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HomeMy WebLinkAbout2014-42 CC Reso - Approving the CDBG Housing Rehab Program GuidelinesRESOLUTION NO. 2014-42 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF UKIAH APPROVING THE COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) HOUSING REHABILITATION PROGRAM GUIDELINES. WHEREAS, the City of Ukiah has received and will apply for future Community Development Block Grant funding; and WHEREAS, the Community Development Block Grant Housing Rehabilitation Program Guidelines are a requirement of said funding; and WHEREAS, the notice for a public hearing was duly published on September 20, 2014, in the Ukiah Daily Journal; and WHEREAS, a Public Hearing was held pursuant to federal Citizen Participation requirements before the City Council on November 5, 2014, to receive public comment and consider the City of Ukiah's Community Development Block Grant Housing Rehabilitation Program Guidelines. NOW, THEREFORE, BE IT RESOLVED as follows: 1. The City of Ukiah has reviewed and herby approves the Community Development Block Grant Housing Rehabilitation Program Guidelines attached hereto as Exhibit A. 2. The City Manager or designee is hereby authorized and directed to act on the City's behalf in all matters pertaining to the CDBG Housing Rehabilitation Program Guidelines. I 3. The Assistant City Manager is hereby authorized to sign all necessary reports as required by the CDBG Housing Rehabilitation Program Guidelines to be submitted to the State of California, Department of Housing and Community Development. THE FOREGOING RESOLUTION WAS ADOPTED at a regular meeting of the Ukiah City Council held on the 5l" day of November 2014, by the following roll call vote. AYES: Councilmembers Scalmanini, Crane, Thomas, Landis, and Mayor Baldwin NOES: None ABSENT: None ABSTAIN: None Philip E:' aldwin, Mayor ATTEST: I i 6 ) i t l, b i l (,( K ist ine Lawler, ity Clerk i EXHIBIT A THE CITY OF UKIAH'S COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) HOUSING REHABILITATION PROGRAM GUIDELINES Attached behind this page] I I I I I City of Ukiah Page 1 CDBG Single-Family Housing Rehabilitation Guidelines CITY OF UKIAH COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM (CDBG) SINGLE-FAMILY HOUSING REHABILITATION PROGRAM GUIDELINES April 2, 2014 Revised October 23, 2014 Attachment 1 City of Ukiah Page 2 CDBG Single-Family Housing Rehabilitation Guidelines I. APPLICANT ELIGIBILITY A. Conflict of Interest No member of the Ukiah City Council, the Home Improvement Loan Committee, or employee of the City of Ukiah during their tenure or for one year thereafter shall have any interest, direct or indirect in any Home Improvement Program loan contract or the proceeds thereof. B. Income 1. Owner-Occupant The maximum household income allowable to qualify for a Home Improvement Program loan is eighty percent of the median income (targeted income) for Mendocino County, as established by the California Department of Housing and Community Development. Eligible applicants will not have an annual gross income exceeding the levels established for "low- and moderate-income (LMI)" households adjusted by family size. The owner will be required to provide income documentation. Single-family housing rehabilitation program operator or City staff will determine whether applicants satisfy the income eligibility criteria. Income limits will be updated within 30 days of receipt from the California Department of Housing and Community Development. All applicant information obtained by staff will be kept confidential. C. PROPERTY To be eligible for program financing, properties must comply with the following criteria: 1. Location Units to be rehabilitated under the Program must be located in the incorporated areas of City of Ukiah excluding portions subject to flooding. The City reserves the option of completing the “eight step” process for areas subject to flooding, converting to exempt City of Ukiah Page 3 CDBG Single-Family Housing Rehabilitation Guidelines status, and including these areas at the discretion of the Certifying Officer. 2. Occupancy Although there is no minimum length of ownership requirement under the program, an owner-occupant must reside in the unit prior to the processing of a loan application, and the unit must be the resident’s primary residence. However, if in the opinion of the City Building Services Official, the unit as it exists is uninhabitable, this requirement may be waived. 3. Title Property owners shall hold land in fee title. 4. Condition To qualify, the level of disrepair must include at least one major system failure, such as roof, foundation, structural, plumbing, heating, electrical or an accumulation of deficiencies that constitute a threat to health and safety. All repair work will meet Uniform Building Code standards. The priority will be the elimination of health and safety hazards. All property improvements must be physically attached to the property and permanent in nature. General property improvements should be limited to 15% of the rehabilitation loan amount. Luxury items are not permitted. Rehabilitation financing will be available to eligible property owners only when a reasonable expenditure of funds will enable a residential unit to be brought up to HUD Section 8 Housing Quality Standards and Uniform Building Code standards. 5. Life Estate Applicants meeting all other eligibility criteria who hold a Life Estate on the property and reside on the property are eligible for a rehabilitation loan. Income eligibility will be determined by the income of the occupant/holder of the Life Estate. The holder of the Fee Simple Estate will be required to sign all loan documents. The loan conditions will provide that the loan is due and payable upon City of Ukiah Page 4 CDBG Single-Family Housing Rehabilitation Guidelines sale or transfer of the property and upon termination of the Life Estate of the current occupant. (In making loans to Life Estate holders City or program operator staff will regularly monitor such loans to verify the status of the occupant). 7. Mobile/Manufactured Homes CDBG funds may be used for the rehabilitation of a mobile home. An alternative to actual rehabilitation of a mobile home is to replace the unit with a used mobile home. To be considered eligible for rehabilitation costs, the used mobile home must have been occupied and not used as a demonstration model. Should the residential dwelling or existing mobile home that is being considered for rehabilitation meet the criteria for reconstruction discussed below, a new mobile home can be used for replacement. All costs associated with the purchase and transportation can be added to the applicant's loan. 8. Reconstruction Changes in federal law and policies allow the use of CDBG funds to demolish and reconstruct LMI-owned and occupied residential structures. Reconstruction is defined as the demolition and construction of a structure. States may establish guidelines for authorizing reconstruction, provided the guidelines are consistent with federal standards. Grantees must document that the reconstruction costs are less than newly constructed housing and that the estimated cost of the reconstructed housing (including demolition, site preparation and temporary relocation) is less than the fair market value of the reconstructed housing and land combined. This may be accomplished by completing the Test for Reconstruction and providing an appraisal or equal on the fair market value of the newly reconstructed housing. A copy of the Test for Reconstruction must be kept in the project files and be available for review during the monitoring visit. The residential structure to be reconstructed must be a structure or unit within a structure with cooking, eating, sleeping, and sanitation facilities which has been legally occupied as a residence within the preceding 12 months. City of Ukiah Page 5 CDBG Single-Family Housing Rehabilitation Guidelines Reconstruction of a unit is categorically excluded from the National Environmental Policy Act (NEPA, see Chapter 3) if the project is four or fewer units per NEPA 58.35(a) (7). Building plans for reconstruction should meet new construction building and zoning standards for room size, setbacks, and off- street parking areas. II. REHABILITATION STANDARDS A. General Requirements Rehabilitation activity will consist of eligible improvements required to bring a residential dwelling unit up to HUD Section 8 Housing Quality Standards and Uniform Building Code Standards for decent, safe and sanitary housing. Any rehabilitation work will comply with all pertinent standards of the various codes and ordinances adopted by the City of Ukiah including current State standards for residential energy conservation, the Uniform Housing Code and where applicable, local codes and ordinances. It shall be the responsibility of the Housing Rehabilitation Staff to determine the most cost effective and appropriate manner in which to complete the needed repairs of a dwelling. The purpose of the Home Improvement Program is to assure a living unit, which provides for a healthful environment and complete living facilities arranged and equipped for suitable and desirable living conditions commensurate with the type and quality of the property under consideration. To provide each living unit with space necessary for suitable living, sleeping, cooking and dining accommodations, as well as sanitary facilities: 1. Independent facilities shall be provided for each living unit except that common facilities such as laundry and storage space or heating may be provided for each property. 2. Each living unit shall contain provisions for each of the following: (a) A continuing supply of safe potable water. (b) Sanitary facilities and a safe method of sewage disposal. (c) Heating adequate for healthful and comfortable living conditions. (d) Domestic hot water. City of Ukiah Page 6 CDBG Single-Family Housing Rehabilitation Guidelines (e) Electricity for lighting and for electrical uses in the dwelling. 3. Clothes closet space should be provided with bedrooms or located conveniently nearby. 4. Exterior doors shall have keyed locks. 5. Attics and underfloor area shall have proper access and insulation as required by local codes. 6. Every dwelling shall be supplied with a means of disposal or removal of trash and garbage, which is inaccessible to rodents. B. Access to the Building Walks and steps shall be provided for all-weather access to the building and constructed so as to provide safety and reasonable durability. C. Grading Any deficiencies in proper grading or paving adjacent to the building shall be corrected to assure surface drainage away from foundations and basement walls. D. Unacceptable Features Features which are not ordinarily acceptable in any property and must be corrected where feasible are: 1. Buildings in which adequate attic and/or underfloor space ventilation has not been provided to prevent conditions conducive to dampness, decay, fungi and/or insect infestation and deterioration of the structure. 2. Buildings constructed on wood mudsills resting directly on the ground. 3. Crawl space vents with vent bottom less than 6 inches above the finish grade. 4. Foundations with top of stem wall less than 6 inches above finished grade. 5. Wood, siding, floors and/or door casings or sills in contact with ground. 6. Retaining walls shall be maintained in adequate repair and must be provided where necessary to protect the structure, driveway and walls and to prevent soil erosion. City of Ukiah Page 7 CDBG Single-Family Housing Rehabilitation Guidelines E. Structural Soundness All structural components of the dwelling shall be in sound condition and considered serviceable for the expected useful life of the rehabilitated building. Sagging floors, fireplaces, partitions, stairs, and exterior walls shall be restored if practicable to an acceptable level or plumb position, and supported or braced so as to prevent a recurrence of these conditions. Stair railings shall be rigid. Individual structural members in a seriously deteriorated condition shall be replaced. Loose or damaged joints between structural members shall be corrected. F. Inspections and Correction A careful inspection by qualified persons will be made of each building and accessory structure on each property for evidence of actual or potential insect or rodent infestation or access channels. Defects in existing buildings, which permit the entrance of rodents, termites or other vermin will be corrected by appropriate preventive measures. Damaged or deteriorated structural members will be replaced. A number of preventive and protective measures against the several forms of infestation are: 1. Window or other openings near grade are to have snug fitting screens. 2. Exterior doors are to fit tightly and be flashed or caulked at sill. 3. Opening for pipes or ducts through floors or walls are to have tight fitting collars. 4. Cracks and crevices in foundations and aboveground walls may be effectively sealed by pointing with mortar or other approved materials. 5. Cracked, broken or decayed wood surfaces shall be replaced. 6. Appropriate chemical treatment of soil adjacent to foundations and within hollow masonry foundations and treatment of soil in enclosed spaces. 7. The Application of precautions or corrective actions recommended by licensed professional exterminators. G. Exterior and Interior Finishes Exterior and interior finishes shall assure that the building finishes will be adequate to: prevent the entrance or penetration of moisture and weather; protect from damage by decay, corrosion, insects and other destructive elements; provide reasonable durability and economy of maintenance. City of Ukiah Page 8 CDBG Single-Family Housing Rehabilitation Guidelines H. Exterior Appurtenances All exterior appurtenances or accessory structures, which serve no useful purpose, or those in a deteriorated condition which are not economically repairable, may be removed. Such structures include porches, terraces, entrance platforms, garages, carports, walls, fences and miscellaneous sheds. I. Foundations All masonry or concrete foundation walls will be improved to a safe, and sound condition with the top of the wall not less than 6 inches above finish grade. All wood foundation posts, sills, girders and plates showing signs of rot, decay, infestation or structural failure shall be replaced with new suitable materials of proper design where practicable. J. Exterior Walls Wood siding materials and trim that are broken, split or damaged so as to permit the entrance of weather or that show signs of decay or insect infestation shall be replaced. Where required, all existing wood surfaces shall be suitably prepared for painting and shall receive at least one coat of prepared exterior house paint. New wood siding materials shall be protected by appropriate finishes. Composition sidings, including mineral surfaced fiberboard, mineral surfaced asphalt siding, asbestos-cement types, etc., which show deterioration, damage or joint failure so as to permit the entrance of weather or adversely affect the appearance of the dwelling may be repaired, replaced or covered with new suitable siding materials.1 K. Interior Walls and Ceilings 1. All loose and broken gypsum board shall be renailed or replaced, if possible, and refinished. All loose and broken plaster shall be soundly patched and repaired. Where its deterioration is so extensive that patching is impractical, the entire wall or ceiling area shall be replastered or covered with acceptable 1Wherever deteriorated walls, ceilings, or other areas are suspected of containing asbestos materials, precautionary protective measures will be taken to protect workers and residents from harmful dust. These measures may include full abatement procedures as provided by trained personnel. Dwellings which were built prior to 1978 and are occupied by children under the age of seven will be evaluated to determine the existence of chipping or pealing lead-based paint. The occupants of all units rehabilitated through the program will receive a Lead-Based Paint Warning advising parents of the possible need to have children evaluated for possible lead poisoning. In incidents where lead-based paint poisoning has been determined, or where problems are believed to be likely, HUD-approved abatement procedures will be followed in cooperation with the local Health Department. City of Ukiah Page 9 CDBG Single-Family Housing Rehabilitation Guidelines drywall materials.2 2. All walls and ceilings shall be properly prepared and painted or shall receive other appropriate finish. 3. Interior doors, jambs and interior trim, which show excessive deterioration, abuse and patching shall be replaced. Existing and/or new interior millwork shall be properly prepared and receive protective finish. All broken or missing hardware shall be replaced. L. Kitchen Fixtures Countertop and backsplash shall be of approved durable and water-resistant materials. Where required, a new sink and fittings properly connected to hot and cold water supply and waste lines shall be installed. M. Finished Floors 1. Bathrooms/toilet compartments and kitchen floors shall be provided with approved underlayment, approved waterproof floor covering materials, and appropriate base mould. 2. Floors in other areas of the living unit which show excessive wear, shrinkage, cupping or other serious damage shall be, if possible, replaced or covered with acceptable finish flooring materials properly installed. Sound wood floors showing normal wear and discoloration may be refinished.3 3. Finish floors shall be appropriate to the use of the space, be in good condition, and provide low maintenance service life. N. Roof Drainage Each dwelling will have a controlled method of disposal of water from roofs where necessary to prevent damage to the building and property if possible. O. Roof All roofs and flashings shall be replaced or repaired to the extent necessary to protect the building against leakage. P. Gutters, Cornices and Exterior Details Gutters, downspouts, eaves, rafter ends, fascias, soffits and cornices, 2/ Ibid 3/ Ibid. City of Ukiah Page 10 CDBG Single-Family Housing Rehabilitation Guidelines mouldings, trim, etc., showing evidence of leakage, rust, decay or deterioration will be replaced with new materials suitably protected with paint or stain. Repairs shall be made with any necessary changes of existing design or with appropriate new design within reasonable limits to prevent recurrence of the deterioration. Q. Chimneys Chimneys, brickwork or fireplaces showing signs of deterioration should be repaired or replaced with appropriate materials if possible. R. Windows, Doors, and Other Openings Existing windows and doors, including their hardware, shall properly function and give evidence of continuing acceptable service. Defective glass or locking mechanisms shall be replaced or repaired. Windows and doors and their frames which show signs of decay, deterioration, excessive warping, racking or misalignment shall be replaced or repaired and adequately protected with paint and flashings against further deterioration. S. Electrical Wiring When electrical services must be replaced, a 100-amp main service with a minimum of 4 branch circuits is required. Additional branch circuits shall be installed, as required, to service cooking ranges, clothes dryers, water heaters and other major appliances. A minimum of one outlet and one permanently installed overhead light fixtures or 2 outlets for each living room and each bedroom is required. Every other habitable room shall have at least one outlet and a source of natural or artificial light. An outlet may consist of one receptacle or two and must be permanently installed. Permanent light fixtures with wall- mount switches are required in kitchen and bath. T. Plumbing All plumbing fixtures shall be appropriately connected to approved drain, waste, vent, and supply lines. All leaking, deteriorated or clogged piping shall be replaced or restored to a condition which will provide safe and adequate service for the plumbing fixtures or equipment to which they are connected. U. Heating and Ventilation No unvented fuel-burning heater shall be permitted. All heating devices and appliances shall be of an approved type. Each living unit shall have properly vented domestic water heating equipment capable of adequately supplying hot water, as defined in U.P.C., with properly sized safety devices in place. City of Ukiah Page 11 CDBG Single-Family Housing Rehabilitation Guidelines V. Porches, Walks and Steps All unsafe or unsound porches and steps will be removed or replaced and protected from deterioration with paint or other acceptable finish. Where required, approved handrails and guardrails shall be provided. W. Fences and Gates Dilapidated wood fencing which poses a health or safety hazard should be replaced. Wood fences which have missing pickets, boards, panels or which lean may have missing parts replaced with suitable materials. Sagging gates may be braced and those dragging on the ground may be rehung. X. Landscaping Brush which poses a fire hazard shall be removed. Trees that are undermining the structural integrity of the dwelling will be safety-pruned. All debris, lumber and trash shall be removed. Y. Painting and Decorating Where necessary, a protective and decorative finish coating shall provide: adequate resistance to weathering, protection of finished surfaces from moisture or corrosion, an attractive appearance, and reasonable durability. Where painted surfaces are in a well-maintained condition and not disturbed by the rehabilitation work, painting and decorating is not required. Z. Expansion of Dwelling Rehabilitation assistance may provide for the expansion of kitchen and bathroom facilities. An existing bedroom may be enlarged or an additional bedroom may be provided where it has been determined that a family is living in an overcrowded condition as defined by the Bureau of Census. For the purpose of adding a second bathroom, overcrowding is defined as five or more persons sharing the same home. AA. Kitchen Equipment Rehabilitation assistance may provide for the repair or purchase of a kitchen range and/or refrigerator if missing or unsafe. BB. Energy Conservation Measures Rehabilitation loans may be used to reduce energy consumption through the installation of: City of Ukiah Page 12 CDBG Single-Family Housing Rehabilitation Guidelines 1. Dual glazing 2. Storm windows 3. Attic, floor, and wall insulation 4. Water heater blankets and timers 5. Hot water pipe insulation 6. Caulking and weatherstripping of doors and windows 7. Replacement of inefficient woodstoves or furnaces (including flues and heat shields). 8. Duct testing and sealing for existing HVAC systems 9. Water conserving showerheads and faucet aerators 10. Hardwired energy efficient light fixtures and CFL’s CC.Incipient Violations Rehabilitation assistance may be used for rehabilitation work necessary to correct incipient, as well as actual violations of Housing Quality Standards. An incipient violation exists if it is thought that the physical condition of an element in the structure will deteriorate into an actual violation in the near future. DD.Building Permits and Related Fees Rehabilitation assistance may provide funds to cover the cost of building permits and related fees that are required to carry out the proposed rehabilitation work when such fees are not waived. EE.Ineligible Costs Except as provided for herein, a rehabilitation loan shall not be used for: 1. New construction, substantial reconstruction, expansion of the structure, or the finishing of unfinished spaces (except in documented overcrowded conditions). 2. Luxury items, materials, fixtures, equipment or landscaping of a type or quality which exceeds that customarily used in the locality for properties of the City of Ukiah Page 13 CDBG Single-Family Housing Rehabilitation Guidelines same general type and value as the property to be rehabilitated (General Property Improvements). 3. Appliances not required by Section 8 Housing Quality Standards (Energy Star rated appliances may replace any existing appliances in poor condition). 4. Acquisition of land. 5. Penalty building permit fees. FF. Sewer Lateral Replacement/Repair Grant Program In certain cases, CDBG funds may be made available to income-eligible residents solely to provide repairs or replacements of sewer laterals. This activity is considered to be housing rehabilitation and, although similar in many ways to standard housing rehabilitations, have a number of differences. Sewer lateral repair and/or replacement is subject to the following: a. The applicant must be eligible and qualified under the City’s housing rehabilitation program guidelines. b. Funds provided for sewer lateral replacement and/or repair to single family units are grants and do not require repayment. The applicant must qualify under one of the three situations in Section III.4. c. Applicants are selected on the basis of "first come, first ready" until funds are exhausted. d. Sewer lateral projects generally do not undertake repairs to the interior of housing units unless such repairs are absolutely necessary for a code-compliant sewer lateral. III. TYPES OF FINANCING AND TERMS A. Owner-Occupants 1. Maximum Loan Amount An eligible owner may qualify for the full cost of the rehabilitation work needed to comply with Section 8 Housing Quality Standards and Uniform Building Code. Maximum assistance with funds is $100,000. Total indebtedness against property will not exceed 100 percent of after-rehabilitation value. Rehabilitation costs for jobs may be supplemented with personal financing or with other loan or grant programs. 2. Deferred Payment Loans (DPLs) A DPL is a zero to four percent (0-4%) interest loan secured by a deed of trust with no payback required until the borrower sells or transfers title or discontinues residence in the dwelling. When specific circumstances occur, the DPL becomes immediately due and payable. Payments may be made voluntarily on a DPL. 3. Below Market Interest Rate (BMIR) Loans Amortized loans secured by a deed of trust will bear a fixed simple interest rate City of Ukiah Page 14 CDBG Single-Family Housing Rehabilitation Guidelines of 0-4% per annum on the unpaid principal balance, depending on the income of the borrower, and eligible housing and/or other expenses. Whenever possible loans will be amortized. The term of all amortized loans will be for 15 years unless a longer period is deemed necessary to protect the integrity of the loan. There will be no prepayment penalty. 4. Determining Eligibility Owner-occupants with incomes below 50% of the median income for Mendocino County adjusted for family size are eligible for Deferred Payment Loans. On a case-by-case basis other hardship expenses such as medical costs and housing expenses in excess of 30% of the household’s gross monthly income may be considered in determining the need for a DPL. Owner-occupants with incomes between 50% and 80% of the County median income, adjusted for family size will be eligible for BMIR loans. A limited number of $10,000 grants are available for any of the following three situations: 1. For very low-income (gross annual income less than 50 percent of Mendocino County median income) elderly persons - at least 55 years of age. 2. For persons with disabilities–grants for removal of architectural barriers to ADA accessibility to a house with one or more disabled occupants. 3. Lowest Targeted Income Group - with gross annual income less than 50 percent of county median income. For the above situations, costs for documents (preliminary title report, appraisal, etc.) required of the applicant to meet program qualification requirements may be included in the grant so as not to cause undue financial hardship. The Loan Committee will determine if the grant should include these costs. The Loan Committee may adjust the interest rate from 4% to 0% to assure affordability. Affordability is based on 30% of gross income applied to housing costs. Housing costs include mortgage payments on the subject property, the housing rehabilitation loan payment, real estate taxes and insurance on the subject property. Applicants who have housing costs in excess of this 30% figure may qualify for a deferred or partially deferred loan. 5. Reconstruction Policy The reconstruction of existing low-income owner occupied single family residential structures may be authorized with prior State and Federal approval. Procedures shall be consistent with applicable State and Federal guidelines. Reconstruction financed with loan funds shall, with Loan Committee approval, City of Ukiah Page 15 CDBG Single-Family Housing Rehabilitation Guidelines be subject to the per unit maximum of HOME subsidy limits based on number of bedrooms. B. Security Property to be rehabilitated shall act as security for the loan. All loans shall be secured by a Promissory Note and Deed of Trust, which shall be recorded. A junior deed of trust may be approved as security for a loan. Total liens of record against the property may not exceed 90% of the after rehabilitation value as determined by the Loan Committee based upon the estimate provided by Housing Rehabilitation staff. C. Transfer of Title All loans become immediately repayable in full when there is any transfer of title to the property, other than to a surviving spouse. City staff may permit the same or revised terms if income criteria are met by the new property owner. IV. OCCUPANCY REQUIREMENTS A. Owner-Occupants 1. Owner occupants will be required to submit to the City between January 1 and 15 of each year for the term of the loan:  Proof of occupancy in the form of a copy of a current utility bill.  Statement of unit's continued use as a residence.  Declaration that other title holders do not reside on the premises.  Proof of property (hazard) insurance, showing City of Ukiah listed as loss payee. 2. In the event that an owner-occupant sells, transfers title, or discontinues residence in the rehabilitated property for any reason, the loan is due and payable. (a) If, however, the owner-occupant who qualifies for financing dies, and if the heir to the property lives in the house and is income- eligible, the heir may be permitted, upon approval of the City to assume the loan at the rate and terms he or she qualifies for under current participation guidelines. (b) If the owner-occupant who qualifies for financing dies and the heir City of Ukiah Page 16 CDBG Single-Family Housing Rehabilitation Guidelines is not income-eligible, the loan is due and payable. 3. If an owner wants to convert the rehabilitated property to any commercial or non-residential use, the loan is due and payable. V. OWNER PARTICIPATION OR SELF HELP LOANS The purpose of the Home Improvement Program is to improve the housing conditions of low-income residents. Three important considerations in achieving this purpose are: 1) the work should be done in a timely manner 2) the work should meet certain basic standards of quality 3) work must comply with the rehabilitation standard established by the Program (Section 8 Housing Quality Standards and Uniform Building Code). In situations where a home owner is also a construction contractor or can provide references establishing a history of working in residential construction, the property owner may complete some or all of the tasks required to rehabilitate his/her property if he/she has the degree of skill required to perform the work involved. Self-help is usually appropriate for the accomplishment of tasks of an unskilled nature such as general clean up, demolition of small buildings, removal and disposal of debris, or for work which involves minimum use of costly materials and equipment, such as exterior and interior painting. Work of a skilled nature is appropriate only if the owner has a license to perform such tasks. Owners who participate in the Home Improvement Program on the basis of performing some or all of the work themselves, which is known as providing “owner participation” or “self-help,” will be expected to comply with the guidelines outlined below. 1. Evaluation. An evaluation must be performed by the Housing Rehabilitation Specialist to determine the applicant’s suitability for owner participation. The option to allow owners to do the work themselves may be provided at the sole discretion of the Housing Rehabilitation Staff. 2. Work Schedule. Borrowers approved to provide owner participation will be required to submit a detailed work schedule in accordance with deadlines established by the program. This work schedule must include the following: a. A complete list of materials, which will be required for the project. b. A precise cost estimate of materials to be purchased. This estimate must be based on actual costs. c. A detailed list (company names, addresses, and telephone numbers) of places where materials are to be purchased. City of Ukiah Page 17 CDBG Single-Family Housing Rehabilitation Guidelines d. A specific list of individuals (contractors, subcontractors or laborers) who will be needed to assist the owner in completing the project. This list shall include contractors’ license numbers, addresses, telephone numbers, and specific amounts to be paid. Owners are reminded that it is against program policy for any owner or member of the owner’s immediate family to receive payment, either directly or indirectly, for housing rehabilitation work. e. A detailed time schedule showing the dates when work will be started, when work will be done on each task, and when all work will be completed. 3. Permits. It is the responsibility of the homeowner to contact the appropriate governmental offices to determine whether building permits or other permits will be required. Failure to do this may result in loan cancellation or demands that work be started over and corrected. Whatever local requirements prevail for permit issuances, the owner will be expected to comply with those requirements. The work being allowed by this program is for health and safety purposes. A building permit is mandatory for all code-related items. A copy of each permit must be forwarded to the Housing Rehabilitation Specialist and the original should be posted on the structure. Building permit fees, where applicable, are reimbursable items; therefore, they should be included in the original Work Schedule. When each code item is completed (such as electrical, plumbing) the Building Permit is signed off by the Building Inspector. A running copy of the card, showing sign-offs as they occur, shall be provided to Housing Rehabilitation staff. 4.Disbursements. Any disbursements made from the owner’s loan shall be done in accordance with the work schedule approved by the program. Any obligations incurred which are not in accordance with the work schedule may be denied for payment. Disbursements shall be authorized jointly by the homeowner and a duly authorized representative of the Home Improvement Program. All disbursements must be justified by original receipts that are legible, state the materials purchased or labor provided, and they must be otherwise traceable by the program. Disbursements will be for eligible materials only. 5.Prohibition Against Cash Refunds. Homeowners are reminded that it is a violation of program policy for cash refunds to be received for materials purchased or labor secured. In cases where materials are to be returned and cash is to be received, all cash must be immediately returned to the owner’s escrow account. 6.Labor Summary Record. By allowing work to be done on an owner participation basis, it is expected that certain savings will result to the housing rehabilitation program and to the owner’s loan. The method of keeping track of work being done is the City of Ukiah Page 18 CDBG Single-Family Housing Rehabilitation Guidelines “Participant Labor Summary Record.” VI. APPLICANT SELECTION AND LOAN CLOSING A. Home Improvement Loan Committee 1. Purpose The function of the Home Improvement Loan Committee will be to review and act on applications recommended by program staff for financing. The Committee shall review applications in terms of: eligibility, compliance with all program requirements, consistency of staff recommendations regarding loan terms and type(s) of assistance to be provided. The Committee will also review the proposed loan package, and, if appropriate, recommend changes in loan terms and type(s) of assistance to be provided. 2. Composition The Committee will consist of one member of the City of Ukiah Finance Division, one member of the City of Ukiah Public Works Division and one member of the City of Ukiah Special Projects Division. 3. Meetings The Home Improvement Loan Committee shall meet periodically to review and act on applications. A quorum shall exist and all minutes shall be recorded. A quorum is a simple majority of the full committee. The Committee members shall be advised at least seven calendar days before the Committee meeting. 4. Action Action of the Home Improvement Loan Committee shall be by majority vote. B. Application Processing The Housing Rehabilitation Staff shall gather any necessary financial information to determine applicant eligibility and repayment ability. An application consists of: 1. A form containing financial and household information regarding the property owner. 2. A form containing necessary income and household information. Owner Occupant income will be verified by use of one or more of the following forms. a. Request for Verification of Employment b. Verification of Public Assistance City of Ukiah Page 19 CDBG Single-Family Housing Rehabilitation Guidelines c. Income tax information (1040s, etc.) d. Benefit letters for sources of public assistance or pensions e. Copies of recent benefit or pay checks 3. Credit evaluations and income, employment and mortgage verifications as obtained by staff. 4. A preliminary work write-up and cost estimate of required rehabilitation work as prepared by program staff and approved by applicant. 5. Preliminary Title Report (Full or Limited Coverage) and Estimate of current market and after rehabilitation market values. 6. Property Appraisal. 7. Termite Inspections and clearances shall be obtained if deemed necessary. 8. A contingency (depending on the complexity of the job) may be included in each loan. At the completion of rehabilitation, any unexpended funds will be applied to the loan principal. 9. Owners will receive information regarding rights as prescribed by law and an authorization form for signature which states that the owner understands that he/she may be inconvenienced by the rehabilitation work and that he/she agrees to authorize inspectors and workers to enter his/her living quarters during reasonable hours. C. Application Selection A Loan Committee Report (LCR) will be prepared for all loan applications determined by staff to be eligible for a housing rehabilitation loan. The LCR and the application will be brought before the Home Improvement Loan Committee for approval. General lending criteria that will be used to assist in evaluating the applications of eligible property owners for financial assistance will include: 1. The ability and willingness of an applicant to repay a loan, as well as all existing liabilities, as evidenced by such criteria as income, credit history, necessary monthly expenses, and stability of income. 2. The economic feasibility of property rehabilitation such that a reasonable expenditure of funds will enable the correction of all major health and/or safety related items, with the rehabilitated property providing adequate collateral for a loan that is secured with a deed of trust. An eligible borrower may be considered for a subsequent loan, provided he/she has no delinquent payments longer than 10 days and otherwise meets program requirements and underwriting criteria. City of Ukiah Page 20 CDBG Single-Family Housing Rehabilitation Guidelines All recommendations for loans shall be developed by the Housing rehabilitation staff and submitted to the Home Improvement Loan Committee. The Housing rehabilitation staff’s recommendations shall be submitted in written form and shall propose the terms of the loan, interest rate, special conditions, and whether the loan should be approved or denied. All applications shall be submitted for consideration regardless of whether the recommendation is for approval or denial. D. Loan Approval All Home Improvement Program Loans must be approved by the Home Improvement Loan Committee. In order to obtain financing, applicants must meet all property and income eligibility guidelines in effect at the time of loan approval. Applicants will be provided written notification of approval or denial. Reason for denial will be provided to the applicants in writing. An appropriate funding cut off point established for each review period will determine the number of applications that may be approved for funding at that particular time. Qualified applications not selected for funding during one review period will be automatically reconsidered during subsequent periods. Housing Preservation Revolving loans may be approved by the City Loan Committee when the applicant is clearly eligible and when in the opinion of the Loan Committee existing housing conditions pose a hazard to the health and safety of the applicant. E. Loan Closing A Home Improvement Loan Program applicant will have up to two weeks after Loan Committee approval to accept the offered terms and conditions. At the end of this period, City staff may rescind the loan commitment. The Housing Rehabilitation Staff will provide for the execution of all necessary loan documents and their recordation. F. Appeals Objections by any applicant as to policy, procedures, method of operation or decisions by Citystaff or Home Improvement Loan Committee will be referred to the Assistant City Manager. The Assistant City Manager will schedule a hearing for the applicant and establish hearing procedures. Decisions of the Home Improvement Loan Committee will be based upon its interpretation of the Program Policies and Administrative Procedures. VII. INSURANCE A. Hazard Insurance City of Ukiah Page 21 CDBG Single-Family Housing Rehabilitation Guidelines The borrower shall maintain hazard insurance on the property for the duration of the Home Improvement Loan(s). This insurance must be an amount adequate to cover all encumbrances on the property. The insurer must identify the City of Ukiah as Loss Payee for the amount of the Home Improvement Loan(s). Proof of insurance shall be provided to the City. In the event the borrower fails to make the hazard insurance premium payments in a timely fashion, the City, at its option, may make such payments. If the City makes any such payments, the City may, at its sole discretion, add such payments to the principal amount that the applicant is obligated to repay under this program. B. Flood Insurance In areas designated by the U.S. Department of Housing and Urban Development (HUD) as flood prone, the owner is required to maintain flood insurance in an amount adequate to secure the Home Improvement Loan. This policy must designate the City of Ukiah as Loss Payee. The initial premium may be paid with Home Improvement Loan proceeds for the first year. VIII. GENERAL CONTRACTING PROCEDURES AND REQUIREMENTS A. Contractor Qualifications The Housing Rehabilitation Staff will maintain a list of all interested contractors who will be kept informed of upcoming bid proposals. All interested contractors must submit an application for approval. All contractors and subcontractors must have a current, valid California Contractor's License and shall provide such proof of insurance as may be required by the City of Ukiah. Contractors will be checked against HUD’s list of federally debarred contractors. No award will be granted to a contractor on this list. Contractors are required to follow all federal and state regulations pertaining to the City of Ukiah Single-Family Housing Rehabilitation Program. Contractors must have public liability and property damage insurance, and worker’s compensation, unemployment and disability insurance, to the extent required by State law. To the maximum extent feasible, the program shall make every attempt to utilize local, small and minority contractors. B. Procurement Bidding for rehabilitation work will be done on a competitive basis with contracts being awarded to the lowest responsible and responsive bidder selected by the property owner. The homeowner will be the responsible agent, but the City and/or its administrator will prepare the work write-up, prepare and advertise the bid package, and assist the owner in negotiating the construction contract. City of Ukiah Page 22 CDBG Single-Family Housing Rehabilitation Guidelines The Contract for rehabilitation will be between the property owner and the contractor. The Housing Rehabilitation Staff will assist the homeowner with the rehabilitation contract process. C. Inspections and Payments Where warranted by the size of the job and depending upon the contractor's credit line and number of jobs in progress, progress payments tied to the completion of various stages of rehabilitation work will be authorized. The number of payments to be made will be specified in the construction contract. Authorization of progress payments will require: 1. Inspection of the property by the City Building Inspector to insure that the completed work is in compliance with local building code standards. Inspection of the property by the Housing Rehabilitation staff to insure that the work being billed complies with the Contract Documents and Rehabilitation Standards. If the work is not found to be in substantial compliance, the payment amount will be delayed until compliance has been achieved. 2. Following an inspection and approval by the Housing Rehabilitation staff and property owner of the contractor's invoice and all work being billed, the payment amount will be calculated according to the contract provisions governing holdbacks. The payment check will be made out to the contractor. Final Payment (10% retention) is processed in the same general manner as progress payments. Upon written final acceptance of the work by the property owner, the Housing rehabilitation staff, a Notice of Completion will be recorded on the property. Final Payment (10% retention) may be released following the receipt of a Release of Lien from the Contractor and waiting period of 31 days from the recordation of the Notice of Completion. D. General Contract Conditions and Specifications The General Conditions and Specifications of the Home Improvement Program shall be included in all contracts for housing rehabilitation. All change orders to the contract specifications require the signature of the ownerand the City’s Housing Rehabilitation staff. When there are disputes between the contractor and property owner over contract specifications, job scope or adequacy of performance, City of Ukiah staff will make the final determination of contract requirements; City staff will have the authority to release final payment where there is substantial compliance with the contract. IX. TEMPORARY RELOCATION Owner occupants will be informed of their eligibility for up to $3,000 in temporary City of Ukiah Page 23 CDBG Single-Family Housing Rehabilitation Guidelines relocation benefits if occupancy during rehabilitation constitutes a substantial danger to health and safety of occupant or public danger or is otherwise desirable because of the nature of the project. Relocated owner occupants will receive housing costs, payment for moving and related expenses and appropriate advisory services. X. REPAIR CALLBACKS In the event that a contractor must be called back to make corrections on rehabilitation work items that are not covered by the one year warranty, the City has the option to cover the costs through the current CDBG construction budget. XI. COMPLAINT AND APPEAL PROCEDURE Complaints concerning the City’s Housing Rehabilitation Program should first be made to the City’s housing rehabilitation staff. City staff will act as mediator between the homeowner and the General Contractor, and attempt to resolve any disputes and adverse situations. If unresolved in this manner, the complaint or appeal shall be made in writing and filed with the City. The City will then schedule a meeting with the City’s Loan Review Committee. Their written response will be made within fifteen (15) working days. If the applicant is not satisfied with the committee's decision, a request for an appeal may be filed with the City Council. GRIEVANCES BETWEEN BORROWER/GRANTEE AND CONSTRUCTION CONTRACTOR Contracts signed by the contractor and the borrower/grantee include the following clause, which provides a procedure for resolution of grievances: Any controversy arising out of or relating to this Contract, or the breach thereof, shall be submitted to binding arbitration in accordance with the provisions of the California Arbitration Law, Code of Civil Procedure 1280 et seq., and the Rules of the American Arbitration Association. The arbitrator shall have the final authority to order work performed, to order the payment from one party to another, and to order who shall bear the costs of arbitration. Costs to initiate arbitration shall be paid by the party seeking arbitration. Notwithstanding, the party prevailing in any arbitration proceeding shall be entitled to recover from the other all attorney's fees and costs of arbitration. XII. DELINQUENCIES, DEFAULTS AND FORECLOSURES A. Policy The City acknowledges that circumstances beyond a borrower's control may temporarily limit his/her ability to meet loan terms. The City desires to be flexible enough so that in cases of: death of a family member, loss of job, divorce and major illness loan terms may be modified. City of Ukiah Page 24 CDBG Single-Family Housing Rehabilitation Guidelines While the City, in this policy, outlines a system that can accommodate crises that restrict borrowers' ability to meet loan terms, it should in no way be misunderstood. Loan terms must be fulfilled. B. Procedure 1. Thirty (30) day and sixty (60) day delinquencies. The City or administrator will send the borrower a letter noting the amount delinquent or performance default. This letter shall be followed by a telephone call reminding the borrower of the loan amount and due date or performance default. 2. Ninety (90) day delinquency. The City will send a certified letter noting the amount delinquent or performance default. In this letter, a date and time shall be set for a meeting between the borrower and the City housing rehabilitation staff or designee. At this meeting the following will be discussed: - reasons for delinquency or default - any changes in the borrower's health, family circumstances or financial status that limits their repayment ability - amount in arrears. At conclusion of this meeting, the following will be determined: - how and when the amount in arrears will be paid; - how performance defaults will be remedied; - if a personal emergency (loss of a job, loss of spouse or co-borrower, serious illness) has restricted repayment ability. If because of such an emergency, the borrower cannot fulfill the term(s) of the loan or afford to pay the full monthly installment, housing rehabilitation staff may exercise one or more of the following options: a. Extend the time of payment or otherwise alter the terms of any of the indebtedness; b. Accept additional security therefore of any kind, including trust deeds or mortgages; c. Alter, substitute or release any property securing the indebtedness. Any action taken as a result of this meeting shall be documented and recorded in the required fashion. City of Ukiah Page 25 CDBG Single-Family Housing Rehabilitation Guidelines 3. If the borrower does not appear for the 90-day delinquency meeting, and does not contact City staff to reschedule the meeting, staff may immediately begin foreclosure proceedings. 4. Any borrower who participates in the process outlined in Item B and then becomes 90 days delinquent within two years of renegotiating their loan terms may be subject to immediate foreclosure. XIII. AFTER-REHABILITATION PROPERTY MAINTENANCE A. Policy ALL Home Improvement Loans require the borrower: 1. To protect and preserve said property and to maintain it in good condition and repair; 2. Not to remove, demolish or materially alter any building or any improvement thereon, nor to change or alter either the terms and conditions of any existing lease of the premises, or the present character of use of said property; 3. To complete or restore promptly and in good workmanlike manner any building or improvement that may be constructed, damaged or destroyed thereon and pay when due all costs incurred therefore; and to comply with all of the terms of any loan agreement between Trustor and Beneficiary; 4. Not to commit or permit waste of the property; 5. To comply with all laws, covenants, conditions or restrictions affecting the property; 6. To cultivate, irrigate, fertilize, fumigate, prune and do all other acts that from the character or use of said property may be reasonably necessary, the specific enumerations herein not excluding the general. These conditions help assure that the property does not revert to a substandard state. B. Procedure When the City becomes aware that rehabilitated property is not being properly maintained it may: City of Ukiah Page 26 CDBG Single-Family Housing Rehabilitation Guidelines 1. Provide the borrower in writing: a. a list of needed repairs or maintenance items b. a recommendation as to a solution to the deficiencies c. a request that the repairs be performed within 60 days 2. At the end of the 60-day period, Housing Rehabilitation staff shall inspect the property. If the needed repairs have not been performed, staff shall set an appointment with the borrower to discuss why maintenance has not been performed. If the borrower is unable to afford to make the needed repairs and if the repairs represent a new building deficiency not covered by the original rehabilitation, additional funds may be provided. 3. Following the visit and inspection, the borrower will be given 60 days to make the necessary repairs. The borrower will be given written notice at the start of this phase that if repairs are not performed within 60 days the borrower will be considered to be in default. 4. If repairs are not performed within 60 days of the notice outlined in Item 3, the City may begin foreclosure proceedings. XIV. AMENDMENTS Amendments to these Policies and Procedures may be made by the City and will be submitted to the California Department of Housing and Community Development for approval. Where changes in the guidelines would adversely affect program applications already under review, such applications will be evaluated under the guidelines in effect at the time of application. XV. ATTACHMENTS The following documents are attached and form a part of these guidelines:  ATTACHMENT A: Annual Household Income Definition/Income Limits  ATTACHMENT B: City of Ukiah Residential Anti-displacement and Relocation Assistance Plan  ATTACHMENT C: CDBG Foreclosure Policy City of Ukiah Page 27 CDBG Single-Family Housing Rehabilitation Guidelines City of Ukiah Page 28 CDBG Single-Family Housing Rehabilitation Guidelines ATTACHMENT A ANNUAL HOUSEHOLD INCOME DEFINITION/INCOME LIMITS INCOME LIMTS FOR ALL OF MENDOCINO COUNTY – 2014 Number of Persons in Household 1 2 3 4 5 6 7 8+ Income Limit (Yearly) $30,700 $35,100 $39,500 $43,850 $47,400 $50,900 $54,400 $57,900 Note: Limits contained above will be updated annually as HCD releases the information. City of Ukiah Page 29 CDBG Single-Family Housing Rehabilitation Guidelines ATTACHMENT B CITY OF UKIAH RESIDENTIAL ANTI-DISPLACEMENT AND RELOCATION ASSISTANCE PLAN The jurisdiction will replace all occupied and vacant occupiable low/moderate-income dwelling units demolished or converted to a use other than as low/moderate-income housing as a direct result of activities assisted with funds provided under the Housing and Community Development Act of 1974, as amended, as described in 24 CFR 470.606 (b) (1) and 24 CFR 92. All replacement housing will be provided within three years of the commencement of the demolition or rehabilitation relating to conversion. Before obligating or expending funds that will directly result in such demolition or conversion, the jurisdiction will make public and submit to the Department the following information in writing: 1. A description of the proposed assisted activity; 2 The general location on a map and approximate number of dwelling units by size (number of bedrooms) that will be demolished or converted to a use other than as low/moderate-income dwelling units as a direct result of the assisted activity; 3. A time schedule for the commencement and completion of the demolition or conversion; 4. The general location on a map and approximate number of dwelling units by size (number of bedrooms) that will be provided as replacement dwelling units. 5. The source of funding and a time schedule for the provision of replacement dwelling units; 6. The basis for concluding that each replacement dwelling unit will remain a low/moderate-income dwelling unit for at least 10 years from the date of initial occupancy. The jurisdiction will provide relocation assistance to each low/moderate-income household displaced by the demolition of housing or by the conversion of a low/moderate-income dwelling to another use as a direct result of assisted activities. Consistent with the goals and objectives of activities assisted under the Act, the jurisdiction will take the following steps to minimize the displacement of persons from their homes: City of Ukiah Page 30 CDBG Single-Family Housing Rehabilitation Guidelines A. Steps to Minimize or Prevent Displacement 1. Use CDBG funds to provide seed money grants or loans, long-term mortgage loans at favorable rates, or capital grants to tenant groups of multi-family buildings to help them convert to cooperatives. 2. Stage rehabilitation of assisted housing to allow tenants to remain during and after rehabilitation, working with empty building or groups or empty units first so they can be rehabilitated first and tenants moved in before rehab on occupied units or building is begun. 3. Establish temporary relocation facilities in order to house families whose displacement will be of short duration, so they can move back to their neighborhoods after rehabilitation or new construction. 4. Evaluate housing codes and rehabilitation standards in reinvestment areas to prevent their placing undue financial burden on long-established owners or on tenants of multi-family buildings. 5. Provide counseling via Government or non-profit organizations to assist homeowners and renters to understand the range of assistance that may be available to help them in staying in the area in the face of revitalization pressures. 6. Shift the concentrated demand generated by intense investment in one or two neighborhoods to other neighborhoods by: (a) targeting public improvements into several other neighborhoods with potential for revitalization; (b) conduction of advertising campaigns to attract interest in other neighborhoods. B. Steps to Assist Displaced Persons to Remain in their Present Neighborhood 1. Provide lower-income housing in the neighborhood through HUD housing programs; purchase units as is; rehabilitate vacant units; 2. Give Priority in assisted housing units in the neighborhood to area residents facing displacement. 3. Target Section 8 existing program certificated to households being displaced, and recruit area landlords to participate in the program. 4. Provide counseling and referral services to assist displacees find alternate housing in the neighborhood. 5. Work with area landlords and real estate brokers to locate vacancies for household City of Ukiah Page 31 CDBG Housing Rehabilitation Guidelines facing displacement. C. Steps to Otherwise Mitigate Adverse Effects of Displacement 1. Use of public funds, such as CDBG funds, to pay moving costs and provide relocation payments, or require private developers to provide compensation to persons displaced by development activities. 2. Give displacees priority in obtaining subsidized housing units. 3. Provide counseling and referral services to assist displacees to locate elsewhere in the community or metropolitan area. D. Additional Procedures for Acquisition of Single-Family Homes (HOME funds) When the jurisdiction uses HOME funds to obtain a single-family home, or to provide financial assistance in such a transaction, the URA and its implementing regulations (49 CFR part 24) will be adhered to. Policies and Procedures described in HUD Handbook 1378, Chapters 1 through 6 and Chapter 8 will be implemented, and those specific to the HOME program described on pages 8-17 through 8-23, will be followed. 1. Unit occupied by home owner: The home owner will be notified in writing that the jurisdiction 2. Will not use its power of eminent domain to acquire the property. The homeowner will be informed in writing of the jurisdictions estimate of the fair market value to the property. These notices will be issued at the earliest possible date. 3. Unit occupied by tenant: The homeowner will receive the notifications stated above. In additions, the tenant will be issued a notice at the earliest possible date. The notice will include all information required under URA including a caution not to move prematurely, and information on relocation assistance. Information on comparable replacement units will be provided, as well as material on social services and housing programs. Upon moving, the tenants will be provided with moving expenses and rent differential, (per URA) where applicable. A notice informing tenants of the date they will be required to move will be issued. If a unit is vacant at the time of negotiation of sales, or becomes vacant later, any prospective tenant will be notified of the pending sale, informed that they may be required to move, and that they will not be entitled to relocation assistance. The issuing of all notices and the processing of relocation assistance will be the responsibility of the City of Ukiah and/or its administrator. City of Ukiah Page 32 CDBG Housing Rehabilitation Guidelines ATTACHMENT C CDBG FORECLOSURE POLICY Process for Loan Foreclosure: Upon any condition of loan default: 1) non-payment; 2) lack of insurance or property tax payment; 3) violation of rent limitation agreement; 4) change in title or use without approval; 5) default on senior loans, Lender will send out a letter to the Borrower notifying them of the default situation. If the default situation continues then the Lender may start a formal process of foreclosure. When a senior lien holder starts a foreclosure process and the Lender is notified via a Request for Notice of Default, the Lender, who is the junior lien holder, may cancel the foreclosure proceedings by "reinstating" the senior lien holder. The reinstatement amount, or payoff amount must be obtained by contacting the senior lien holder. This amount will include all delinquent payments, late charges and fees to date. Lender must confer with Borrower to determine if, upon paying the senior lien holder current, the Borrower can provide future payments. If this is the case then the Lender may cure the foreclosure and add the costs to the balance of the loan with a Notice of Additional Advance on the existing note. If the Lender determines, based on information on the reinstatement amount and status of borrower, that bringing the loan current will not preserve the loan, then staff must determine if it is cost effective to protect their position by paying off the senior lien holder in total and restructure the debt such that the unit is made affordable to the Borrower. If the Lender does not have sufficient funds to pay the senior lien holder in full, then they may choose to cure the senior lien holder and foreclose on the property themselves. As long as there is sufficient value in the property, the Lender can afford to pay for the foreclosure process and pay off the senior lien holder and retain some or all of their investment. If the Lender decides to reinstate, the senior lien holder will accept the amount to reinstate the loan up until five (5) days prior to the set "foreclosure sale date." This "foreclosure sale date" usually occurs about four (4) to six (6) months from the date of recording of the "Notice of Default." If the Lender fails to reinstate the senior lien holder before five (5) days prior to the foreclosure sale date, the senior lien holder would then require a full pay off of the balance, plus costs, to cancel foreclosure. If the Lender determines the reinstatement and maintenance of the property not to be cost effective and allows the senior lien holder to complete foreclosure, the Lender's lien may be eliminated due to insufficient sales proceeds. Lender As Senior Lien Holder: When the Lender is first position as a senior lien holder, active collection efforts will begin on any loan that is 31 or more days in arrears. Attempts will be made to assist the homeowner in bringing and keeping the loan current. These attempts will be conveyed in an increasingly urgent manner until loan payments have reached 90 days in arrears, at which time the Lender may consider foreclosure. Lender’s staff will consider the following factors before initiating foreclosure: A. Can the loan be cured and can the rates and terms be adjusted to allow for affordable payments such that foreclosure is not necessary? City of Ukiah Page 33 CDBG Housing Rehabilitation Guidelines B. Can the Borrower refinance with a private lender and pay off the Lender? C. Can the Borrower sell the property and pay off the Lender? D. Does the balance warrant foreclosure? (If the balance is under $5,000, the expense to foreclose may not be worth pursuing.) E. Will the sales price of home "as is" cover the principal balance owing, necessary advances, (maintain fire insurance, maintain or bring current delinquent property taxes, monthly yard maintenance, periodic inspections of property to prevent vandalism, etc.) foreclosure, and marketing costs? If the balance is substantial and all of the above factors have been considered, the Lender may opt to initiate foreclosure. The Borrower must receive, by certified mail, a thirty-day notification of foreclosure initiation. This notification must include the exact amount of funds to be remitted to the Lender to prevent foreclosure (such as, funds to bring a delinquent BMIR current or pay off a DPL). At the end of thirty days, the Lender should contact a reputable foreclosure service or local title company to prepare and record foreclosure documents and make all necessary notifications to the owner and junior lien holders. The service will advise the Lender of all required documentation to initiate foreclosure (Note and Deed of Trust usually) and funds required from the owner to cancel foreclosure proceedings. The service will keep the Lender informed of the progress of the foreclosure proceedings. When the process is completed, and the property has "reverted to the beneficiary" at the foreclosure sale, the Lender could sell the home themselves under a homebuyer program or use it for an affordable rental property managed by a local housing authority or use it for transitional housing facility or other eligible use. The Lender could contract with a local real estate broker to list and sell the home and use those funds for program income eligible uses.