HomeMy WebLinkAbout2021-10-12; City Council; ; Acquisition of 2674 Alameda Circle, an Affordable Housing Resale Unit, and Expenditure of Community Development Block Grant Special Revenue Funds in the amount of up to $Meeting Date: Oct. 12, 2021
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Allen Edwards, Housing Compliance Officer
allen.edwards@carlsbadca.gov, 760-434-2906
Subject: Acquisition of 2674 Alameda Circle, an Affordable Housing Resale Unit,
and Expenditure of Community Development Block Grant Special Revenue
Funds in the amount of up to $305,000
District: 3
Recommended Action
Adopt a resolution authorizing the City Manager to execute all required documents and
appropriating $305,000 in Community Development Block Grant funds for the purchase of an
affordable housing unit at 2674 Alameda Circle.
Executive Summary
The City of Carlsbad received notice that an affordable housing unit in the 100-unit Mulberry
condominium project in Bressi Ranch is available for the city to purchase to preserve the unit as
affordable housing. City Council Policy Statement No. 73 (Exhibit 3) authorizes the City Manager
or designee to exercise the city’s option to purchase an existing affordable housing unit, subject
to City Council appropriation of funds and acceptance of the grant deed.
Staff recommend the City Council approve the purchase using $305,000 in Community
Development Block Grant funds. The city will buy the property with the intent to resell it to an
eligible lower-income buyer.
There are sufficient funds available in the Community Development Block Grant Fund to
purchase this affordable unit.
Discussion
Program overview
The city adopted an inclusionary housing ordinance in 1993 that requires all residential
developments larger than six units to restrict 15% of the total number of homes in a project as
affordable to low-income households. Residential developers have the option to produce rental
or ownership properties to satisfy the inclusionary requirements. As a condition of the
inclusionary housing program, homebuyers of restricted affordable homes enter into an
agreement with the city that requires them to notify the city when they intend to sell their
properties and allow the city the option to purchase them at restricted prices.
Oct. 12, 2021 Item #2 Page 1 of 31
During the first 15 years of ownership, an affordable unit may only be sold at a restricted,
affordable price, either to the city or a low-income homebuyer. After 15 years, owners may sell
their units at market price if the city does not exercise its purchase option. Upon a market sale
of an affordable unit, the city recaptures its original subsidy plus contingent interest. The unit’s
affordability restrictions are removed, and the city’s share of sale proceeds are deposited into
the Housing Trust Fund to create additional affordable housing opportunities. The
condominium at 2674 Alameda Circle was purchased in 2005, thus putting it at risk of
converting to market rate if the city does not exercise its option.
By making the purchase, the city preserves the housing unit’s affordability and will resell it to an
eligible lower-income buyer, in keeping with the Affordable Housing Resale Program Guidelines
approved by the City Council in December 2020. As the owner, the city could place additional
restrictions on the property and resell it at a lower price to create more affordable housing
opportunities.
The property and the purchase
To fulfill its inclusionary housing obligation in 2005, the Bressi Ranch developer built the
Mulberry complex of 100 affordable condominiums and sold the units to low-income
homebuyers (Exhibit 3). The condominium at 2674 Alameda Circle is one of those affordable
units and would be the city’s ninth affordable unit purchase at Mulberry and 11th overall.
The owner of the affordable housing unit notified the city of their intent to sell on July 7, 2021.
The city responded on July 30 that it would exercise the option entered into a purchase and
sale agreement with the owner Aug. 10, 2021.
Staff determined that the purchase is consistent with the guiding principles of City Council
Policy No. 73 in that:
• The unit would be at risk of converting to market rate since the owner’s resale
restriction agreement with the city has been in effect for more than 15 years.
• Community Development Block Grant funds are available to cover the purchase.
• The acquisition is consistent with a priority in the city’s Fiscal year 2020-2025
Consolidated Plan, the city’s official application for Community Development Block
Grant funds, to “increase and preserve affordable housing opportunities for low-and-
moderate income households” and it is an approved activity in the FY 2021-22
Community Development Block Grant Annual Action Plan.
Staff recommend the City Council authorize the City Manager to execute all required
documents to complete the purchase of the property, which includes acceptance of the grant
deed and authorize the appropriation and expenditure of $305,000 in Community Development
Block Grant funds to cover the purchase price, related escrow and other processing fees. The
city would likely incur some additional costs to refurbish the unit and prepare it for resale. The
City Council approved Affordable Housing resale program guidelines in December 2020 (Exhibit
4.) Housing & Homeless Services Department staff are working on implementing the program –
developing the application process, eligibility requirements, etc.) to be consistent with the
guidelines adopted by the City Council, with resales to begin this fall.
Oct. 12, 2021 Item #2 Page 2 of 31
Options
Staff provide the following options for the City Council’s consideration:
1. Approve the purchase of the unit as presented.
Pros
• Retains an affordable housing unit in the city’s inventory
• Allows the city to assist another lower income household with the unit as
originally intended
• Funds are available for this activity and will be partially repaid upon resale to be
available for further eligible uses
Cons
• Reduces available Community Development Block Grant funds by $305,000
2. Do not approve this purchase.
Pros
• The Community Development Block Grant funds could be redirected for other
use
Cons
• Eliminates this unit as an affordable unit in the city’s inventory
• Market rate price will be too high for lower income households to purchase
Fiscal Analysis
The homeowner purchased the condominium at 2674 Alameda Circle in 2005 at the restricted,
subsidized price of $201,500. The restricted price for the city to buy this affordable unit is based
on the change in area median income levels during the seller’s period of ownership. Over the
past 16 years, area median income increased by 50%, resulting in a restricted purchase price of
$302,250. Staff anticipates that there will be additional acquisition costs including escrow fees.
Staff is requesting that the City Council appropriate and approve the expenditure of $305,000 in
Community Development Block Grant funds to cover all acquisition costs for the subject
property. As a condition of the city’s option to purchase, a 6% transaction fee, amounting to
$18,135, is to be paid to the City of Carlsbad at the close of escrow because the city is acting as
the real estate agent. Funds paid at the close of escrow will be returned to the Community
Development Block Grant Fund. Proceeds from the resale of the purchased unit to another
low-income household would also go back to the fund to use for another eligible purpose.
As noted above, there are sufficient funds available in the Community Development Block
Grant Fund to purchase this affordable unit.
Next Steps
The City Manager or designee will execute all acquisition documents to complete the purchase
of the home and subsequently record the grant deed to transfer ownership of the home to the
City of Carlsbad. The home will then be resold to a lower-income household at a later date.
Oct. 12, 2021 Item #2 Page 3 of 31
Environmental Evaluation
This action does not constitute a project as defined by the California Environmental Quality Act
under Public Resources Code section 21065. It has no potential to cause either a direct physical
change in the environment or a reasonably foreseeable indirect physical change in the
environment and therefore does not require environmental review.
Public Notification and Outreach
This item was noticed in accordance with the Ralph M. Brown Act and was available for public
viewing and review at least 72 hours prior to the scheduled meeting date.
Exhibits
1. City Council resolution
2. Location map
3. City Council Policy Statement No. 73
4. Affordable Housing Resale Program Guidelines
Oct. 12, 2021 Item #2 Page 4 of 31
RESOLUTION NO. 2021-230
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXECUTE ALL REQUIRED
DOCUMENTS AND APPROPRIATING $305,000 IN COMMUNITY
DEVELOPMENT BLOCK GRANT FUNDS FOR THE PURCHASE OF AN
AFFORDABLE HOUSING UNIT AT 2674 ALAMEDA CIRCLE
EXHIBIT 1
WHEREAS, the property owner of 2674 Alameda Circle provided notice to the city on July 7,
2021, indicating the owner's intent to sell or transfer ownership of the restricted affordable housing
unit at the noted location; and
WHEREAS, City Council Policy No. 73 authorizes the City Manager or designee to exercise the
city's option to purchase an existing affordable housing unit, subject to City Council appropriation of
funds and acceptance of the grant deed; and
WHEREAS, the purchase is consistent with City Council Policy No. 73 guiding principles in that:
1) the unit would be at-risk of converting to market rate since the owner's resale restriction agreement
with the city has been in effect for more than 15 years; and 2) Community Development Block Grant
funds are available to cover the purchase, the acquisition is consistent with FY 2020-2025 Consolidated
Plan priorities and is an approved activity in the FY 2021-22 CDBG Annual Action Plan; and
WHEREAS, tlie purchase approval by the City Council enables the city to preserve and extend
the affordability of the existing unit, and to resell it to an eligible buyer in accordance with the City of
Carlsbad Affordable Housing Resale Program Guidelines.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1. That the above recitations are true and correct.
2. That the City Manager is authorized to execute all required documents, including th·e
Acceptance of the Grant Deed (Attachment A), for the purchase of said property, and to
expend $305,000 in Community Development Block Grant funds to cover the purchase
price, related escrow and other processing fees to complete the acquisition.
Additionally, said funds are authorized for costs related to refurbishing and preparing
the unit for resale.
Oct. 12, 2021 Item #2 Page 5 of 31
RECORDING REQUESTED BY: Chicago Title Company
When Recorded Mail Document
and Tax Statement To: Geoff Patnoe
City of Carlsbad 1200 Carlsbad Village Drive Carlsbad,CA 92008
Escrow Order No.: 73721012466
APN/Parcel ID(s): 213-190-04-23
SPACE ABOVE THIS LINE FOR RECORDER'S USE
Exempt from fee per GC 27388.1 (a) (2); recorded in connection with a concurrent
transfer subject to the imposition of documentary transfer tax.
GRANT DEED
The undersigned grantor(s) declare(s)
0 This transfer is exempt from the documentary transfer tax.
The grantee is the United States or an agency or instrumentality thereof, a state or territory, or political subdivision thereof, R & T 11922. □The documentary transfer tax is $ _______ and is computed on:□the full value of the interest or property conveyed.□the full value less the liens or encumbrances remaining thereon at the time of sale.
The property is located in 0 the City of Carlsbad.
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, Daryl Neal, an unmarried woman as to undivided 90% interest and Natasha Tyron, a married woman as her sole and seperate proeprty (who acquired title as Natasha Albright, a single woman), as to an undivided 10% interest as tenants in common
hereby GRANT(S) to City of Carlsbad
the following described real property in the City of Carlsbad, County of San Diego, State of California:
For APN/Parcel ID(s): 213-190-04-23
A more complete legal description attached hereto and made a part hereof marked as Exhibit A
PROPERTY COMMONLY KNOWN AS: 2674 Alameda Circle, Carlsbad, CA 92009
Grant Deed SCA0000129.doc I Updated: 04.08.20
MAIL TAX STATEMENTS AS DIRECTED ABOVE
Printed: 09.24.21 @ 04:45 PM
CA-CT-FWDO-02180.055822-73721012466
Attachment A
Oct. 12, 2021 Item #2 Page 7 of 31
Oct. 12, 2021 Item #2 Page 8 of 31
APN/Parcel ID(s): 213-190-04-23
Dated: September 24, 2021
GRANT DEED
(continued)
IN WITNESS WHEREOF, the undersigned have executed this document on the date(s) set forth below.
Daryl Neal
t\)J-1)__(2 .'[
Natasha Tryon ~
A notary public or other officer completing this certificate
verifies only the identity of the individual who signed the
document to which this certificate is attached, and not the
truthfulness, accuracy, or validity of that document.
State of G-eo~~l c,_,_
County of F" \,-\:. o t'\
On __ q..J.-f---/_Z_7..;...._· .....;.../_Z_O_Z_I __ before me. P4 (l{lG~i,, G-J?-fl. N f , Notary Public,
(here insert name and title of the officer)
personally appeared Jv A TA SH A Ill Y O A/ ,
who proved to me on the basis of satisfactory evidence to be the personk8'1 whose name~ isja,rEr"subscribed to the
within instrument and acknowledged to me that-Ae/she/~ executed the same in +tts/herJtheir authorized capacit~
and that by ~her/tfle+r signature~ on the instrument the person~. or the entity upon behalf of which the person~
acted, executed the instrument.
I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and
correct.
WITNESS my hand and :ffi~ ~~ ~---
Signature
Grant Deed
SCA0000129.doc I Updated: 04.08.20
Darrell Grant
NOTARY PUBLIC
Cobb County, GEORGIA
My Commission Expires 05/20/2025
Printed: 09.24.21 @ 04:46 PM
CA-CT-FWDO-02180.055822-73721012466
Oct. 12, 2021 Item #2 Page 9 of 31
APN/Parcel ID(s): 213-190-04-23
Dated: September 10, 2021
GRANT DEED
(continued)
IN Vl4V:e undersigned have executed this document on the date(s) set forth below.
oarylNa1
Natasha Albright
A notary public or other officer completing this certificate
verifies only the identity of the individual who signed the
document to which this certificate is attached, and not the
truthfulness, accuracy, or validity of that document.
State of __ Ct{___.__/_,f{) _______ ~_fl_1(/ ____ _
County of Sa/\ V ?Jo
On )e ptG(VJ h e.r 23, 2o2-t before me, _____ /---'. f:~1_'n,_~~"'-~'-------------' Notary Public,
(here insert name and title of the officer)
personally appeared 'Dar¥/ )le.a_ ( ,
who 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.
I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and
correct.
WITNESS my hand and 0-71 seal.
~ Cr
Signature
Grant Deed
SCA0000129.doc I Updated: 04.08.20
Printed: 09.10.21 @ 04:02 PM
CA-CT-FWDO-02180.055822-73721012466
Oct. 12, 2021 Item #2 Page 10 of 31
EXHIBIT "A"
44031
MULBERRY AT BRESSI RANCH
Phase 2
A condominium unit composed of:
PARCEL 1 (Common Area Interest):
An undivided fractional interest as tenant in common in and to the Common Area of Phase 2 as
described on the MU LB ERR Y AT BRESSI RANCH CONDOMINIUM PLAN (the
"Condominium Plan,') recorded on February 1 I, 2005, as Document No. 2005-0 I I 7224, in the
Office of the County Recorder of San Diego County, California, being a portion of Lot 1 of
CARLSBAD TRACT MAP CT 03-03, in the City of Carlsbad, County of San Diego, State of
California, according to Map thereof No. 14800, filed in the Office of the County Recorder of
San Diego County on May 21, 2004. The undivided fractional interest hereby conveyed is the
reciprocal of the number of Residential Units shown on the Condominium Plan as being within
Phase 2 of the Condominium Plan.
EXCEPTING THEREFROM all Residential Units shown on the Condominium Plan.
RESER VINO THEREFROM the exclusive right to possession and use of any Exclusive Use
Area shown on the Condominium Plan.
PARCEL 2 (Residential Unit):
Residential Unit No. __IL, as shown upon the Condominium Plan.
PARCEL 3 (Exclusive Use Areas):
The exclusive right to use any Exclusive Use Area shown on the Condominium Plan as being
appurtenant to the Residential Unit described in Parcel 2 above.
PARCEL 4 (Easement Over Association Property):
A non-exclusive easement for use and enjoyment of and access over the Association Property
("Association Property" is defined in the Declaration of Covenants, Conditions and Restrictions
and Reservation of Ease·ments for Mulberry at Bressi Ranch described below), excepting any
Exclusive Use Area. The easement hereby reserved, which is appurtenant to the Residential Unit
described above, is for access and use of the-Association Property, subject to the provisions of
the Declaration of Covenants, Conditions and Restrjctions and Reservation of Easements for
Mulberry at Bressi Ranch and the rules and regulations of the MULBERRY AT BRESSI
RANCH HOMEOWNERS ASSOCIATION, a California nonprofit mutual benefit corporation.
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4403,2
RESERVING THEREFROM FROM ALL PARCELS all easements for access, development,
encroachments, maintenance and other purposes set forth in the DECLARATION OF
COVENANTS, CONDITIONS AND RESTRICTIONS AND RESERVATION OF
EASEMENTS FOR MULBERRY AT BRESSI RANCH (referred to as the "Mulberry
Declaration"). The MulJ,erry Declaration is described below.
ALSO RESERVING FROM ALL PARCELS, for the benefit of Granter, its successors in
interest and assignees, the right to enter the Lot (i) to complete and repair any improvements or
landscaping located thereon as determined necessary by Granter, in its sole discretion, (ii) to
comply with requ~rements for the recordation of the subdivision map described above or the
grading or construction of the Properties, as defined in the Mulberry Declaration, or (iii) to
comply with requirements of applicable governmental agencies. Grantor shall provide
reasonable notice to Grantee before such entry. If Grantee refuses to cooperate with Grantor,s
exercise of this dght, Grantor may enforce this right of entry in a court of law. Grantee shall be
responsible for all damages arising out of such refusal to cooperate, including attorneys' fees and
court costs. The term of this reservation of right of entry shall automaticaJly expire ten ( 10)
years after the date this Grant Deed is recorded. .
ALSO EXCEPTING AND RESERVING FROM ALL PARCELS, pursuant to a Grant Deed
recorded on January 25,· 2005, as Document No. 2005-0061440, Official Records of San Diego
County, California the foJlowing in favor of the Grantor under such Grant Deed:
A. All oil, oil rights, minera_ls, mineral rights, natural gas rights and other
hydrocarbons by whatsoever name known, geothennal steam and all products derived from any
of the foregoing, that may be within or under the above described land ("Land"), together with
the perpetual right of driJling, mining, exploring and operating therefor and storing in and
removing the same from said Land or any other land, including the right to whipstock or
directionally drill and mine from lands other than the Land, oil or gas wells, tunnels and shafts
into, through or across the subsurface of the Land, and to bottom such whipstocked or
directionally dri11ed wells, tunnels and shafts under and beneath or beyond the exterior limits
thereof, and to redrill, retunnel, equip, maintain, repair, deepen and operate any such wells or
mines without, however, the right to dril1, mine, store, explore or operate through the surface or
the upper 500 feet of the subsurface of the Land.
B. The right to place on, under or across the Land, transmission lines and other
facilities for a community antenna television system within publicly dedicated streets and
customary hook-ups from the streets to the Homes and thereafter to own and convey such lines
and facilities, and the right to enter upon the Land to service, maintain, repair, recqnstruct and
replace said lines and facilities; provided, however, that the exercise of such rights shall not
unreasonably interfere with Grantee's reasonable use and enjoyment of the Land.
C. Any and all water, water rights or interests therein appurtenant or relating to the
Land or owned or used by Grantor in connection with or with respect to the Land (no matter how
acquired by Grantor), whether such water rights shall be riparian, overlying, appropriative,
littoral, percolating, prescriptive, adjudicated, statutory or contractual, together with the right and
power to explore, drillt redrill, remove and store the same from or in the Land or to divert or
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44033
otherwise utilize such water, rights or interests on any other property owned or !eased by
Grantor, but without, however any right to enter upon the surface of the Land in the exercise of
such rights.
D. Nonexclusive easements in gross on, over and under the Land for the
construction, installation and maintenance of communication systems, electric, gas, telephone,
water,. sewer and drainage facilities within publicly dedicated streets (and customary hook-ups
from such streets to Homes), provided that the construction and installation of such facilities
shall not unreasonably interfere with Grantee's development of the Land. Except as such
easements have been conveyed to a utility company or other public or quasi-pub1ic entity, said
easements in favor of Gran tor shall automatically terminate and be of no further force or effect as
to any portion of the Land upon the conveyance thereof to a buyer or other transferee who is
entitled to receive by reason of such conveyance a Subdivision Public Report pursuant to
California Business and Professions Code Section 11018.2 or any similar statute hereafter in
effect, or upon conveyance· to an association whose members consist in whole or in part of such
buyers or other transferees.
THIS CONVEYANCE JS MADE SUBJECT TO:
I. Current Taxes and Assessments.
2. DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND
RESERVATION OF EASEMENTS FOR MULBERRY AT BRESSI RANCH recorded on
March 10, 2005, as Document No. 2005-0197712, in the Office of the County Recorder of San
Diego. County, California ("Mulberry Declaration") and any amendments thereto, and the
covenants, conditions, restrictions, rights, easements, reservations, benefits and burdens therein
contained, each and all of which are covenants running with the land established in accordance
with Section 1468 of the California Civil Code for the benefit of and binding upon the parties
hereto and each successive owner of all or any portion of the land affected thereby and are
hereby expressly incorporated herein by reference as though set out herein in full.
3. The Notice of Builder's Election for Handling of Construction Claims pursuant to
California Civil Code Section 895 et seq. recorded on February 28, 2005, as Document No.
2005-0159300, in the Office of the County Recorder of San Diego County ("Notice of
Election") and the restrictions, rights, benefits and burdens therein contained, each and all of
which are covenants running with the land established in accordance with Section 1468 of the
California Civi] Code for the benefit of and binding upon the parties hereto and each successive
owner of alJ or any portion of the land affected thereby and are hereby expressly incorporated
herein by reference as though set out herein in full.
4. The Deed and Declaration Establishing Access Easement Rights recorded on February
28, 2005, as Document No. 2005-0159299, Official Records of San Diego County, California
('~ccess Declaration").
5. All other covenants, conditions, restrictions, reservations, rights, rights-of-way and
easements of record as well as any of such matters that are apparent.
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LOCATION MAP
2674 ALAMEDA CIRCLE
Oct. 12, 2021 Item #2 Page 13 of 31
{city ofCarlsbad
Council Policy Statement
Category: AFFORDABLE HOUSING
Policy No. 73
Date Issued: 12-08-2020
Effective Date: 12-08-2020
Resolution No.
Cancellation Date:
Supersedes No.
2020-234
N/A
73, issued 1/22/08
Specific Subject: City Option to Purchase Resale Affordable Housing
PURPOSE:
To provide procedural guidelines for staff when exercising the city's option to purchase restricted
affordable housing ownership units that were created under the lnclusionary Housing Program. The
city's primary interest in exercising its option to purchase affordable units is to preserve, extend and
enhance affordability covenants to subsequent lower-income purchasers and to provide additional
housing opportunity to underserved populations. The policy will establish the authority, selection
criteria, and resale requirements for the identification, acquisition and disposition of these affordable
units.
BACKGROUND:
The city's lnclusionary Housing Ordinance requires developers of residential projects with more than
six units to provide fifteen percent of the homes to lower income households at an affordable price.
Developers may satisfy the ordinance requirements by providing rental or for sale {ownership) units.
Ownership units produced under the lnclusionary Housing Program have affordability restrictions for
30 years. Under the initial requirements of the lnclusionary Housing Program, low-income
homebuyers were required to execute resale agreements that allowed them to sell their homes at
market rate to a non-low-income homebuyer if they repaid the city any outstanding loan amounts
and paid the city a share of the equity from the sale. This initial policy resulted in the loss of many of
the for-sale affordable units in the city. To more effectively implement inclusionary housing
requirements {CMC 21.85.040{E)), the policy was changed to require a restricted unit to be sold to
another low -income household during the first 15 years of the 30-year affordability term. In year 16
and later, the home could be sold to a non-low-income household with the repayment of the city
subsidy loan with a share of equity {also referred to as contingent interest).
The revised policy also required that the city would be given an option, or first right of refusal, to
purchase the affordable unit at a restricted price upon notice of intent to sell from the owner. The city
could also assign its option to a "city-designated purchaser", defined as another public agency, a
nonprofit corporation, or an eligible low-income purchaser. The restricted price option to purchase or
assign is a requirement for participation in the homeownership program and applies throughout the
entire 30-year term of the loan.
For the restricted affordable housing ownership units, if the city declines its option to purchase the
unit or to assign the option to a city-designated purchaser, the owner is required to resell the
Page 1 of 3
Exhibit 3
Oct. 12, 2021 Item #2 Page 14 of 31
Policy No. 73
affordable home to another low-income household during the first 15 years of ownership at a
restricted affordable price established by the city. After the initial 15 years, and if the city declines to
exercise its option to purchase or to assign its option to a city-designated purchaser, the resale
agreement permits the owner to sell the unit at market value to a non-low-income buyer and the city
recaptures its subsidy together with shared equity (contingent interest) up through the 30th year of
the resale agreement. The revenue from the loan payoff and shared equity is deposited into the city's
Housing Trust Fund to create additional opportunities for affordable housing within the city.
POLICY:
By adopting this policy, the City Council grants authority to the City Manager, or designee, to accept
or decline the option to purchase a restricted affordable housing ownership unit at a restricted low-
income price during the full term of the resale agreement. This policy shall apply to all units restricted
under a Resale Restriction Agreement and Option to Purchase in order for a housing development to
comply with the requirements of the city's Inclusionary Housing Program. The decision to accept or
decline the option to purchase a restricted affordable housing ownership unit will be guided by the
following principles:
1. The unit would be at-risk of conversion to market rate if the city declines its option to
purchase it; or
2. The public interest is served well through purchase of the unit by the city and resale to a
qualified lower-income household; or
3. An underserved population will benefit greater from the city's purchase and resale of the
unit; or
4. An affordable housing opportunity will be enhanced through the city's purchase and resale of
the unit; and
5. Special funding (such as CDBG, HOME, Successor Housing Agency funds) is available and/or is
required to be expended in a timely manner and the city's purchase of the unit is a qualified
expenditure of these funds; or
6. When special funding is unavailable, sufficient Housing Trust Fund dollars are available to
purchase the unit.
The City Manager, or designee, will consider options to purchase as written notices of intent to sell
from restricted affordable housing ownership units are received. If the city receives notices of intent
to sell from multiple owners at a given time, the City Manager, or designee, may rank order them
based on the principles above. For example, an affordable unit that is at-risk of conversion to market
rate (i.e., can be sold to a market rate purchaser after 15 years) will be prioritized for acquisition over
a unit that is not at-risk (i.e., must be sold to a low-income buyer). Other factors, such as purchase
price, amount of available funding, size, location and condition of the unit may be taken into account
when rank ordering multiple options to purchase units.
Upon a decision by the City Manager, or designee, to exercise the option to purchase a restricted
affordable housing ownership unit, the City Manager, or designee, will proceed accordingly to
complete the purchase transaction and present it to the City Council for consideration and final
action, accepting the Grant Deed for the property.
Page 2 of 3
Oct. 12, 2021 Item #2 Page 15 of 31
Policy No. 73
Upon approval of the City Council of the acquisition and completion of the purchase transaction, the
restricted affordable housing ownership unit will be resold by the city according to the Affordable
Housing Resale Program Guidelines recommended for approval by the Housing Commission and
approved by the City Council, and which may be amended from time to time to update policies,
process and/or resale priorities.
As an alternative to accepting the option to purchase the restricted affordable housing ownership
unit, the City Manager, or designee, is authorized to assign the city's option to an eligible low-income
purchaser. This alternative is appropriate when: a) there is insufficient funding available or there are
higher priority uses for the available funding; and b) the unit would be at-risk of conversion to market
rate if the city declines its option to purchase it. In such a case the City Manager, or designee, will
assign the city's purchase option to an eligible purchaser drawn from a waiting list maintained in
accordance with the Affordable Housing Resale Program Guidelines.
Assignment of the city's purchase option to another public agency, nonprofit corporation, or an
eligible purchaser not on the waiting list will require City Council approval.
If the city is unable to accept or assign its option to a city-designated purchaser, then the City
Manager, or designee, is authorized to decline the option and allow the restricted affordable housing
ownership unit to be sold according to the terms of the resale agreement. The City Manager's, or
designee's, decision to decline the option to purchase will be valid for no more than 180 days. If the
unit owner has not completed the sale of their home within this time frame, the unit owner will be
required to file another notice of intent to sell and grant the city another opportunity to exercise or
assign its option to purchase the unit at an affordable price.
All sales of city-owned restricted affordable housing ownership units require City Council approval.
Page 3 of 3
Oct. 12, 2021 Item #2 Page 16 of 31
Approved by City Council, Dec. 8, 2020
Resolution No 2020-234
CITY OF CARLSBAD
AFFORDABLE HOUSING RESALE PROGRAM GUIDELINES
1.PROGRAM BACKGROUND
In 2018, the Carlsbad City Council authorized staff to exercise the city’s option to purchase
restricted affordable housing ownership units when the original lower-income buyer provided
notice of intent to sell the unit during the 30-year regulatory/loan term. These units were
originally constructed by a private residential developer in Carlsbad to satisfy the requirements
of the city’s Inclusionary Housing Ordinance and initially sold to a qualified lower-income buyer
at an affordable restricted price. Because the units are substantially subsidized to a below
market price affordable to lower-income households, the city holds a “silent” second loan on
the property that equals the value of the price subsidy (the difference between the fair market
value of the unit and the restricted price for a lower income household). As part of the loan
agreement between the city and the homeowner, the city has an option to purchase the unit at
the time they are made available for sale by the homeowner; this option may be exercised at
any time of sale during the 30-year term of the loan and the city pays the restricted price for
the unit, calculated at the time of sale.
The City Council has subsequently approved use of federal Community Development Block
Grant (CDBG) funds to purchase these units with the intent of preserving and extending the
long-term affordability of the units. Because federal and potentially local housing funds have
and will be used to purchase these units, the city intends to enhance the public benefit of the
program through these resale guidelines by providing affordable homeownership opportunities
to lower-income households and potentially providing a larger secondary loan if determined to
be needed by the city to allow for the purchase by a qualifying buyer who meets the city’s
priorities.
2.PROGRAM OVERVIEW
The City of Carlsbad Affordable Housing Resale Program is a homeownership program
specifically designed to assist qualified lower-income households to purchase a city-owned
residential property at an affordable price; these affordable units (under city ownership) were
purchased from the original low-income homeowner at the time the owner decided to sell the
unit and provided required notice to the city of the owner’s intent to sell the unit. The price the
qualified buyer will pay for the unit will be set by the city to ensure that total housing costs for
the qualified buyer will not exceed 30 percent of the gross household income of the buyer.
Pricing will be based on incomes ranging from 50 to 80 percent of the San Diego Area Median
Income (AMI). The difference between the fair market value of the property at time of sale to
the qualified buyer and the actual price paid by the qualified buyer will continue to be
Exhibit 4
Oct. 12, 2021 Item #2 Page 17 of 31
structured as a secondary loan documented in a promissory note executed by the new
homeowner and with the city as the beneficiary. The loan will become immediately due and
payable to the City of Carlsbad if the homeowner fails to comply with the terms of the loan and
the requirements set forth within these resale program guidelines. The unit may be sold by the
new owner but may only be sold to an eligible buyer at a price that is affordable to the
designated income level set forth within the 30-year loan agreement. The city will retain an
option to repurchase the unit again at a restricted price throughout the term of the agreement
when the owner decides to sell at a later date.
3. PROGRAM REQUIREMENTS AND BUYER ELIGIBILITY
The city has established basic threshold eligibility criteria for participation in this affordable
housing homebuyer program.
A. The buyer must currently be living in San Diego County.
B. The buyer has not purchased a unit under any other First-Time Homebuyer or
Affordable For-Sale Housing Program administered by the City of Carlsbad in the past
seven years.
C. The buyer’s income may not exceed the maximum income limit for the resale program
which shall be 80 percent of the San Diego County Area Median Income (AMI) as
established by the US Department of Housing & Urban Development and as published
by the State Department of Housing and Community Development and in effect at the
time of the buyer’s application, adjusted for household size.
D. The buyer must have a minimum income which allows for the total of all housing costs
to not exceed 30 percent of the total gross household income for the buyer. The
minimum income shall be determined on a case-by-case basis taking into consideration
the size and market value of the unit, the homeowner association fees (if any) and other
related housing costs (including a utility allowance) at the time of application to
purchase one of the units.
E. At time of application for a particular unit, the buyer’s household size shall meet the
following minimum and maximum household size:
Unit Size Household Size
Minimum Maximum
1 bedroom 1 3
2 bedrooms 2 5
3 bedrooms 3 7
4 bedrooms 4 9
Oct. 12, 2021 Item #2 Page 18 of 31
This requirement is intended to promote efficient use of available affordable housing
and to prevent overcrowding at the time of sale; however, this does not limit future
growth in the household size after the purchase. The buyer must execute legal
documents that prohibit the unit or any portion thereof from being used as a short or
long-term rental, and require the owner to use the unit as their primary residence for
no less than 10 months out of each calendar year.
F. Co-borrowers or co-signers who will not occupy the property as their primary
residence are not permitted. A non-borrowing spouse is considered a co-
borrower if they will occupy the property, even if they will not be on the loan for
the first mortgage. Student dependents who live outside San Diego County at or
near their college will not be counted as a household member.
G. For the purpose of determining household size, any person claimed as a
household member must have lived with the borrower for a minimum of twelve
consecutive months immediately prior to purchase and must provide evidence
they will live in the subject property after purchase. In addition, any non-
borrowing person listed as having no income on the application must be
indicated as a dependent on the applicant’s tax return for the previous year to be
considered a household member.
Appendix A provides a quick review summary of eligibility requirements, documentation
requirements and clarifications of the standards.
4. NOTIFICATION OF AFFORDABLE UNIT FOR SALE BY THE CITY
In an effort to be fair and ensure those that meet the priority criteria set forth by the city have
an opportunity to purchase one of the city-owned affordable units, the city will open an
application period when there are units available for purchase. The application period will
remain open for a period of 60 days, or longer if needed to receive enough qualified
applications.
A. Outreach Strategies
o The city will utilize print media and electronic media to inform the
public of affordable for-sale housing opportunities.
o The city will target outreach to minority and special needs
populations that may not otherwise have the opportunity to access
affordable housing opportunities.
o The city will communicate the status of affordable housing
availability to a variety of agencies including social service agencies,
Oct. 12, 2021 Item #2 Page 19 of 31
nonprofit agencies, and special interest groups in the community,
advising them of eligibility factors and guidelines so that they can
make appropriate referrals.
B. Public Noticing and Application Period
o The city will provide notice in local newspapers and the city website
when affordable housing units will be offered for sale. The notices
will announce when the application period will open and provide
information on how to apply to purchase an affordable unit. Notices
will be sent 15 days prior to the opening date of the application
period.
o Applications for the purchase of an affordable unit must be filed with
the City of Carlsbad, Housing Services Division by the date and time
specified in the public notice. Applications will be date and time
stamped in the order in which they are received.
C. Marketing.
o Informational materials for applicants will include a general
description such as the locations and number of affordable units,
number of bedrooms, number of parking/garage spaces per unit,
amenities, pricing, etc.
o Marketing materials will include photos of the exterior and interiors
of available units.
5. APPLICATION PROCESS
A. Once the application period is opened by the city, an interested buyer will be able to
download the application from the city’s website (www.carlsbadca.gov/housing),
complete it, provide the required back-up documentation and then return the original,
signed application and supporting documents to:
City of Carlsbad
1200 Carlsbad Village Drive, Carlsbad, CA 92008
Attn: Homebuyer Program, Housing Services.
o Application forms will be mailed to interested buyers upon request.
B. The potential buyer shall be required to complete both a program and uniform
residential loan application to purchase the unit and must provide all pertinent
documentation requested by the City of Carlsbad to determine eligibility as well as to
determine sorting priority (see Section 6 below). Applications will only be accepted if all
documentation is provided at the time the application is submitted to the city.
Incomplete applications will be returned to the potential buyer with a list of required
documentation to be submitted to the city; applications may not be resubmitted until all
required documentation is available and included with the completed application.
Oct. 12, 2021 Item #2 Page 20 of 31
Please note that all applications must be signed and dated and may be noted on credit
reports as an application for a loan.
C. Submission of an incomplete application will be returned to the applicant, and the
application will not be considered for the purchase of an existing unit until it is accepted
as complete. A resubmitted application will be date and time stamped when it is
received. If the resubmitted application is accepted as complete, the resubmittal date
and time will be used for sorting as described in Section 6 below. It is important to
review the application closely and ensure that the application is complete, signed and
dated, and that all pertinent documents are included upon initial submission.
D. Persons with disabilities are entitled to request a reasonable accommodation in rules,
policies, practices, or services, or to request a reasonable modification in the application
process and purchasing process, when such accommodations or modifications may be
necessary to afford persons with disabilities an equal opportunity to housing.
6. APPLICATION SORTING
At the conclusion of the application period, based on the following criteria, all verified complete
applications will be placed in one of three eligibility lists, and in the order that applications were
accepted as complete:
List A List B List C
Applicant household has
BOTH
Gross annual household
income that is 50 percent of
Area Median Income or less,
adjusted for household size
AND
Current housing cost burden
of 50 percent of gross
household income or greater
Applicant household has
EITHER
Gross annual household
income that is 50 percent of
Area Median Income or less,
adjusted for household size
OR
Current housing cost burden
of 50 percent of gross
household income or greater
All other eligible applicants
Applicants will be selected first from List A in the order in which applications were accepted as
complete. If units are still available after selection of applicants from List A has been completed,
then applicants from List B will be selected in the order in which applications were accepted as
complete. If units are still available after selection of applicants from List B has been completed,
then applicants from List C will be selected in the order in which applications were accepted as
complete.
Oct. 12, 2021 Item #2 Page 21 of 31
Once all units are purchased by applicants on the eligibility list, remaining eligible applicants will
be kept on a waiting list as provided in Section 7 below. If units still remain after all applicants
from the eligibility lists have been considered and provided an opportunity to purchase a unit,
then any remaining units will be sold to an eligible purchaser on a first-come, first-served basis.
7. WAITING LIST AND ASSIGNMENT OF OPTION TO PURCHASE
If there are more qualifying buyers than units available at the time of application, the applicant
will be placed on a waiting list (with the same rank order) following the completed sale of the
last affordable unit until the next application period is opened by the city. The applicant will
then be considered for the opportunity to purchase a restricted affordable housing unit at that
time.
As described in Section 1, in many cases the city has the option to purchase an existing
affordable unit when the homeowner chooses to sell. The city also has the right to assign its
option to an eligible purchaser rather than purchasing the unit outright and then re-selling it.
Accordingly, whenever an owner of an affordable unit notifies the city of their intent to sell, the
city may assign its purchase option to an eligible buyer on the waiting list created under this
program. Note that in these cases, the qualifying household income limits and affordable unit
sales prices will be determined by the terms of the original resale restriction agreement with
the owner, generally set at 80 percent AMI and adjusted for household size. Therefore, the
waiting list will be screened for applicants meeting the qualifying income requirements, who
will then be selected in their ranked order.
Applicants should notify the city of any changes in email or mailing address to ensure that the
city has the most current contact information for communications regarding unit availability or
any program changes. Applicants on the waiting list will be contacted to update their
application at the time additional units are made available for purchase.
8. INCOME QUALIFYING FOR PROGRAM ELIGIBILITY
The household’s gross annual income must not exceed the income restriction set forth within
these program guidelines and as noted above (maximum 80 percent of AMI for San Diego
County, adjusted for household size). Gross income will be calculated according to these
guidelines. The combined gross annual income of all members of the household age 18 and older
who are currently living together and have lived together for 12 months or more and will be living
in the property must be included in the determination of income. The household’s income must
be projected as an annual income. It will be assumed that today’s circumstances will continue for
the next 12 months, unless there is verifiable evidence to the contrary. All households must be
income-qualified no more than 60 days prior to the purchase closing date. For the purpose of
determining income eligibility, all income is included even if there is less than a two-year work
history.
Oct. 12, 2021 Item #2 Page 22 of 31
9. HOUSING DEBT-TO-INCOME RATIO (HOUSING AFFORDABILITY)
The buyer/borrower’s monthly housing costs/debt—including principal, interest, property taxes,
property insurance, and if applicable, private mortgage insurance and homeowner’s association
dues—shall not exceed 30 percent of the buyer/borrower’s gross monthly income; this is known
as the housing debt-to-income ratio. Please note that the income of a non-borrowing spouse is
included when calculating this ratio if s/he has a work history of two or more years.
All household monthly debt (including home loan, car loans, credit card debt, etc.) shall not
exceed 50 percent of the buyer household’s gross monthly income.
10. INCOME FOR DEBT-TO-INCOME CALCULATIONS
Program guidelines require the combined income of all persons on title, including a non-borrowing
spouse (if applicable), to be included in the calculation of income. The household’s actual /average
income will be calculated for underwriting purposes. It will be assumed that today’s
circumstances will continue for the next 12 months, unless there is verifiable evidence to the
contrary. Applicants, co-applicants and non-borrowing spouses must have a minimum of a two-
year continuous work history.
11. DOWN PAYMENT REQUIREMENTS
The following down payment requirements shall apply to this affordable housing resale program
with the intent of requiring minimal investment by the buyer to extend the opportunity for
homeownership to a larger population of lower income households. But, there is also a cap to
the cash investment to ensure maximum public benefit. An all-cash transaction will not be
permitted, except where exceptional circumstances demonstrate that is necessary to serve a
special population such as very-low or extremely low-income seniors or the disabled.
B. Minimum required down payment is three percent of the purchase price.
o The borrower’s down payment must be from their personal funds or
a gift from an immediate family member. Immediate family
members include the following people: father, mother, brother,
sister, grandparent, uncle, aunt or child.
C. Maximum down payment: 20 percent of the purchase price.
o An exception to the maximum down payment guideline may be made for
buyers whose sole source of income is derived from Social Security, Social
Security Disability or Veterans Disability, in which case a down payment
sufficient to bring their housing debt-to-income ratio to no less than 30
percent may be accepted.
Oct. 12, 2021 Item #2 Page 23 of 31
o As the program is designed for lower-income buyers with limited assets
but sufficient income to support a first mortgage payment, large down
payments from family members with significant assets to assist the
buyers qualify for the mortgage loan will not be considered.
D. All-cash transactions are not permitted. An exception may be made for buyers
whose sole source of income is derived from Social Security, Social Security
Disability or Veterans Disability, and the proposed payment for property taxes,
homeowners association (HOA) dues and homeowners insurance is equal to or
greater than 30 percent of their income. The buyer must meet all eligibility
requirements, have acceptable credit and have sufficient income to support the
HOA, property taxes and monthly debt obligations.
12. ASSET LIMITATION
At the time eligibility is determined, the liquid assets of all household members, including
children, must not exceed an amount equal to the maximum income limit set for the
particular affordable unit, as adjusted for household size.
A. The term “liquid assets” refers to cash and assets, which are readily convertible to
cash within a reasonable period, including but not limited to savings and checking
accounts, certificates of deposit of any term, marketable securities, money market
and similar accounts, mutual fund shares, and insurance policy cash values.
B. The term “liquid assets” shall not include retirement account funds if those
accounts are not accessible to the buyer.
C. An exception may be made for buyers whose sole source of income is derived
from Social Security, Social Security Disability or Veterans Disability and a down
payment of more than 20 percent is required to reduce their housing debt-to-
income ratio to no more than 30 percent. In this case, the borrower’s assets must
not exceed an amount equal to the maximum income limit (50 percent of San
Diego County Area Median Income), as adjusted for household size after the
maximum allowable down payment contribution.
D. The minimum household reserve requirement is $1,000. The reserves must be from
liquid assets.
13. CREDIT GUIDELINES
A. Minimum credit score: 640
B. No foreclosure or bankruptcy (Chapter 7 or 13) within the last seven years
C. A letter of explanation is required for all derogatory reporting dated within two
Oct. 12, 2021 Item #2 Page 24 of 31
years prior to the close of escrow
D. All collections, charge-offs and judgments must be paid or settled with the
creditor through escrow or prior to the close of escrow. Back-up documentation
showing the account has been paid is required if paid outside of escrow
E. A credit report for a non-borrowing spouse is required. All debt of the non-
borrowing spouse will be used in the debt-to-income ratio calculations
14. FIRST TRUST DEED LOAN
The borrower shall secure a 30-year fixed rate loan from a private lender. No adjustable
rate loans or other financing programs shall be permitted. Conventional, Federal Housing
Administration (FHA) and Veterans Administration (VA) financing are acceptable. First
trust deed lenders are required to collect and manage an impound account for payment
of taxes, assessments and property insurance for the term of the first mortgage.
15. HOMEBUYER EDUCATION CLASS
All applicants, co-applicants and non-borrowing spouses, whether on title or not, are
required to attend a homebuyer education class given by a City of Carlsbad-approved
Homebuyer Education Provider.
16. OCCUPANCY REQUIREMENTS
As long as the borrower(s) owns the affordable unit, the borrower(s) must reside in the
unit as their principal place of residence. The borrower(s) shall not rent or lease all or any
part of the restricted unit at any time. The unit shall be occupied full time (at least 10
months out of the year) and may not be used at any time as a vacation home or short-
term vacation rental, or allow any other rental transaction or similar use. Borrower(s)
must comply with annual occupancy certification requirements and submit the
certification to the city upon request.
17. AFFORDABLE RESALE RESTRICTIONS
On the date of the sale of each Affordable Housing Resale Housing Program property,
the city will record resale restrictions on the property. The resale restrictions will include
income restrictions for new buyers, future sales price restrictions, initial occupancy
restrictions, and length of restriction (30 years). Note that future buyer income
restrictions and future sales price limits shall apply throughout the entire 30-year
affordability term. The resale restrictions are included in the following documents:
Oct. 12, 2021 Item #2 Page 25 of 31
A. Declaration of Restrictive Covenants Regarding Restrictions on Transfer of
Property, Occupancy Restrictions, Refinancing Restrictions, and Option to
Purchase
B. Deed of Trust
C. Promissory Note
D. Notice of Affordability Restrictions
E. Buyer’s Disclosure Statement
18. CITY’S CONTINUING ROLE
The City of Carlsbad is the Affordable Housing Homeownership Program administrator
and secondary lender. As the program administrator, the city is responsible for oversight
and compliance of the affordable resale restrictions. The city’s responsibilities include
but are not limited to:
A. Managing the Affordable Housing Homeownership Program interest and waiting list
B. Calculating the sales price for affordable for-sale units at the time of the first
sale and for each subsequent sale
C. Ensuring that upon resale, the property is in a “move-in” ready condition
D. Verifying eligibility of buyers that participate in the program
E. Monitoring owner-occupancy compliance
The city may use third parties to assist in administering the program.
The City of Carlsbad is a lien holder on each unit and has no further ownership interest in the
properties after the initial sale of the unit.
19. REFINANCE
The Deed of Trust and Promissory Note to the city may be subordinated to the
refinancing of the existing first trust deed loan in order to lower the interest rate and
subsequent monthly payment only. Refinancing that increases the current principal
balance (except for reasonable costs of refinance) or increases the monthly mortgage
payment will not be permitted. Mortgage loans or equity lines of credit junior in lien
priority to the city deed of trust are not permitted. No reverse mortgages will be
approved for the affordable units. All refinances are subject to prior written approval by
the city.
Oct. 12, 2021 Item #2 Page 26 of 31
20. PROPERTY CONDITION
Units offered under this program will be sold by the City “as is”, which the City has
determined is in “move in condition”. The city will make no repairs and is not responsible
for any defects in the construction of the units or any repairs or replacements that may
be required for the units. All buyers are encouraged to engage the services of a home
inspector to provide for a full home inspection prior to close of escrow on the purchase
transaction. The potential buyer will be permitted to cancel escrow if there are any
conditions in the unit which are unacceptable to the buyer and with the understanding
that the city will make no repairs or correct any identified defects.
At the time the new owner decides to resell the purchased affordable unit, the unit shall
be restored to “move in condition” prior to providing the Notice of Intent to Sell to the
City of Carlsbad.
Oct. 12, 2021 Item #2 Page 27 of 31
These guidelines are provided as a basis for the determination of program eligibility and
underwriting of Affordable Housing Resale Program loans. The City of Carlsbad at its sole
and reasonable discretion, and with the City Manager’s approval, may make exceptions to
any guideline set forth herein, if not inconsistent with City Council Policy No. 73.
Please be aware that reporting fraudulent, untrue and/or incomplete documentation is
a serious program violation. This could lead to the termination of your participation in
the Affordable Housing Resale Program.
It is also important to acknowledge that Title 18, Section 1001 of the United States Code,
states that a person is guilty of a felony for knowingly and willingly making false or
fraudulent statements to any department or agency of the United States. It is very
important to provide complete and accurate information as requested by the City of
Carlsbad.
The City of Carlsbad is committed to affirmatively furthering fair housing by promoting fair
and equal housing opportunities for individuals living in the City of Carlsbad and San Diego
County. This commitment extends to all housing programs managed or owned by the city
and to all grant-funded programs provided by the city. It is the policy of the city to provide
services without regard to race, color, religion, national origin, ancestry, age, gender, source
of income, familial status or physical/mental disability.
Oct. 12, 2021 Item #2 Page 28 of 31
Appendix A
Summary of Applicant Eligibility and related standards and acceptable documentation:
Applicant Eligibility Standards
Co-Signers Co-signers who will not occupy the property are prohibited.
Documentation • If married: spouse must sign city forms,
disclosures and promissory note,
regardless of vesting.
• If divorced: copy of final divorce decree
and judgment from the court.
• Death certificate for deceased spouse.
• Non-U.S. Citizen: copy of permanent alien
registration card (green card). All
borrowers must be a U.S. Citizen or
Permanent Resident.
• Copy of driver’s license or other government-issued photo ID.
Income (Required for ALL household members over the age of 18) Standards
Alimony and Child Support Copy of divorce decree and/or child support
agreement, with six months proof of payment.
To be used for eligibility and underwriting.
Support must continue for 12 months or more. Disability Income Copy of award letter from payer. Social Security Income Copy of award letter from payer. Pension Income Copy of award letter or W-2 from payer.
Workers Compensation Benefits Copy of award letter from payer. Unemployment Compensation Copy of award letter from payer.
Financial Aid (student loans, etc.) Copy of award letter from payer.
Interest or Dividend Income Two years 1040s, copies of current statements verifying buyer’s assets. Tax Returns & W-2s Three years of signed tax returns. Two years W-2s for all employers.
Salaried / Wage Earners Most recent pay stubs covering a minimum of
two month’s income. Pay stubs to reflect year-
to date earnings and deductions. If there are
multiple employers, all pay stubs showing year-
to-date earnings.
Part-Time Employment Most recent pay stubs covering a minimum of two months. Pay stubs to reflect year-to-date earnings and deductions.
Oct. 12, 2021 Item #2 Page 29 of 31
Bonus and Overtime Income Must be documented on pay stub. Will be used
if there is a two-year history and likelihood of
continuation.
Self-Employed Two years of tax returns with schedule C
and a year-to-date signed profit and loss
statement. Must have a minimum two-year
history of self-employed income.
Commission Only Two years of tax returns with schedule C
and a year-to-date signed and dated profit
and loss statement or most current pay
stubs covering a minimum of one month.
Must have a minimum two-year history of
commission income.
Assets (Required for ALL households members over age 18) Standards
Checking and Savings Accounts Three months most recent bank statements for ALL accounts.
Stocks and Bonds Must be verified by brokerage firm or similar company and statement of account. Saving Bonds Copy of bond.
401K or Retirement Accounts Copy of account statement and letter from
employer verifying that borrower does not
have access to the funds, if applicable. Liabilities Standards
Alimony/Child Support Included as debt if more than six months remaining. Copy of divorce decree.
Installment Loans Included as debt if more than six months
remaining.
Revolving Accounts Payment stated on credit report or application
is used, whichever is higher. If payment is not
stated, the higher of $10 or 5% of the
outstanding balance owed is used.
Student Loan If loan is deferred for one year or more, it is not
included as a monthly obligation. If less than a
year deferment or borrower making payments,
it is included as a debt. Credit History Standards
Credit Reports Must be a “three repository merged” credit
report. Any items not belonging to borrower
must be removed from the report. Credit
report cannot be dated more than 60 days from
underwriting. Minimum credit score: 640.
Oct. 12, 2021 Item #2 Page 30 of 31
Collections All unpaid collections must be paid. Need letter of explanation from borrower.
Derogatory Credit Letter of explanation is required for all
derogatory credit. No accounts can be past due
at the time of loan application.
Bankruptcy No bankruptcy (Chapter 7 or 13) within the last
seven years. Short Sales / Foreclosures No short sale or foreclosure within the last seven years. Judgments, Garnishments and Involuntary Liens No outstanding judgments, garnishments or involuntary liens are allowed.
Inquiries Any inquiries within the last 90 days must be explained.
No or Limited Credit History Alternative credit history is required. Utility
payment records (at least three months most
recent statements), rental payments (past 12
months) or other personal loans (past 12
months). Need three forms of credit history, at
least one must be a rental history.
Oct. 12, 2021 Item #2 Page 31 of 31