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HomeMy WebLinkAbout8.2 First Time Homebuyer Loan Program CITY CLERK File # D~[Ql[Q]{2J[Q] 'f3()-(PO AGENDA STATEMENT CITY COUNCIL MEETING DATE: June 19, 2007 SUBJECT: First Amendment to the City of Dublin First Time Homebuyer Loan Program Report prepared by John Lucero, Housing Specialist ATTACHMENTS: 1) Resolution approving the First Amendment to the City of Dublin First Time Homebuyer Loan Program (FTHLP), with the Amended Program attached as Exhibit A 2) Redlined text of the "Loan Terms" section ofthe First Time Homebuyer Loan Program. 3) Minutes of December 13, 2005 Joint Study Session Meeting. ~ oi \(,(1) .,' 2) Receive Staff Presentation; and Adopt Resolution approving the First Amendment to the City of Dublin First Time Homebuyer Loan Program (FTHLP). RECOMMENDATION: FINANCIAL STATEMENT: The 2006-2007 Fiscal Year budget and the proposed 2007-2008 budget include $500,000 for each fiscal year in Affordable Housing Funds to begin providing loans to applicants through a First Time Homebuyer Loan Program. The impact ofthis Amendment is that the rate of return to the City on funds that are loaned under the Program will likely be reduced. PROJECT DESCRIPTION: Background In 2006, the City Council approved the "City of Dublin First Time Homebuyer Program" and subsequently authorized Staff to finalize the form loan documents and issue loans. Approximately five loans are anticipated to be made this fiscal year. The program provides loans to first-time home buyers that meet certain other criteria. Simple interest begins accruing on the date of the loan, but neither principal nor interest payments are required unless 30 years elapse, the property is sold or the primary mortgage is refinanced, or the first time buyer defaults. COPY TO: Page 1 of2 ITEM NO. --.S. Z K:\Agenda Statements\2007\CC\Interest Rate Adjustment\CCSR 6-] 9-07 FTHLP Fina1.doc At a Joint City Council/Planning Commission Study Session held on December 13, 2005, the City Council provided Staff with direction on 12 policy issues affecting the development of a First Time Homebuyer Loan Program (FTHLP). One of those policy issues (Policy Issue No.9) was a determination of how the interest should be calculated on the loans. At that meeting, the City Council concurred with Staffs recommendation that the interest should be tied to the City's average rate of return on its investments. Staffs thought was that tying the interest rate to the City's average rate of return was a fiscally responsible method of determining the interest rate. The Program document therefore states that the interest rate is set forth as "interest at a percentage equal to the average of the City's pooled investments for the previous year". Under the existing Program, Staff calculates the FTHLP interest annually for the upcoming fiscal year in accordance with Program documents. In the past two fiscal years, the City's yield on its pooled investments has been increasing. The current FTHLP interest rate for the fiscal year 2006-2007 is 3.5 percent. Given the current rate of return on the City's pooled investments, the FTHLP interest rate for fiscal year 2007-2008 would be expected to be approximately 4.3 percent. Most subSIdized loan programs use a fixed interest rate of3%. Increasing the FTHLP interest rate to 4.3% would make Dublin's FTHLP the highest interest rate down payment assistance program in the Tri-Valley region. The Cities of Livermore and Pleasanton and the California Housing Finance Authority offer a down payment assistance program that provides 3 percent interest loans to first time homebuyers. If the City's yields increase still further, the Program will become a less beneficial program to first time homebuyers. In addition, the interest rate calculation required by the current Program is more expensive than would be a fixed rate. For one thing, doing an annual calculation is Staff intensive. Additionally, each year, Staff would need to modify and reprint promotional materials. Finally, each year Staff will be required to announce the new interest rate to financial institutions and developers. A fixed interest rate would avoid all of these tasks, reducing the expense. Proposed Amendment In order to establish a fixed interest rate, Staff is proposing that the FTHLP be amended under the Section of "Loan Terms." The currently calculated interest rate is 3.5 percent, and Staffproposes that the FTHLP loan program interest rate be fixed at this amount. While 3.5 percent is 1'2 a percentage point higher than other cities in the Tri Valley area, the loan will remain competitive and well below market. In addition, since the City has already made several loans at this rate, it seems equitable to the current loan holders to keep the program at 3.5 percent. The proposed Amendment to the interest rate has been included in Attachment 1, Exhibit A and also shown in Attachment 2 as redlined pages 2 and 3 for City Council's reference. RECOMMENDATION: Staff recommends that the City Council: 1) Receive Staff Presentation; and 2) Adopt the Resolution approving the First Amendment to the City of Dublin First Time Homebuyer Loan Program Page 2 of2 K:\Agenda Statements\2007\CC\Interest Rate Adjustment\CCSR 6-] 9-07 FTHLP Fina1.doc '1,g RESOLUTION NO. XX - 07 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN ************************************ FIRST AMENDMENT TO THE FIRST TIME HOME BUYER LOAN PROGRAM WHEREAS, the City Council included the establishment of a First Time Homebuyer Program as a high priority in the 2005-2006 goals and objectives; and WHEREAS, on March 21, 2006, the City Council approved a First Time Homebuyer Loan Program (the Program); and WHEREAS, material changes to the Program can be made by the City Council as stated in the Material Changes and Interpretations section ofthe Program; and WHEREAS, the adopted Program contained a provision that the interest rate be based on the prior year's average of the City's pooled investments; and WHEREAS, Staff prepared a report to the City Council recommending that the interest rate be set at 3.5 percent under the Program to be more competitive with the surrounding jurisdictions and to reduce Staff time in implementing the Program; and WHEREAS, the interest rate change to 3.5 percent has been incorporated in the Program attached as Exhibit A. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby approve the Amended First Time Homebuyer Program attached as Exhibit A. PASSED, APPROVED AND ADOPTED this 19th day of June 2007 by the following vote: AYES: NOES: ABSENT: ABSTAIN: Mayor ATTEST: City Clerk K:\Agenda Statements\2007\CC\CC Reso 6.19.07 FTHLP ] st Amend.doc ~#8,2 b/,Qj07i Attachment 1 d. ~ /3 CITY OF DUBLIN FIRST TIME HOMEBUYER LOAN PROGRAM Goal of Pro2ram: The goal ofthe First Time Homebuyer Loan Program is to provide assistance to households striving to enter the home buying market in the City of Dublin by offering financial assistance and education. Definitions "Area Median Income" shall mean the Median Income adjusted by actual household size as published annually by State Department of Housing and Community Development ("HCD") for the County of Alameda, which Median Income levels shall be adjusted concurrently with their publication by HCD. "Application Completion Letter" shall mean that letter sent by the City to the applicant ensuring that the applicant's application was complete and the applicant meets the eligibility requirements. "Below-Market Rate Loan" shall mean a loan of up to fifteen percent (15%) of the sales price capped at the monthly median home price as published by Bay East Association of Realtors "City" shall mean the City of Dublin, California. "Conditional Loan Approval" shall mean that the applicant's loan was complete, the applicant meets eligibility requirements, and the applicant may proceed to locate a home and begin the rest of the Loan process. "County" shall mean the County of Alameda, California. "Eligible Household" shall mean a household that meets the eligibility criteria set forth in these policies and procedures. "First Time Homebuyer" shall mean a purchaser who has not owned a home, condominium or mobile home, whether as sole owner, tenant-in-common, joint tenant or other form of ownership within the past three (3) years. The City may consider displaced homemakers or other hardship cases. "Gross Household Income" shall mean all income from all sources from all adult household members derived as provided in the Internal Revenue Code (26 USC Section 61), whether or not exempt from federal income tax. Such income includes, but is not limited to, the following: 1. Wages and salaries including overtime pay; 2. Compensation for services, including fees, commissions, tips and bonuses; 3. Net income derived from business; K:\First time homebuyers\Interest Rate Adjustment\Dublin FTH Program With Interest Rate Amendment 6-19-07.DOC Page -1 - of7 Exhibit A .3 ~J& 4. Gains derived from dealings in property; 5. Interest; 6. Rents; 7. Royalties; 8. Dividends; 9. Alimony; 10. Child Support; 11. Annuities; 12. Income from life insurance and endowment contracts; 13. Pensions; 14. Income from discharge of indebtedness; 15. Partnership distributions; 16. Life insurance survivor benefits; 17. Income from an interest in an estate or trust; 18. Public benefits including but not limited to TANF, SSI, disability income; and/or 19. When a family has net family assets in excess of $5,000, income shall include the actual amount of income, if any, derived from all of the family assets or two percent (2%) ofthe value of such assets, whichever is greater. "HUD" shall mean the United States Department of Housing and Urban Development. "Market Rate Loan" shall mean a loan of up to ten percent (10%) of the sales price capped at the monthly median home price as published by Bay East Association of Realtors "New" shall mean a home not previously occupied. "Loan" shall mean a loan or any other form of financial assistance provided by the City to assist a homeowner to purchase a home, including the Below-Market Rate Loan and the Market Rate Loan. "Program" shall mean the City of Dublin First Time Homebuyer Loan Program, including Market Rate and Below-Market Rate Loans for first time homebuyers. "Public Service Employee" shall mean an employee of any public agency situated within the City. Loan Terms: Market Rate Loan. When the property is sold, the City receives not only its original loan but also the greater of: (1) three and one half percent (3.5%) or (2) equity based on the proportion ofthe City's loan compared to the total cost ofthe home (for example, if the cost of the home is $450,000 and the loan is $45,000, the percentage would be 10%). The home does not remain an affordable housing unit with a maximum affordable sales price Below-Market Rate Loan. When the property is sold, the City has right of first refusal and the property may not be sold beyond a maximum affordable sales price. The City also K:\First time homebuyerslInterest Rate AdjustmentlDublin FTH Program With Interest Rate Amendment 6-I9-07.DOC Page - 2 - of7 Lf 1 )8, receives interest at three and one half percent (3.5%). The City does not receive a percentage of the increased equity. The Loan is considered a "deferred" loan because no payments are due until the owners sell the home or a default occurs. Defaults include, but are not limited to, the following: failure to occupy the property as one's primary residence; refinancing above the value ofthe Loan balance; violations of senior deeds of trust; or impermissible transfer. If refinancing of the primary mortgage occurs, Staff will determine if this refinancing will require Loan repayment. The Loan may pair up with the following primary loan products: a fixed mortgage of 30 years or longer, some types 5 year fixed and then adjustable rate mortgage (5/1 ARM), some products that offer interest only for a specified time period and then revert to a fixed mortgage of 30 years or longer, or any CalHF A product. However, others may be considered on a case-by-case basis. The specifics of the primary loan products will be reviewed on a case-by-case basis to determine ifthe loan is deemed secure enough to pair up with the City's "silent second." The Loan may also work with layered financing as long as the other loans do not reduce the security of the City's funds. Examples are down payment loans along with primary loans provided by CaIHFA. The maximum Loan amount for which an Eligible Household may qualify does not include the amount the City will front for servicing fees or the cost of any additional due diligence for which the City was required to obtain (i.e. title reports, termite inspection, credit report and appraisal). Such expenses will be added to the debt secured with the Loan. The Loan shall contain no co-signatories, and only the purchaser's/s name/s may be on the deed. Qualifying Criteria: A household is eligible for a Loan if it meets the following criteria: 1. First Time Homebuver: Meets the definitions of First Time Homebuyer described above. 2. Income: The total Gross Household Income must be no more than 120% of the area median for a Below-Market Rate Loan, and no more than or 140% ofthe area median for Market Rate Loans. The area median is based upon the numbers established annually by HCD, and is adjusted for household size. 3. Assets: The household may have no more than two hundred and fifty thousand dollars ($250,000) oftotal assets, excluding pensions and federally approved pre-tax savings accounts. 4. Owner Occupancy: Applicants must certify that they will occupy the property as their full-time residence at least ten (10) months each year, and that they will not rent or lease the property. 5. US Citizenship/Legal Residency: Applicants and all household members must be United States Citizens or have the legal right to reside in the United States. K:\First time homebuyers\Interest Rate AdjustmentlDublin FTH Program With Interest Rate Amendment 6-I9-07.DOC Page - 3 - of7 6~18 6. Down Payment: Applicants must be able to provide three percent (3%) ofthe sales price of the home as a down payment. Preferences: The Program contains preferences for certain individuals (described below). The preferences are determined when the application is processed for completeness. If the applicant has preference points, the applicant moves ahead of other applications that have yet to receive a letter from Staff confirming a complete application. A household receives preference for a Loan if one of its members meets any of the following criteria: Lives in the City Works in the City Public Service Employee Senior (62 years +) Permanently Disabled Immediate relative of a City resident Demolition or condominium conversion 3 points 3 points 1 point 1 point 1 point 1 point 1 point Application Submittal Requirements: Application - Review for Comvletion A completed application packet would contain the following: 1. Identification: Drivers license, birth certificate, or other form of legal photographic identification for all adult household members; 2. Mortgage Materials: Pre-approval letter with description of loan type and completed mortgage application. 3. Account Statements: Three (3) most recent months of statements for all accounts, including checking, savings, or other investment accounts owned in part or full by all adult household members. 4. Employment Income Verification: Verification must specify the amount and type of pay (i.e. wages, overtime wages, commissions, bonuses), frequency of pay, and year-to-date earnings, including check stubs or earning statements showing employee's gross pay per pay period and frequency of pay. Due to the unpredictable nature of overtime, commission, and bonus income, if necessary, these forms of income may be estimated using prior year income history. K:\First time homebuyers\Interest Rate AdjustmentlDublin FTH Program With Interest Rate Amendment 6-I9-07.DOC Page - 4 - of 7 ~1)S 5. Other Income Verification: For sole proprietors, gross business receipts and three (3) most recent business tax returns, including all schedules and attachments; social security, pensions, public assistance or disability; alimony or child support. 6. Tax Returns: Three (3) most recent income tax returns for all adult household members including all attachments and schedules. 7. applicable. Verification of Divorce or Separation Status: Signed and filed court document, if 8. Authorization to Obtain Credit Reports: Each adult household member shall authorize the City to obtain his or her credit report. Application Processing Once an application packet is received by the Staff, the qualifications ofthe applicant will be evaluated. Staffwill determine income, credit score, total debt, and preferential status by reviewing the application material. 1. Identification: Staffwill confirm the identity of each applicant. 2. Mortgage Materials: Staffwill confirm that applicant has been pre-approved for a type of primary loan accepted under the Program. 3. Account Statements: Staff will analyze accounts to determine that the household does not have more than $250,000 in assets, excluding pensions and federally approved pre-tax savings accounts. 4. Employment Income Verification: Staff will analyze most current documentation to establish whether income exceeds 120% or 140% of the area median income. 5. Other Income Verification: Staff will analyze most current documentation to establish whether income exceeds 120% or 140% ofthe area median income. 6. Tax Returns: Staffwill analyze tax returns to determine the assets and income of the applicants, as well as their first time homebuyer status. 7. Verification of Divorce or Separation Status: Staff will review these court documents as necessary to determine how applicant will take legal ownership of the home. 8. Authorization to Obtain Credit Reports: Staff will obtain credit reports to determine that FICA credit score is not below 620. Staffwill determine that debt-to-income ratio does not exceed 50%. When Staff determines that all the information has been provided, that the application is complete, and the applicant is qualified; Staff shall send a letter to applicant. Receipt of this K: \First time homebuyers \Interest Rate Adjustment\Dublin FTH Program With Interest Rate Amendment 6-I9-07.DOC Page - 5 - of7 I i J/j "application completion letter" ensures that the applicant is conditionally approved and may proceed to locate a home and begin the rest of the Loan process. Staff will then forward an applicant information packet to the Loan Committee. Loan Committee Review After the applicant has received the application completion letter he/she is considered conditionally approved. The applicant's information packets will be delivered to a three (3) person loan approval committee as determined by the City Manager or designee from time to time. Within 5 business days, the members of the loan committee will review the application and, upon a two-thirds vote, confirm or deny the eligibility for a Loan. Locating a Home After the applicant has been determined to be qualified and is conditionally approved, the applicant must then locate a home, place a real estate bid, have the bid accepted by seller, enter into a purchase agreement, and provide the purchase agreement to Staff for review. The applicant must also provide a check for 1 % of the home price to the City of Dublin. This check will be held until loan closing. If the loan closes Staff will send the check to the escrow company for use as part of the 3% required down payment. If the loan does not close and the City of Dublin has incurred expenses in securing documents needed to qualify the loan (title report, appraisal, termite report, etc.) then the cost of documents secured will be deducted from the 1 % provided. The difference from the amount spent, at cost, and the amount provided by the applicant will be returned to the applicant. Due Diligence on Selected Home 1. Once the applicant has located a home, if it is an existing, previously owned home, the City of Dublin Staffwill secure a title report on the property to establish the ownership on the property as well as any clouds or conditions on the title to the property that may merit consideration. 2. The Staffwill secure a termite report from the applicant or termite firm to determine that the structure is sound and will work with the Building Division to determine if any of the recommended work must be completed prior to sale to ensure a sound structure and to safeguard the City's interest in the property. In any case, if termite infestation is found in the report, the seller must comply. If any work is determined to be necessary the seller must comply before the City will enter into a loan with an applicant for the property. This step is unnecessary on a new home. 3. The Staffwill secure an appraisal of the home to assure that the asking price is reasonable. This step is unnecessary on a below-market rate Inclusionary home. All of the above due diligence documents may be obtained from the primary lender or the City may need to enter into contracts for the various services with private service providers. K:\First time homebuyers\Interest Rate AdjustmentlDublin FTH Program With Interest Rate Amendment 6-I9-07.DOC Page - 6 - of7 g e~ /& Disbursement of Loan Funds to Escrow Comvanv Once the City receives approval from the Loan Committee, the applicant has located a home, and all due diligence on the property is complete, a claim will be made for a check or wire for the total amount to be loaned. The claim will be held until the home enters escrow, at which time the claim will be delivered to the Finance Division for issuance. The loan funds will be delivered or wired to the escrow company along with closing instructions. Loan Documents Staffwill draw up a complete set ofloan documents once the home enters escrow. Once all due diligence is complete, the buyer will be called into the office to execute the loan and real estate documents, and the executed documents will be delivered to the Escrow Company for closing and recording. Education The applicant must take a HUD or Fannie Mae certified First Time Homebuyer class within six (6) months prior to loan closing. Staff will be able to provide locations to applicants where this requirement may be met. Material Chan2es and Interpretations Material changes and interpretations to the Program may be made only by Council. Non- material changes and interpretations of the Program may be made by the City Manager or his or her designee. K:\First time homebuyerslInterest Rate AdjustmentlDublin FTH Program With Interest Rate Amendment 6-I9-07.DOC Page - 7 - of7 q1/~ 4. Gains derived from dealings in property; 5. Interest; 6. Rents; 7. Royalties; 8. Dividends; 9. Alimony; 10. Child Support; 11. Annuities; 12. Income from life insurance and endowment contracts; 13. Pensions; 14. Income from discharge of indebtedness; 15. Partnership distributions; 16. Life insurance survivor benefits; 17. Income from an interest in an estate or trust; 18. Public benefits including but not limited to TANF, SSI, disability income; and/or 19. When a family has net family assets in excess of $5,000, income shall include the actual amount of income, if any, derived from all of the family assets or two percent (2%) of the value of such assets, whichever is greater. "HUD" shall mean the United States Department of Housing and Urban Development. "Market Rate Loan" shall mean a loan of up to ten percent (10%) ofthe sales price capped at the monthly median home price as published by Bay East Association of Realtors "New" shall mean a home not previously occupied. "Loan" shall mean a loan or any other form of financial assistance provided by the City to assist a homeowner to purchase a home, including the Below-Market Rate Loan and the Market Rate Loan. "Program" shall mean the City of Dublin First Time Homebuyer Loan Program, including Market Rate and Below-Market Rate Loans for first time homebuyers. "Public Service Employee" shall mean an employee of any public agency situated within the City. Loan Terms: Market Rate Loan. When the property is sold, the City receives not only its original loan but also the greater of: (1) interest in a percentage equal to the a'v'erage of the City's pooled investments for the previous year three and one half percent (3.5%) or (2) equity based on the proportion of the City's loan compared to the total cost of the home (for example, ifthe cost of the home is $450,000 and the loan is $45,000, the percentage would be 10%). The home does not remain an affordable housing unit with a maximum affordable sales price Below-Market Rate Loan. When the property is sold, the City has right of first refusal and the property may not be sold beyond a maximum affordable sales price. The City also K:\First time homebuyerslInterest Rate AdjustmentIDublin FTH Program With Interest Rate Amendment REDLINED 6-I9-07.DOC Page 2 of7 ATTACHMENT 2 to ~ /% receives interest on the original loan at a percentage equa-l to the average of the City's pooled investments f{)r the preyious year three and one half percent (3.5%). The City does not receive a percentage of the increased equity. The Loan is considered a "deferred" loan because no payments are due until the owners sell the home or a default occurs. Defaults include, but are not limited to, the following: failure to occupy the property as one's primary residence; refinancing above the value of the Loan balance; violations of senior deeds of trust; or impermissible transfer. If refinancing of the primary mortgage occurs, Staff will determine if this refinancing will require Loan repayment. The Loan may pair up with the following primary loan products: a fixed mortgage of 30 years or longer, some types 5 year fixed and then adjustable rate mortgage (5/1 ARM), some products that offer interest only for a specified time period and then revert to a fixed mortgage of 30 years or longer, or any CalHF A product. However, others may be considered on a case-by-case basis. The specifics of the primary loan products will be reviewed on a case-by-case basis to determine if the loan is deemed secure enough to pair up with the City's "silent second." The Loan may also work with layered financing as long as the other loans do not reduce the security of the City's funds. Examples are down payment loans along with primary loans provided by CalHF A. The maximum Loan amount for which an Eligible Household may qualify does not include the amount the City will front for servicing fees or the cost of any additional due diligence for which the City was required to obtain (i.e. title reports, termite inspection, credit report and appraisal). Such expenses will be added to the debt secured with the Loan. The Loan shall contain no co-signatories, and only the purchaser's/s name/s may be on the deed. Qualifying Criteria: A household is eligible for a Loan if it meets the following criteria: 1. First Time Homebuyer: Meets the definitions of First Time Homebuyer described above. 2. Income: The total Gross Household Income must be no more than 120% of the area median for a Below-Market Rate Loan, and no more than or 140% ofthe area median for Market Rate Loans. The area median is based upon the numbers established annually by HCD, and is adjusted for household size. 3. Assets: The household may have no more than two hundred and fifty thousand dollars ($250,000) oftotal assets, excluding pensions and federally approved pre-tax savings accounts. 4. Owner Occupancy: Applicants must certify that they will occupy the property as their full-time residence at least ten (10) months each year, and that they will not rent or lease the property. K:\First time homebuyerslInterest Rate Adjustment\Dublin FTH Program With Interest Rate Amendment REDLINED 6-I9-07.DOC Page 3 of7 f)~ g A special joint meeting of the Dublin Planning Commission and City Council was held on Tuesday, December 13,2005, in the Regional Meeting Room of the Dublin Civic Center. The meeting was called to order at 5:00 p.m., by Mayor Lockhart. .. ROLL CALL PRESENT: Councilmembers Hildenbrand, McCormick, Oravetz and Zika, and Mayor Lockhart. Planning Commissioners Biddle, Fasulkey, King, Schaub and Wehrenberg ABSENT: None. .. PUBUC COMMENT Mayor Lockhart asked for public comments. No comments were made by the public at this time. .. PROPOSED FIRST TIME HOMEBUYER LOAN PROGRAM WORKSHOP 5:03 p.m. (430-60) Housing Specialist Julia Abdala explained that the City Council and Planning Commission would participate in a joint workshop to discuss components of the proposed First Time Homebuyer Loan Program. Staff would then ask the City COWlcil to provide direction in preparing a draft First Time Homebuyer Program, which would subsequently go to the City COWlcil for consideration and approval. Members of the First-Time Homebuyer Taskforce CITY COUNCIL MINUTES VOLUME 24 SPECIAL MEETING December, 13, 2005 PAGE 457 www.ci.dublin.ca.us ATTACHMENT 3 /2-~ 1& present, all of whom were instrumental in creating the draft loan program, were introduced: Rick Anixter, Bank of America; JoAnn Duncan, Irwin Home Equity; Mary Rose Parkman, City of Concord; Mike Seeley, DID Mortgage. Ms. Abdala briefly reviewed the 12 issues which would be discussed and for which Council would give direction by Staff: 1) Definition of a First Time Homebuyer; 2) Target units for which the City would provide loans; 3) Maximum amount of financing that the City could provide in a First Time Homebuyers loan; 4) Maximum sale price allowed for a home to participate in the Dublin program; 5) Maximum income that would be allowed for applicants for a First Time Homebuyer Loan; 6) Who would be able to utilize the Dublin First Time Homebuyer Loan; 7) Type of loan that the City could provide; 8) Possibility of equity sharing on repayment of the First Time Homebuyer loan as apposed to simple repayment of the First Time Homebuyer Loan; 9) If any interest should be charged and the amount of interest that could be charged for the First Time Homebuyer Loan at maturity; 10) City preferences in providing First Time Homebuyer Loans to applicants; 11) Charging an administrative fee for providing the loan and servicing the loan; and 12) Maximum assets that an applicant may own and still quality for a Dublin First Time Homebuyer Loan. Staff suggested that each issue be discussed individually and directed provided by the Council before moving on to the next topic of discussion. Issue #1: Defmition of a First Time Homebuyer. Ms. Abdala advised that Staff recommended that a First Time Homebuyer be defined someone who has not owned a home for 3 years, and reviewed the rationale, as well as pros and cons of the proposed definition. The COlUlCil, Commission and Taskforce discussed the pros and cons of the definition, and the possibility of addressing displaced homemakers and other hardship situations in the definition. Ms. Abdala clarified that 3 years and some consideration for displaced homemakers and other hardship situations was recommended by the Council and Commission. CITY COUNCIL MINUTES VOLUME 24 SPECIAL MEETING December, 13,2005 PAGE 458 www.ci.dublin.ca.us 13 ~ liS' By consensus, the Council and Commission concurred that First Time Homebuyer should be defined as no home ownership for three years and should include consideration for displaced homemakers and other hardship situations. Issue #2: Should the City provide loans for inclusionary units as weD as market-rate homes? Ms. Abdala advised that Staff recommended that the loan program include both inclusionary and market rate units, and reviewed the rationale, as well as pros and cons of recommendation. The Council, Commission and Taskforce discussed the pros and cons of the definition, agreed that including both would make the program more comprehensive and flexible. By consensus, the Council and Commission concurred that the loan program should include both inclusionary units and market rate homes. Ms. Abdala reviewed inclusionary unit underwriting examples associated with Issue #2, as shown in Power Point presentation. Issue #3: What is the maximum amount that the City should loan under the First Time Homebuyer Loan Program? Ms. Abdala advised that Staff recommended 10% for market rate homes and 15% for inclusionary units, and reviewed the rationale, as well as pros and cons of the recommendation. The Council, Commission, Staff and those present discussed the program structure and reviewed possible financing scenarios, as well as the possibility of piloting the program for a year and a loan cap for individual loans. By consensus, the Council and Commission concurred that the maximum loan amount should be 10% for market rates homes and 15% for inclusionary units and no maximum doUar amount cap. CITY COUNCIL MINUTES VOLUME 24 SPECIAL MEETING December, 13,2005 PAGE 459 www.ci.dubJin.ca.us JLf~ {g Cm. Zika disagreed, stating that there should be a maximum cap because if the market rate units were funded, there would be no money left to fund inclusionary homes without down payments. Issue #4: Should the maximum home price a buyer may purchase with fmancing from the City of Dublin be set at the latest median price as established by Bay East Association of Realtors? City Manager Richard Ambrose advised that Staff recommended that there be a limit to the process of homes that could be financed through the City's First Time Homebuyers Loan program. By consensus, the Council and Commission concurred that the maximum home price a buyer may purchase with financing from the City of Dublin be set at the latest median price as established by Bay East Association of Realtors. Issue #5: Should loans be made available to qualifying households with incomes up to 140% of the County of Alameda median income? Ms. Abdala advised that Staff recommended that loans be made available to qualifying households with incomes up to 140% of the area median, and reviewed the rationale, as well as pros and cons of the recommendation. The C01IDCil, Commission, Staff and those present discussed possible financing scenarios and agreed that, by accommodating this higher income category, more workforce households would be served. By consensus, the Council and Commission concurred that loans should be made available to qualifying households with incomes up to 140% of the County of Alameda median mcome. CITY COUNCIL MINUTES VOLUME 24 SPECIAL MEETING December, 13, 2005 PAGE 460 www.ci.dublin.ca.us )5~ ,g Issue #6: Should the City of Dublin offer First Time Homebuyer Loans to nonresidents as well as Dublin residents? Ms. Abdala advised that Staff recommended that the loan program not be limited to Dublin residents only because restricting loan funds could nm the risk of not attracting enough qualified candidates. She reviewed the rationale, as well as pros and cons of the recommendation. The Council, Commission, Staff and those present discussed whether or not to include nonresidents in the program. The pool of Dublin residents seeking and qualifying for this type of City financing may be too small to provide for a successful loan program, and the possibility of including qualifying applicants who worked in Dublin. By consensus, the Council and Commission concurred that loans should be made available to qualifying applicants who live and/or work in the City of Dublin. Issue #7: Should Dublin provide loans with payment deferred until the home is sold or refinanced? Ms. Abdala advised that Staff recommended that the program include a deferred loan with the full payment due at the sale or refinancing of the home, and reviewed the rationale, as well as pros and cons of the recommendation. The Council, Commission, Staff and those present discussed various repayment and refinancing scenarios, as well staffing to oversee the program or the possibility of outsourcing for loan servicing if amortized loans were the preferred method of having loans repaid. By consensus, the Council and Commission concurred that the program should include a deferred loan with full payment due at the sale of the home and possibly at refinancing depending on the reason for the refinance. For example, if the applicant refinanced for a better interest rate or put money back into the house, they would not have to repay. If they pulled money out for personal use, they would have to pay the City back at time of refinance. CITY COUNCIL MINUTES VOLUME 24 SPECIAL MEETING December, 13, 2005 PAGE 461 www.ci.dublin.ca.us 10 ~ )fJ Issue #8: Should the City loan be repaid with principal and a share in equity earned on home? Ms. Abdala indicated that this option related to market rate units only and advised that Staff was not recommending that to share equity on inclusionary units where the buyers received a First Time Homebuyer loan because of the resale agreements these properties have on title. Staff recommended that whatever percentage of the sale price that the City financed, the City would get that percentage of equity at the sale. For example, on a 10% loan, if the original sale price was $500,000 and the City provided a loan of $50,000, then when the loan was repaid, the City would receive $50,000 plus 10% of any appreciation on the property financed, and the seller would still get 90% of the equity. The rationale, as well as pros and cons of the recommendation, was reviewed. The Council, Commission, Staff and those present discussed various financial scenarios for equity sharing, as well as the possibility of having this option for market rate only and #9, which would be discussed next, for inclusionary units. The scenario of the market rate unit selling for less than it was purchased at was discussed, and Staff recommended a clause which stated that, if there was no equity or if the equity was less than what the City would earn in interest, then the City would ask for interest. By consensus, the Council and Commission concurred that market rate home loans should be repaid with principal and a share in the equity percentage equal to matching what the City's contribution was and review how it works with other programs. Issue #9: Should the City First Time Homebuyer Loan Program require loans received to be paid back in fuD, including interest in the amount of the average rate of return earned by the City. Ms. Abdala advised that, per direction in #8 that market rate home loans should be repaid with principal and a share in equity earned, this issue would apply to inclusionary housing only. CITY COUNCIL MINUTES VOLUME 24 SPECIAL MEETING December, 13,2005 PAGE 462 www.ci.dublin.ca.us )1~ /~ By consensus, the Council and Commission concurred that inclusionary unit loans should be repaid with interest. Issue #10: Should the City preferences used in the Inclusionary Zoning Ordinance be applied to the First Time Homebuyer Program? Ms. Abdala advised that the application of this option would result in a ranking system for applications and reviewed the rationale, as well as pros and cons of the recommendation. The Council and Commission discussed the point system for Inclusionary housing which was already in place, and had taken considerable time and study to devise, and agreed that it could be used as a weighting device for the loan program with the inclusionary units getting preference. Ms. Abdala clarified that the Council was directing Staff to include some preference for Inclusionary units? The Council advised yes. Issue #11: Should the City charge an administrative fee, to be determined, for the administration and servicing of these First Time Homebuyer Loans? Ms. Abdala advised that collecting an administrative fee would help pay for the services of the Housing Staff to administer this program, and reviewed the rationale, as well as pros and cons of the recommendation. The Council, Commission, Staff and those present discussed the costs involved to administer the loan program and whether a fee program would be beneficial or necessary. If no fee was required, the suggestion of collecting money for the mandatory homebuyers' class and credit counseling was also discussed. The Council directed Staff to look at different options and report back to Council when this was presented at a future Council meeting. CITY COUNCIL MINUTES VOLUME 24 SPECIAL MEETING December, 13, 2005 PAGE 463 www.ci.dublin.ca.us }g'1/2 Issue #12: What should be the maximum in assets owned that should be aUowed for a household to qualify for a City loan? Ms. Abdala advised that Staff recommended that no household with liquid assets over $250,000 qualify for a City loan, but the actual situation may vary on a case-by-case basis and would be reviewed and evaluated along with the entire financial status of the household in the underwriting process. The rationale and pros and cons of the recommendation were also reviewed. The Council, Commission, Staff and those present discussed the difference between liquid assets and other assets, as well as the need to allow for some assets to handle emergency situations. By consensus, the Council and Commission concurred that the maximum amount in liquid assets that a household may have and still qualify for the loan program. should be $250,000. The Council directed Staff to incorporate the direction given by the Council and Planning Commission related to each of the 12 issues into the draft First Time Homebuyers Loan program to be presented to the Council for its consideration at a future meeting. Mayor Lockhart thanked the First Time Homebuyer Taskforce for their assistance in crafting this program. . AQJOURNMENT There being no further business to come before the Planning Commission and City Council, the special meeting was adjourned at 6:59 p.m. to the regular Planning Commission meeting of December 13, 2005, and the regular City Council meeting of December 20,2005 at 7:00 p.m. in the Coun~r 1 ed at 100 ivic Plaza. ATIEST: ~.. \ \ C. =.l~~ CITY COUNCIL MINUTES VOLUME 24 SPECIAL MEETING December, 13, 2005 PAGE 464 www.ci.dublin.ca.us