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HomeMy WebLinkAbout1999-06-15; City Council; 15264; Establish Moderate Income Loan Programi /-4 - CITY OF CARLSBAD -AGENDA BILL I AB# ‘8 &&BY TITLE: MTG. 6-15 -59 ESTABLISHMENT OF A MODERATE INCOME LOAN PROGRAM DEPT. H/RED RECOMMENDED ACTION: That the City Council ADOPT Resolution No. 54 - 22 1 , APPROVING an allocation of $50,000 from the Housing Trust Fund to establish a Moderate Income Loan Program to provide downpayment assistance to first-time moderate income homebuyers to purchase homes in the City of Carlsbad and APPROVING the related loan and security agreements. ITEM EXPLANATION The City of Carlsbad’s Housing Element contains policies and programs which are designed to create housing opportunities for all segments of the community. Specifically, Goal 3.10(b) of the Element states that “The City’s Housing Authority and Housing and Redevelopment Department will work to secure funding and develop additional lending programs for moderate income, especially first-time home buyers.” The Moderate Income Loan Program (M.I.L.P.), described in further detail below, has been developed to implement this goal. As proposed, the M.I.L.P. will provide qualified applicants with second trust deed loans to be used toward downpayment or closing costs when purchasing their first home. Loans will be limited to 3% of the purchase price or $5,000, which ever is less. The interest rate on the loan will decline over the life of the loan. The interest rate will be 6% simple interest for years 1-5, 3% simple interest in years 6- 10, and interest will be forgiven if ownership exceeds 10 years. Repayment of the loan will be deferred until sale, transfer, refinance, or the property is no longer the primary residence of the borrower. To participate in the program, homebuyers must live or work in the City of Carlsbad, provide a minimum of 2% of the total purchase, and have an annual income that does not exceed 120% of the Area Median Income. Eligible properties must be located within the City of Carlsbad, currently owner occupied or vacant to avoid any relocation of existing tenants, and will be limited to single-family detached homes, condominiums and townhomes. HOUSING COMMISSION RECOMMENDATION The Housing Commission reviewed the M.I.L.P. at their May 13, 1999, meeting. The Commission found that the Moderate Income Loan Program meets the purpose and intent of Housing Element Goal 3.1 O(b) and therefore unanimously recommended that the City Council approve the program as presented. The Commission also concurred with staffs recommendation that the M.I.L.P. originally be funded in the amount of $50,000 to assist a minimum of ten moderate income, first-time homebuyers. The Program is intended to initially be a Pilot program. At the end of the first year, the program will be evaluated and a determination made at that time as to whether or not to continue the program. FISCAL IMPACT The approval of this program will require the allocation of $50,000 from the Housing Trust Fund to assist a minimum of ten moderate income homebuyers. If a decision is made to continue the program past the first year, additional funding will be required at that time. The Housing Trust Fund currently has an undesignated fund balance of approximately $2,300,000. 1 \ - Page 2 of Agenda Bill No. 15, a6 y h EXHIBITS 1. City Council Resolution No. m -2&f , to approve the allocation of $50,000 from the Housing Trust Fund to establish the Moderate Income Loan Program and to approve the related loan agreement, promissory note and buyer disclosure statement. 2. Moderate Income Loan Program Guidelines 3. Loan Agreement, Promissory Note and Buyer Disclosure Statement 4. Housing Commission Staff Report dated, May 13, 1999 and Draft Meeting Minutes 1 ! l( 1' 1; 1: 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 99-221 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING THE ALLOCATION OF $50,000 FROM THE HOUSING TRUST FUND TO ESTABLISH A MODERATE INCOME LOAN PROGRAM TO PROVLDE DOWNPAYMENT ASSISTANCE TO FIRST TIME MODERATE INCOME HOMEBUYERS PURCHASING HOMES IN THE CITY OF CARLSBAD. WHEREAS, the City of Carlsbad’s Housing Element identifies and analyzes the existing and projected housing needs and list goals, policies, objectives, resources and programs for the preservation, improvement and development of housing; and WHEREAS, the Housing Element further identifies short-term objectives, policy positions, and action programs which can be utilized to achieve the long-term housing goals of the City of Carlsbad; and WHEREAS, the Housing Element seeks to provide a variety of housing opportunities for households of all income levels; and WHEREAS, Goal 3.10(b) of the Housing Element states that the City of Carlsbad’s Housing and Redevelopment Department will work to secure funding and develop additional lending programs for moderate income, especially first-time home buyers; and WHEREAS, on May 13, 1999, the Housing Commission did hold a public meeting to consider the Moderate Income Loan Program to provide downpayment assistance to first-time moderate income homebuyers purchase homes in the City of Carlsbad; and WHEREAS, at said public meeting, upon hearing and considering all testimony, if any, of all persons desiring to be heard, said Commission considered all factors and recommended approval of the Moderate Income Homebuyer Program to the City Council; WHEREAS, on June 15, 1999, the City Council held a public meeting to consider the Moderate Income Loan Program; and WHEREAS, at said public meeting, upon hearing and considering all testimony, if any, of all persons desiring to be heard, the City Council considered all factors relating to the Moderate Income Homebuyer Program d / t s 1c 11 li 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. The above recitations are true and correct. 2. The Program is consistent with the goals and objectives of the City of Carlsbad’s Housing Element, the Consolidated Plan, and the Carlsbad General Plan. 3. The project will provide a minimum of 10 home-buying opportunities for moderate income first-time homebuyers earning 120% or below of the county median income. The Program, therefore, has the ability to effectively serve the City’s housing needs and priorities as expressed in the Housing Element. 4. That based on the information provided within the City Staff Report and testimony presented during the public meeting of the City Council as well as the Commission Staff Report and testimony presented during the public meeting of the Housing Commission on May 13,1999, the City Council ADOPT Resolution No. ci9 -aaf , APPROVING the allocation of $50,000 from the Housing Trust Fund to establish a Moderate Income Loan Program to provide downpayment assistance to first-time moderate income homebuyers purchasing homes in the City of Carlsbad, and approval of the related loan and security agreements. 5, That the City Council hereby authorizes the City Manager or his/her designee to execute all documents related to provision of the City assistance, including but not limited to a Promissory Note, Deed of Trust and Borrower Disclosure in substantially the form presented, and approval by the City Attorney. PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council of the City of Carlsbad, California, held on the 15 day of June, 1999, by the following vote, to wit: AYES: Council Members Lewis, Nygaard, Finnila & Hall NOES: None -SEW: Council Member Kulchin ABSTAIN: ATTEST: (SEW CCRESONO. 99-2ai PAGE 2 Exhibit 2 CITY OF CARLSBAD MODERATE INCOME LOAN PROGRAM Information & Program Guidelines Introduction The Moderate Income Loan Program (M.I.L.P.) is a program designed to provide qualified applicants with second trust deed loans to be used toward downpayment or closing costs when purchasing their first home. The loans will be limited to 3% of the purchase price or $5,000 (whichever is less). Repayment of the loan will be deferred until sale, transfer, refinance or when the M.I.L.P. assisted buyer no longer occupies the property. To be eligible for the loan, borrowers’ income must be at or below 120% of the currently published San Diego County median income, adjusted for household size, as defined by the U.S. Department of Housing and Urban Development and the California Department of Housing and Community Development. 1. Eliaible Properties (A) Loans will only be made on residential properties located within the City limits of Carlsbad. (B) Properties can be new or resale single-family homes including detached homes, condominiums, or townhouses. (C) Properties purchased with M.I.L.P. assistance must be owner-occupied or vacant at the time of the purchase offer, in order to avoid the potential cost of relocating tenants. (D) Properties purchased with M.I.L.P. assistance must meet minimum code, health and safety standards upon occupancy. 2. Household Eliqibilitv Reauirements (A) PI cc> Households shall have sufficient income and credit worthiness to qualify for primary financing from one of the participating program lenders. Households shall be required to have sufficient liquid assets to be able to provide a minimum investment toward the required downpayment. A minimum investment of 2% will be required from the borrowers. Households shall not have assets which exceed $50,000, as defined by this program. 3. Income Qualification Criteria Household adjusted gross income shall not exceed 120% of the San Diego area median income adjusted for family size. The income limits shall be subject to annual adjustments. Number In Household Number In Household 1 1 Person Person 2 2 Person Person 3 3 Person Person 4 4 Person Person 5 5 Person Person 6 Person 7 7 Person Person 8 Person 8 Person 6 Person Maximum Yearly Maximum Yearly Household Income ’ Household Income ’ 44,100 44,100 50,400 50,400 56,700 56,700 63,000 63,000 68,050 68,050 73,100 78,100 78,100 83,150 83,150 Effective: l/27/99 Effective: l/27/99 I 73.100 I I 4. Maximum Purchase Price The appraised value of the property cannot exceed $240,000. The maximum purchase price will be determined based on the buyer’s ability to obtain a first mortgage loan and maintain an acceptable affordability level as set forth herein. 5. Loan Limits and Terms (A) P) (C> m The maximum loan under this program shall be the lesser of 3% of the purchase price or $5,000. The terms of the City’s second trust deed loan were designed to encourage long term residency in the program-assisted home. Interest on the City’s loan will descend and may ultimately be forgiven based on the number of years the assisted household resides in the home. If the property is sold, transferred, refinanced or the assisted borrower no longer occupies the property within years l-5 from the date the Deed of Trust is executed, the simple interest rate at payback will be 6%. During years 6-10 the simple interest rate will be 3%. After IO years of owner-occupancy, all interest will be forgiven. The loan shall become due and payable at the time of the property’s transfer or sale, or when the acceleration clause noted below is triggered. The acceleration clause will be in effect when the property is no longer the assisted borrower’s principal place of residency, or upon discovery of willful misrepresentation or fraud in connection with the program. Rental of the property is prohibited and will cause the loan to be accelerated. 1 Figures based on HUD B HCD published 1999 Median Income Limits for San Diego County. 2 - (E) The loan is not assumable. (F) The loan will be secured by a promissory note and deed of trust. (G) Refinancing of the property yvilJ accelerate the loan except in the case of an FHA Streamline Refinance. 6. Eliuible Borrowers/Borrower Prioritv The program is for first-time homebuyers. (A) Priority will be given to residents of Carlsbad and/or households who are employed in businesses located within the City of Carlsbad and have been employed for 90 days. (B) City of Carlsbad employees are eligible to participate. (C) Applications will be accepted only from households who have not owned a home for at least three years. 7. Aqencv Loan Procedures (A) All buyers receiving loans through the City’s program are required to participate in a Homebuyer Training Program. The training can be accomplished in one-on-one meetings, group meetings periodically provided by participating program lenders or by completing a home-study course completion of the homebuyer training. (B) Homebuyers will apply for M.I.L.P. through an approved program lender. Lender will determine applicant’s eligibility for funding based on City guidelines. A list of approved lenders is available from the City’s Housing & Redevelopment Program. 8. Additional Procedures and Requirements The First-Time Homebuyer Commission will serve as an appeal board for rejected loans if review is requested. t” ? Exhibit 3 MODERATE INCOME LOAN PROGRAM NOTICE TO BORROWER: THIS NOTE IS NOT ASSUMABLE PROMISSORY NOTE Secured by Deed of Trust $ Carlsbad, California , 19% FOR VALUE RECEIVED, the undersigned (the “Borrower”) promises to pay to the City of Carlsbad, a municipal corporation (the “City”), or order, at the Housing and Redevelopment Department, 2965 Roosevelt Street, Suite B, Carlsbad, California 92008, or such other place as the City may designate in writing, the principal sum of $ , plus Interest calculated pursuant to Section 4 below. 1. Put-nose of Loan. Borrower is purchasing the Residence located at in the City of Carlsbad. This Note evidences a loan made by the City to the Borrower (the “City Loan”) pursuant to the Carlsbad Moderate Income Loan Program (“MILP”). The City Loan is in the amount determined by the City to be necessary for the Borrower to afford to purchase the Residence making a reasonable downpayment and using conventional first mortgage financing for the balance of the purchase price not financed by the City Loan, as amended. 2. Definitions. The terms set forth in this Section shall have the following meanings in this Note. a. reserved. b. ” Interest” shall mean the amount set out in Section 4. 1010\02\111700.3 C. “Fair Market Value” shall be determined by a real estate appraisal made by an independent residential appraiser designated by the City. If possible, the appraisal shall be based upon the sales prices of comparable properties sold in the market area during the preceding three-month period. The cost of the appraisal shall be paid by the Borrower. Nothing in this subparagraph shall preclude the Borrower and the City from establishing the Fair Market Value of the Residence by mutual agreement in lieu of an appraisal. d. “First Mortgage” shall mean the promissory note and deed of trust evidencing and securing the first mortgage loan for the Residence. e. “Residence” shall mean the housing unit and land encumbered by the deed of trust executed in connection with this Note. f. “Transfer” shall mean any sale, assignment or transfer, voluntary or involuntary, of any interest in the Residence, including, but not limited to, a fee simple interest, a joint tenancy interest, tenancy in common interest, a life estate, a leasehold interest, or an interest evidenced by a land contract by which possession of the Residence is transferred and the Borrower retains title. Any Transfer without satisfaction of the provisions of this Note is prohibited. A transfer: (i) to an existing spouse who is also an obligor under the Note; (ii) by a Borrower to a spouse where the spouse becomes the co-owner of the Residence; (iii) between spouses as part of a marriage dissolution proceeding; (iv) to an existing spouse or child of the Borrower by device or inheritance following the death of the Borrower; (v) by the Borrower into an inter vivos trust in which the Borrower is the beneficiary; or (vi) by deed of trust or imposition of a lien subordinate to the Deed of Trust, shall not be considered a Transfer for the purposes of this Note; provided, however, that the Borrower shall continue to occupy the Residence as his or her principal place of residence and the Borrower shall provide written notice of such transfer to the City pursuant to Section 14 below. 3. This Note is secured by a second deed of trust dated the Security. same date as this Note (the “Deed of Trust”). 4. Interest. If the subject property is sold, transferred, or refinanced, or is no longer the primary residence of the assisted buyer, within five years of the initial purchase of said property, the Borrower shall pay interest equal to six percent (6%) simple interest of the loan amount. If the subject property is sold, transferred, or refinanced, or is no longer the primary residence of the assisted buyer, within years six through ten of the initial purchase of said property, the Borrower shall pay interest equal to three percent (3%) simple interest of the loan amount. If the subject property is sold, transferred, or refinanced in year eleven or later, all interest shall be foregiven and only the principal amount of the laon shall be due. The Interest shall be paid to the City at the time set forth in Section 7(b) below, unless forgiven by the City pursuant to Section 7(c) below. 5. The Term of this Note shall mean the period commencing Term. on the date of this Note and expiring on the date in which the subject property is sold, transferred, or refinanced, or is no longer the primary residence of the assisted buyer. 1010\02\111700.3 2 6. Residency. First Time Homebuver. and Owner- OccuuancvReauirements; Renresentations Regarding Requirements. a. The Borrower shall either have lived in the City for a minimum of sixty (60) days or work in the City, and also be a first time homebuyer. Failure of the Borrower to comply with these requirements shall be a default under this Note. The Borrower shall provide written certification to the City that he or she meets these requirements. b. The Borrower is required to occupy the Residence as his or her principal place of residence, and failure by the Borrower to comply with this requirement shall be a default under this Note. The Borrower shall be considered as occupying the Residence if the Borrower is living in the Residence for at least ten (10) months out of each calendar year. The Borrower shall provide an annual written certification to the City that the Borrower is occupying the Residence as his or her principal place of residence. The Borrower shall not lease the Home to another party. Any lease of the Residence shall be a default under this Note. C. Borrower hereby certifies that all income, residency or employment, and first time homebuyer status information previously submitted to the City is true and correct. Misrepresentation by Borrower of this information provided to the City shall be a default under this Note. 7. Renavrnent. a. Repayment of the principal amount of this Note shall be deferred until such time as the Term of the loan expires as defined in Section 5. At such time as the Term of the Note expires, the borrower shall repay the amount of Dollars ($2. b. The total amount of the principal and any Interest owed under this Note shall immediately become due and payable (i) in the event of a default by the Borrower under this Note, the Deed of Trust, or the First Mortgage, (ii) on the date Transfer is made whether voluntarily, involuntarily, or by operation of law and whether by deed, contract of sale, gift, devise, bequest or otherwise, (iii) in the event Borrower ceases to occupy the Residence as his or her principal place of residence; or (iv) at the end of the Term of this Note as described above in Section 5. Failure to declare such amounts due shall not constitute a waiver on the part of the City to declare them due in the event of a subsequent Transfer. C. In the event, upon expiration of the Term, (i) no Transfer has occurred, (ii) Borrower has repaid all principal pursuant to subsection (a) above, (iii) Borrower continues to owner-occupy the Residence, and (iv) Borrower is not in default hereunder or under the Deed of Trust, the City shall forgive repayment of all Interest due hereunder. 8. Prenavments. The Borrower may prepay all or part of the balance due under this Note including principal and Interest. In the event the entire amount of principal due under this Note is prepaid, all Interest, calculated as of the date of prepayment, shall also be due at the time of prepayment. 1010\02\111700.3 3 9. No Assumption of Note.The Borrower acknowledges that this Note is given in connection with the purchase of property (the “Residence”) as part of a program of the Agency to assist in the purchase of homes by lower income persons. Consequently, this Note is not assumable by transferees of the Residence, but is due in full upon Transfer. 10. Maintenance: Taxes: Insurance. Borrower shall maintain the Residence in good repair and in a neat, clean and orderly condition. Borrower shall promptly pay all property taxes due on the Residence prior to any delinquency and shall comply with the insurance requirements set forth in the Deed of Trust. 11. Refinance of First Mortgage Loan. The outstanding principal and interest on this Note shall not be due upon prepayment and refinance of the First Mortgage, and the Deed of Trust shall be subordinated to the refinanced loan, provided that (i) such refinancing is approved by the City, (ii) the amount refinanced does not exceed the outstanding principal balance of the First Mortgage at the time of refinance plus reasonable costs of refinance, and (iii) the refinance does not result in higher monthly payments on the First Mortgage Loan than were due prior to the refinance. 12. Certification of Purchase Price on Transfer. Upon any sale of the Residence, the Borrower shall submit to the City at least fifteen (15) days prior to the close of escrow, a copy of the sales contract and a written declaration, under penalty of perjury, from the Borrower and the proposed purchaser in a form acceptable to the City stating the gross sales price of the Residence. The certification shall also provide that the proposed purchaser or any other party has not paid and will not pay to the Borrower, and the Borrower has not received and will not receive from the proposed purchaser or any other party, money or other consideration, including personal property, in addition to what is set forth in the sales contract. 13. Notice to Citv of Transfers. Borrower shall provide the City with written notice of any sale, assignment or transfer, voluntary or involuntary, of any interest in the Residence, including, but not limited to, encumbrance of the Residence with a junior deed of trust or transfer of the Residence to a spouse or trust. Borrower shall provide this notice to the City no later than fifteen (15) days before the sale, assignment, or transfer occurs, except where the transfer is by devise or inheritance after death of the Borrower in which event notice shall be provided within thirty (30) days of the date of the transfer. 14. Default. a. The Borrower shall be in default under this Note if he or she is in default under the First Mortgage following the expiration of First Mortgage cure periods, or if, after the notice and cure period provided by the City to the Borrower pursuant to the notice and cure provisions of the Deed of Trust, the Borrower (i) fails to pay any money when due under this Note; (ii) breaches any representation or covenant made in this Note in any material respect; or (iii) breaches any provision of the Deed of Trust. 1010\02\111700.3 4 b. Upon the Borrower’s breach of any covenant or agreement of the Borrower in this Note or the Deed of Trust, including, but not limited to, the covenants to pay, when due, any sums secured by the Deed of Trust, the City, prior to acceleration, will send, in the manner set forth in Section 20, notice to the Borrower specifying: (1) the breach; (2) if the breach is curable, the action required to cure such breach; (3) a date, not less than thirty (30) days from the date the notice is effective, by which such breach, if curable, is to be cured and (4) if the breach is curable, that failure to cure such breach on or before the date specified in the notice may result in acceleration of the sums secured by the Deed of Trust and foreclosure by the City. The notice will also inform the Borrower of the Borrower’s right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of default or any other defense of the Borrower to acceleration and sale. 15. Acceleration. Upon the occurrence of a default under this Note, the Deed of Trust, or the First Mortgage, the City shall have the right to declare the full amount of the principal along with any Contingent Interest under this Note immediately due and payable. Any failure by the City to pursue its legal and equitable remedies upon default shall not constitute a waiver of the City’s right to declare a default and exercise all of its rights under this Note and the Deed of Trust. Nor shall acceptance by the City of any payment provided for herein constitute a waiver of the City’s right to require prompt payment of any remaining principal and interest owed. 16. No Offset. The Borrower hereby waives any rights of offset it now has or may later have against the City, its successors and assigns, and agrees to make the payments called for in this Note in accordance with the terms of this Note. 17 Waiver: Attorney Fees and Costs. The Borrower and any endorsers or guarantors of this Note, for themselves, their heirs, legal representatives, successors and assigns, respectively, severally waive diligence, presentment, protest, and demand, and notice of protest, dishonor and non-payment of this Note, and expressly waive any rights to be released by reason of any extension of time or change in terms of payment, or change, alteration or release of any security given for the payments hereof, and expressly waive the right to plead any and all statutes of limitations as a defense to any demand on this Note or agreement to pay the same, and jointly and severally agree to pay all costs of collection when incurred, including reasonable attorney fees. If an action is instituted on this Note, the Borrower promises to pay, in addition to the costs and disbursements allowed by law, such sum as a court may adjudge reasonable as attorneys’ fees in such action. 18 No Waiver bv the City. No waiver of any breach, default or failure of condition under the terms of this Note shall be implied from any failure of the City to take action with respect to such breach, default or failure or from any previous waiver of any similar or unrelated breach, default or failure. 19. Notices. All notices required in this Note shall be sent by certified mail, return receipt requested, or express delivery service with a delivery receipt, or personally delivered with a delivery receipt obtained and shall be deemed to be effective as of the date 1010\02\111700.3 5 shown on the delivery receipt as the date of delivery, the date delivery was refused, or the date the notice was returned as undeliverable as follows: To the Borrower: At the address of the Residence. To the City: City of Carlsbad Housing and Redevelopment Department 2965 Roosevelt Street, Suite B Carlsbad, CA 92008-2389 Attention: Housing and Redevelopment Director The parties may subsequently change addresses by providing written notice of the change in address to the other parties in accordance with this Section 20. 20. Joint and Several Obligations. This Note is the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon them and their successors and assigns, 21. Controlling; Law. This Note shall be construed in accordance with and be governed by the laws of the State of California. 22. AssiP;nment bv Citv. The City may assign its right to receive the proceeds under this Note to any person and upon notice to the Borrower by the City all payments shall be made to the assignee. The City may not transfer or assign the Note to a profit-making entity without first obtaining approval of the First Mortgage lender. The City may transfer or assign this Note to a government agency or non-profit entity without obtaining approval of the First Mortgage lender. 23. Invalid Provisions. If any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Note, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained in this Note. 24. Entire Agreement. This Note (along with the Deed of Trust) sets forth the entire understanding and agreement of the City and the Borrower and any amendment, alteration or interpretation of this Note must be in writing signed by both the City and the Borrower. BORROWER 1010\02\111700.3 6 1010\02\111700.3 (Print Name) (Print Name) 7 PROMISSORY NOTE CITY OF CARLSBAD ADMINISTRATIVE COVER SHEET (Remove Upon Completion) BLANK LINES: CHECKLIST Amount of City Loan, p. 1, upper left Date of Document, p. 1, upper right Borrower’s Name, p. 1, first paragraph Amount of City Loan, p. 1, first paragraph Street Address of Residence, p. 1, Section 1 Original Purchase Price of Residence, p. 1, Section 2(a) Contingent Interest Percent, p. 2, Section 4 Monthly Repayment Amount, p. 3, Section 7(a) Date Monthly Repayment Commences, p. 3, Section 7(a) Signatures, p. 8 1010\02\111700.3 - c Recording Requested and When Recorded Mail To: City of Carlsbad City Clerk’s Office Attn: City Clerk 1200 Cailsbad Village Drive Carlsbad. CA 92008 NOTE TO BORROWER: THIS DEED OF TRUST CONTAINS PROVISIONS PROHIBITING ASSUMPTIONS DEED OF TRUST AND SECURITY AGREEMENT THIS DEED OF TRUST AND SECURITY AGREEMENT (“Deed of Trust”) made as of this day of ,192 among (“Borrower”) as trustor, and (“Trustee”), and the City of Carlsbad, a municipal corporation (the “City”), as beneficiary. The Borrower, in consideration of the promises herein recited and the trust herein created, irrevocably grants, transfers, conveys and assigns to the Trustee, in trust, with power of sale, the property located in the City of Carlsbad, State of California, described in the attached Exhibit “A” (the “Property”). TOGETHER with all the improvements now or hereafter erected on the property, and all easements, rights, appurtenances, and all fixtures now or hereafter attached to the property, all of which, including replacements and additions thereto, shall be deemed to be and remain a part of the property covered by this Deed of Trust; and TOGETHER with all articles of personal property or fixtures now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all bther goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefore, whether or not the same are, or shall be attached to said building or buildings in any manner; and all of the foregoing, together with the Property, is herein referred to as the “Security”; To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever; TO SECURE to the City the repayment of the sums evidenced by a promissory note executed by the Borrower to the City dated ,19-A in the amount of Dollars (S ) (the “Note”); 1010\02\104149.01 1 TO SECURE to the City the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Deed of Trust; and the performance of the covenants and agreements of the Borrower contained in the Note and this Deed of Trust; and TO SECURE the performance of any obligations of Borrower in any other agreements with respect to the financing of the Property or the Security the failure of which would adversely affect Beneficiary, whether or not Beneficiary is a party to such agreements. BORROWER AND CITY COVENANT AND AGREE AS FOLLOWS: 1. Borrower’s Estate. That the Borrower is lawfully seized of the estate hereby conveyed and has the right to grant and convey the Security, that other than this Deed of Trust, the Security is encumbered only by that deed of trust executed by the Borrower in connection with a loan made to the Borrower by or its successors and assigns (the “First Lender”), dated ,19 executed by the Borrower in favor of First Lender, and recorded in the County of San Dzgo on ,19 and assigned Recorder’s Serial No. (the “First Lender Deed of Trust”), securing a promissory note executed by the Borrower in favor of the First Lender (“First Lender Note”), to assist in the purchase of the Property. The Borrower agrees to warrant and defend generally the title to the Security against all claims and demands, subject to any declarations, easements or restrictions listed in a schedule of exceptions to coverage in any title insurance policy insuring the City’s interest in the Security. (As used in this Deed of Trust, the term “First Lender” shall include all successors and assigns of the First Lender.) 2. Reuavment of Loan. The Borrower will promptly repay, when due, the principal and interest required by the Note. The Note contains the following provisions concerning repayment of the loan under certain conditions: No Assumption of Note. The Borrower acknowledges that this Note is given in connection with the purchase of property (the “Residence”) as part of a program of the Agency to assist in the purchase of homes by lower income persons. Consequently, this Note is not assumable by transferees of the Residence, but is due in full upon Transfer. 3. First Lender Loan. The Borrower will observe and perform all of the covenants and agreements of the First Lender Note, First Lender Deed of Trust, and related First Lender loan documents. 4. Owner-Occunancv Reauired: No Leasing Permitted. The Borrower shall occupy the Property as his or her principal place of residence. The Borrower shall be considered as occupying the Property if the Borrower is living in the unit for at least ten (10) months out of each calendar year. The Borrower shall provide an annual written certification to the City that the Borrower is occupying the Property as his or her principal place of residence. The Borrower shall not lease the Property to another party. Any lease of the Property shall be a default hereunder. 5. Charges; Liens. The Borrower will pay all taxes, assessments and other charges, tines and impositions attributable to the Security which may attain a priority over this Deed of Trust, by the Borrower making any payment, when due, directly to the payee thereof. The Borrower will promptly furnish to the City all notices of amounts due under this paragraph, and in the event the Borrower makes payment directly, the Borrower will promptly discharge any lien which has priority over this Deed of Trust; provided, that the Borrower will not be required to discharge the lien of the First Lender Deed of Trust or any other lien described in this paragraph so long as the Borrower will agree in writing to the payment of the obligation secured 1010\02\104149.01 2 i7 by such lien in a manner acceptable to the City, or will, in good faith, contest such lien by, or defend enforcement of such lien in, legal proceedings which operate to prevent the enforcement of the lien or forfeiture of the Security or any part thereof. 6. Hazard Insurance. The Borrower will keep the Security insured by a standard fire and extended coverage insurance policy in at least an amount equal to the replacement cost of the Security, but in no event less than the amount necessary to prevent the Borrower from becoming a co-insurer under the terms of the policy. The insurance carrier providing this insurance shall be licensed to do business in the State of California and be chosen by the Borrower subject to approval by the City; provided, that such approval will not be withheld if the insurer is also approved by the First Lender, the Federal Home Loan Mortgage Corporation, Fannie Mae, Freddie Mat, the United States Department of Housing and Urban Development, the United States Department of Veterans’ Affairs, or successors thereto. All insurance policies and renewals thereof will be in a form acceptable to the City and will include a standard mortgagee clause with standard lender’s endorsement in favor of the holder of the First Lender Note and the City as their interests may appear and in a form acceptable to the City. The City shall have the right to hold, or cause its designated agent to hold, the policies and renewals thereof, and the Borrower shall promptly furnish to the City, or its designated agent, the original insurance policies or certificates of insurance, all renewal notices and all receipts of paid premiums. In the event of loss, the Borrower will give prompt notice to the insurance carrier and the City or its designated agent. The City, or its designated agent, may make proof of loss if not made promptly by the Borrower. The City shall receive thirty days advance notice of cancellation of any insurance policies required under this section. Unless the City and the Borrower otherwise agree in writing, insurance proceeds, subject to the rights of the First Lender, will be applied to restoration or repair of the Security damaged, provided such restoration or repair is economically feasible and the Security of this Deed of Trust is not thereby impaired. If such restoration or repair is not economically feasible or if the security of this Deed of Trust would be impaired, the insurance proceeds will be used, subject to the rights of the First Lender, to repay the Note and all sums secured by this Deed of Trust, with the excess, if any, paid to the Borrower. If the Security is abandoned by the Borrower, or if the Borrower fails to respond to the City, or its designated agent, within thirty (30) days from the date notice is mailed by either of them to the Borrower that the insurance carrier offers to settle a claim for insurance benefits, the City, or its designated agent, is authorized, subject to the rights of the First Lender, to collect and apply the insurance proceeds at the City’s option either to restoration or repair of the Security or to repay the Note and all sums secured by this Deed of Trust. If the Security is acquired by the City, all right, title and interest of the Borrower in and to any insurance policy and in and to the proceeds thereof resulting from damage to the Security prior to the sale or acquisition will pass to the City to the extent of the sums secured by this Deed of Trust immediately prior to such sale or acquisition subject to the rights of the First Lender. 7. Preservation and Maintenance of Security. The Borrower will keep the Security in good repair and will not commit waste or permit impairment or deterioration of the Security. 8. Protection of the Citv’s Securitv. If the Borrower fails to perform the covenants and agreements contained in this Deed of Trust, the First Lender Note, the First Lender Deed of Trust, or if any action or proceeding is commenced which materially affects the City’s interest in the Security, including, but not limited to, default under the First Lender Deed of Trust, the First Lender Note or any other deed of trust encumbering the Property, eminent domain, insolvency, 1010\02\104149.01 3 code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then the City, at the City’s option, upon notice to the Borrower, may make such appearances, disburse such sums and take such action as it determines necessary to protect the City’s interest, including but not limited to, disbursement of reasonable attorney’s fees and entry upon the Security to make repairs. Any amounts disbursed by the City pursuant to this paragraph, with interest thereon, will become an indebtedness of the Borrower secured by this Deed of Trust. Unless the Borrower and City agree in writing to other terms of payment, such amount will be payable upon notice from the City to the Borrower requesting payment thereof, and will bear interest from the date of disbursement at the lesser of ten percent (10%) or the highest rate permissible under applicable law. Nothing contained in this paragraph will require the City to incur any expense or take any action hereunder. 9. Inspection. The City may make or cause to be made reasonable entries upon and inspections of the Security; provided that the City will give the Borrower reasonable notice of inspection. 10. Forbearance bv the Citv Not a Waiver. Any forbearance by the City in exercising any right or remedy will not be a waiver of the exercise of any such right or remedy. The procurement of insurance or the payment of taxes or other liens or charges by the City will not be a waiver of the City’s right to accelerate the maturity of the indebtedness secured by this Deed of Trust. 11. Remedies Cumulative. All remedies provided in this Deed of Trust are distinct and cumulative to any other right or remedy under this Deed of Trust or any other document, or afforded by law or equity, and may be exercised concurrently, independently or successively. 12. Successors and Assigns Bound. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective successors and assigns of the City and the Borrower subject to the provisions of this Deed of Trust. 13. Joint and Several Liability. All covenants and agreements of the Borrower shall be joint and several. 14. Notice. Except for any notice required under applicable law to be given in another manner, all notices required in this Deed of Trust shall be sent by certified mail, return receipt requested or express delivery service with a delivery receipt, or personally delivered with a delivery receipt obtained, and shall be deemed to be effective as of the date shown on the delivery receipt as the date of delivery, the date delivery was refused, or the date the notice was returned as undeliverable as follows: To the Owner: At the address of the Residence. To the City: City of Carlsbad Housing and Redevelopment Department 2965 Roosevelt Street, Suite B Carlsbad, CA 920082389 Attn: Housing and Redevelopment Director 1010\02\104149.01 4 The parties may subsequently change addresses by providing written notice of the change in address to the other parties in accordance with this section. 15. Controlling Law. This Deed of Trust shall be construed in accordance with and be governed by the laws of the State of California. 16. Invalid Provisions. If any one or more of the provisions contained in this Deed of Trust or the Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions, and this Deed of Trust and the Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained in this Deed of Trust or the Note. 17. Captions. The captions and headings in this Deed of Trust are for convenience only and are not to be used to interpret or define the provisions hereof. 18. Default: Remedies. Upon the Borrower’s breach of any covenant or agreement of the Borrower in this Deed of Trust, including, but not limited to, the covenants to pay, when due, any sums secured by this Deed of Trust, the City, prior to acceleration, will send, in the manner set forth in Section 14 of this Deed of Trust, notice to the Borrower specifying: (1) the breach; (2) if the breach is curable, the action required to cure such breach; (3) a date, not less than thirty (30) days from the date the notice is effective as set forth in Section 14 of this Deed of Trust, by which such breach, if curable, is to be cured; and (4) if the breach is curable, that failure to cure such breach on or before the date specified in the notice may result in acceleration of the sums secured by this Deed of Trust and sale of the Security. Notice shall be effective as of the date shown on the delivery receipt as the date of delivery, the date delivery was refused or the date the notice was returned as undeliverable. The notice will also inform the Borrower of the Borrower’s right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of default or any other defense of the Borrower to acceleration and sale. If the breach is not curable or is not cured on or before the date specified in the notice, the City, at the City’s option, may: (a) declare all of the sums secured by this Deed of Trust to be immediately due and payable without further demand and may invoke the power of sale and any other remedies permitted by California law; (b) either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Security and take possession thereof (or any part thereof) and of any of the Security, in its own name or in the name of the Trustee, and do any acts which it deems necessary or desirable to preserve the value or marketability of the Security, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security shall not cure or waive any breach hereunder or invalidate any act done in response to such breach and, notwithstanding the continuance in possession of the Security, the City shall be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any uncured breach, including the right to exercise the power of sale; (c) commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (d) deliver to the Trustee a written declaration of default and demand for sale, pursuant to the provisions for notice of sale found at California Civil Code Sections 2924, et seq., as amended from time to time; or (e) exercise all other rights and remedies provided herein, in the instruments by which the Borrower acquires title to any Security, or in any other document or agreement now or hereafter evidencing, creating or securing all or any portion of the obligations secured hereby, or provided by law. The City shall be entitled to collect all reasonable costs and expenses incurred in pursuing the remedies provided in this paragraph, including, but not limited to, reasonable attorney’s fees. 1010\02\104149.01 19. Acceleration. Upon the occurrence of a default under the Note, this Deed of Trust, the First Lender Note, or the First Lender Deed of Trust, the City shall have the right to declare the full amount of the principal along with any interest under the Note immediately due and payable. Any failure by the City to pursue its legal and equitable remedies upon default shall not constitute a waiver of the City’s right to declare a default and exercise all of its rights under the Note and this Deed of Trust. Nor shall acceptance by the City of any payment provided for in the Note constitute a waiver of the City’s right to require prompt payment of any remaining principal and interest owed. 20. Borrower’s Right to Reinstate. Notwithstanding the City’s acceleration of the sums secured by this Deed of Trust, the Borrower will have the right to have any proceedings begun by the City to enforce this Deed of Trust discontinued at any time prior to five (5) days before sale of the Security pursuant to the power of sale contained in this Deed of Trust or at any time prior to entry of a judgment enforcing this Deed of Trust if: (a) the Borrower pays City all sums, if any, which would be then due under this Deed of Trust and no acceleration under the Note has occurred; (b) the Borrower cures all breaches of any other covenants or agreements of the Borrower contained in this Deed of Trust; (c) the Borrower pays all reasonable expenses incurred by City and the Trustee in enforcing the covenants and agreements of the Borrower contained in this Deed of Trust, and in enforcing the City’s and the Trustee’s remedies, including, but not limited to, reasonable attorney’s fees; and (d) the Borrower takes such action as City may reasonably require to assure that the lien of this Deed of Trust, City’s interest in the Security and the Borrower’s obligation to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon such payment and cure by the Borrower, this Deed of Trust and the obligations secured hereby will remain in full force and effect as if no acceleration had occurred. 21. Reconveyance. Upon payment or forgiveness of all sums secured by this Deed of Trust, the City will request the Trustee to reconvey the Security and will surrender this Deed of Trust and the Note to the Trustee. The Trustee will reconvey the Security without warranty and without charge to the person or persons legally entitled thereto. Such person or persons will pay all costs of recordation, if any. 22. Substitute Trustee. The City, at the City’s option, may from time to time remove the Trustee and appoint a successor trustee to any trustee appointed hereunder. The successor trustee will succeed to all the title, power and duties conferred upon the Trustee herein and by applicable law. 23. Subordination to First Mortg;aPe. Notwithstanding any other provision hereof, the provisions of this Deed of Trust shall be subordinate to the lien of the First Lender Deed of Trust and shall not impair the rights of the First Lender, or the First Lender’s successor or assign, to exercise its remedies under the First Lender Deed of Trust in the event of default under the First Lender Deed of Trust by the Borrower. Such remedies under the First Lender Deed of Trust include the right of foreclosure or acceptance of a deed or assignment in lieu of foreclosure. After such foreclosure or acceptance of a deed or assignment in lieu of foreclosure, or upon assignment of the First Lender Deed of Trust to the Secretary of the United States Department of Housing and urban Development (the “Secretary”), this Deed of Trust shall be forever terminated and shall have no further effect as to the Property or any transferee thereafter; provided, however, if the holder of such First Lender Deed of Trust acquired title to the Property pursuant to a deed or assignment in lieu of foreclosure, or if the First Lender’s Deed of Trust is assigned to the Secretary, this Deed of Trust shall automatically terminate upon such acquisition of title, or assignment to the Secretary provided that (i) the City has been given written notice of default under such First Lender Deed of Trust and (ii) the City shall not have cured or commenced to cure the default within such 30-day period and given its firm commitment to complete the cure in the form and substance acceptable to the First Lender. Borrower agrees to record any necessary documents to effect such termination, if applicable. 1010\02\104149.01 6 24. Attomev’s Fees. If any action or proceeding is brought to enforce this Deed of Trust or any provision of this Deed of Trust or the Note, the prevailing party shall be entitled to its attorney’s fees and the cost of such action or proceeding. IN WITNESS WHEREOF, the Borrower has executed this Deed of Trust as of the date first written above. Borrower (Print Name) Borrower (Print Name) 1010\02\104149.01 EXHIBIT A Property Description 1010\02\104149.01 STATE OF CALIFORNIA ) 1 COUNTY OF SAN DIEGO “) On , 199-, before me, , personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. STATE OF CALIFORNIA ) ) COUNTY OF SAN DIEGO “) On , 199-, before me, , personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. 1010\02\104149.01 DEED OF TRUST AND SECURITY AGREEMENT CITY OF CARLSBAD ADMINISTRATIVE CHECKLIST (Remove Upon Completion) BLANK LINES: CHECKLIST Date of Document, p. 1, first paragraph Borrower’s Name, p. 1, first paragraph Trustee’s Name, p. 1, first paragraph Date and Amount of Promissory Note, p. 2, second full paragraph First Lender’s Name, p. 2, Section 1 Date of First Lender’s Deed of Trust, p. 2, Section 1 Recording Information for First Lender’s Deed of Trust, p. 2, Section 1 Signatures, p. 9 Include Exhibit A, Property Description Notary BORROWER DISCLOSURE STATEMENT FIRST-TIME HOMEBUYER CARLSBAD MODERATE INCOME LOAN PROGRAM The City of Carlsbad (the “City”) is loaning you money through its Moderate Income Loan Program (the “Program”) so that you will be able to buy your home. The City offers the Program in order to enable low income households to own their own homes in Carlsbad. As a condition of the financing, the City will require you to sign a Promissory Note and a Deed of Trust. The Deed of Trust will be recorded apainst your property. This Disclosure Statement explains the major provisions of the Promissory Note and the Deed of Trust to help you understand their requirements. You should, of course, read all of the City loan documents yourself and become completely familiar with them.’ A. PRIMARY RESIDENCE AND LEASING YOUR HOME Under the terms of the Promissory Note and Deed of Trust, the house you buy with the assistance of the City loan must be your main place of residence. This means you must live in the house no less than 10 months out of each calendar year. Each year, you must certify in writing to the City that you are living in your home as your main place of residence. In addition, you cannot lease your home. If you fail to follow these provisions, you are considered to be in default, and the City may declare its loan immediately due and payable. B. NOTICES TO CITY 1. Notice of Intent to Sell, As&n or Transfer. If you decide to sell, assign or transfer your home or any partial interest in your home, or if you record a mortgage or deed of trust against your home, you must let the City know in writing at least fifteen (15) days prior to the sale, assignment, transfer, or the recording of a mortgage. 2. Notice and Certification of Purchase Price. If you go to sell your home, at least fifteen (15) days before the sale closes (close of escrow), you must give the City a copy of the sales contract and a written statement that declares, under penalty of perjury, the gross sales price of the home. The written statement must be signed by both you (as seller) and the proposed buyer. The written statement must also certify that the proposed buyer, or any other party, has not paid and will not pay to you money or any other consideration that is not set out in the sales ’ Numerical examples are included in this Disclosure Statement to help you better understand the concepts, terms, and provisions of your City loan. Please be aware that these are simply to show how things work and that they are not intended to represent your specific situation. If you follow along with a calculator, you may not get exactly the same answers. Any differences are probably due to how your calculator “rounds-off” numbers. 1010\02\112580.2 1 contract for the home. The statement must also certify that you (as the seller) have not received and will not receive from the proposed buyer, or anybody else, money or other consideration that is not included in the sales contract. 3. Delivery of Rewired Notices. Any notice you must provide to the City under the terms of the City loan documents must be sent by certified mail, return receipt requested, or express delivery service with a delivery receipt, or personally delivered with a delivery receipt obtained. C. INTEREST ON THE CITY LOAN The City loan charges interest”. The interest represents the benefit you received from the City loan, and may generally be described as the percentage of the sales price that the City loaned to you, with an adjustment or discount applied. The interest on your loan is due immediately if: . You default under the City loan or the First Mortgage, or . You sell or transfer title to your home, or . The home is no longer your primary residence; or . The end of the term of your loan is reached, with exceptions (see section E. below) The interest on your City loan is based upon the length of time your occupy the subject residence as follows: five (5); (1) The interest rate is equal to six percent (6%) in years one (1) through year (2) year ten (10); and The interest rate is equal to three percent (3%) in years six (6) through years; (3) The interest is forgiven if the property is occupied more than ten (10) An example is used to show each of the three (3) sales scenarios and how each would be calculated. (4 Interest Amount Due - vears l-5. The interest due on a property sold in years one through five calculated as follows: Example 1 Your loan from the City is $5,000. The original sales price you paid for your home was $120,000. You sell the property three years from the date of purchase. Loan Amount from City: - $5,000 multiplied by 6% interest rate x 6% equals: = $300 multiplied by number of years in the property 3~s x 1010\02\112580.2 2 equals interest amount due to the City = $900 plus original loan amount $5,000 + total amount due the City $5.900 = Co> Interest Amount Due - Years 6- 10. The interest due on a property sold in years six through ten is calculated as follows: Example 2 Your loan from the City is $5,000. The original sales price you paid for your home was $120,000. You sell the property e&l& years from the date of purchase. Loan Amount from City: - $5,000 multiplied by 6% interest rate 3% x equals: = $150 multiplied by number of years in the property 8vrs x equals interest amount due to the City = $1.200 plus original loan amount + $5.000 total amount due the City = $6.200 w Interest Amount Due - Years 11 and later. The interest due on a property sold in years eleven or later is calculated as follows: Example 2 Your loan from the City is $5,000. The original sales price you paid for your home was $120,000. You sell the property eleven years from the date of purchase. Loan Amount from City: - $5,000 multiplied by 6% interest rate 0% x equals: =$ 0 multiplied by number of years in the property x 11 vrs equals interest amount due to the City =$ 0 plus original loan amount + $5,000 total amount due the City $5,000 = D. DEFAULT PROVISIONS When you accept City loan assistance, you agree to meet all of the conditions of all of the City loan documents. If you violate any provisions of the documents, you are considered to be in default under your City loan. Also, if you default under the first mortgage loan, you would also be considered to be in default under the City loan. If you do not correct the violation, the City could require you to immediately repay the principal and contingent interest owing on the City loan. The City could also go to court and get a court order to enforce the provisions of the City loan documents, which may result in a foreclosure on your home. * * 1010\02\112580.2 * * * * * * * * * * * * 3 Please sign the enclosed copy of this Borrower Disclosure Statement in the space provided below and return it to the City at , Carlsbad, California. I have read and understand the above Borrower Disclosure Statement. By: Signature of Borrower Dated: Print Name of Borrower By: Signature of Borrower Dated: Print Name of Borrower 1010\02\112580.2 4 - Exhibit 4 T.&E ciry o~cAR/sbad~o~hq ANY RE~NE/o~ENT DEPARTMENT A REPORT To TIE Housiq ConmissioN STAR: Craig, Ruiz MANAGEMENT ANA~YSI ITEM NO. 3 DATE: MAY 13,1999 SUBJECT: MODERATE INCOiME LOAN PROGRAM - RECOMMENDATION OF APPROVAL TO THE CITY COUNCIL TO PROVIDE $50,000 TO ESTABLISH THE MODERATE INCOME LOAN PROGRAM TO PROVIDE DOWNPAYMENT ASSISTANT TO MODERATE INCOME HOUSEHOLDS AND TO APPROVE THE RELATED LOAN AND SECURITY AGREEMENTS I. RECOMMENDATION That the Housing Commission ADOPT Resolution No. 99-004, recommending APPROVAL to the City Council to allocate $50,000 from the Housing Trust Fund to establish the Moderate Income Homebuyer Assistance Program to provide downpayment assistance to first-time moderate income homebuyers to purchase homes in the City of Carlsbad and the related loan and security agreements. II. PROJECT BACKGROUND The City of Carlsbad’s Housing Element identifies and analyzes the existing and projected housing needs and list goals, policies, objectives, resources and programs for the preservation, improvement and development of housing. Section Three of the Element sets out the City’s long-term housing goals and identifies a menl~~ cf shorter- term objectives, policy positions, and action programs which can be utilized to achieve these long-term goals. Specifically, Goal 3.10(b) states that “The City’s Housing Authority and Housing and Redevelopment Department will work to secure funding and develop additional lending programs for moderate income, especially first-time home buyers.” The Moderate Income Loan Program (MILE’), which is described in further detail below, attempts to implement this goal. III. PROGRAM DESCRIPTION The MILP is a program designed to provide qualified applicants with second trust deed loans to be used toward downpayment or closing costs when purchasing their first home. The loans will be limited to 3% of the purchase price or up to a maximum of $5,000, which ever is less. Repayment of the loan will be deferred until sale, transfer or refinance or , or if the property is no longer the primary residence of the borrower. The program requirements are listed in Exhibit No. 2, which has been included for the Commission’s review, and is summarized as follows: MODERATE INCOME LOAN PROGRAM MAY 13, 1999 PACE 2 1. Eligible Properties - all properties must be located within the City of Carlsbad, and is limited to single-family homes including detached homes, condominiums and townhomes. 2. Household Eligibility Requirements - all households shall have sufficient income and credit worthiness, and shall have sufficient liquid assets to be able to provide a minimum investment of 2% of the purchase price. 3. Loan Limits & Terms - loans will be the lessor of 3% of the purchase or $5,000. The interest rate on the loan will be 6% simple interest for years l-5, 3% simple interest in years 6-10, and interest will be forgiven if occupancy exceeds 10 years. The loan is due and payable if the property is sold or transferred, or if the property is no longer the primary residence of the borrower. 4. Eligible Borrowers - assistance will be limited to those people who live or work in the City of Carlsbad, earn less than 120% of the area median income, adjusted for family size, and have not owned a home in the past three years. IV. STAFF RECOMMENDATION The price of housing in the City of Carlsbad is out of reach for most, if not all, low and moderate income households. The City’s Housing Element states that the City will establish programs that will meet the needs of lower and moderate income households. Specifically, Goal 3.10(b) states that the Housing and Redevelopment Department will establish programs that provide for housing opportunities for first time moderate income home buyers. It is staff’s opinion that the Moderate Income Loan Program meets the purpose and intent of Goal 3.10(b) and therefore recommends that the Housing Commission recommend approval of the program to the City Council. Staff is recommending that the MILP originally be funded in the amount of $50,000 to assist a minimum of ten moderate income, first-time homebuyers. The Program is intended to be a Pilot program and will be evaluated at the end of one year. At the end of the first year, any modifications, if necessary, would be made at that time. V. EXHIBITS 1. Housing Commission Resolution No. 99-004 2. Program Criteria 3. Borrower Note 4. Borrower Deed of Trust 5. Borrower Disclosure HOUSING COMMISSION MINUTES MAY 13,1999 Page 5 Mr. Lother said that t apartments. At that t second phase, hence th nce at the meeting to comply with that request. d that he thinks the 90 units will be a great ad e City’s program and they are anxiou arted. He said they do agree with Staffs report an greements and deeds of trust, etc. Chairperson Latas asked if there we questions of the appl Commissioner Rose asked for clariticatio ted in December. Mr. Lother responded that the 116-unit apa ould be completed in December 1999. seconded, that the Housing rovide $1,350,000 i ds from the Carlsba r-sale, affordable two and three recommending APPROVAL to the $1 assistance from either the r Assistance Program (CHAP) or Homes, Inc., for construction of condominium units in g Ordinance for the Latas, McNeill, Rose, Scarpelli 3. MODERATE INCOME LOAN PROGRAM - RECOMMENDATION OF APPROVAL TO THE CITY COUNCIL TO PROVIDE $50,000 TO ESTABLISH THE MODERATE INCOME HOMEBUYER ASSISTANCE PROGRAM TO PROVIDE DOWNPAYMENT ASSISTANCE TO MODERATE INCOME HOUSEHOLDS AND TO APPROVE THE RELATED LOAN AND SECURITY AGREEMENTS. Craig Ruiz said that Goal 3.10(b) states that “The City’s Housing Authority and Housing and Redevelopment Department will work to secure funding and develop additional lending programs for moderate income, especially first-time home buyers.” This program would establish a second trust deed loan to be used toward down payment or closing costs for the purchase of a first home. The amount of the loan would be the lessor of 3 percent of the purchase price or $5,000. It would be due upon sale or transfer of the property. The guidelines for the program would be (1) eligible properties, (2) household eligibility, (3) loan limits and terms, and (4) eligible borrowers. These guidelines are explained in Staffs May 13, 1999 report. Staff is recommending that the Housing Commission recommend to the City Council the approval of the moderate-income loan program. Staff is recommending $50,000 to assist up to a minimum of 10 first-time homebuyers. Because Staff considers this to be a pilot program, they are recommending a small, manageable amount of money to make sure the program works. Staff thinks the program will work, thinks there is product out there, and thinks there are people who will qualify for the program. Staff would re- evaluate the program after all the funds were distributed to determine if the program could be repeated. Commissioner Rose asked for clarification of first-time homebuyers. )L . 3c’ ” HOUSING COMMISSION MINUTES MAY 13,1999 Page 6 Mr. Ruiz said that most government-lending programs define a first-time homebuyer as somebody who has not owned a home in the past three years. It is not technically the first home one has owned. About the only exception to that would be a “displaced home-maker” who is somebody who as a result of a divorce or a family situation is in need of housing. Commissioner Rose asked if this program is for those who live or work in Carlsbad. Mr. Ruiz responded affirmatively. Ms. Fountain added that the work site has to be physically located in Carlsbad. Chairperson Latas and Commissioner Scarpelli complimented Staff for developing this program. There was discussion about the properties being due on sale rather than rental property. Mr. Ruiz explained that the City will be notified if the property is sold. The homebuyer also has to do an annual affidavit to prove that they are still on the property and show a copy of the property taxes, etc. Commissioner McNeil1 asked if this could be used in conjunction with low-cost housing like Ranch0 Carrillo. Mr. Ruiz responded that the units at Ranch0 Canillo would be for low income, and this is for moderate; so they would be over-income and would not qualify. ACTION: VOTE: AYES: NOES: ABSTAIN: Motion by Commissioner Rose, and duly seconded, that the Housing Commission ADOPT Resolution No. 99-004, recommending APPROVAL to the City Council to allocate $50,000 from the Housing Trust Fund to establish the Moderate Income Homebuyer Assistance Program to provide downpayment assistance to first-time moderate income homebuyers to purchase homes in the City of Carlsbad and the related loan and security agreements. 4-o-o Latas, McNeil& Rose, Scarpelli None None CHAIRPERSON REPORT: Chairperson Latas wanted to point out to the City Council that the draft documents for Item #2 would be dramatically different from what the Housing Commission saw this evening, so they should preview the documents for themselves. Ms. Fountain responded that the documents usually are not dramatically different. Some legal language might change or some minor revisions may be made. There was some discussion about establishing a time limit for Staff and applicant presentations. DIRECTOR REPORT: Ms. Fountain said that Mr. Ruiz came up with the moderate-income program. He did the necessary research for a program he thinks will work in Carlsbad and should receive the credit for the program. 3s