Agenda 11/27/2001 - Laserfiche WebLink

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The 50% forgivable loan is proposed based on the inability of the owner-occupants to repay 100% of the loan over a reasonable term. The forgivable portion of the lien will be reduced proportionately over the loan term, or 1/120~' each month, as long as the residency terms are complied xvith and the required payments on the amortized loan are made each month. If the owner sells or otherwise transfers the property during the term of the loan, the City will require satisfaction of the remaining lien (original loan amount minus any portions already paid or forgiven). However, in the event of the owner's death and transfer of title to heirs through a will or probate, there are three options. (1) The heirs may occupy the property and assume the loan provided the heir-occupant is income-eligible for assistance as defined in Section V-A. The City will recalculate the ability-to-pay amount based on the heir-occupant's documented income level, and continue the amortization of the loan to the conclusion of the loan term. (2) The heirs may rent the property to an income- eligible tenant as defined in Section V-A. In this case, the City will refinance the outstanding balance of the loan at 3% interest under the terms of Section VI-B. (3) Should the heir-owners instead decide to sell the property to a third party or rent to a tenant who is not income-eligible, the City will require satisfaction of the remaining lien. The three options described above shall also be available in the event the owner is institutionalized and a third party assumes management of the owner's affairs through a power of attorney. B. Tenant-Occupied: Forgivable Loan With Optional Equity Participation Financial assistance to investor-owners includes a loan for up to 100% of the total rehabilitation cost, as required to bring the unit up to DHCD/HUD Housing Quality Standards. Fifty percent (50%) of the loan will be forgiven over a 10-year period. The remaining 50% of the original City investment will be amortized over a 10-year period at 0% interest. The investor-owner also has the option of equity participation. For each 10% of equity participation in the rehabilitatien cost, the investor-owner may reduce the loan term by one year. Thus, 'at full 50% investor-owner equity participation, the loan term may be reduced to five years. A lien will be placed on the rehabilitated property for the full amount of City participation in the rehabilitation cost. The loan term will be not more than ten years and not less than five years, as described above. The investor-owner will be contractually required to rent to a qualified LMI tenant during the term, at rents not in exceeding 35% of the tenant's household income. There is no penalty for early payoff if the investor-oWner chooses to remove the lien on the property. In this event, the required payback will be 100% of the City investment in the property, minus any monthly payments already made and any portions of the loan already forgiven.