HomeMy WebLinkAbout1981-05-05; City Council; 6591; Residential Rehabilitation Program< *
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AGEKDA BLLL NO- , b 5- 9 / ""_.
DATE : May 5, 1981
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DEPARTMENT I Housing and Redevelopment - I_
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RESIDENTIAL REHABILITATION PROGRAM - I --'""" -
Statement of the Ma'cter
At its meeting of October 28, 1980, City Council directed staff to investigate the fe
of taking over the administration of the Residential Rehabilitation Program. This pr
is presently being conducted for the City of Carlsbad by the County of San Diego. Th
program has been ineffective in Carlsbad.. It is funded by Community Development'Bloc
funds. Staff has researched the program and concluded that a modified version of the County program could succeed in meeting Carlsbad's rehabilitation needs.
It is the purpose of-this report to present staff's analysis and recommendation. Fou
are presented to the Council in the attached report. Council may choose:
Option # 1 - Stay with existing County program. Option # 2 - City takes over promotion and outreach of County program.
Option # 3 - City takes over. program with requirements tailored to local
Option # 4 - City out of program, money reprogrammed.
housing needs.
... Staff is recommending Option #3, that the City take over the rehabilitation program w
requirements tailored to local housing needs. A local program would differ from-the 1
that it would include an intensive local outreach program. It would utilize a local
agency to service loans. Local control would allow flexibility and adaptability of eligibility requirements.By combining the City's Commercial Rehabilitation monies wit:
Residential program, greater leveraging of funds could be achieved. The report outli: the reasons for this recommendation. Also presented is a brief history of the existi.
program and a comparative analysis of other programs in the area.
EXHIBITS:
Executive Report Summary
Fiscal Impact Analysis
Memo dated March 12, 1981 to Housing and Redevelopment Director
FISCAL IMPACT:
$96,900 funded by Block Grant.' (See Executive Summary and cost analysis attached as
Exhibits I and 11).
RECOMMENDATION:
City CounCil direct staff to request return of Carlsbad's Residential Rehabilitation :
plus administration fees, from the County of San Diego for the purpose of conducting i
locally administered rehabilitation program.
COLDCIL ACCIOJJ :
5- 5- 81 Council approved the staff recmndation as set forth above.
* e EXECUTIVE REPORT SUMMARY 0 -
RESIDENTIAL REHABILITATION PROGRAM
GOAL :
The goal of a local rehabilitation program is to upgrade existing housing stock and mai-r!
affordable housing. It is designed to assist property owners to obtain financing who pr
viously were not interested in or could not afford a home improvement loan. This is acc
lished by making the loan terms more attractive and reducing the monthly cost of repayin
loan (in some cases reducing the cost to zero). A corollary goal is to "leverage" the 1
Community Development Block Grant funds set aside for rehabilitation to reach as many hc
holds as possible.
FUNDING: $103,000 3rd year Community Development Block Grant Funds
The present program has been run by the County since July 1978. Seven loans have been n
$16,463 has been expended, leaving a balance of $86,537. Administration fees of 10% to
will be requested resulting in an aFproximate balance of 2 $96,900.
RECOMMENDATION: It is proposed that the balance be returned to Carlsbad for use in a p'
of local residential rehabilitation.
PROGRAM: Program would consist of making available:
1) Below Market Interest Rate Loans
2) Deferred Loans
3) Grants
TARGET AREA: Census Tract 179.00
ELIGIBLE PARTICIPANTS:
1) Property Owners with annual incomes which fall within
prescribed limits
2) Absentee owners who agree to specific rental rates
in order to qualify.
ELIGIBLE IMPROVEMENTS: Interior/exterior/code repairs as eligible per Title I FHA
Loans and loan committee approval.
STAFFING: Existing Housing and Redevelopment staff will be used to implement program.
Additional staff requirements will be analyzed as the program develops. No additions
anticipated in first six months of operation.
By utilizing a local lender, staff could combine the Commercial Rehabilitation program
with Residential. This would enable a better leveraging of funds and offer a readily
available package to the -aarea.
EXHIBIT I
FISCAL IMPACT
aABILITATION PROGRAM a
ADMINISTRATIVE COST:: ANALYSIS
Direct Costs
Intermediate Clerk Steno 20%
Salary 2,500 P.E.R.S. 240
F. I .C.A. 140
Workers Compensation 20
Total Personnel Cost 2,900
Materials and Supplies
Equipment Rental 450
Office Supplies 200
Postage 350
Printing 1,000
Duplicating 300
Advertising 2,000
Telephone(Long Distance only) 100
Mileage 200
Travel, conference E meetings 200
Total Material and Supply 4,800
cost:
TOTAL DIRECT COSTS 7,700
lndi rect Costs
Salaries and fringe benefits
Program Coordinator-30% 5,150
Building Inspector-5% 1,050
Total Salaries & Fringe 6,200 - Benefits
Space Rental and Maintenance 0 f< ;'r ::
Supervision and Legal 0 2: ;Yc ;!
Insurance 0 :c * 9;
TOTAL INDIRECT COSTS 6,200. TOTAL REHABILITATION PROGRAM COST 13 9 9.00
5 Reimbursable by Block Grant
ALLOCATION OF BLOCK GRANT FUNDS (Hypothetical)
45,000 - 10-13% loans (approximately 10)
5,500 - 6% loans (approximately 5)
8,500 - 3% loans (approximately 5)
24,000 - 0% loans (approximately 8)
13,900 - administrative costs 96 , 900 TOTAL
EXHIBIT I I
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P*?E!%ORMVDUN
DATE : March 12, 1981
'ro : Jack E. Henthorn, Mousing and RedeveloDment Director
FROH : Chris Salomone, Administrative Aide/Block Grant e 3.
SUBJECT: RESIDENTIAL REHABILITATION
It is the purpose of this report to address the feasibility of the City of
Carlsbad administering a Residential Rehabilitation Program.
I 1 RECOXLIENDATION :
Staff recommends that City Council direct staff to request return
of Carlsbad's Residential Rehabilitation funds, plus administration
fees, from the County of San Diego for the purpose of conducting
a locally administered rehabilitation program.
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BACKGROUND/ANALYSIS
L. < EXISTING PROGM4
The present residential rehabilitation program in Carlsbad is financed through
the Community Development Block Grant program. Funds are annually subventioned
to local governments based on a population/poverty/housing formula. The major
federal requirement is that funds be used .primarily to assist low-moderate income
households. The formula requires that cities with yoplations of less than
50,000 cannot apply directly to the federal government for monies. Therefore,
the County of San Diego is the grantee on behalf of the City of Carlsbad and as
such, determines eligibility requirements for housing rehabilitation in Carlsbad.
The following page is an outline of the existing County Drogram.
EXHIBIT I I I
COUNTY ADMINISTERED RESIDENTIAL REHABILITATION LOAN PROGP 0 BAS I C PROV 1 S I ON@
TYPES OF LOANS:
1. Below Market Interest Rate Loans:
The County will prepay a portion of the interest on loans
which will substantially reduce the monthly payments to be
pa id by the homeowners.
Maximum Loan $ 10,000. Maximum term 15 years.
2. Deferred Loans:
For borrowers found to be "non-bankable" for a part or all
of a needed rehabilitation loan. Repaid at no interest. When
property changes title, the loan principal is due in full.
Maximum $ 5,000 recommended.
A contract is secured with a Commercial Bank for this arrangement.
ELIGIBLE PARTICIPANTS
Appl icants
1. Located within a designated rehabilitation target area.
2. Limited to owner/occupant.
3. Owners assets must fall within prescribed limits.
4. Owners must have title to property for one year prior to
application.
ELIGIBLE IMPROVEMENTS:
1. Additions and alterations to increase the livability or
usefulness of existing rooms, porches, stairways, closets,
bathrooms, and entrances.
2. Interior work which improves lilability, such as paintings,
papering, plastering, new flooring, and tile work.
3. Exterior work which preserves or protects the structure such
painting, roofing, and siding.
4. Repairs, restoration, or replacement of major systems,
structures, such as heating, plumbing, electrical or structural
repa i rs.
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FUNDING :
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On July 15, 1978, the Board of Commissioners of the Housing Authorizy OF the
City of Carlsbad approved a resolution authorizing the Housing Authority of
the County of San Diego to operate a rehabilitation program uithin the area.
of operation (Census Tract 179.00). $103,000 "- of Block Grant funds were
appropriated for Carlsbad's use in this program.
TARGET AREA:
Census Tract 179.00 has been identified as the Target Area for the Residential
Rehabilitation Program. Census information indicates 200 deteriorated or
delapidated units in this Tract. (62% of City's total) The area exhibits all.
the characteristics requisite for concentrated residential rehabilitation.
The City's deteriorated housing stock is concentrated in this area. High
concentration of low-income population, ethnic population, residential density
and low employment density render the area eligible for government funding
and resources. In compliance with the recommendations of the Carlsbad Housing
Element renewed efforts should be undertaken to upgrade Carlsbad's housing
stock and preserve its unique residential character.
COUNTY TRACK RECORD:
In the two and one-half year life of theprogram the County has made only
seven loans. This has expended $16,563.00, leaving a balance of $86,537.00
(plus administration fees).
Several factors are likely responsible for the lack of success of the County's
program.
1. Lack of intimate knowledge of local housing characteristics.
2. Lack of effective outreach program in the local area.
3. Restrictive eligibility reqpirements.
4. Failure to include absentee owners in the plan.
(2)
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The County program requirements simply do not match up with CarLsbad's
unique housing conditions. County staff is remote from the target area
and the program only one of many under their jurisdiction. On the other
hand, s&cessful ongoing programs are being run by several San Ufego
County small cities.
OPTIONS:
The City has the option to request from the County all monies (including
administrative costs) allocated for this program and initiate a local
residential rehabilitation program. This would entail adopting new
eligibility requirements closer allied to Carlsbad's housing needs. Another
option is for the City to take over promotional and outreach responsibilities
and through concentrated effort solicit eligible applicants for the existing
program. A third option is to declare the program unsuccessful and request
an alternative allocation of the funds.
OPTION #1 Stay with existing County program.
OPTION #2 City takes over promotion and outreach of County Program-
OPTION #3 City takes over program with requirements tailored to local
housing needs.
OPTION #4 City out of program, money reprogrammed.
(3)
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Discussion of Options -
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OPTION # 1 - Both County and City staff agree that existing
program is ineffective. It is simply not meeting
the objectives it was intended to address.
OPTION ## 2 - Additional City staff time would be required to
boost outreach efforts. Staff analysis is that
this promotion would result in a few additional
loans but still be ineffective in meeting total
local needs.
OPTION K 3 - By designing a program to suit City's housing
make-up, local rehabilitation needs could be
directly addressed. A large number of multi-unit
dwellings and absentee owners characterize the
target area. Neither of these are eligible for
loans under the present program. Local lenders
could expedite loan processing. Local inspectors
and staff would permit rapid processing of
projects. Administration fees would be requested
from County to cover additional staff costs.
OPTION H 4 - The funds could be reprogrammed for another project.
(4)
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As prcuiously demonstrated Carlsbad's housing needs are. sufficient to warrant
ongoing remedial attention. In the long run neighborhood decay can mean a
loss of affordable housing and displacement of long-time residents. Forecasts
indicate increasing demands in this area for resources and staff. Some sort
of rehabilitation program is a necessary component of a comprehensive housing
strategy.
CONCLUSION:
Housing and Redevelopment staff recommends that the City ask the County of San
Diego that all rehabilitation monies including administration fees be turned
over to the City of Carlsbad so that a local residential rehabilitation loan
program can be initiated. The highest probabi€ity of success would result from
a program that is both approximate and responsive to unique local conditions.
Such a program would differ considerably from the existing program. It would
necessarily include:
1. An intensive local outreach program, bi-lingual, door to door, with
fo1low-up.
2. Utilizing local lending agency to service loans.
3. Applicability to owner-occupant as well as absentee owners.
4. Flexibility and adaptability of eligibility requirements because of
local control.
Successful ongoing programs are being run by several San Diego County small cities.
Their experience indicates :
- A locally administered program could result in the rehabilitation of 40
housing units i.n the target area.
- A locally administered Frogram would provide a nearby location for client
and bank servicing. This would expedite processing and add continuity to
process from client contact to final contract.
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- A locally adnlinistered prograin would have the additional impact of
educating staff and local lenders and building an infrastructure to
deal with future funding sources, ie. UDAG grants, local admtnistered
CDBG, federal/state housing programs.
- Eligible applicants for residential rehabilitation programs are often
the most difficult to reach by traditional outreach and advertising.
Historically, skepticism of bureaucracies, reluctance to reveal personal
financial information and lack of information about program policies
render the eligible applicant inaccessible. Success has been the result
of concentrated outreach by local staff members. Cities that have
tailored their programs to local conditions have shown the viability
of residential rehabilitation programs.
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- The absentee owner must be availed of these rehabilitation efforts. The
inclusion of absentee owners is seen as necessary because of the number
of multi-dwelling units and rental properties within the target area.
- Local lenders have expressed a desire to be involved in such a program
and several diverse loan and servicing packages are now available to
the City.
- Relieved of burden of administering this program for the City of Carlsbad,
County should provide administration fees to the City for use with
the program.
- By utilizing a local lender, staff could combine the Commercial 3ehabilita
- program with Residential, thus offering an attractive and readily
available package to the total development area,
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11. THE PROPOSED PROGRMI
The loan assistance and grant program is an integral part of the overall housing
rehabilitation ...-..- program. There are four major reasons why this component is .-
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rcqrrired for the success of the housing program.
1. It should encourage the investment of capital and effort by owners
and/or occupants of the pilot area as investment by a major lending
institution.
2. It contributes to neighborhood stability because it encourages people
to invest in existing units.
3, Because of the high cost of new construction, this program, which keeps
older units on the market and in sound condition, will aid in getting
lower and moderate income people into appropriate housing.
4. Programs which have attempted code compliance without some form of
assistance to residents of project areas have developed problems.
Additionally, staff contacts with other cities in California have
revealed that the incentive provided by grants and low-interest loans
are the key to success in a rehabilitation program.
A local committee will be established to screen all loan applications. In its
first year of operation, Carlsbad's Housing Rehabilitation program will be
available to the following target area residents:
1. Those are owner-occuoants of single family dwellings, located in the
target area.
2. Owner-occupants of duplexes located in the target area.
3. Those who own single family dwellings and multi-family units, but do
not occupy the units.
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TYPES OF LOANS
The loan program may be divided into these categories: 1.- low-interest
property implovement loans; 2.- deferred loans; 3.- and direct grants.
1- The first category of assistance is the below market interest rate
(BMIR) loan program. Staff suggests this program be arranged through
local lender's FHA Title I program. Basically, this program alIows
the City to increase the impact of its C.D. funds in the pilot area
through low-interest subsidized loans. Government insured loans
are provided at low-interest to property owners who have been approved
by the City's loan committee. The City may lower the amount of interest
on these loans by making an up-front payment of an agreed upon
precentage of the total amount of interest which would be paid over
the entire term of the loan. For the first year, staff suggests that
interest ratesbe subsidized to 3.00% and 6.75%, or 12.00% depending
upon the income of the applicant. The maximum term of loans under
this program is twelve years. The minimum loan amount is $1,000 and
the maximum is $15,000.
Eligibility for the program -
The City will offer three levels of subsidy to applicants, depending on their
income levels:
1. For applicants whose gross annual income is less than 80% of the County
Median income for their family size, a 3% loan interest rate.
2. For applicants whose gross annual income is between 80% and 100% of
the County Median income for their family size, 6.75% loan interest rate.
3. For applicants whose income is between 100% and 120% of the County
Median income for their family size, a 10%-12% loan interest rate.
(8)
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4 . Absentee owners of low-rent propert.ies, rate i.s to be determined
by committee review.
All interest subsidies will be based on the prevailing FHA Title I Home
Improvement Loan APR. For specific income requirements see Attachment I.
2- The second category of assistance would be a deferred loan program.
This program would use C.D. funds to make direct long term, zero
interest loans. A lien would be taken on the property and the loan
would be due in full at the time the property changes hands. The
minimum deferred loan will be $500- the maximum will be $5,000.
No monthly payments will be required in this program. This type of
program has beer, demonstrated to be of great usefulness to the
elderly and others with very low fixed incomes.
Eligibility for the program will be based on income criteria, target
area location, and the nature of repairs. Elderly or handicapped
persons having an income of less than 80% of the County Median income
may be eligible for deferred loans at the discretion of the Community
Rehabilitation Loan Committee. In these cases the deferred loan
would be used only to correct code violations. The loan princiyal
plus 5% annual interest is due upon any transfer of the title.
3- The third category of assistance is the grant.
"
The Community Rehabilitation Loan Committee reviews applications to
see if an applicant may be eligible for a grant. Eligibility criterion.
are the following: in target area, owner-occupant, to correct code
violation, single family residence, applicant must have an income less
than 50% of the County Median income for the appropriate family size.
The maximum grant amount is $1,000. Recipients of grants must sign
a ':ReimSursement Agreement" which provides for repayment of the grant
if owner sells the property rehabilitated within five years.
(9)
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Variation to consider: some cities offer grants for exterior p8inting
to applicants up to 100% of income limits, others offer rebates to
owners for their work in rehabilitating their own unit.
COMP;1!JNITY REIJ..BILITATION LOAN COP4IITTEE
The Community Rehabilitation Loan Committee is the final review board for loan
ayplicants. It shall consist of five members selected from the community and
City government and staff. This committee shall review applications as presented
by staff and rule as to their acceptability and disposition. (See attachment 2)
ELIGIBLE REPAIRS
1. Additions and alterations to increase the livability or usefulness
of existing structure,
2. Exterior work to help preserve or protect structures such as painting,
roofing, siding.
3. Interior work to make a structure more livable such as painting,
papering plastering, new flooring, and tile work.
4. Repairs, restoration, or replacement of important parts of structures such
as heating systems, plumbing systems, electrical wiring, structural
repairs, and built-in kitchen appliances in residential structures.
All improvements made to properties must be in keeping with the objective of
the program and deemed necessary by City staff. These improvements must follow
the standards set by both the Uniform Housing and Building Codes, and FHA. In
addition, each improvement must meet the work details set forth by the
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rehabilitation specialist in the general bid specifications. Any deviat.io11
from these specifications can result in no-payment of fees. The specification
details acceptable materials that should be used to assure the durability of
each repair Si
All improvements made to properties are not eligible for loan assistance under
the present program. Following are examples of imrovements - not eligible:
Barbeque pits
Bathhouses
Burglar alarms
Burglar protection bars
dumbwaiters
Fire extinguishers
Flower Boxes
Greenhouses
Mangars (airplane)
Kennels
Outdoor fireplaces or hearth
Penthouses
Photo murals
Radiator covers or enclosures
stands
Swimming Pools
Television antennas Tennis courts
Valance or cornice boards
Kitchen appliances designed and manufactured to be freestanding that are not
built-in permanently affixed as an integral part of the kitchen in a residential
structure.
Waterproofing of a structure by pumping or injecting any substance in the earth
adjacent to or beneath the basement or foundation or floors,
A feasibility analysis will be necessary on each house involved in the program
in order to determine whether it is eligible for rehabilitation. This can be
done after the initial inspection is completed, If the value of the house,
after repairs, exceeds the cost of repairs then the house is eligible for
rehabilitation.
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(11)
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CONTRACTING PROCEDURE
Once a loan has been approved by the financing agency, the Housing Rehabilitation
office will &?gin the contracting procedure. Any denials will be referred back
to the Loan Committee for consideration. The contracting objective is to obtain
the best possible work at the least cost while enforcing high performance
standards. Therefore, all contracts will be reviewed by the City. (See attachment
The contract will be forwarded to t'ne bank which will prepare the loan documents
and advise the City of the interest subsidy due. The applicant will make payments
in equal monthly installments, the first payment is due thirty days after the
note date. The City obtains all signatures and returns documents to the bank
along with the interest subsidy. The bank will forward payment to the City in
the form of a cashier's check payable to the borrower. The City will obtain
written agreements that it may control the proceeds of the loan. A fund control
will be used for job continuity.
SmnMY
The rehabilitation loan assistance program, which will be administered jointly
by the Rehabilitation Office and the local lender is directed toward moderate
and low-income families who are not able to meet the credit requirements and
payments on a normal market loan. Through lower interest rates and extended
repayment periods, this program can lower monthly payments to as little as
$50.00 at 6% per month interest and $42.00 at 3% interest on a $5,000, twelve (12)
year loan. Based on the ability of the applicant to pay, either a deferred
loan or loans at 3%, or 6.75%, or 12%, will be made.
Responsibility for on-site segments of the program lie with the Building Inspection
and Housing Department. Any repairs involving the public right-of-way, e.g,,
sewers and streets, will be handled by the Engineering Department.
(12) .
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The maximum loan amount will be the lesser or: (OT) the anounc requircci t.a
make repairs; (b) $10,000; (c) a sum, \vhen added to the outstanding indebtedness
on the property, does not exceed the sum of the total value of the property
plus the improvements. The maximum term of a low interest loan is twelve (12)
years. The minimum monthly payment is $20.00.
I
(13)
attachment I
‘ FAMILY SIZE
I ”. - ” -
1
2
3
4
5
6
7
8
9
10
11
12
e 100%
”
15,000
17,120
19,250
21,370.
22 9 750
24,060
25 , 440
26,750
28,490
30,340
32 , 310
34,410
8 0% *
”-
I2,OOO
13 J 700
15,400
17 9 100
18,200
19 , 250
20,350
21,400
22,790
24,270
25,850
27,530
Residential participants must have title to the property on which the rehabilitati
loan is taken for a minimum of one year prior to and following application. In
addition it is reconmended that absente2 owners be eligible for below market
interest rate loans. Owners of rental property are to sign an agreement not to
change rental rates in excess of Fair Market Rents.
Median income for family of four in County
of San Diego for 1980 was $19,000 -
Census Tract 179
Median income for family of four in 1980 was 12,429
~ - ~ . ...~ "" - I . .. e
COFDlUNITY REHABILITATION LOAN COBNITTEE
The Community Rehabilitation Loan Committee is the final review boa.rd. for
loan applicants. It shall consist of five members selected from the
Community a;?d- City government and staff. This committee shall review
applications as presented by staff and rule as to their acceptability and
disposition.
The function of the Loan Committee will be to approve/disapprove all 1oa.n
applications following their credit approval/disapproval by the lender. The
committee must review and make disposition of all cases involving, but not
limited to, the following:
1. Requests for grants;
2. Hardship cases where hazardous conditions exist and the participant
cannot afford any loan, or a loan large enough to correct the
unsafe and/or unsanitary conditions;
3. Approval of deferred payment option, subsidized or partial
payment option, etc.;
4. Situations where participant should be relocated (hazardous
conditions, structures too far gone to salvage, etc);
5. Disagreements between Housing Rehabilitation Coordinator and
participant regarding what repairs must be made first to correct
unsafe and/or unsanitary conditions;
6. Request to deviate from the interest rate schedule;
7. Participants whose loan applications have been denied by the
bank ;
8. Self-help repair projects;
9. Final approval of successful bidder.
10. Absentee owner application.
< 2)
PROCEDURE:
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The Loan Cownittee will schedule meetings as approved applications are
received from the lender. When the Program Coordinator has problem cases
to resolve, he/she will request time on the agenda. Sufficient information on
each case wj.11 be sent out with the agenda no later than 3 days preceeding
the scheduled committee meeting.
6' a.t tach-rment 5 .* . 0 ?
L0.W PROCESS FLO!!: CI'ART -
FINANCIAL COUNSELING (lender) REI-IARILTTATION COUNSELING (
Contract Bids
Loan Committee, Contractor Selection
Conference/Signature
(Point of No Return)
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Progress Payments Interim Inspections .
Job Completion .I L 1
Counseling Loan Servicing/ '9 Construction Complaints