EPA CAN DO 2369 University Avenue East Palo Alto, CA 94303 - (650) 473-9838 o - (650) 473-0913 f, www.epacando.org 1 Board of Directors
Angah Miessi
Mark Moulton
Kenia Najar Miranda
Melvin Gaines
George Hunt
Anna Turner
William Webster
November 29, 2022
To: Karen Camacho, Interim Housing and Economic Devt. Manager, City of East Palo Alto From: Duane Bay, Executive Director, EPACANDO
Subject: Update on Below-Market-Rate (BMR) Enforcement Cases This report provides an update on the 11 BMR cases in which probable violations of the BMR regulatory agreements have been identified. In each of these cases, EPACANDO has been in contact with the homeowner to put them on notice of potential enforcement actions. The table below summarizes the statuses of these enforcement cases and provides EPACANDO’s recommendations for City action, as appropriate. In summary, the 11 cases involve 13 violations of the regulatory agreements: one failure to pay off a City loan, one failure to adhere to the owneroccupancy requirement (and possible renting-out of the home), three non-compliant transfers of title to living trusts, and eight non-compliant refinancings.
Notably, seven of the 11 enforcement cases involve some of the earliest BMR homes, in which the homeowners are bound by an older version of the BMR regulatory agreement that does not require homeowner cooperation with monitoring, an explicit requirement in the more modern regulatory agreements. The limitations of these old-version regulatory agreements impede the abilities of EPACANDO and the City to hold BMR homeowners accountable to the rules and regulations of the BMR program. Therefore, it is recommended that we seek opportunities to persuade these homeowners to sign onto the more modern version of the regulatory agreements, which also include some provisions that are more favorable to the homeowners. Some of EPACANDO’s recommendations below include making offers to the homeowners with old-version agreements to resolve their violations by signing onto the more modern regulatory agreements.
With regard to the three instances of non-compliant title transfers into living trusts, all three involve the old-version BMR regulatory agreement which does not permit transfers of title into trusts. In contrast, the more modern version of the agreement explicitly provides homeowners with this right, as long as they provide written notice to the City. However, that notice requirement differs from the regulations found in most other local agencies’ BMR programs, where most often agency approval is required before a homeowner may transfer their title into a living trust. EPACANDO recommends that the City consider amending its current regulatory agreement to add a requirement for City approval before a homeowner may transfer their title into a living trust, but this matter can be presented and discussed more thoroughly at a later date.
We hope to meet with the City in the near future to discuss our enforcement recommendations and determine the most appropriate next steps.
2 Table: BMR Enforcement Cases, as of November 29, 2022 Alleged
Violation
Old or Modern
Regulatory
Agreement?
Actions Taken Thus
Far
Recommendations for
City Action
1. In default of
down payment
assistance loan
from City
Old agreement
(2000)
In 2011, City staff tried
to get owner to sign a
modification and
amendment to the note
and deed of trust, but
owner refused. More
recently, EPACANDO
has made numerous
additional attempts, but
these have also failed.
Send a Notice of Default
directing owner to cure
the violation by making
payments including
interest. The Notice can
state that if the default is
not cured, the City may
take further enforcement
action, up to and
including exercising its
City option to purchase,
or it may extend the
deadline to cure.
2. Non-compliant
refinance, but
currently not
over-financed
Modern
agreement
Sent Notice of Concern
(informing them of their
past violation and the
BMR rules for
refinancing, but taking
no further action).
Potentially send warning
letter, but take no further
enforcement action.
3. Non-compliant
refinance, but
currently not
over-financed
Modern
agreement
Sent Notice of Concern
(informing them of their
past violation and the
BMR rules for
refinancing, but taking
no further action).
Potentially send warning
letter, but take no further
enforcement action.
4. Non-compliant
refinance, but
currently not
over-financed
Modern
agreement
Sent Notice of Concern
(informing them of their
past violation and the
BMR rules for
refinancing, but taking
no further action).
Potentially send warning
letter, but take no further
enforcement action.
5. Non-compliant
refinance, but
currently not
over-financed
Old agreement
(2001)
Sent Notice of Concern
(informing them of their
past violation and the
BMR rules for
refinancing, but taking
no further action).
Send owner letter asking
them to sign onto new
regulatory agreement in
exchange for taking no
enforcement action.
6. Non-compliant
refinance, but
currently not
over-financed
Old agreement
(2002)
Sent Notice of Concern
(informing them of their
past violation and the
BMR rules for
refinancing, but taking
no further action).
Send owner letter asking
them to sign onto new
regulatory agreement in
exchange for taking no
enforcement action.
7. Non-compliant
refinance, but
currently not
over-financed
Old agreement
(2001)
Sent Notice of Concern
(informing them of their
past violation and the
BMR rules for
Send owner letter asking
them to sign onto new
regulatory agreement in
3 refinancing, but taking
no further action).
exchange for taking no
enforcement action.
8. (1) Transferred
title to living
trust
(2) Noncompliant
refinance, but
currently not
over-financed
Old agreement
(2000)
(1) Sent Notice of
Concern. Received copy
of owner’s trust
agreement and reviewed
to confirm owner was
the beneficiary. Met
with owner to inform
them of violation; told
them no action is
necessary yet, but there
will be follow-up in the
future to reach a
resolution, and it may be
necessary to remove title
from trust to become
compliant.
(2) Sent Notice of
Concern (informing
them of their past
violation and the BMR
rules for refinancing, but
taking no further action).
(1) Send letter asking
owner to sign more
modern BMR agreement
which will explicitly
allow them to keep their
title in the living trust; if
they decline, consider
taking enforcement
action requiring them to
remove the title from
their trust.
(2) Potentially send
warning letter, but take
no further enforcement
action.
9. (1) Transferred
title to living
trust
(2) Noncompliant
refinance, but
currently not
over-financed
Old agreement
(2000)
(1) Sent Notice of
Concern. Sent letter
telling owner no action
is necessary yet, but
there will be follow-up
in the future to reach a
resolution, and it may be
necessary to remove title
from trust to become
compliant.
(2) Sent Notice of
Concern (informing
them of their past
violation and the BMR
rules for refinancing, but
taking no further action).
(1) Send letter asking
owner to sign more
modern BMR agreement
which will explicitly
allow them to keep their
title in the living trust; if
they decline, consider
taking enforcement
action requiring them to
remove the title from
their trust.
(2) Potentially send
warning letter, but take
no further enforcement
action.
10. Transferred
title to living
trust
Old agreement
(2001)
Sent Notice of Concern.
Received copy of
owner’s trust agreement
and reviewed to confirm
owner was the
beneficiary. Met with
owner to inform them of
violation; told them no
action is necessary yet,
but there will be followSend letter asking owner
to sign more modern
BMR agreement which
will explicitly allow
them to keep their title
in the living trust; if they
decline, consider taking
enforcement action
requiring them to
4 up in the future to reach
a resolution, and it may
be necessary to remove
title from trust to
become compliant.
remove the title from
their trust.
11. Not owneroccupiedModern
agreement
Sent Notice of Concern.
Had owner sign
Affidavit of Residency
confirming she has
moved back into the
home as her permanent
residence. Reviewed and
verified documents to
demonstrate residency
(utilities, bank
statements, verification
of no rental income on
tax returns, etc.).
Potentially send warning
letter, but take no further
enforcement action.
Continue monitoring
case to ensure owneroccupancy is legitimate.