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HomeMy WebLinkAbout1982-04-06; City Council; 6956; Rehabilitation Programs - Bank Proposaln j/ 4 G. :j I 9.(2’* CITII+F CARLSBAD - AGEND~LL AB#,-- DEPT. HD. TITLE: MTG. .3!’6@2. . CITY ATTY REHABILITATION PROGRAMS: SELECTION OF BANK PROPOSAL DEPT. BLDG. RECOMMENDED ACTION: City Counci7 direct staff to deposit authorized funds with the Bank of America and begin operation of Commercial and Residential Rehabilitation Programs. P ITEM EXPLANATION: On January 26, 1982, City Council approved the Residential and Commercial Rehabilitation Programs to be administered by the Building Department. At that time, City Council directed staff to update solicited bank proposals and make arrangements to deposit the funds with a lender and begin the program. Staff has reviewed proposals from five lending institutions. The proposiils offer a leveraging of the Block Grant funds and would pay a competitive .interes rate to the City and funds deposited. Additionally, a revolving loan fund would allow the funds to be utilized in the future as the loans are paid off. With Council approval funds can be deposited and loan processing begun w.ithin thirty (30) days. FISCAL IMPACT: The City wi 11 deposit the sum of $134,189.00 from the General Fund with the lending institution , and request a lump sum draw down from Community Developmen Block Grant funds from the County of San Diego to reimburse the General Fund. It will take approximately three (3) weeks for the County to reimburse the City I EXHIBITS: n a n a s 6 a 6 IJJ =r 0 Q z .. z 3 A- Memorandum to Bui 1 ding Offici a1 dated March 16, 1982. B- Letter from Bank of America dated February 10, 1982. C- Resolution No. CbgL(0 . D- Memo from Chris Salomone dated March 25, 1982, E- Property Rehabilitation Loan Agreement - Bank of America 0 0 -a+ 4 IT I' e MEMORANDUM 0 DATE : March 16, 1982 TO : Marty Orenyak y Building Director FROM : Chris Salomone, Administrative Assistant GW II/Redeve'lopment Division SUBJECT: REHABILITATION PROGRAMS - BANK PROPOSALS I PURPOSE The services of a lending institution are necessary to implement the City's Rehabilitation Programs. It is the purpose of this report to describe the bank selection process y delineate the various proposals and make a I recommendation. ! - RECOMMENDATION.: The City may deposit designated funds with the Bank of America, Carlsbad Branch, for the purpose of implementing Commercial and Residential Rehabilitation Programs. BACKGROUND: The City Council has authorized the use of Community Development Block Grant funds fol the establishment of local rehabilitation programs. $103,000 for Residential- (3rd Year Community Development Block Grant) and $55,000 for Commercial Rehabilitatiot (5th Year Community Development Block Grant). Staff was directed to design a prograr for the City which would meet the needs of the local community. On January 26, 1982, the City Council approved the programs and instructed staff to deposit funds with a lender and begin operating the programs. BRIEF PROGRAM DESCRIPTIONS: RESIDENTIAL REHABILITATION It is the primary goal of Carlsbad's Residential Rehabilitation Program to upgrade thl existing housing stock and maintain affordable housing. The program is designed to assist property owners to obtain financing who previously were not interested in or EXHIBIT "A" ' MOf3/16/82 Rehab Bank Proposals I ' ? pade.2 m a could not afford a home improvement loan. This is accomplished by making the loan terms more attractive and reducing the monthly cost of repaying the 1 oan (in some cases reducing the cost to zero). A corollary goal is to "leverage" the 1 imi ted Community Development Block Grant funds set aside for rehabilitation to reach as many households as possible. The program would make available: 1) Below Market Interest Rate Loans 2) Deferred Loans 3) Grants Income restrictions could determine the assistance level. COMMERCIAL REHABILITATION The Commercial Rehabilitation Loan Program provides below market interest rate loans to businesses in the Vi11 age Area (Census Tract 179.00) to improve commercial propert Loans to eligible businesses will be offered at 12% simple interest per annum. The maximum term for these loans is tens years. Both owners and tenants may apply for loans. Tenants must have a lease or rental agreement extending at least six months beyond the requested term of the loan. Loans may be made for renovation of single buildings or groups of buildings under single ownership or lease including chain stores and neighborhood shopping centers. There are no income restrictions for applicants. However, applicants must show sufficient financial capability to repay the requested loan pursuant to normal bank underwriting standards. BANK SELECTION PROCESS: In order to implement these programs a lending institution will be utilized. Staff has approached prospective lenders and solicited proposals. Staff has asked that the proposals contain a description of the services the lender will provide to the City il return for their selection as depository of these funds. Under agreement with the City the selected Bank will be the principal loan processing agent and the depository for all loan funds. These funds, along with any interest earned and principal repayments received, may only be used to make rehabilitation loa1 pursuant to program guidelines. t * M0/3/16/82 1 1 Rehab Bank Proposals 0 Page 3 0 The Bank will process all loan applications submitted and make recommendations for approval . The Bank wi 11 a1.so handle a1 1 loan fund transfers and disbursements and provide appropriate accounting records to the City. In order to reduce the effective interest rate, the Community Development Block Grant funds will be used to subsidize the interest rate or to collateralize loans. Under the interest rate subsidy method, the City will repay to the Bank the differen between the contractural interest rate charged by the Bank and the rate charged to the Borrower. Under the collateralized loan method, the City will deposit a percent of the principal of the loan in a non-interest bearing account as partial security for the loan. These funds are repaid to the City proportionately as the loan princi is repaid. The bank wi 11 recommend to the City which method to use based upon the amount of loan and term. The choice of loan subsidy method has no effect upon the loan terms to the borrower. The following lending institutions have submitted proposals for consideration: - Bank of America - Crocker National Bank - 1st Interstate Bank - La Jolla Bank - Security Pacific Bank The proposals submitted offered similar services. The proposals offer a leveraging of the Block Grant funds and would pay a competitive interest rage to the City on funds deposited with each institution. All of the banks would service both the Commercial and Residential Rehabilitation Programs. ANALYSIS : In evaluating the lender proposals staff considered various elements, some specific and some subjective. Some examples of the criteria for rehabilitation lender propo: are as foll ows : 1) Leveraging and interest rates on deposits 2) Location 3) Commercial and Residential ability/willingness 4) Experience 5) Additional benefits, outreach, staff training, etc. forms, credit checks, presentations to Council and Committee's - '. I MOJ3/16/82 Rehab Bank Proposals ) , page '4 e e 6) 7) 8) 9) 10) 11 1 12 1 13) 14 1 Cost per loan Fees Processing costs Percent costs Time for process Revolving loan fund Can loans be approved by local branch or do they have to go through main office in another City Total package Can contract be amended or revised easily? Each Bank has indicated experience with both interest subsidy and collateralized loan options. All institutions presented a complete proposal and were willing to tailor their program to Carlsbad's specific needs. SUMMARY : All proposals submitted would meet the basic needs of the City's Rehabilitation Programs. Each institution demonstrated their capability of administering a home and business improvement loan program as designed. In researching this project, staff has found that most cities revise their programs as their needs evolve. Many cities are putting together consortiums of banks to gai greater leverage and sophistication. It is staff's intention to remain in this marke posture and amend the programs as we experience specific needs. The Bank of America has established a good track record in other cities with similar programs. Additionally, the Bank of America is presently administering funds for the City of Carlsbad. Staff believes that this institution would capably administer the Residential and Commercial Rehabilitation Programs for the City of Carlsbad. (All proposals are available for review in the Community Development Department.) CS: a1 1 '1 e 0 rr. -, ." : .;r -) :.?? ,:~d 1.; BANKOFAMEFUCA ;, : _.I_ .! ,: ' .. 1 - ,;r::i LOIS CYR Asstsiani Vice Presiden! City Improvement and Restoration Program February 10, 1982 Chris Salomone Department of Housing & Redevelopment 3096 Harding Street Carlsbad, California 92008 Subject: Update on Proposal for the City of Carlsbad Residential/Commercial Rehabilitzation Loan Program Dear Chris: Your call requesting an update on your proposal was most welcome. You are to be commended for your patience. in work through the bureaucratic maze, to obtain your funding from the County of Sari Diego, and be in a position to proceed now with your program. The Bank of America is prepared to offer a Revolving Loan Fund/ Compensating Balance Program, enabling you to create a loan pool of a maximum of $300,000.00 (depending on utilization of "shared risk" loans in the 4% to 13% percent category). Your contract will include the following services: 1. Deposit of lump sum drawdown (of $151,000.) to accrue interest at highest legal rate. Interest to be utilized in rehabilitzation project. 2. "Escrow" or undisbursed loan fund account at no charge to authority or borrower during construction stage. 3. Repayment program commences upon completion of construction. 4. Bank absorbs approximately $500. in loan fees (lot book, appraisal and recording) and waives origination fees of approximately 3% on these loans. EXHIBIT I'B" BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION - 555 SOUTH FLOV!ER STREET - LOS ANGELES, CALIFORNIA 90071 I. t '1 l a e 5. Bank does not charge a packaging fee to political enitity or borrower. 6. "Deferred Loans'' are a component of every comprehensive contract, and will be processed for $37.50 plus out- of -pocket expenses. 7. Revolving loan fund ultimately returns all funding to city. 8. Your local branch Carlsbad-El Camino Real, under the management of Richard Darling, will be servicing your entire loan portfolio. 9. City Improvement & Restoration Department services over 90 contractees throughout California, and assists your local branch whenever necessary. 10. The City Improvement & Restoration Department, working with your Carlsbad-El Camino Real office of Bank of America, will put at your disposal, resources of other departments, should programing needs require same. 11.. Rates on attached sheet are committed for 30 day period. The Bank of America would enjoy a partnership with the City .of Carlsbad, in assisting you in your outgoing efforts to stabilize an improved housing in Carlsbad. I will look forward to seeing you in the near fu.ture. /d Sincerely, $4 Lois C. Cyr Assistant Vice President Program Manager-South LC :mm (213) 683-2991 cc: William Baughn, Senior Vice President San Diego Region a4595 Don 'Walsh, Vice President/Statewide Head City Improvement & Restoration 53765 Dick Darling,Manager Carlsbad-El Carmino Real $11043 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION $ '7 ' * a COPPENSATING BALANCE/REVOLVING LOAN PROGRAM The Compensating Balance Program has evolved fron our efforts to address the needs of very- and low-incone households. It: makes 3,00% APR loans, maximum maturity of 15 years. These loans are secured with noninterest-bearing savings account equal to 100% of the principal lent. Under this program, Bank will originate deferred payment (hardship) loans for the political subdivision. This progran is currently active in 90 California political subdivisions. 1. Efaxinum loan terns: 15 years (180 months). 2. Minimum monthly payment per loan: no minimurn 3. Maximum loan: no maximum. .4. Minimum loan: no minimurn; request that loans under $1,000 be made on a case basis only. 5. Service provided to the political subdivision: a. I b. C. d.. e. f. g* h. i. j. . -. . I . " k. Bank takes loan application. Bank performs all credit checks and communicates credit information and recommendation to the political subdivision. Political subdivision retains right to override Bankrs credit decision . Bank provides and executes all loan documentation. All loans secured by deed of trust unless political subdivision requests an exception. Bank disburses loans in progress payment format, Disbursement procedure remains flexible to consider unforeseen repair work. Political subdivision controls final access of contractors to loan proceeds. Bank provides monthly accounting of program, including loans made, delinquencies, and principal repaid on loans on a monthly basis. Bank remits to political subdivision principal repaid on loans on a monthly basis. In the case of defaulted loans, Bank will provide political. subdivision with its foreclosure service -For standard rates and fezs, 6. Zero percent savings account provides guarantee as well as subsidy for--loans. Risk is shared based on the compensating balance supporting each load. Loans delinquent 90 days may be charged back to the political subdivision by debit- ing this account and assigning a note and deed of trust to the political su3- division for follow-up. 7. Eased on an average loan size of $10,000, Bank is prepared to negotiate interest rate and compensating balance requirements as listed below: 4.25% Loans requiring 90% compensating deposit 7.25% Loans requiring 70% compensating deposit 10.25% Loans requiring 50% compensating deposit 13.50% Loans requiring 30% compensating deposit 2/10/82 BANK OF AEERICA NATIONAL TRUST AND SAV!r\iGS ASSOCIA:!ON .. ., ,.. . I, * @ Exhibit "D" MLMORANDUM DATE : March 25, 1982 TO : Marty Orenyak, Building Official e".;. FROM : Chris Salomone, Administrative Assistant II/Redevelopment SUBJECT: REHABILITATION LENDER PROPOSAL-AGENDA BILL In response to the City Manager's questions regarding this agenda bill: 1) The actual dollar amount of the deposit with the lender will be $134,189. ($79,189 for Residential Rehabilitation - $55,000 for Commercial Rehabilitation). The bank's letter indicated a dollar figure of $151,000, however, the bank was just guessing at the amount and the forthcoming contract will be far;the;speci:fied.,amount ($134,189). The bank is agreeable to this with no changes in the proposal. 2) Jim El 1 iott and myself have included a Resol uti on with the Agenda Bill to indicate the necessary transfer of funds for a short term. CS: a1 ? I ,I -, ' /I 0 m.. I 1 2 3 I I I RESOLUTION NO. 6840 AUTHORIZING THE DEPOSIT OF FUNDS FROM THE CONTINGENCY ACCOUNT NITH THE SELECTED ~ REHABILITATION PROGRAM DEPOSITORY 4 5 WHEREAS, the City Council of the City of Carlsbad has authorized the 6 rehabi 1 i tation program, and 7 of Community Development Block Grant funds for the establishment of a local .. 8 WHEREAS, the City of Xarlsbad and the County of San Diego have agreer 9 provide local rehabilitation services through the' Community Development Bloi 10 Grant program, and 11 -WHEREAS, the City of Carlsbad must select a depository to assist in . .. i2 administration of the rehabilitation loan process, and 13 WHEREAS, the City of Carlsbad desires to immediately deposit $134,18! 15 WHEREAS, the timely depositing of funds with the selected depository 14 guarantee rapid implementation of the local rehabilitation program, and 16 from the contingency account with the selected depos'i tory, this amount to bc 17 18 19 20 21 22 23 24 25 26 27 28 reimbursed within ////I /I// //I/ //I/ //I/ I/// ///I /I//. /I// ///I /I// three weeks from the Block Grant fund; - ll . .. I 1 1 2 3 4 5 6 7 .. 8 3 10 la 12 12 14 15 1E 17 1E 1E I I t 1 I i )I I 0 0 .. i NOW, THEREFORE, BE IT RESOLVED, that the City- Council of the City of Carl Sbi shall approve the Rehabilitation Agreement with the Bank of America and sha deposit $134,189, with this depository frorn.,the City's contingency account. PASSED, APPROVED AND ADOPTED at a regular meeting of the City Counci of the City of Carl sbad on thi.s 6th day of Apri'l 1982, by the fol 1 owing \rot to wit: . ' AYES : Council Mers Packard, Cakler ,. Anear, Lewis and Kulchin NOES: None. ABSTAIN : Eone ABSENT : None .. .. /gGL/<fid v.24.r- - .. RONALD C. PACKARD, Mayor 4 R3,. ALETHA TRAUTENKRANZ 9 City C1 erk .* (Seal 1 20 21 22 23 24 251 26 : 27 . 28 - ' 'I' '1 I a 0 Exhibit "E" COMMERCIAL AND RESIDENTIAL COMPREHENSIVE FORM ' . ,. PROPERTY REHABILITATION LOAN AGREEMENT THIS AGREEMENT is made by the CITY OF CRRLSBAD, a pol i tical subdivision in the State of California, herein called "Authority," and BANK OF PJIERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national bank- ing association, herein called "Bank." RECITALS A. Authority has authorized a Housing Preservation Program and a Commercial Property Rehabilitation Program as part of an adopted Community Development Block Grant Program (as may be amended and modi - fi ed from time to time) hereinafter collectively called "Program. I' B. As part of Authority's implementation of Program, Author- ity has requested Bank to make below-market interest rate property re- . habilitation loans ("Loans" or "Program Loans") to certain owners/tenants of real property within Authority and approved by Authority as recipients of Loans ("Applicants"). The purpose of the Loans will be the rehabi 1 i- tation of real property in accordance with Program. In addition, Author-' ity has requested a choice of several types of Loans to Applicants. C. To support these objectives, and based on an initial de- posit of Community Development Block Grant funds, Bank is willing to provide Authority and kppl icants with Collateralized Loans for Resi- dential Property Improvement (Part Three), Col1,ateral ized Loans for Commercial Property Improvement (Part Four), Deferred Payment Loans (Part Five) 3 and other services at rates and terms not available to the general pub1 ic or to Authority independent of this .Agreement. > , ,. 0 0. - NOW, THEREFORE, for an ,in consideration of the foregoing and the mutual agreements' made herein, and for other good and valuable con- .sideration, Authority and Bank agree as follows: PART. ONE a DEPOSIT OF COMMUNITY DEVELOPMENT BLOCK GRANT. FUNDS 1. Au-thori ty shall deposit $134,189 of Community Development Block Grant rehabilitation funds available to Authority under the Hous- ing and Community Development Acts of 1974 and 1977, as amended, as part of this Agreement. 2. Authori ty.'s deposits of Community Development Block Grant funds may be made in any of the foll owi.ng forms: (a} A deposit to the Warehouse Account, the funds in which are una1 located to ,Loans. (b) A .deposit to Collateralized Loan Account (s) which are noninterest-bearing savings accounts which subsidize Loans and are pledged as Loan collateral. (c) The -purchase from Bank of time certificate (s) of , deposit, the proceeds of .which are allocated to future.Program Loans. Bank will pay, at Authority's election, the highest interest rate per- ' mi tted by 1 aw and this Agreement on a1 1 account described above. If legal interest rate limitations are changed, Bank will pay its highest rate offered to the public.' .. 2 .. .I .. ,, , 1 , .: e -e . 3. Authority relinquishes the use of and control over ac- counts described in paragraph 2(b): This account(s) will be used only for the Loan purposes described in this Agreement. 4. Authority retains full accessibility to all deposits which are unallocated to existing Program Loans. 5. Authority agrees all interest earnings will be paid to .-the Warehouse Account and will become immediately available for the sub- sidy of Loans. PART TWO APPLICATION PROCEDURES 6. At the'request of Authority, Bank, through its Carl-sbad- El Camino Real Branch, shall consider making Loans to qualified Appli- cants directed to Eank by Authority. Bank shall notify the respective Applicant(s) in writing.of any such request .it receives from Authority. The notification shall contain the following statement: "The City of Carlsbad has requested the Carlsbad-El Camino Real Branch of Bank of America National Trust and Savings Association, 2550 El Camino Real, Carlsbad, California 92008, to consider making a specific extension of credit to you .I1 ., A.qualif.ied Applicant shall be identified by Authority or its agents, using Authority's established s-tandards, which must con- sider, without limitation: (a) For each improvement Loan Applicant: (1) Applicant is' "the owner of record" of the property. subject to rehabilitation. .. .. 3 .. .. I G LI ,I e 0. I .(2) Applicant has verifiable income(s) which can be used to repay the proposed Loan. (3) Authority has detetmined that the proposed Loan, given Program options available, will best serve the . rehabilitation needs of Applicant and' the Program objectives. (b) In add.ition, each commercial improvementlrehabilita- .tion Loan Applicant, if a lessee,.has a lease which, with options, .. extends at least six (6) months beyond.the maturity of the proposed Loan. 7. Authority shall furnish to Bank, with respect to each Loan application: .- .. (a) an introductory letter stating that Applicant qua- lifies for Loan consideration, based on minimum standards in para- graph 6, and that Authority desires Bank to consider making a Loan to Applicant; (b) a breakdown of the costs involved in the rehabili- tation work to be performed on Applicant's real property; (c) a description of the work; (d) an estimate of the value of the real property of- fered as security for the Loan, or a statement that the Loan is to be unsecured; (e) a copy of any contractor bid proposed to, or ac- cepted by, Applicant; . - (f) a statement including the name of the contractor selected by Applicant who will perform.the rehabilitation work, 4 . .. /. , ' ~. ' '> 0 .II . - and that Authority knows no reason to disqualify the contractor from program participation; and (E) for each commercial improvement/rehabilitation Loan, Authority shall also furnish to Bank, with respect to each Loan Ap- plicant; (1) 2-year business income statements supported by IRS income tax filings; (2) a copy of the existing lease, if Applicant is a property tenant; and (3) Applicant's personal.financia1 statement. 8. Bank shali perform its customary credit evaluation with respect to Applicant, render its judgment with respect to the credit- worthiness of Applicant, and recommend appropriate Loan terms. 9. Upon completion of its credit evaluation, Bank shall fur- nish to Authority a recomaendation whether to proceed .with the Loan or not, including.: (a) a recommendation as to use of either Collateralized or Deferred Payment Loan, or some combination thereof; and (b) an indication of which of the following Loans (for ., which Bank assumes part of the credit risk, as indicated paren- thetically below) 'Rank 'is willing to make to Applicant: (-1) for residential property improvement Loans : (i) a 6.75% Collateralized Loan (30% credit risk); or ' (ii) a 12.00% Collateralized Loan (70% credit .. risk). . 5 .. .. .. .I a 0. . 5 , ,I1 '(2) For commercial property improvement Loans: a 12 .OO% Collateralized Loan (65% credit risk). 10. After having determined the exact nature and scope of the rehabilitation work to be performed on Applicant's real property, Author- ity may reques" Bank to grant Applicant a Loan, which either must be from among those designated by .Bank pursuant to paragraph 9(b) above or must :be a-Loan pursuant to paragraph ll(a) (100% collateralized) or Part Five .. (Deferred Payment Loan). PART THREE COLLATERALIZED LOANS FOR RESIDENTIAL PROPERTY IMPROV~EMENT 11. Each Collateralized Loan shall be supported by a deposit, as described below, made by Authority to a Collateralized Loan Account. These accounts shall at all times be at: least equal to: . (a) 100% of unpaid principal for each 3.00% Loan for which Bank has not designated Applicant (pursuant to paragraph 9(b)(1)) as a party to whom Bank is willing to make a (partially) Collateralized Loan; (b) 70% of unpaid principal for each 6.75% Loan; (c) 30% of unpaid principal for each 12.00% Loan; plus, in each case, 100% of accrued unpaid interest. Authority hereby assigns the CollatSralized Loan Account to secure the Collateralized Loans. - 12. (a) Unless Authority requests one note only, each Cc1.- lateralized Loan shall be evidenced' by 'two notes, effective in sue- cession, as provided herein. 6 . .. I .' .. I 0 e.. L (b) The note first effective shall be a short-term com- mercial note, the term of which shall coincide approximately with the rehabilitation period (although all references herein to the short-term commercial n0t.e are singular, a Loan could include more than one short-term commercial note). The term of any one short- term commercial note may not exceed ninety (90) days, although the note may be extended, renewed, or refinanced. The Loan proceeds ,. thereof shall be disbursed by Bank in a number of draws, each to follow completion of an applicable state of construction, as cer- tified to Bank by Authority. Interest shall accrue only on the disbursed portion of the Loan. (c) Promptly after Bank's disbursement of the final drag under the short-term commercial note, that note shall be refinanced .. by an installment note, as provided for at subparagraph (e) below or, alternatively, as provided for in Part Five, Deferred Payment Loans. At the time the short-term commercial note is refinanced by the,installment note, Applicant may either pay Bank the accrued in- terest on the short-term commercial note or may have it added to the principal of the installment note. (d) As part of its normal credit accommodations, Bank will make creditor life and disability insurance available to each Applicant. Insurance will be at Applicant's option, subject to standard qualifications and premiums. Qualifications and premiums are subject to change without prier netice. In the case of de- ,faulted Loans, Authority agrees to guarantee unpaid.premiums in . accordance with the provisions of parairaph 15 below. - 7 . .. t :; 1 a @ (e) The term of the installment note will be determined by Bank for the Loan in question, but ray not exceed 15 years, and the installment note shall b.e amortized in equal monthly install- ments over its term. Interest will be calculated on a simple in- terest basis for each installment note. . 13. With respect to Collateralized Loans: (a) On both the short-term commercial note and the in- stallment note, interest and other finance charges, as defined in the Federal Truth in Lending Act and Regulation Z thereto, shall be such as to result in an Annual Percentage Rate, as defined in.that Act and Regulation, of 3.00% or 6.75% or 12.00%. '(b) The Loan shall be documented using Bank's standard f oms. (c) Both the short-term commercial note and the install- ment note shall, at Bank's or Authority's option, be secured by a deed of trust covering the real property that is the subject of the rehabilitation for which the proceeds of the Loan are to be used. 14. Authority shall make a relevant deposit to the Collateral- ized Loan Account in the percentage of Loan amount provided for at para- graph 11, when the commercial note and deed of trust, if 'any, are signed by Applicant and when interest on a short-term commercial note becomes added to the principal of a subsequent installment note. At the end of each calendar month ending 180 days after Authority's first .deposit here- under, Bank shall remit to Authority the amount by which the Collateral- ized Loan Account exceeds the paragraph 11 percentages of the unpaid ,. .8 ,_ .. ~ ,'* b ., ' a 0 balances of Collateralized Loans. Funds that Bank thus remits to Author- ity shall be deemed funds that Authority deposited at least 180 days be- fore. 15. If a Collateralized Loan remains in default for a continu- ous period of ninety (90).days on account of nonpayment of any sum of money due pursuant to the terms thereof or of any instrument or document related thereto, Bank may withdraw from the Collateralized Loan Account, and pay to itself, an amount equal to the then outstanding principal bal- ance of the Loan multiplied by the same percentage as tEe perceritage of the Loan amount that was deposited to the Collateralized Loan Account pursuant to paragraph 11, plus 100% of accrued unpaid interest on the Loan, together with insurance-premiums, if any, accrued through the 90th day of default. Bank shall have RO recourse against Ailthority or the Collateralized Loan Account for any amounts in excess of those permitted under this paragraph. During any niEety (90) day default yeriod, Bank shall perform its customary collection procedures with respect to the Loan. 16. After a withdrawal from the Collateralized Loan Account' under paragraph 15 above, in the case of a Loan for which the ,deposit to the Collateralized Loan Account under paragraph 11 was less than 100% of the Loan amount: (a) Bank need not assign the deed of trust to Authority upon completion of the withdrawal, but.may, for its owri account, exercise rights under the deed of trust to recover the remaining outstanding and unpaid principal of.the Loan plus accrued unpaid '9 .. ,, :. I 'I e .e interest thereon together with insurance premiums, if any, accrued after the 90tkday of default. (b) At its election, Bank may assign to Authority such . rights as may be necessary for Authority to attempt to recoup any. funds withdrawn from the, Collateralized Loan Account in connection with any Loan defahlt. (c) If Bank subsequently recovers funds with respect to a defaulted Loan (as, for example, but without limitation, if a 'voluntary sale of the property takes place), Bank shall, after de- ducting the previously unreimbursed percentage of Loan loss to which Bank is entitled, plus Bank's costs of recovery, return and pay over to 'Authority all amounts in excess thereof 17. After a withdrawal from the Collateralized Loan Account . under paragraph 15 above, in the case of a Loan for which the deposit to the Collateralized Loan Account under paragraph 11 was 1OOX of the Loan amount, Bank shall assign the Loan to Authority? the assignment to be ac- complished by: (a) the due endorsement by Bank to Authority of the promissory note evidencing the Loan, without recourse or warranty; and (b) the delivery of the promissory note and the assign- ment and delivery of the deed of trust. 18. Collateralized Loans, as described in paragraphs 11 through 17, must have an average original Loan amount of $lO,OOO.OO, Authority's .. Collateralized Loans will be analyzed every 180 days from contract ap- proVal. If average .$lO,OPO Loan amounts are not maintained, Bank may: .. 10 : .. VI 1, 0 .a (a) 'increase borrower interest rates for new Loans; (b) increase collateral requirements for new Loans; or (c) assess an origination fee for new Loans. PART FOUR COLLATERALIZED LOANS FOR COWfRCIAL PROPERTY IMPROVEXENT 19. Each Collateralized Loan shall be supported by a non- interest-bearing deposit made by Authority to a Collateralized Loan Ac- count, an account that shall at all times be at least equal to 35% of the unpaid principal for each 12.00% Loan, plus 100% of accrued unpaid interest. Authority hereby assigns the Collateralized Loan Account to .secure the Collateralized Loans. 20. (a) Unless Authority requests one note only, each Col- lateralized Loan shall be evidenced by two notes, effective in suc- cession, as provided herein. (b) The note first effective shall be a short-term corn- . mercial note, the term of which shall coincide approximately with the rehabilitation period (although all references herein to the short-term commercial note are singular, a Loan could include more than one short-term comnercial note). The term of any one short- . term commercial note may not exceed ninety (90) days,.although the note may be extended, renewed, or refinanced. The Loan proceeds thereof shall'be disbursed by Bank in a number of draws, each to follow completion of an applicable state of construction, as cer- tified to Bank by 'Authority. Interest .shall accrue only on the ' a. .. disbursed portion. of the Loan. 11 .I >I ,L e .. (c) Promptly after Bank's disbursement of the final draw under the short-term commercial not.e, that note'shall be refinanced by an installment note, as provided for at subparagraph (e) below or, alternatively, as provided for in Part Five, Deferred Payment Loans. At the time the short-term commercial note is refinanced by the installment note, Applicant may finance the accrued interest on the short-term commercial note. (d) As part of its normal credit accommodations, Bank will make creditor life and disability insurance available to each Appli- cant subject to standard qualifications and premiums, which qualifi- cations and premiums are subject to change without prior notice. However, if Applicant does not qualify 'for or elects not use the creditor life and disability insurance 'offered by Bank, Applicant shall be required to obtain a policy of Creditor Life Insurance, in a form acceptable to Bank while any part of the Loan remains out- standing, in an amount at least equal to the amount outstanding un- der the Loan to Applicant , with Bank- named as beneficiary. Upon Authority's request, said insurance shall be prepaid from Loan pro- ceeds and said amount added to the principal amount of the Loan. At Bank's request, each Applicant shall also be required to main- tain a standard policy'of hazard insurance covering the real pro- perty upon which the rehabilitation work is to be performed in effect while any part of the Loan renains outstanding,.with Bank named as beneficiary. In the case of defaulted Loans, Authority agrees to guarantee unpaid premiums in accordance with the provi- sions of paragraph 23 below. 12 ., ,. " , .> L 0 .e (e) The term of the installment note shall be determined by Bank for the Loan in question, but may not exceed years, and the installment note shall be amortized in equal month- ly installments over its term. Interest will be calculated on a simple interest basis for each installment note. 21. With respect to Collateralized Loans: (a) On both the short-term commercial note and the in- stallment note, interest and other finance charges, as defined in .the Federal Truth in Lending Act and Regulation Z thereto, shall - be such as to result in an Annual Percentage Rate, as defined in ' that Act and Regulation, of 12 .OO%. (b-) The Loan shall be documented using Bank's standard forms . (c) Both the short-term commercial note and the install- .. ment note may,'at Bank!s or Authority's option, be secured by a deed . of trust covering the real property that is the subject of the re- habilitation for which the proceeds of the Loan are to be used. 22. Authority shall make a relevant deposit to the Collateral- ized Loan Account in the percentage of Lo.an amount provided for at para- graph 19 when the commercial: note and deed of trust, if any, are signed I . by Applicant. At the end of each calendar month ending 180 days after Authority's first deposit hereunder, Bank shall remit to Authority the amount by which the Collateralized Loan Account exceeds the paragraph 19 percentage of the unpaid balances of Collateralized Loans. Funds that Bank thus remits to Authority shall be'deemed funds that Author- ity deposited at l.east.180.days before.. .. 13 . ,. 0 0. \ ' ) ,,, I 23. If a Collateralized Loan remains in default for a continu- ous period of ninety (90) days on account of nonpayment of any sum of money due pursuant to the terms thereof, or'.of'any instrument or docu- ment related thereto, Bank may withdraw from the Collateralized Loan Account, and pay to itself, an. amount equal to the then outstanding prin- cipal balance of the Loan multiplied by the same percentage as the per- ..centage of the Loan amount that. was deposited to the Collateralized Loan .. Account pursuant to paragraph 19, plus 100% ,of accrued unpaid interest on the Loan, together with insurance premiums, if any, accrued through the 90th day of default. Bank shall have no recourse against Authority or the Collateralized Loan Account for.any amounts in excess of those permitted under this paragraph. During any ninety (90) day default per- iod, Bank shall perform its customary collection procedures with respect to the Loan. 24.. Aftera withdrawal from the Collateralized Loan Account under paragraph 23 above: (a) 3ank need not assign any deed of trust to Authority upon completion of the withdrawal but'may, for its own account, exercise rights under the deed of trust, note, or other instrument in Bank's possession to recover the remaining outstanding and un- paid principal of the Loan plus'accrued unpaid interest thereon together with insurance premiums, if any, accrued after the 90th day of default. - (b) At its election, Bank may assign to Authority such rights as' may be necessary for Authority to attempt' to recoup any 14 . ,. , ,\I .'I I ? 0 -e - funds withdrawn from the Collateralized Loan Account in connection with any Loan default. (c) If Bank subsequently recovers funds with respect to a defaulted Loan (as, for example, but without limitation, if a voluntary sale of the property takes place), Bank shall, after de- ducting the previously unreimbursed percentage of.Loan loss to which Bank is entitled, plus Bank's cost of recovery, return and pay over to Authority all amounts in excess thereof. 25. Collateralized Loans, as described in paragraphs 19 through 24, must have an average original Loan amount of $10,000..00, Authority's Collateralized Loans wili be analyzed every. 180 days from contract ap- proval. If average $10,000 Loan amounts are not maintained, Bank may: (a) increase borrower interest rate for new Loans; (b) increase collateral requirements for new Loans; or (c) assess an origination fee for new Loans. .. .. PART FIVE DEFERRED PAYXENT LOANS 26. In the event Authority requests Bank to make a Loan, the terms of which are other tkan as provided in Parts Three and Four, Bank shall. comply with Authorityls request. In that case, after Bank has ob- tained Applicant's note on terms Authority has requested for the Loan, Bank shall, promptly after completion of the respective rehabilitation work, assign the Loan to Authority according to the same procedure, and for the same price, as would be applicable under paragraphs 15 and 17 .. 15 .. e. .'I., t , 11, c e 0. (Part Three) in the case of the assignment following default of a Col- lateralized Loan for which the deposit to the Collateralized Loan Account under paragraph 11 was 100%. Promptly after the assignment, Authority shall pay to Bank a fee to cover its internal administrative and out-of- pocket expenses, as specified by Bank, but in no event less than THIRTY- SEVEN DOLLARS ABD 50/100 ($37.50) nor more than SEVENTY-FIVE DOLLARS .($75.00) for each Loan so made. Such fee shall be Authority's sole ex- pense and shall not be recovered from Applicant. .. 27. Prior to the making of the first Deferred Payment Loan, Authority shall furnish to Bank an opinion of its legal counsel: (a) stating that Authority has establish,ed rates and terms for its Deferred Payment Loan Program note; (b) designating whether any Deferred P.ayment Loan fee is a "chargc to be financed'' or a "prepaid finance charge" under Regulation Z; and (c) that Authority has delivered this information and its 'note to Bank's Carlsbad-El Camino Real Branch. PART SIX . GENERAL PROVISIONS 28. On Auth0rityI.s request, Bank, shall, for its customary fees , therefore, accept for collection purposes, pursuant to Bank's then cur- rent installment pfocedures, a Program Loan that has been transferred to Authority. - 29. On Authority's request, Bank shall, for its customary fees, prov.ide foreclosure services with respect to'a defaulted Program Loan 16 t< 3 . .. , '! I, 9 e 0 that has been transferred to Authority, in which case Bank shall be sub- stituted for Continental Auxilary.. Company/Authori ty as trustee under the applicable deed of trust. 30. (a) This Agreement shali expire 1 November 1982. This Agreement may be terminated or amendid through mutual acceptance by either of the parties hereto at six (6) month intervals from 1 November 1981 provided written notice of intent to amend or ter- minate is given to the other party at least fifteen (15) days prior to the amendment or termination date. (b) Any termination of this Agreement shall not affect program Loans outstanding at the time of termination. , (c) At termination , Bank shall retain the Coll ateral- ized Loan Accounts and shall remit monthly to Authority the amount by which the Collateralized Loan Accounts exceed the paragraph 11 . (Part Three) and paragraph 19 (Part Four) percentages of the unpaid balances of Col 1 ateral ized Loans. 31. Bank covenants and agrees that nothing in this Agreement or any agreement made pursuant hereto shall be deemed or construed by . Bank to make Authority a surety or guarantor of any Loan, and that Bank's rights with respect to a Collateralized Loan shall be limited to those set forth in Part Three and Part Four hereof. 32. Authority and Bank shall comply with all applicable stat- utes and regulations, including without limitation, where applicable, the Federal Truth in Lending Act and Regulation Z thereto, the Consumer 17 ... 0 I -, !* e 0. t Credit Reporting Act, and the Equal Credit Opportunity Act and Regula- tion B thereto. .I 33. Except as specifically required by this Agreement, Author- ity waives any right it may have bo require Bank to: (a) proceed against any Applicant or other person; (b) proceed against or exhaust any collateral for the relevant Loan; or .. (c) pursue any other remedy in Bank's power; and waives'any defense arising by reason of any disability or other de- fense of Applicant or any other person, or by reason of. the cessation from any cause whatsoever, other than full papent, of the liability of an Applicant or any other person. 34. Bank and Authority acknowledge the "Special Purpose" na- ture of the Program and Program Loans. To serve this "Special Purpose," a Loan shall be considered in default after the date of a transfer of the deed of trust property which, according to the provisions of the note, make the entire principal and interest of the note due and payable, re- gardless of Bank's ability or inability to enforce those provisions of the note. 35. Any communications between the parties hereto may be given . by mailing same, postage prepaid, to Bank at its Carlsbad-El Camino Real Branch, 2550 El Cadiin0 Real, Carlsbad, California 92008, and to Author- ity at its Office of Community Development, City of Carlsbad, City Hall, 1200. Elm !,venue, Carlsbad, California 92008, or to such other addresses as either party may in writing hereafter indicate. 18 . .. ' 1, - 'i I' * e -0. 36. This Agreement and any agreement, document, or instrument attached hereto or referred to herein integrate all terms and conditions mentioned herein or incidental hereto, and supersede all oral negotia- tions and prior writing in respect to the subject matter hereof. In the event of any conflict between the terms, conditions, and provisions of this Agreement and any such agreement, document, or instrument,.the' ..terms, conditions, and provisions of this Agreement shall prevail. 37. Authority shall indemnify and hold harmless Bank against al1,claims and damages, alleged or otherwise, of whatsoever nature, aris- ing out of or in any way connected with the acts or omission of any con- tractor performing rehabilitation work in connection with this Agreement; provided, however, that Authority's obligations under this paragraph shall not extend to negligent or wilful acts or omissions by Bank. All contractors shall operate as independent contractors and nothing herein is intended to affect 'such independent contractor status.' 38. . Bank may, at its option, decline to make additional Loans from and after the date when the principal balance of all Loans outstand- ing has exceeded FIVE HUIDRED THOUSAND DOLLARS. ($500,000.00). 39. This Agreement may be executed in as many counterparts as may be deemed convenient, each of which, when executed, shall be deemed .I . an original. 40. The operating aspects of this Agreement, including but not 1imi.ted to target area boundaries, may be altered from time to time through a letter of understanding, accepted mutually by Authority's Dir- ector of Community Development and Bank's City Improvement and Restora- .. tion Program (CIRP) Department, Oakland, California. 19 .. 2 ._I ,i .. 0 e. 1 I; w IN WITNESS WHEREOF, this Agreement is executed by Authority acting by and throggh its . . . . . . . . .. . ... ¶ pursuant to Resolution No, authorizing such execution, and by Bank. Dated this day of ,19' - . . .. .. .BANK OF AMERICA NATIONAL TRUST SAVINGS ASSOCIATION CITY OF CARLSBAD BY BY .. / E. .Anderson Title Title Vice-PresidentlStatewide "- City Improvement and Rest tion Program - 20 . ..