HomeMy WebLinkAbout1986-05-06; City Council; Resolution 85391
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RESOLUTION NO. 8539
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA APPROVING AN AGREEMENT
BETWEEN THE CITY OF CARLSBAD AND THE BANK OF AMERICA FOR SERVICING THE CITY'S LOAN PROGRAM
WHEREAS, the City Council of the City of Carlsbad,
California does hereby resolve as follows:
(1) That an agreement between the City of Carlsbad and Bank
of America for servicing the City's Loan Program, a copy
of which is attached hereto as Exhibit A and made a part
hereof, is hereby approved.
(2) That the Mayor of the City of Carlsbad is hereby authorized
to execute said agreement on behalf of the City of Carlsbad.
PASSED APPROVED AND ADOPTED at a regular meeting of the
City Council of the City of Carlsbad, California, held on the 6th
day of May, 1986, by the following vote, to wit:
AYES: Council Members Casler, Lewis, Kulchin, Chick and Pettine
NOES: None
ABSENT: None
ABSTAIN : None
ATTEST :
ALETHA L. RAUTENKRANZ, City C@rk
(SEAL)
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COMHERCIAL AND RESIDENTIAL
COW FORM
1980 FUNDING
PROPERTY RtHABI LmON LOAN AG REEMENT
r
THIS AGREEMENT is made by the CITY OF CARLSBAD, a municipal
corporation in the State of California (herein called "Authority"), and BANK
OF &!ERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association (herein called "Bank").
RECITALS
A. Authority has authorized a Housing Preservation Program as part
of an adopted Community Development Block Grant Program (as may be amended and
modified from time to time) hereinafter collectively called "Program".
B. As part of Authority's implementation of Program, Authority has
requested Bank to make bel ow-market interest rate property rehabilitation
loans ("Loans" or "Program Loark") to certain owners of residential real
property within Authority and approved by Authority as recipients of Loans
("Appl icants").
real property in accordance with Program.
requested a choice of several types of Loans to Applicants,
The purpose of the Loans would be the rehabilitation of said
In addition, Authority has
C. To support these objectives., and based on an Initial deposit of
Cmunity Development Block Grant funds; Bank is willing to provide Authority
and Applicants with Collateral ired Loans (Part Three) , Deferred Payment Loans
(Part Four), and other services at rates and terms not available to the
general public or to Authority independent of this Agreement.
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D. The terms and conditions of this agreement are subject to the
provisions governing 1 ump-sum drawdowns for property rehavil i tation of the HCD
regulations on Cmunity Development Block Grants contained ;in Title 25,
Administrative Code ;Section 7124, and/or Section 570.513 of the HUD
regulations on Cmunity Development Block Grants, 24 CFR Part 570.
NOW, THEREFORE, for and in consideration of the foregoing and the
mutual agreements made herein, and for other good and valuable consideration,
Authority and Bank agree as follows:
PART ONE
DEPOSIT OF COMMUNITY DEVELOPMENT
BLOCK GRANT FUNDS
1. Authority shall deposit up to $300,000 of Community Development
Block Grant rehabil itation funds available to Authority under the Housing and
Comunity Development Acts of 7974 and 1977, as amended, as part of this
Agreement .
2. Authority's deposits of Community Development Block Grant funds
may be made in any of the following forms:
(a) A deposit to the Warehouse Account, the funds in which are
una1 1 ocated to Loans.
(b) A deposit to Collateralized Loan Account(s) which are
nonlnterest-bearing savings accounts which subsidize Loans and are pledged as
Loan coll ateral , wl th the exception of coll ateral ized account for 12%
comnercial loans which accrue at 5.25%.
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0 0 (c) The purchase from Bank of time certificate(s1 of deposit
from which a11 proceeds are allocated to future Program Loans. Bank will pay,
at Authority's election, the highest interest rate permitted by law on all
accounts described above. If legal interest rate 1 imitations are removed,
Bank will pay its highest rate offered to the public.
3, Authority relinquishes the use of and control over accounts
described in paragraph 2(b). These accounts will be used only for the Loan
purposes described in this Agreement.
4. Authority retains full accessibility to all deposits which are
unallocated to existing Program Loans.
5, Authority agrees all interest earnings will be paid to the
Warehouse Account and will be used in accordance with Community Development
Block Grant regulations contained in 24 CFR 570.513(c).
PART TWO
APPL I CAT1 ON PROCEDURES
6. At the request of Authority, Bank, through its Carlsbad-El Camino
Real Branch, shall consider making loans to qual ified Appl icants directed to
Bank by Authority. Bank shall notify the respective Applicant(s) in writing
of any such request it receives from Authority.
contain the following statement:
The notification shall
"The City of Carlsbad bas requested the
Carlsbad-El Camino Real Branch of Bank of America National Trust and Savings
. Association, 2550 E1"Camino Real, Carl sbad, Cal i fornia 92008, to consider
making a specific extensfon of credit to you. Y
A qualified Applicant shall be identified by Authority or its
agents, using Authority's established standards, which must consider, without
1 fmi tation: -- .
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(a) Applicant is "the owner of record" of the property subject
to rehabilitation.
(b) Authority has verifiable income(s) which can be used to
repay the proposed Loan.
(c) Authority has determined that the proposed Loan, given
Program options avail able, will best serve the rehabilitation needs of
Appl icant and the Program objectives.
(d) In addition, each Cmercial Improvement Rehabilitation Loan
Applicant, if a lessee, has a lease which, with options, extends at least six
(6) months beyond the maturity of the proposed Loan.
7. Authority shall furnish to Bank, with respect to each loan
appl i ea ti on:
(a) an introductory 1 etter stating that Authority desires Bank
to consider making a Loan to Applicant;
(b) a breakdown of the costs involved in the rehabilitation work
to be perfoned on Applicant's real property;
fc) a description of the work;
(d) an estimate of the value of the real property offered as
security for the Loan;
(e) a copy of any contractor bid accepted by Applicant; and
(f) a statement including the name of the contractor who will
perform the rehabilftatfon work, and a statement that Authority has satisfied
itself with respect to the competence and reliability of the particular
contractor; and
(9) for each Commercial Improvement Rehab11 itation Loan, Bank
shall require from Applicant:
(1) 2-year business income statements supported by IRS
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income tax filings; -4-
(2) a copy of the existing lease, if Applicant is a
property tenant;
(3) Applicant's personal financial statement;
(4) A policy of Creditor Life Insurance, in a form
acceptable to Bank.
equal to the amount outstanding under the Loan to Applicant, with Bank named.
as beneficiary.
The policy remains outstanding, in an amount at least
Upon Authority's request, said insurance shall be prepaid
from Loan proceeds and said amount added to the principal amount of the Loan.
At Bank's request, each Appplicant shall also be required to maintain a
standard policy of hazard insurance covering the real property upon which the
rehabilitation work is to be performed in effect while any part of the loan
remains outstanding, with Bank named as beneficiary.
Loans, Authority agrees to guarantee unpaid premiums in accordance with the
provisions of pzragraph 15 below.
In the case of defaulted
(h) Release of information form.
8. Bank shall perform its customary credit evaluation with respect
to the Applicant, render its judgment with respect to the creditworthiness of
the Applicant, and recommend appropriate Loan terms.
9. Upon completion of its credit evaluation, Bank shall furnish to
Authority a recommendation to proceed with the Loan or not, including: *
(a) a recommendation as to use of either a Collateralized, or
. Deferred Payment Loan, or some combinatfon thereof; and
(b) an indication which of the following Loans (for which Bank
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assumes part ot the credft risk, as indicated parenthetically below) Bank is
will ing to make to Appl Scant:
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(J ) for residential property improvewnt Loans:
(i)
(ii)
(iii)
3.00% Collateralized Loan (0% credit risk);
6.25% Collateralized Loan (30% credit risk);
8.50% Collateralized Loan (50% credit risk);
(iiii) 10.75% Collateralized Loan (70% credit risk).
(2) for commercial property improvement Loans;
(i) 6.00% Collateralized Loan (0% credit risk);
(ii) 10.00% Collateralized Loan (60% credit risk).
10. After having determined the exact nature and scope of the
rehabilitation work to be performed on Appl icant's real property, Authority
may request Bank to grant App'licant a Loan, which either must be from among
those designated by Bank pursuant to paragraph 9(b) above or must be a Loan
pursuant to paragraph 11 (a) (100% collateral ized) or paragraph 19 (Deferred
Paymnt Loan). PART THREE
COLLA~LOANS
7 1. Each Collateral ized Loan shall be supported by a
noninterest-bearing deposit made by Authority to a Collateral ized Loan
Account, an account which shall at all times be at least equal to:
(a) 100% of unpaid principal for each 3.00% residential or 6.00%
comnercial Loan for which Bank has not designated the Applicant (pursuant to
paragraph 9(b)) as a party 'to whom Bank is willing to make a (partially)
Coll ateral ized Loan;
(b.) 7a of unpaid principal for each residential 6.25% Loan;
(c) 50% of unpaid principal for each residential 8.50% Loan;
(d) 30% of unpaid principal for each residential 10.75% Loan;
(e) 4a of unpaid principal for each comercfal 10.00% Loan;
plus, in each case, 100% of accrued unpaid interest, Authority hereby assigns
the Cot lateral ized Loan Accou-nt to secure the Collateralized Loans,
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12. (a) Unless Authority requests one note only, each
Collateralized Loan shall be evidenced by two notes, effective in succession,
as provided herein.
(b) The note first effective shall be a short-term commercial
note, the term of which shall coincide approximately with the rehabilitation
period (although all' references herein to the short-term commercial note are
singular, a Loan could include more than one short-term commercial note).
term of any one short-term commercial note may not exceed ninety 190) days,
although the note may be extended, renewed, or refinanced.
thereof shall be disbursed by Bank in a number of draws, each to follow
completion of an applicable state of construction, as certified to Bank by
Authority.
The
The Loan proceeds
Interest shall accrue only on the disbursed portion of the Loan.
(c) Promptly after Bank's disbursement of the final draw under
the short-term comercial note, that note shall be refinanced by an
installment note, as provided for at subparagraph (d) below or, a1 ternatively,
as provided in Part Four (Deferred Payment Loans). At the time the short-term
commercial note is refinanced by the installment note, Applicant may either
pay Bank the accrued interest on the short-term commercial note or may have it
added to the principal of the installment note.
(d) The term of the fnstallment note shall be determined by Bank
for the Loan in question but:
(i) may not exceed fifteen (15) years for residential;
.. (ii) may not exceed ten (10) years for commercial
rehabilitation.
The fnstallment note shall be amortized in equal monthly installments over its
tem. Interest will be calculated on a simple interest basis for each
fnstallment note.
13. With respect to Collateral fzed Loans:
(a) On both the short-term commercial note and the installment
note, interest and other finance charges shall be such as to bear the interest
rates described in paragraph 11, which shall be calculated on a simple
interest basis.
(b) The loan shall be documented using Bank's standard forms.
(c) Both the short-term commercial note and the installment note
shall, at Bank's or Authority's option, be secured by a deed of trust covering
the real property that is subject of the rehabilitation for which the proceeds
of the Loan are to be used.
14. Authority shall make a relevant deposit to the Collateralized
Loan Account in the percentage of Loan amount provided for at paragraph 11,
when the commercial note and deed of trust are signed by Applicant and when
interest on a short-term comercial note becomes added to the principal of a
subsequent installment note. At the end of each calendar month ending 180
days after Authority's first deposit hereunder, Bank shall remit to Authority
the amount by which the Collateral ized Loan Account exceeds the paragraph 11
percentages of the unpaid balances of Collateralized Loans. Funds that Bank
thus remits to Authority shall be deemed funds that Authority deposited at
least 180 days before.
. 15. If a Collateralized Loan remains in default for a continuous
perfod of n'inety (90) days on account of nonpayment of any sum of money due .. #..-
. pursuant to the terms thereof or of any instrun&% or document related
thereto, Bank may withdraw from the Collateralized Loan Account, and pay to
itself, an amount equal to the then outstanding principal balance of the Loan
multiplied by the same percentage as the percentage of the Loan amount that
was deposited to the Collateral ized Loan Account pursuant to paragraph 11
plus 100% of accrued unpafd fnterest on the Loan through the 90th day of
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default.
Loan Account for any amounts in excess of those permitted under this
paragraph.
Bank shall have no recourse against Authority or the Collateralized
During any ninety (90) day default period, Bank shall perform its
customary collection procedures with respect to the Loan.
16. After a withdrawal from the Collateralized Loan Account under
paragraph 15 above, in the case of a Loan for which the deposit to the
Collateralized Loan Account under paragraph 11 was less than 100% of the Loan
amount:
(a) Bank need not assign the deed of trust to Authority upon
completion of the withdrawal but may, for its own account, exercise rights
under the deed of trust to recover the remaining outstanding unpaid principal
of the Loan plus accrued unpaid interest thereon after the 90th day of default.
(b) At its election, Bank may assign to Authority such rights as
may be necessary for Authority to attempt to recoup any funds withdrawn from
the Collateral ized Loan Account in connection with any Loan default.
Authority agrees to recoup funds, as much as possible, for the benefit of Bank
as well as itself. Funds recov-ered shall be credited as follows:
(1
(2) to the costs of recovery;
to withdrawals from the Collateralized Loan Account;
(3) to Bank's Loan charge-off.
(c) If Bank subsequently recovers funds with respect to a
defaulted Loan (as, for example, but without limitation, if a voluntary sale
of the property takes place), Bank shall, after deducting the previously
unreimbursed percentage of Loan loss to which Bank is entitled, plus Bank's
cost of recovery, return and pay over to Authority all amounts in excess
thereof.
17. After a withdrawal from the Collateral iied Loan Account under
paragraph 15 above, in the case of a Loan for which the deposit to the
Collateralized Loan Account under paragraph 11 was 100% of the Loan amount,
Bank shall assign the Loan to Authority, the assignment to be accomplished by:
(a) the due endorsement by Bank to Authority of the promissory
note evidencing the loan, without recourse or warranty; and
fb) the delivery of the promissory note and the assignment and
delivery of the deed of trust.
18. Collateral ized Loans, as described in paragraphs 11 through 17,
must have an average original Loan amount of $10,000, which provides Authority
favorable rates and terms, based on thjs average loan size.
costs associated with smaller average loan size are significantly greater,
Authority's Coll ateral ized Loans wi 11 be analyzed every 180 days from contract
approval.
adjustmnts affecting the pricing of future activity as follows:
Since operating
If average $10,000 Loan amounts are not maintained, Bank may make
(a) increase borrower interest rates for new Loans;
(b) increase coll.atera1 requirements for new Loans; or
(c) assess an origination fee for new Loans.
These options are negotiated and mutually accepted by Bank and Authority.
The Bank's total commitment for loans to be made under this
In addition, Bank agrees to make up to
19.
program is limited to $526,000.
$2,000,000 in loans to qualified businesses using the various Small Business
Administration programs which relate to, and are supportive of the Authority's
goals and objectives in which the Bank is participating at the time of
appl ication.
by the Local Development Corporation of San Diego County up to any amount
limitations on each transactfon; the regular SBA 7 fa) program up to $550,000
per loan and Bank of America's Preferred lender's Program (PLP) up to $650,000 -1 0-
These include, primarily, the SBA Section 503 program provided
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per loan or, any combination of these programs which, in the Bank's judgement
are appropriate and best suit the requirements of the applicant, the Authority
and the Bank.
PART FOUR DEFERR- LOANS
20. In the event Authority requests Bank to make a Loan, the terms
of which are other than as provided in Parts Three and Four above, Bank shall
comply with Authority's request.
Applicant's note on terms Authority has requested for the Loan, Bank shall,
promptly after compt etion of the respective rehabilitation work, assign the
Loan to Authority according to the same procedure, and for the same price, as
would be appl icable under paragraphs 15 through 17 (Part Three) in the case of
In that case, after Bank has obtained
the assignment following default of a Collateralized Loan for which the
deposit to the Collateralized Loan Account under paragraph 11 was 100%.
Promptly after the assignment Authority shall pay to Bank a fee to cover its
internal administrative and out-of-pocket expenses, as specified by Bank, but
in no event less than THIRTY-SEVEN AND SO/lOO DOLLARS ($37.50) nor more than
ONE HUNDRED DOLLARS ($100.00) for each Loan so made. Such fee shall be at
Applicant's sole expense and shall not be recovered from Applicant(s).
21. Prior to the making of the first Deferred Paymgnt Loan,
Authority shall furnish Bank an opinion of its legal counsel:
(a) statfng that Authority has establfsed rates and terms for
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its Deferred Payment Loan Program note;
(b) designating whether any Deferred Payment Loan fee is a
"charge to be financed" or a "prepaid finance charge" under Regulation 2; and
(c) that Authority has dellvered this information and note to
Bank's Carlsbad-El Camfno Real. Branch; - --- .. .
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PART FIVE
GENERAL PROYISIONS
22. On Authority's request, Bank shall, for its customary fees
therefor, accept for collection purposes, pursuant to Bank's then current
installment collection procedures, a Program Loan that has been transferred to
Authority.
23. On Authority's request, Bank shall, for its customary fee
therefor, provide foreclosure services with respect to a defaulted Program
Loan that has been transferred to Authority, in which case Bank shall be
substituted for Continental Auxiliary Company/Authority as trustee under
applicable deed of trust.
24. (a) The term of this Agreement shall mature on December 15,
1987.
hereto at six (6) month intervals from June 15, 1986, provided.written notice
of intent is given to the other party at least fifteen (15) days prior to the
termination
date.
This Agreement may be terminated or amended by either of the parties
(b) Any termination of the Agreement shall not affect Program
Loans outstanding at the time of termination.
(c) At termination, Bank shall retain the Collateralized Loan
Account and shall remit monthly to Authority the amount by which the
Col1 ateral ized loan Account exceeds the paragraph 11 percentages of the unpaid
bat ances of Collateral ized Loans.
25. Bank covenants and agrees that nothing in this Agreement or any
agreement made pursuant hereto shall be deemed or construed by Bank to make
Authority a surety or guarantor of any loan, and that Bank's rights with
respect to a Collateral ized Loan shall be 1 imi ted to those set forth at
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paragraphs 15 thmugh 17 hereof. 1-
26. Authority and Bank shall comply with a71 applicable statutes and
regulations, including without limitation, where applicable, the Federal Truth
in Lending Act and Regulation Z thereto, the Consumer Credit Reporting Act,
and the Equal Credit Opportunity Act and Regulation B thereto.
27. Except as specifically required by this Agreement, Authority
waives any right it may have to require Bank to:
(a) proceed against any Applicant or other person;
(b) proceed against or exhaust any collateral for the rslevant
Loan; or
(c) pursue any other remedy in Bank's power;
and waives any defense arising by reason of any disability or other defense of
Applicant or any other person, or by reason of the cessation from any cause
whatsoever, other than full payment, of the liability of an Applicant or any
other person.
28. Bank and Authority acknowledge the "Special Purpose" nature of ,
the Program and Program Loans.
be considered in default after &e date of a transfer of the deed of trust
property which, according to the provisions of the note, make the entire
principal and interest of the note due and payable, regardless of Bank's
abflity or inability to enforce those provisions of the note.
To serve this "Special Purpose'', a Loan shall
29.. Any communications between the parties hereto may be given by
. mailing the same, postage prepaid, to Bank at its Carlsbad-El Camino Real
Branch, 2550 El Camino Real, Carlsbad, Californfa 92068, and to Authority at
its City Hall, 1200 Elm Avenue, Carlsbad, Calf fornfa 92008, or to such other
addresses as either party may in wrf ting hereafter f ndfcate.
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30, This Agreement and any agreement, document, or instrument
attached hereto or referred to herein integrate all terms and conditions
mentioned herein or incidental hereto, and supersede a1 1 oral negotiations and
prior writings in respect to the subject matter hereof. In the event of any
conflict between the terms, conditions, and provisions of this Agreement and
any such agreement , document , or instrument, the terms, conditions, and
provisions shall prevail.
31, Authority shall indemnify and hold harmless Bank against all
claims and damages, alleged or otherwise, of whatsoever nature arising out of
or in any way connected with the acts or missions of any contractor
performing rehabilitation work in connection with this Agreement; provided,
however, that Authority's obligations under this paragraph shall not extend to
negligent or willful acts or omissions by Bank. All contractors shall operate
as independent contractors and nothing herein is intended to affect such
independent contractor status.
32. Bank may, at its option, decline to make additional Loans from
and after the date when the principal balance of all Loans outstanding has
exceeded SIX HUNDRED THOUSAND AND N0/100 DOLLARS ($600,000.00).
33. This Agreement may be executed in as many counterparts as may be
deemed convenient, each of which, when executed, shall be deemed an original.
34. The operating aspects of this Agreement, including but not
limited to target.area boundarfes, MY be altered from time to time through a
letter of understanding, accepted mutually by Authority's City Manager and
Bank's City Improvement and Restoration (CIR) Department.
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IN WITRESS &HEREOF, this Agreement is executed by Authority
acting by and through its pursuant to
Resolution No. authorizing such execution, and by Bank.
Dated this day of , 1986.
BANK OF AFJERICA NATIONAL TRUST
AND SAVINGS A
ariier
Title Title Assistant Vice President Community Development Department
APPROVEE! AS TO FORM: Attached is a true and correct copy of the original Resolution
tity Clerk .
OC08
IN WITNESS WHEREOF, this Agreement is executed by Authority
acting by and through its City Council pursuant to
Resolution No. 8539 authorizing such execution, and by Bank.
Dated this /d za day of &'&' , 1986.
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THE CITY OF CARLSBAD,
A MuniciDal CorDoration
Title Mayor
APPROVED AS TO FORM:..
BANK OF AM= IONAL TRUST
AND SAVING C TION
BY C. t.' 6arner
Title Assistant Vice President
Community Development Department
Attached is a true and correct'
copy of the original Resolution
A&, Bpg- City Clerk
0008