Year 3 and Year 4 shall be used as the Index, rather than the dIfference between Year 1 and Year 4. ThIS amount shall be the estImated gross cooperatIve Income for Year 4. A cap of three percent (3%) per year shall be used In determInIng the Increase In carrYIng charges. (B) PaynLents under the terms of the senIor loan (s) to be paId In Year 4 shall be deducted from the gross cooperatIve Income determIned In subparagraph (A). (C) The operatIng eosts and contributIons to reserves to be paId by the cooperatIve In Year 4, as determIned by staff after reVIewIng the annual report and budget, shall be de- ducted front the adJusted cooperatIve Income determIned In subparagraph (B). (0) The remaInder, WhICh shall be called the "residual receIpts" for Year 4 shall be paId to the loan serVlcer In twelve monthly payulents on the fIrst day of the month. In Year 4, the cooperatIve shall be not 1 f led of the payment amount WIthIn SIxty days of the start of the year. The fIrst - 6 - paynlent shall be due on the fIrst day of the thIrd nlonth. The cooperatIve WIll make twelve equal monthly payn~nts un- tIl the fIrst day of the thIrd month of year fIve, when the new paynLent amount calculated for Year 5 WIll apply. ThIS process shall be repeated each year. These payments shall be credIted to Interest fIrst, and then to prIncIpal. The TORCA loan may be prepaId at any tIme wIthout penalty. The entIre remaInIng unpaId balance (prInCIpal and accrued Interest) WIll be due at the end of the program loan term of thIrty-three years. UnderwrItIng GUIdelInes: The CIty WIll reqUIre that the coopera- tIve obtaIn the maXImum prIvate fInanCIng at the best avaIlable ternLS In order to leverage lInlI ted TORCA funds. HOUSIng 01 VI 5 I on staff WIll reVIew the proposed operatIng budget to ensure that It provIdes adequate but not eXceSSIve funds to nLeet the operatIng costs of the cooperatIve, and to provide the necessary reserves. The total of the prIvate lender's funds, the cooperatIve eqUIty contrIbutIon, and the TORCA loan amount shall not exceed one hun- dred percent of the total development costs of the proJect. Loan Serv ICIng: The CI ty shall enter 1 nto a ServIC Ing Agreement WIth a prIvate lendIng InstItutIon for the serVICIng of each TOR- CA loan. Whenever pOSSIble, the TORCA loans shall be serVIced by the prIvate lender partIcipatIng In the proJect. The serVICIng fees shall be paId by the borrower, accordIng to normal lendIng practIce. - 7 - ApplIcatIon and FundID9 Process The process for the submIttal of loan applIcatIons, and loan re- VIew and fund In9 IS descr Ibed 1 n deta 11 In the "LIfilI ted EqUI ty CooperatIve Loan Program GuidelInes", WhICh IS attached to thIs r e po r t (Attachment nAn). These procedures and processes are SInlI1Iar to those used by the CI ty for the PIca NeIghborhood HOUSIng Trust Fund and CItYWIde Housing AqUIsItIon and RehabIlItatIon Program loans. The maJor points to be noted In these procedures are dIscussed below. ApplIcatIon SubmIttal and InItIal ReVIew: HOUSIng DIVISIon staff WIll be avaIlable at any tIme durIng the converSIon process to dISCUSS the program crIterIa and dIstrIbute loan applIcatIons to Interested cooperatIve converters. ApplIcatIons WIll not be for- nlally accepted from a cooperatIve for reVIew and competItIve evaluatIon untIl the cooperatIve has prepared and submItted a Tenant Partlclpat i ng Conver 51 on applIcat I on WI th suffIcIent In- tent to Purchase forms to IndIcate that the applIcatIon IS feaSIble. Upon receIpt of a completed appllcatlon, Houslng DIVI- sIon staff WIll reVIew it to determIne that It meets the baSIC ellglbllIty requlrements concernIng household Income, and to pre- llffilnarlly determIne the nlaXlmunl loan amount for which the cooperatIve would be elIgIble. Quarterly ReVIew: At the end of each quarter CIty staff WIll com- petltlvely evaluate all cooperatlve applIcatIons receIved In that quarter. Slnce cooperatlve loans applIcatIons are expected to be SUbITLl t ted Infrequently, due to the tIme requl red for forull ng a - 8 - , 1 cooperatIve, It IS lIkely that only one cooperatIve applIcatIon WIll be available for reVIew at a tIme. In order to avoId commlt- tIng sIgnIfIcant loan funds to a proJect that would not be com- petltlve under these crIterIa, each loan applIcatIon shall be analyzed to ensure that the loan wIll benefIt low and moderate Income and Ithard to house" households, Improve the CIty'S hOUSIng stock, and that at least fIfty-one percent of the low and moder- ate Income persons In the proposed cooperatIve proJect Intend to partICIpate In the cooperatIve. On the one hundred pOInt scale descrIbed In the Program GUIdelInes each project WIll be required to score at least slxty-flve pOlnts to be elIgIble for fundlng. Staff shall also monltor the allocatIon of funds on a quarterly baSIs between condomInIum and cooperatIve loans. The avaIlable TORCA funds for each quarter WIll be assIgned to proJects accord- 109 to the allocation establIshed In the TORCA progranL deSIgn report. A mlnImum of 51% of the fund shall be avaIlable to llIIllted eqUIty cooperatIve loans. ThIS fund wlll be used to make payments to other cIty funds that have orlglnated loans to TORCA proJects, and to make new loans to cooperatives as loan appllca- tIons are approved. If loan appllcatlons for cooperatIves have been approved, but suffICIent funds are not avaIlable, funds WIll be set-aSIde each quarter untIl the loan can be closed. A maXImum of 49% of the fund shall be avaIlable for condominIum loans. If suffiCIent funds are not available to award loans to all ellglble applIcants, the lowest ranklng applIcatIons shall be carrIed over to subsequent quarters. If sufflcIent approvable applIcatIons - 9 - , \ have not been submItted In a quarter, and If there are outstand- Ing conlnll tntents for cooperatIve loans, the funds In excess of those approved for COndOITllnIUnl loans shall be transferred to the cooperatIve fund. Approval of RehabIlItatIon: The Progranl GUIdelInes require that each bUIlding that receIves TORCA loan funds be rehabIlItated to the extent necessary to ensure that all heal th and safety code vIola tI ons or lnc IPI en t v Iolat Ions are corrected, and that all ma] or bUIldIng systenls are In good work Ing order and WIll not reqUIre repaIr or replacement for fIve years from the date the loan IS made. TORCA program staff WIll conduct an InspectIon WIth the cooperatIve sponsor, a rehabIlItatIon speCIalIst hIred by the TORCA program on a per-InspectIon baSIS, and a CIty BUIldIng In- spector pr lor to loan fund lng, to ensure that the work wr 1 te-up prepared by the cooperatIve and approved by the constructIon lender IS adequate to Il1eet program requ 1 renlents. The TORCA pro- gram staff WIll monItor the rehabIlItatIon of each cooperatIve to determIne that the scope of work approved prIor to loan fundIng IS completed and does not change WIthout CIty approval. Loan Approval: Once funds have been reserved for a proJect Hous- Ing DIVISIon staff shall prepare a prellITllnary comnlI tment letter, and work WI th the borrower and pr IITlary lender (s) to ensure that all addl tlonal InformatIon IS prOVIded and legal documents are prepared and executed pr lor to loan fund Ing. No TORCA loan WIll be nlade untIl program sta ff have reVIewed and approved the terms and condItIons of the constructIon loan, If any, and the terms of the flrnl COTIlnlltment of permanent fInanCIng by the prImary lender. - 113 - < , Paynlen t for appr a 1 sals, tl tIe repor ts, InspectIons, and other related costs shall be Included In each program loan. Loan D1 sbursement: The CI ty Manager and Cl ty Attorney shall ap- prove and execute the Proml ssory Note, Deed of Trust, Regul atory Agreement, and escrow Instructions for each loan. Upon executIon of the necessary escrow InstructIons by the CI ty Manager, the D1 rector of Fl nance shall author i ze the dlsbur senlent 0 f loan funds to be deposIted Into an escrow account wIth a prlvate es- crow cOlllpany. The loan funds shall be d 1 sbur sed through escrow accordIng to the CIty Manager's slgned InstructIons. Regulatory Agreement Compllance MonItorIng: The cooperatIve shall submlt an annual report on Its complIance wIth the terms of the Regul atory Agreement. The repor t shall Indl cate the nurTtber of membershlp shares transferred In that year, the carrYIng charges for each unlt, and the Inconle ranges of the new members. It shall lIst the names and posItlons of the Board of DIrectors, and pro- vIde cop1es of llllnutes of thelr llleetings. It shall also sumlllarIze any changes to the cooperatlve's Artlcles of Incorporatlon and By-Laws, or changes to the Occupancy Agreements wIth the IndI- vIdual members. The TORCA staff shall reVIew each annual report and conduct a monItorIng VISIt to the cooperatIve as necessary to confIrm InformatIon. Loan Serv IC lng: Each TORCA loan shall be servIced by a pr I vate lenderjservIcer under the terms of an agreenLent wIth the CIty. The TORCA staff shall maIntaIn regular contact wIth the serVIcer - 11 - . . to dISCUSS any problems that may arIse In such areas as collect- Ing loan paynlents and IlLalntalnlng adequate Insurance coverage. The TORCA staff shall also conduct a bI-annual VISIt to the ser- VIcer to reVIew the loan flIes. Predevelopment Loans CooperatIve converSIon proJects WhIch qualIfy under eIther the PICO NeIghborhood HOUSIng Trust Fund or the CIty-wIde HOUSIng AcqUISItIon and RehabIlItation Program may request InterIm development loans for purchase and operatIon as a non-prof 1 t owned rental proJect, as allowed under these programs. However, after a reVIew of the other CIty resources avaIlable to prospec- t 1 ve cooperatI ves for predevelopnlent ass 1 stance, and an analysI S of the demand for such loans, It IS not recommended that the pre- development loan component of the cooperatIve loan program descr lbed In the program desIgn report be Illlplemented at thIS tIme. ThIS policy lllay make converSIons dIffIcult for bUIldIngs that are not sponsored by, or workIng wIth, non-profIts such as CommunIty CorporatIon of Santa MonIca, who are supported by other funds of the CI ty. If a SIgnIfIcant demand for predevelopment loans 1 S Ideo t I f led In the future staff may return to Counc 11 WI th operatIng gUIdelInes for the predevelopnLent loan program and fundIng requests on a case-by-case baSIS. (2) CondollllnlunL Loan Program: Use of Mort9age Revenue Bonds The second component of the TORCA Homeownershlp Asslstance Pro- gram, as descrIbed In the program deSIgn report of AprIl 23, - 12 - I. I ,. ~ 1985, provIdes deferred loans to low and moderate Inconle con- domInIum buyers. These loans wIll be based on the dIfference between the purchase pr Ice of the tenant I 5 unI t and the max lITlUm aTIloun t the tenant can afford to borrow from a pr 1 vate lender, up to a maXIllLunL of $30,000 per unIt. In order to leverage the TORCA funds as much as posslble, and to provIde affordable long-term fInanCIng for low and nLoderate lncome borrowers, the CIty may take advantage of ItS ab 11 i ty to Issue slng Ie fanllly nlor tgage revenue bonds. In work i ng WI th Interested commun 1 ty member sand lenders over the past several months It has become apparent that a bond Issue would be a SIgnIfIcant fInanCIng resource for the purchasers of condonllnlunl unIts. The use of mortgage revenue bonds wIth thIS progranl WIll reqUIre that the bond counsel and bond underwrIters partICIpate In f InalI zIng the deta 11 s 0 f the program desIgn, and prepar lng the program gUIdelInes, In order to ensure that the loan program IS conSIstent WIth federal and state laws and regulatIons concernIng bond Issues. Therefore, thIS report recOllm~nds that the CIty CounCIl approve the Clty'S partICIpatIon In the Issuance of s Ingle-fanllly nLortgage revenue bonds, and take steps to f 1 naIl ze the program desIgn and gUIdelInes. SIngle-famIly mortgage revenue bonds may be issued by a localIty, under the terms of authorIZIng federal and state legislatIon, to make funds available for the orIgInatIon of mortgage loans by pr 1 va te sector lender s for low, moderate, and mIddle 1 nconle hOITLe- buyer s. The bonds are backed by the paynlents on these ITlortgages i the credIt of the ISSUIng agency and the taXIng authorIty of the - 13 - CIty IS not Involved In the Issue. The Interest paid to the bond- buyers IS tax-exempt, and therefore the Interest rate on the mortgage loans can be lower than market-rate loans. The Local Home Mortgage FInance Agency Act (AB1355) provIdes the legal authorIty for CItIes to Issue tax-exempt bonds for hOUSIng purchases. ThIS legIslatIon only allows up to forty percent (40'%) of a SIngle bond Issue to be used for the purchase of eXIstIng hOUSIng, such as condomInIum converSIons. The remaInIng SIxty percent (60'%) must be used for purchase of newly constructed or substantIally rehabIlItated hOUSIng. In practIce, thIS WIll re- qUIre that Santa MonIca undertake a JOInt bond Issue WIth another localIty that WIshes to use the bond proceeds for new constructIon. AB 1355 also establIshes maXIIlLum Income IHLIts for the hOIlLe- buyers. These Income lImIts vary accordIng to the type of alloca- tIon the CtIY receIves from the state. Under an lIentItlementll allocatIon the maXImum Inconle IS 120'% of medIan Income for eIghty percent (80%) of the purchasers of eXIstIng homes. The remaInIng twenty percent (20%) must have Incomes below 110'% of median. Under a IIsupplementary" allocatIon fIfty percent (50%) of eXlst- Ing hOIlLebuyers filUSt have incomes below HHJ% of nLedlan, and the other fIfty percent (50'%) must fall below 80'% of medIan. Usually cItIes receIve a mI x of entI tlement and supplenlen ta ry all ocat Ions from the state allocation committee, as descrIbed below. - 14 - ApplIcatIon for an AllocatIon to Issue Bonds CalIfornIa law reqUIres that each potentIal bond Issuer fIrst receIve an allocatIon from the Mortgage Bond AllocatIon COmITlIttee (MBAC) COITlpr Ised of the Governor, State Treasurer, and State Con- troller or theIr designees. The MBAC ITleets about three tImes each year to allocate the state' s allocatIon aITlong local Issuers on a first-come, first-served baSIS. The next tIme that the MBAC WIll meet wIll be February, 1986, and CItIes are beIng urged to submIt applIcatIons by early October In order to be consIdered at that meetIng. Each 10calI ty may apply for eI ther "entl tlementll or IIsupplemen- tary" allocatIons, or both. On a sta tewlde bas 1 s, there 1 s ap- proXImately $1,000,000,@00 avaIlable for entItlement allocatIons, and $1,000,000,000 for supplementary allocations. Most CItIes are adVIsed to apply for both types of allocatIon, In order to In- crease the fleXIbIlIty of the MBAC In grantIng the allocatIon request, and to apply for SlIghtly more than what they hope to receIve. The CIty IS reqUIred to certIfy at the tIme of applIca- tIon that It has one-half of one percent of the requested alloca- tIon depOSIted under control of the CIty In an Interest-bearIng account In a fInanCIal lnstl tutlon as a "good faI th deposi t". ThIS amount ITLay be collected from Interested developers or- apart- ment owners and converters, or ITlay be the CIty'S funds. In the event that the CIty receIves an allocatIon frOITl the MBAC and does not sell the bonds, these funds must be used for other low and moderate Income hOUSIng programs WIthIn the CIty. - 15 - Therefore, due to the urgency of submIttIng this applIcatIon to the MBAC before October, 1 tIS recommended that the Cl ty des Ig- nate funds from the General Fund reserves for thI S "good fa 1 th depOSIt". The CIty shall then Issue a Request for Proposals and collect fees from Interested partiCIpants pr lor to January 1, 1986. If the CI ty IS unable to IdentIfy suffICIent Interested applIcants at that tIme, It WIll reduce or wIthdraw the appllca- tIon wIthout forfeIture of the depOSIt. It IS estImated that the CIty could use $213,0'1313,0'130' In bond Issue funds fz:om thl s alloca tI on. Once subnll tted to the MBAC, appllca- tIon anlounts may be reVIsed downward, but Illay not be Increased. Thez:efore, It IS recommended that the CIty request an entitlement all oca t 1 on of $213,0'0'0',0'0'13, and a suppl ementary a lloca t Ion 0 f $55,130'0',0'0'0 for a total of $75,01313,13130'. ThIS should result In a total allocatIon 0 f $20,0'0'13,0'0'0' of combIned entI tleIllent and sup- plementary iSSUIng authorIty. The "good faIth depOSIt" of $375,0'1313 shall be deSIgnated as beIng In the General Fund reser- ves. The necessary resolution authorIZIng the SUbItLlttal of the applIcatIon to the Mortgage Bond AllocatIon CommIttee IS attached (Attachment tlB") for adoptIon by the CIty CounCIl. The entIre bond issuance and loan orIgInatIon process IS outlIned In Attachment "C". In order to effectIvely Implement the program and to ensure that the bond Issue IS conSI stent WI th the TORCA program goals, a Mortgage Bond CommIttee, conSIstIng of the CIty Manager and the CI ty Attorney or desIgnees, the DIrector of FInance, the DIrector of the Department of CommunIty and EconomIC Development and the HOUSIng Program Manager, shall deSIgn the - 16 - progranl goal statement and oversee the selection and work of the bond team. FINANCIAL / BUDGETARY IMPACT In order to submit a request for an allocation of $75,00'0,00'0 to the Mortgage Bond Allocation Conlllllttee the City nlust certify that 1 t has one-half of one percent 0 f the requested amount, or $375,000, In an Interest-bearing account under the control of the City, as a "good faith depOSit". For the purposes of submitting the application at thiS time and obtaining a spot on the waiting list, It IS recommended that the City CounCil deSignate $375,000 from the General Fund unrestricted reserves as the reqUired depOSit, and direct staff to establish a revenue account for the receipt of COmII1ltment fees In support of thiS program. The City Will then be reqUired to recertify and resubmit the application to the MBAC by January 1, 1986. Pr lor to that t lIne, the Cl ty shall collect COmII1l tment fees from Interested par tiC Ipants, as described In thiS report, or shall reduce or Withdraw the request for an allocation. Therefore, the "good faith deposlt" Will be paid by the prospective bond program partiCipants, and Will not be a cost to the General Fund. No additional budgetary action IS reqUired. RECOMMENDATIONS It IS reconUllended that the City CounCil: - 17 - 1. Approve the operatIng gUIdelInes and program procedures for the LInlIted EqUIty CooperatIve conlponent of the Tenant OwnershIp Rights Char ter Amendment Homeowner ShIP Ass I stance ProgranL. 2. Adopt the attached resolution authorIZIng the CIty Manager to SUbULI t an applIcatIon for an allocation to Issue mor tgage revenue bonds from the Mortgage Bond AllocatIon COULUII ttee, cer tl fYIng that the "good faIth deposIt" 15 under the control of the CIty, as descrIbed In thIS report; and 3. DIrect the CIty Manager to establIsh a revenue account for the receIpt of bond program depOSIts, and take other necessary ac- tIons to Implement a bond program as descrIbed In thIS report. Prepared by: Ann Sewlll, HOUSIng Program Manager CommunIty and EconomIC Development Department Attachments nAil IIBn nCII - Program GUIdelInes ResolutIon - Mortgage Revenue Bond Process - 18 - Attachment "A" LIMITED EQUITY COOPERATIVE LOAN PROGRAM PROGRAM GUIDELINES , . TABLE OF CONTENTS PROGRAM DESCRIPTION General Terms Type of loan 1 Anlount of loan Allowable Uses Interest SecurIty Repayment Term ServICIng Other RequIrenlents UnderwrItIng GUIdelInes 2 Loan Documents 3 APPLICATION SUBMITTAL AND REVIEW PROCEDURES 5 InItIal InterVIew FeaSIbIlIty of CooperatIve ConverSIon 5 Loan Appllcatlon 5 RehabIlItatIon BId 6 ApplIcatIon Intake 6 ElIgIbIlIty DetermInatIon and MInImum ReqUIrements 6 Loan CalculatIon 7 Loan EvaluatIon 7 Loan Approval 8 Loan ClOSIng 8 Loan D i sbur serrLent 9 RehabIlltatlon 9 PROGRAM MANAGEMENT Affordable UnIt CertIfIcatIon 9 Loan SerVICIng 10 APPENDICES TORCA Funded RehabIlItation RequIrerrLents LIMITED EQUITY COOPERATIVE LOAN PROGRAM GUIDELINES PROGRAM DESCRIPTION The LImIted EqUIty CooperatIve Loan Program wIll provIde aSSIS- tance to low and moderate InCOme households partiCIpatIng In ten- ant partICIpatIng converSIons to lImIted eqUIty cooperatIves and wIll ensure the contInued affordablllty of aSSIsted unIts by pro- VIdIng below market Interest rate deferred payment loans. 1. General Terms: Pernlanent Loans Type: TORCA loans WIll only be made as second or thl rd trust deeds, and WIll never be nLade as the only loan. The TORCA loan WIll be made In the same form as the fIrst loan on the property, the progranL loan shall be olade as a blanket loan to the coopera- tIve whenever the fIrst lender's loan IS made as a blanket loan, and shall be nlade as share loans to Indl VIdual cooperatl ve mem- bers whenever the fIrst lender makes share loans. Amount: The maXImum loan anlount shall be $35,390 per elIgIble occupIed or des ignated unl t Unl ts not occupIed at the tIme of converSIon or occupIed by low or llioderate InCOme households or senIor Cl tIzens who do not WI sh to J 01 n the coopera tl ve may be des 19na ted for ass 1 stance and subsequent occupancy by low or moderate Inconle households when vacated by the current tenants. Allowable Uses: AcqUISItIon and rehabIlItatIon of unIts In bUIldIngs convertIng to lImIted eqUIty cooperatIves under TORCA. Interest Rate: 5% annual slnLple Interest. Interest shall begIn accrUIng the fIrst day of the month follOWIng the thIrd annIver- sary of the note date. SecurIty: Deed of Trust and PromIssory Note WhICh, at the dIS- cretIon of the CIty, may be subordInated to Deeds of Trust secur- Ing loans from prIvate fInanCIal InstItutIons, IncludIng seller takeback fInanCIng, used In conJunctIon WIth the TORCA loan on the same property. Repayment: Payments of prInCIpal and Interest WIll be deferred for the fIrst three years. The cooperatIve WIll begIn nlaklng annual payments towards Interest and prInCIpal begInnIng on the fusdt day of the month fOllOWIng the thIrd anniversary of the note date, based on a calculatIon of hresldual recelptsh as descrIbed below. WIthIn thIrty days of the start of Year 4, the cooperatIve shall submIt an audIt report for Year 3, shOWIng the actual operatIng expenses and status of reserves of the cooperatIve. The coopera- tIve shall also submIt a budget for Year 4 shOWIng prOJected In- creases In expenses. I f the prImary loan from a prl va te lender - 1 - Included prOVISIons for varIable mortgage payments, the coopera- tIve shall also submIt caples of any notices from the lender In- dicatIng Increases In mortgage paynlents due In Year 4, If any. The HOUSIng DIVISIon staff wIll analyze thIS InformatIon and determIne the approvable operatIng budget for the cooperative for Year 4. ThIS InformatIon shall be used to determine the reSIdual receIpts to be paId to the TORCA, fund, as follows: (A) In order to key Increases In payments to Increases In In- come, the staff shall calculate the total amount paid by mem- bers and renters for monthly carrYIng charges and rents at the tInte the loan was nlade. ThIS anlount shall be the "gross InI- tIal carrYIng charges". The percentage Increase or decrease In the Index for Urban Wage Earners and ClerIcal Workers, U.S. CIty Average, as publIshed by the U.S. Bureau of Labor Statis- tics, from the first day of Year 3 to the fIrst day of Year 4 shall be ItlultIplled by the gross InItIal carrYIng charges to determIne the current carrYIng charges that the cooperatIve can afford to pay. ThIS anLount shall be the estlnlated gross coopera t I ve I nconLe for Year 4. A cap of three percent (3%) per year shall be used In deternll nlng the Increase I n carry I ng charges. (B) Payments under the terms of the senior loan (5) to be paId Year 4 shall be deducted from the gross cooperatIve Income determIned in subparagraph (A) (C) The operatIng costs and contrIbutIons to reserves to be paId by the cooperatIve In Year 4, as determIned by staff after reVIeWIng the annual report and budget, shall be de- ducted from the adjusted cooperatI ve Income determIned In subparagraph (B). (D) The renlalnder, WhICh shall be called the "reSIdual receIpts" for Year 4 shall be paId to the loan serVIcer In twel ve monthly paYItlents on the fIr st day of the month. In Year 4, the cooperatIve shall be notIfIed of the payment amount WI th1n 51 xty days of the start of the year. The f1rst payment shall be due on the fIrst day of the thIrd month. The cooperatIve WIll nlake twelve equal Itlonthly pay- ment untIl the fIrst day of thIrd month of year fIve, when the new payment amount calculated for Year 5 WIll apply. ThIS process shall be repeated each year. These paymens shall be credIted to Interest fIrst, and then to prInCIpal. Term: 33 years. OrIgInatIon: CIty staff SerVICIng: PrIvate lender under serVICIng contract Fees: Actual costs of orIgInatIng and serVICIng the loan shall be charged to the Borrower. Such costs ITIay Include appraIsals, escrow company fees and rehabIlItatIon InspectIons. These fees WIll be Included In the loan amount. - 2 - Other RequIrements: A Regulatory Agreement wIll be executed by the CIty and the cooperative requlrIng that the cooperative: 1) MaIntain a deSIgnated number of unI ts affordable for occu- pancy by low and moderate Income households for the term of the loan. ThIS shall be done by allocatIng at least 25% of the unIts that become vacant to households WIth Incomes be- low 50% of medIan, at least (50%) to households below 80% of medIan, and no more than 25% to households WI th 1 ncomes of up to 120% of the median. When less than four vacanCIes occur In one year the order of prIority for filling vacan- CIes shall be households With Incomes less than 50% of medIan, less than 80% and fInally households WI th lnconles less than 120% of median. Affordable units shall be defIned as units With carrying charges equal to or less than 30% of the gross Income of a household earnIng eighty percent (80%) of ITledlan for Los Angeles County for a famIly of four; 2) As required by state 1 aw, lImI t ga 1 ns on resale to 10% of the value of the membershIp share (Initial Investment) per year SImple Interest; 3) MaIntain adequate maintenance and replacement reserves and; 4) Name the CIty as reCipIent of reSidual eqUIty should the cooperatIve dIsolve before the end of the loan terms. Coordination WIth Other CIty HOUSIng Programs: ElIgible proJects may receIve InterIm constructIon finanCing from other CIty hous- Ing aSSIstance programs If the proJects have receIved a permanent fInancing commItment from the TORCA cooperatIve loan program. 2. Underwriting Guidelines: PrIce Test: The apportIoned share of the total development cost of each unIt for WhICh TORCA assistance IS requested must be com- parable WIth other SImIlar unIts In the same or comparable bUIldIngs. Loan to Value and EqUIty ReqUIrements: The CIty WIll follow loan to value and eqUIty reqUIrements established by the prImary lender. PrIvate FInanCIng: The coopeatlve corporation must seek maXImum prIvate fInanCIng before requestIng TORCA aSSIstance. The fInal TORCA aSSIstance commI tment WIll not be nLade untIl the corpora- tlon has receIved a commItment letter from the prIvate lender. DeternlInatIon of Reasonable Costs and Expenses: The Borrower's est 1ma tes of rents, carrYIng charges, expenses, reserves, development costs and use of SUbSidy WIll be reVIewed and com- pared to SImIlar projects of SImIlar SIze and nature. If neces- sary the CI ty may request addI tlonal background documentatIon from the borrower and may request adJustments as necessary. - 3 - Income and Asset LImI ts: For the purposes of th i s program, household Income IS defIned as the aggregate Income of all adults permanently resld Ing 1 n the unI t. In order to qualIfy as a low or moderate Income household program partIcIpants must: 1) Have a total household Incon[e of less than or equal to 80% of the Los Angeles - Long Beach SMSA medIan; 2) Not currently own or have owned In the last three years an- other house or other real estate. 3) For households Wl th one age theIr total lIqUId household Income. or nlore member s assets must not under 55 years of exceed SIX n!onths 4) There are no 11 qu Id asset lImI ts for households where all members are 55 or over. Where after reasonable attenlpts have been nlade by the applIcant/ Sponsor and/or CIty staff to obtaIn the necessary InformatIon from prospectIve cooperatIve members and such households are un- respons I ve, theI r unI t WIll be cons Idered i nelIg Ible for aSSIstance. Conver SIon PartICIpatIon: The converSIon must have the support of no less than SIxty SIX percent (66%) of the households reSId- Ing In the bUIldIng at the tIme of applicatIon as eVIdenced by SIgned Intent to Purchase statements submItted wlth the Tenant PartlcIpatlng ConverSIon applicatIon. The CIty WIll not dIsburse TORCA loan funds untIl at least 66% of the households In the bUlldIng have depOSIted Share Purchase reservatIon fees In an escrow account. RehabIlitatIon ReqUIrements: All maJor structural and functIonal systenls nlust be In, or be brought up to, good workIng condltlon such that no addItIonal n!aJor rehabIlItatIon WIll be required for approXImately 5 years. The proJect fInanCIal plan must establish adequate reserves for reasonable antICIpated repaIrs. Project Management Plan. The Borrower shall prepare a ProJect Management Plan for the CIty's reVIew and approval. The plan WIll be an attachment to the Regulatory Agreenlent and WIll descrIbe the cooperatIve's polICIes and procedures concernIng: 1. SelectIon of management fIrm 2. SelectIon and orIentatIon of future member/owners 3. Procedures for detern[lnIng ITlen[ber/owner elIgIbIlIty and cer- tIfYIng Incomes 4. MaIntenance and repaIr serVIces 5. Records and reportIng reqUIrements 6. Personnel and staffIng SenIor FInanCIng: If the TORCA loan IS subordlnate to a varIable paynlent loan the Borrower ITlust submI t a schedule WI th the loan applIcatIon shOWIng the maXImum possible Increase In debt serVIce per year and the proposed means for meetIng the increases. - 4 - , t ... Seller FInancIng: The CIty WIll reVlew each seller fInancIng proposal and reserves the rIght to refuse a TORCA loan if the terms of the seller fInancIng jeopardIze the contInued affor- dablllty of the proJect. Use of attenlpt lImIted loan. Other HOUSIng Assistance Programs: The Borrower should to use all other resources WhICh may be avaIlable to equlty cooperatives to mInImIze the amount of the program RefInanclng Prlmary Loan: If the Borrower desIres to refInance the prImary debt, or borrow addItIonal funds from a source other than the CIty after the lnItIal clOSIng, the CIty must reVIew and approve the terms and condItIons and the proposed use of the pro- ceeds. The CIty may prohiblt such refInancing If It Will nega- tIvely affect the future affordablllty of the proJect. B. APPLICATION SUBMITTAL AND REVIEW PROCEDURES 1. In I tlal roterv lew ApplIcants may pick up an applIcatIon and InformatIon materIals at any tIme durIng their prelImInary InvestigatIon of convertIng to llIlllted equIty cooperatIve. Staff WIll be ava11able by ap- pOIntment to explaIn the basIc provIsions and requirements of the program and reVIew the loan app11cat10n procedures. Borrowers should he encouraged to take advantage of th1s oppor- tunIty to meet wIth staff before proceedIng with feaSIbIlIty studIes and fIllIng out the loan applIcatIon. At thIS meetIng staff can make a prelIm1nary determinatIon of elIg1bIlIty based on Income InformatIon provIded on the current tenant households. If the applicant IS Interested 1n proceedIng staff should provIde them wIth applIcation materIals and reVIew the applIcatIon proce- dures, answerIng any questIons which may arIse. Staff should maIntaIn a log of all InltIal IntervIews. 2. CooperatIve Convers10n FeaSlbllty Before applYIng for a program loan prospeet1ve borrowers should evaluate the feaSIbIlIty of the eooperat1ve converS10n IncludIng the following: fInancIal feaSIbIlIty, owner's Intent to sell, condItIon of bUIldIng and rehabIlItatIon needs, tenant support and par t Ie Ipa tIon, and other sources of fi nane 1ng. The sponsor of the cooperatIve converSIon WIll be requ1red to demonstrate the feaslbi 11 ty of the proposed pro) ect when the program loan ap- plieat10n IS submItted. If the applIcant has not already submItted the Tenant PartIcIpat- Ing ConversIon application for the cooperatIve conversIon staff WIll dIrect the applIcant to PlannIng and ZonIng for the applIca- tIon and Informatlon for Tenant ParticIpatIng Convers10ns. The applIcant must fIle the TPC applIcatIon before the1r request for a program loan WIll be accepted. - 5 - " 3. Loan ApplIcatIon The applIcant may subrnlt the loan applIcatIon any tIme after: 1. the Tenant PartICIpatIng ConverSIon applIcation has been submItted; 2. the tenants have selected a sponsoring organIzatIon; and 3. the research necessary to demonstrate proJect feaSlb 111 ty and prepare the loan applIcatIon has been completed. For the fIrst reVIew by staff and conSIderatIon for a prelImInary loan COntnl1 tnlent the applIcant must subml t the folloWIOg applIca- tIon Information: completed applIcatIon form Income and elIgIbIlIty InformatIon conversion tImetable rehabIlItatIon plans (If needed) optIon or purchase agreenlent finanCIng plan, IncludIng a copy of fInanCIng applIcatIon or agreement WIth prImary lender proposed ArtIcles of IncorporatIon, cooperatIve bylaws, share and occupancy agreements management plan resolutIon to borrow funds CooperatIve Board traInIng plan Before the fInal commItment WIll be ntade by the City the applI- cant must prOVIde: a copy of the rehabIlItatIon contract If rehabIlItatIon IS planned eVIdence of the fInanCIng commItment from the prImary lender eVIdence of deposit In escrow of share purchase reservatIon fees 4. ApplIcatIon Intake Upon receIpt staff WIll log In all applIcatIons on a central ap- plIcatIon log, aSSIgn a case number and create a fIle for each applIcatIon. Each applIcatIon fIle WIll reqUIre sectIons for: the applicatIon (and other fInanCIng applIcatIons) applIcatIon checklIst, phone log and general correspondence Income verIfIcatIon InformatIon copies of legal documents such as artIcles of IncorporatIon, bylaws, DRE reports rehabIlitatIon documents, InclUdIng work wrIteups, cost es- tImates, bIds and contracts fInanCIal records, IncludIng requests for payment, copIes of checks, records of account balances copIes of executed loan documents IncludIng, Deeds of Trust, PrOlnlSSory Notes and Regulatory Agreements - 6 - ia' $ -. JI WIthIn fIve workIng days of receIpt program staff WIll revIew all applIcatIons for completeness. If the applIcatIon appears to be complete or substantIally complete, I t WIll be assIgned to a staff person for reVIew for elIgIbIlIty and feaSIbilIty. Income- plete applicatIons WIll be returned to the applIcant WIth a ITlemo descrIbIng what addItIonal InformatIon IS requIred. If relatIve- ly lIttle InformatIon IS mISSIng staff will hold the applIcatIon and request the addItIonal InformatIon. 5. Ellglbllllty DetermInatIon and MInImum ReqUIrements Program staff will reVIew the applicatIon to determIne the nmber of ellg lble households, and to determIne the reasonableness of proposed costs and expenses. The apportIoned share of the total development cost for each deSIgnated affordable unl t for WhICh aSSIstance IS requested must be less than or equal to SImIlar unIts In the sanLe or comparable bUIldIng. 6. Loan CalculatIon The maXImum loan amount shall be calculated as follows; Method I: less equals Total Development Cost of the Project MaXImum PrIvate FInanCIng avaIlable FInanCIng Gap Method 2: tImes equals Number of DeSIgnated Affordable UnIts $35,000 (maxlnLunl loan per Affordable UnIt) MaXImum Allowable loan The maXImum loan amount IS the lessor of the FInancing Gap or the MaXImum Allowable Loan. 7. Loan EvaluatIon Staff WIll reVIew each loan applIcatIon based on the underwrItIng gUIdelInes CIted In order to determIne proJect feaSIbIlity and ellblllty. All applIcatIons WIll be ranked based on the follow- Ing pOInt system: Improvement of hOUSIng stock (rehabIlItatIon prOVISIon and cost) POInts WIll be assIgned based on the condItion of the bUIldIng and the extent of lmprovments planned. Percent of low and moderate households 1n cooperatIve 75% low and moderate = 30 pOInts less than 25% low and moderate= 0 pOInts Percent of households IntendIng to purchase at the tIme of converS1on 75% IntendIng to purchase= 20 pOInts less than 50%~ 0 pOInts ASSIstance to dIffIcult to house households 30 pOInts 3l!l pOInts 20 pOInts 10 points - 7 - ... t t" r'" (large famIlIes, mInorItIes or 50% dIffcult to house= 10 pOInts less than 10%= 0 points Leverage of other hOUSIng assIstance Other hOUSIng funds 15% or more of developnLent cost= 19 pOInts dIsabled persons) 19 pOInts funds total 19 pOInts Total 100 pOInts A loan applIcatIon must receIve a mInImum of 65 pOInts to be con- sdered for a program loan. POInts WIll be prorated wIthIn the ranges establIshed above. Loans wIll be revIewed and approved quarterly. Staff shall pre- pare a wrItten evaluatIon and fundIng recoDill~ndatlon for the CIty Manager1s reVIew and approval. ApplIcatIons receIved less than two weeks before the end of the fundIng cycle wIll be carr led forward for cons Idera tion In the next funding cycle. Loan requests WhICh meet the campetI tI ve crIterIa mInImum but cannot be funded In the current fundIng cy- cle WIll be carrIed forward to future fundIng cycles. 8. Loan Approval WIthIn fIve workIng days of a favorable determInatIon and ap- proved by the CIty Manager of the loan request staff wIll prepare a prelIminary CODilllI tnlent letter to be revIewed and SIgned by the DIrector of DC/ED. The letter should state the nlaXlmurn TORCA aSSIstance reserved for the project and lIst all addItIonal con- dItIons, documents and steps that must be undertaken by the Bor- rower to obtaIn a fIrm commI taLent of TQRCA funds. The fInal TORCA loan conlnlI tnlent wIll be made In coordInatIon WI th fInal approval from the Borower's primary lender. 9. Loan ClOSIng PrIor to or concurrent WIth loan clOSIng the applicant must sub- mIt eVIdence of the follOWIng to the CIty for approval: fIrm commItments on all other fInancing and the terms of all senIor and JunIor fInanCIng pro forma tItle POlICY certI fica te of Insurance namIng the Cl ty as an addI tl onal Insured for the full amount of the loan establIshment of any necessary reserve or Impound accounts depOSIt Into an escrow account of share purchase reservatIon fees by no less than SIxty SIX percent (66%) of all tenants intendIng to purchase WIthIn fIve workIng days of the above staff wlll prepare the fInal COIlLIlLItrnent letter, escrow InstructIons and clOSIng docu- ments for the loan and subrnl t to the CI ty Manager and the CI ty - 8 - ... ,,-- ,.. Attorney for reVIew and approval. The CIty Manager WIll SIgn the escrow InstructIons and loan documents. Staff WIll then submIt a request for a warrant to FInance WI th the final loan COfilInI tment and escrow InstructIons. After the loan documents have been revIewed and approved program staff WIll set up an appolntnLent WIth the Borrower to SIgn all loan documents and close the loan. ThIS WIll be coordInated WIth the clOSIng on the prImary loan. Loan documents Include one or filore Deeds of Trust, PromIssory Notes and a Regulatory Agreement. 10. Loan DIsbursement CIty staff WIll contract WIth an escrow company for dIsbursement of the loan. The loan funds WIll be dIsbursed by the escrow com- pany per the escrow InstructIons SIgned by the CIty Manager. 11. RehabIlItatIon TORCA Program loans shall be used princIply for acqUISItIon and secondar Ily for f I nanc Ing rehab II I ta t Ion. The Borrower/Sponsor is responSIble for overseeIng all aspects of the rehabIlItation work. PrograIll staff or a designated agent WIll prOVIde as much aSSIstance as IS pOSSIble to borrowers to help assure that all rehabIlItatIon work IS done properly; however, the Borrower/ Sponsor retaIns prImary responSIbIlIty for overseeIng the con- tractor's work. If TORCA funds are used for rehabIlItatIon: 1) the loan proceeds WIll be dIstrIbuted by an escrow company per instructIons SIgned by the CIty Manager . , 2) staff WIll hIre a rehabIlItatIon specl'alIst to Inspect the rehab work and attest to 1 ts satIsfactory conLpletlon 3) fees for rehabIlItatIon InspectIons and the cost of loan dIsbursemet WIll be added to the total loan amount AddItIonal requirments concernIng the conduct of rehabIlItatIon fInanced by the TORCA loan are descrIbed In AppendIX A PrIor to commItment of loan funds the work wrIteup must be sub- mItted for Clty reVlew to ensure that the proposed rehabllltatlon meets program reqUIrements that the property WIll be safe and habItable and that all maJor structural and functIonal systems are In workIng cond 1 tlon such that no addI tIonal rehabllI tatIon WIll be reqUIred for fIve years. PROGRAM MANAGEMENT 1. Affordable UnIt CertIfIcatIon and Annual Reports There are two parts to the affordable unIt reqUIrement es- tablIshed by the Regulatory Agreement: - 9 - , .. . of T 1) lImIt on annual carrYIng charges of 30% of 80% medIan Income 2) a requIrement to offer vacated unI ts to low and moderate Income households as descrIbed under General Terms above. The cooperatIve corporatIon WIll be requIred to make an annual report to the CIty wIthIn 60 days of the end of each fIscal year establIshed for the CooperatIve. The report shall Include: 1) a certifIed audIt and a fInancIal report descrIbIng antIcI- pated Increases In operatIng and debt serVIce costs and the proposed Increase In carrYIng charges; and, 2) a report on occupancy for the prIor year provIdIng: 1) the number of unIts vacated and re-rented durIng the- past year 11) the number and percentage of low and nloderate Income resIdents resIdIng in the cooperatIve at the begInnIng and end of the year Ill) a certI flea tIon that the tenant selectIon procedures outlIned In the Regulatory Agreement were met. Staff will reVIew these reports for complIance wIth the terms of the Regula tory Agreement. I f the terms are not bel ng met, staff WIll notIfy the CooperatIve In wrItIng and request that the cooperatIve prepare and submIt a plan for correctIng the SItua- tIon. If the CIty does not comment WIthIn 30 days of receIpt of the report the Borrower WIll be consIdered In complIance WIth the terms of the loan. 2. Loan ServICIng Paynlent of prIncIpal and Interest WIll be defered for the the fIrst three years. Per the PromIssory Note and Regulatory Agree- ment, begInnIng In year four the resIdual receIpts avaIlable to repay the program loan shall be calculated as descr Ibed under General Terms: Repaynlent and the resultIng amount paId to the TORCA loan fund annnually WIthIn thIrty days of annIversary of the note the cooperatIve must provIde an operatIng budget and eVIdence of the debt paynLent anlount on senIor loans for the up- comIng year. Staff shall review and approve, or request nlodIficatIons of, the operatIng budget. The C:Ity shall enter Into an agreement WI th a prI vate lender to serVIce the TORCA loan. A prlvate lender WIll charge an annual fee equal to ap- proxlInately @.25% of the outstandIng balance for servlclng the loan. No serVICIng wlll be reqUIred for the fIrst three years of the loan. - 10 - .. .... ~.. .~ AppendIX A: Additional RequIrements for TORCA Funded RehabIlIta- tIon ProJects If the CIty IS provIdIng rehabIlItation fInanCIng Contractors WIll be requIred to provIde paynlent and perfornlance bonds or eqUIvalent securIty to assure that the work IS adequately conL- pleted and all subcontractors are properly paId. Contractor WIll also be requIred to show eVIdence of Insurance and workman I s conL- pensatIon. A wrItten contract In a form acceptable to the City WIll be requIred. The contract must specify the exact work to be done and the total proJect cost. Once the contractor has pro- Vided eVIdence to program staff of bUIldIng perml ts, requIred bonds, and Insurance, a contract IS SIgned, a Notice to Proceed is Issued by program staff and countersIgned by the Borrower. Funds WIll be released only after the work IS satIsfactorIly com- pleted, as determIned by an InspectIon of the property by a pro- gram representatIve. The CIty may contract wIth a prIvate rehabIlItatIon speCIalIst to prOVIde costructIon InspectIon ser- VIces. In addI tlon to InspectIons by program staff or a desIg- nated representatIve, Inspections WIll be made by CIty BUIldIng Inspectors as part of the normal bUildIng pernlIt process. Upon satIsfactory completIon of all work, the owner WIll SIgn a NotIce of CompletIon. The contractor shall warranty all work for one year from thIS tIme, as reqUIred by State law. - 11 - . ]. ".- . . Attachment "C" Slngle Famlly Mortgage Revenue Bond Issue ~ teps T Ene 11 n e 1. Clty Councll authorizes submlsslon of an allocatIon applicatIon and selectIon of flnanclal advisor 9/85 2. TORCA staff/flnanclal advlsor conduct feaSIbll~ty analYSIS and Interest survey of prospective partlclpants. Outllne bond program parameters, and coordlnatlon wIth other housing programs. 10/85 3. Mortgage Bond Comrnl ttee and fInancial advIsor prepare goals and Issuer's POlICY Statement. 113/85 4. Mortgage Bond Corrmlttees and f~nanclal advlsor develop and issue Request for Proposals for underwrIters and bond counsel. 10/85 5. Mortgage Bond CommIttee selects underwrlters and bond counsel for recommendatIon to CIty CounCIl. 11/85 6. FInanCIal adVIsor IdentIfIes JOInt Issuer(s) and prepares cooperatIon agreerrlent. 11/85 7. CIty CounCIl holds publlC hearIng and adopts Issue's Policy Statement for 1986, approves selectIon of bond counsel and underwrIter, and adopts CooperatIon Agreement. 11/85 8. TORCA staff and fInanCIal adVIsor Issue RFP for developers/ converters. 12/85 - 1 - '" . ... l- ., 9. Developers/converters submit requests for loan con@ltments wIth comnd tment fees. 12/86 l@. Mortgage Bond Con~lttee reVIews SIze of Issue and reVIses applIcation to mortgage bond allocatIon commIttee, as necessary. 12/86 11. FInanCIal adVIsor/staff SOlICIts proposals for servIcers, Insurers, trustee, and lenders. 2/86 12. CIty receIves allocatIon from MBAC. 2/86 13. Bond team prepares documents, obtaIns bond rating, and determInes Interest rates. 4/86 14. CIty CounCIl adopts resolutIon approvi ng Bond Purchase Agr:eenlent. 4/86 15. Bonds sold; Program Funds avaIlable. 5/86 16. TORCA staff monItors orlgnation of loans. On-goIng - 2 - t ~ \\o'J-OO\ ~~ L{?6 (1-.,..j"'T'"{t,:: r{.,-~f14-j . t" l- =..' i . t i I I : 't-' t : i.' I -,- -,"-) '~. 'n' ~ CO .. ii I ~.. t C -; -=-i 1 +- 1-' r ~ < 1 a -1i-f- r-r-r ;--", ,!l;; i_i.- c- _IG r "-j;j--:j ) II_J.jt ~F--i li"~ :.... ~ ......1 c, r r P',' ~,.-! . .. ~ r' ~ ;- : r t- i-( I J! ; ;...J - '': t ~ ,- J r" ~ t':) IJ 1 -j j"'lllr1 ] '.ij: fil1ri 1'C 1 (J -: .c r ,-.:-=: p s --. 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