City of Merced
Homebuyer
Acquisition Only
Program Guidelines
For:
HOME Investment Partnerships Program
Community Development Block Grant
(CDBG) Program
CalHome Program
CalHome Approved 2/21/23)
CalHome Revised (date)
CDBG Approved (date)
HOME Approved (date)
ATTACHMENT 5
City of Merced Homebuyer Program Guidelines Page 2
HOMEBUYER PROGRAM GUIDELINES
Table of Contents
1.0. GENERAL
1.1. PROGRAM OUTREACH AND MARKETING
1.2. APPLICATION PROCESS AND SELECTION
1.3. THE HOME PURCHASE PROCESS
1.4. HOMEBUYER COSTS
1.5. HOMEBUYER EDUCATION
1.6. CONFLICT OF INTEREST REQUIREMENTS
1.7. NON-DISCRIMINATION REQUIREMENTS
2.0. APPLICANT QUALIFICATIONS
2.1. CURRENT INCOME LIMITS
2.2. INCOME QUALIFICATION CRITERIA
2.3. DEFINITION OF AN ELIGIBLE HOMEBUYER
3.0. HOUSING UNIT ELIGIBILITY
3.1. LOCATION AND CHARACTERISTICS
3.2. CONDITIONS
3.3 ACQUISITION WITH REHABILITATION PROCESS
3.4. ANTI-DISPLACEMENT POLICY AND RELOCATION ASSISTANCE
3.5. PROPER NOTIFICATION AND DISCLOSURES
4.0 PURCHASE PRICE LIMITS
5.0 THE PRIMARY LOAN
5.1 QUALIFYING RATIOS
5.2 INTEREST RATE
5.3 LOAN TERM
5.4 IMPOUND ACCOUNT
6.0 THE PROGRAM LOAN
6.1 MAXIMUM AMOUNT OF PROGRAM ASSISTANCE
6.2 NON-RECURRING CLOSING COSTS
6.3 AFFORDABILITY PARAMETERS FOR HOMEBUYERS
6.4 RATES AND TERMS FOR PROGRAM LOANS
6.5 LOAN-TO-VALUE RATIO
7.0 PROGRAM LOAN REPAYMENT
7.1. PAYMENTS ARE VOLUNTARY
7.2. RECEIVING LOAN REPAYMENTS
7.3. DUE UPON SALE OR TRANSFER
7.4. LOAN SERVICING POLICIES AND PROCEDURES
7.5. LOAN MONITORING PROCEDURES
8.0. PROGRAM LOAN PROCESSING AND APPROVAL
8.1. COMPLETION OF UNDERWRITING AND APPROVAL OF PROGRAM LOAN
8.2. PRIMARY AND PROGRAM LOAN DOCUMENT SIGNING
8.3. ESCROW PROCEDURES
9.0 SUBORDINATE FINANCING
10.0 EXCEPTIONS AND SPECIAL CIRCUMSTANCES
10.1. DEFINITION OF EXCEPTION
10.2. PROCEDURES FOR EXCEPTIONAL CIRCUMSTANCES
11.0 DISPUTE RESOLUTION AND APPEALS PROCEDURE
City of Merced Homebuyer Program Guidelines Page 3
TABLE OF CONTENTS (CONTINUED)
ATTACHMENTS
ATTACHMENT A: 24 CFR PART 5 ANNUAL INCOME INCLUSIONS AND EXCLUSIONS ATTACHMENT B: ANNUAL INCOME NET FAMILY ASSET INCLUSIONS AND EXCLUSIONS ATTACHMENT C: MAXIMUM PURCHASE PRICE/AFTER-REHAB VALUE LIMITS; HOME PER UNIT SUBSIDY LIMITS; CURRENT INCOME LIMITS
ATTACHMENT D: LOAN SERVICING POLICIES AND PROCEDURES
ATTACHMENT E: SELLER'S LEAD-BASED PAINT DISCLOSURE
ATTACHMENT F: DISCLOSURE TO SELLER WITH VOLUNTARY, ARM'S-LENGTH
PURCHASE OFFER
ATTACHMENT G: INSTRUCTIONS TO HOMEBUYER
ATTACHMENT H: LEAD-BASED PAINT NOTICE OF PRESUMPTION AND HAZARD REDUCTION FORM
ATTACHMENT I: HOMEBUYER PROGRAM LEAD COMPLIANCE DOCUMENT CHECKLIST ATTACHMENT J: CONSTRUCTION PAYMENT REQUEST
City of Merced Homebuyer Program Guidelines Page 4
CITY OF MERCED
HOMEBUYER PROGRAM GUIDELINES
1.0. GENERAL
The above–named entity, hereinafter referred to as the “Sponsor,” has entered into a contractual relationship with the California Department of Housing and Community Development (“HCD”) to administer one or more HCD -funded homebuyer programs. The homebuyer program described herein (the “Program”) is designed to provide assistance to eligible homebuyers in purchasing homes, also referred to herein as “housing units”, located within the Program’s eligible area, as described in Section 3.1.A. The Program provides this assistance in the form of deferred payment “silent” second priority loans as “Gap” financing toward the purchase price and closing costs of affordable housing units that will be occupied by the homebuyers as their primary residence. The Program will be administered by Self-Help Enterprises, (the “Program Operator”).
1.1. PROGRAM OUTREACH AND MARKETING
All outreach efforts will be done in accordance with state and federal fair lending regulations to assure nondiscriminatory treatment, outreach and access to the Program. No person shall, on the grounds of age, ancestry, color, creed, physical or mental disability or handicap, marital or familial status, medical condition, national origin, race, religion, gender or sexual orientation be excluded, denied benefits or subjected to discrimination under the Program.
The Sponsor will ensure that all persons, including those qualified individuals with handicaps, have access to the Program.
A. The Fair Housing Lender and Accessibility logos will be placed on all outreach materials. Fair housing marketing actions will be based upon a characteristic analysis comparison (census data may be used) of the Program’s eligible area compared to the ethnicity of the population served by the Program (includes, separately, all applications given out and those receiving assistance) and an explanation of any underserved segments of the population. This information is used to show that protected classes (age, gender, ethnicity, race, and disability) are not being excluded from the Program. Flyers or other outreach materials, in English and any other language that is the primary language of a significant portion of the area residents, will be widely distributed in the Program -eligible area and will be provided to any local social service agencies. The Program may sponsor homebuyer seminars to help educate homebuyers about the home buying process and future responsibilities. Persons who have participated in local homebuyer seminars will be notified about the Program.
B. The Program Operator will work with local real estate agents and primary lenders to explain the Program requirements for eligible housing units and homebuyers, and to review Program processes. Local real estate agents and primary lenders will also be encouraged to have their customers participate in the Program.
C. Section 504 of the Rehabilitation Act of 1973 prohibits the exclusion of an otherwise qualified individual, solely by reason of disability, from participation under any program receiving Federal funds. The Program Sponsor will take appropriate steps City of Merced Homebuyer Program Guidelines Page 5
to ensure effective communication with disabled housing applicants, residents and members of the public.
1.2. APPLICATION PROCESS AND SELECTION
A. The Sponsor maintains a waiting list of applicants. When applicants are placed on the list, they are sent a Program Brochure and Instructions to Homebuyer (Attachment G) and directed to the Program Operator’s HUD- and CalHome- approved Homebuyer Counseling and Education Program. Each applicant must participate in the Homebuyer Counseling and Education Program and receive a certificate of completion to be eligible for the Sponsor’s Homebuyer Program.
B. Each applicant must participate in individual Housing Counseling as required by 24 CFR §92.254(a)(3) and 24 CFR §5.100 – 5.111, to be provided by a HUD- certified homebuyer counselor employed by an entity approved by HUD to provide housing counseling.
Housing counseling is independent, expert advice customized to the need of the consumer to address the consumer's housing barriers and to help achieve their housing goals, and must include the following processes: Intake; financial and housing affordability analysis; an action plan, except for reverse mortgage counseling; and a reasonable effort to have follow-up communication with the client when possible. The content and process of housing counseling must meet the standards outlined in 24 CFR part 214, which include:
• addressing unique financial circumstances or housing issues • focusing on ways of overcoming specific obstacles to achieving a housing goal such as repairing credit
• addressing a rental dispute, purchasing a home, locating cash for a down payment, and being informed of fair housing and fair lending requirements of the Fair Housing Act
• finding units accessible to persons with disabilities • avoiding foreclosure
• resolving a financial crisis
• except for reverse mortgage counseling, all counseling shall involve the creation of an action plan.
Acceptable forms of housing counseling include in-person, phone, and/or internet, as long as the client and counselor can have an individualized dialogue, with guidance and advice tailored to client’s needs. This includes creating a client budget, financial analysis, an action plan, and referrals to relevant resources such as down payment assistance programs or legal services
A copy of each borrowers’ certificate of completion must be placed into each homebuyer file maintained by the Program Operator.
C. Once the applicant’s name comes to the top of the waiting list, a phone interview is conducted to gather sufficient information concerning household size and composition, income, employment, and credit history to establish preliminary City of Merced Homebuyer Program Guidelines Page 6
eligibility for Program participation. The potential homebuyer is advised to interview and compare lenders to start the pre-qualification process for a primary loan. Potential homebuyers are advised that funds will be available on a first- come, first-served basis upon receipt of a complete application package and pre- qualification letter from the applicant’s primary lender.
D. The Program Operator will provide an income and asset form, submission, and lender cover letter to the potential homebuyer’s primary lender for completion. In addition to these documents, the primary lender must submit a complete application package and pre-qualification letter to the Program Operator on behalf of the applicant. Complete applications are processed on a first-come, first-served basis. Applications are deemed complete only if all information is completed the application is signed and dated, and a primary lender’s pre=qualification information is included. Incomplete applications are returned to the primary lender and will not be date/time stamped until complete.
E. Upon eligibility confirmation, the Program Operator will send both the potential homebuyer and primary lender the following documents: pre-qualification letter Program Brochure, Attachment (G) Instructions to Homebuyer, List of Participating Lenders, Attachment (E) Seller’s Lead-Based Paint Disclosure and the EPA Booklet (Protect Your Family from Lead in Your Home) and (F) Notice to Seller.
If the Program Operator encounters material discrepancies and/or misrepresentations, and/or there are income, asset, household composition, or other important questions that can't be resolved, the Sponsor reserves the right to deny assistance to the household. In this case, the applicant may re-apply after six months have elapsed from the time of written assistance denial.
F. The potential homebuyer is given 90 days in order to find a qualified home and begin securing a primary loan for the housing unit. If during the 90-day time frame, the potential homebuyer is unable to purchase a home, an extension may be given. However, if it appears the potential homebuyer cannot participate in the Program, the reservation of funds expires and the next person on the waiting list is given an opportunity to participate in the Program.
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DEBT SERVICE
FOR A FAMILY OF FOUR EARNING $3,388 PER MONTH
OTHER HOUSEHOLD DEBT SERVICE
Car Payment $ 150
Credit Card Payment 50
Total Other Debt $ 200
A $865 per month loan payment equates to borrowing $143,000 at 5.88% for a 30 year term.
SUBSIDY CALCULATION
FOR A FAMILY OF FOUR EARNING $3,388 PER MONTH
1.3. THE HOME PURCHASE PROCESS
A. The following is a simplified example of how a primary lender would analyze a homebuyer’s finances to determine how much the homebuyer could afford to borrow from the primary lender towards homeownership.
HOUSING PAYMENTS TOTAL OVERALL PAYMENTS
Principal & Interest Payment $ 865 $1,180 Housing
Insurance 82 +200 Other Debt Service
Taxes 233 $1,380 Total Debt Service
Total Housing Expense $1,180 (Overall debt service per month is 41% of $3,388) (PITI is 35% of $3,388)
Purchase Price of Property $ 280,000
Less Primary loan amount 143,000
Less down payment of 1% 2,800
Equals “GAP” $ 134,200
Plus estimated allowable settlement charges 8,400
Equals Total Subsidy $ 142,600
B. The housing unit selection process will be conducted by the homebuyers. Prior to making an offer to purchase an eligible housing unit (see Section 3.0), homebuyer shall provide seller with a disclosure containing the following provisions:
1) Homebuyer has no power of eminent domain and, therefore, will not acquire the property if negotiations fail to result in an amicable agreement; 2) Homebuyer’s offer is an estimate of the fair market value of the housing unit, to be finally determined by a state-licensed appraiser; City of Merced Homebuyer Program Guidelines Page 8
3) The housing unit will be subject to inspection. The housing unit must comply with local codes at the time of construction and local health and safety standards;
4) All housing units built prior to January 1, 1978, will require a lead paint disclosure to be signed by both the homebuyer and Seller (Attachment E); 5) Since the purchase would be voluntary, the seller would not be eligible for relocation payments or other relocation assistance;
6) The seller understands that the housing unit must be either: currently owner- occupied, newly constructed, or vacant for three months prior to submission of the purchase offer;
7) If the seller is not provided with a statement of the above six provisions prior to the purchase offer, the seller may withdraw from the agreement after this information is provided.
C. Applicant submits executed standard form purchase and sale agreement and primary lender prequalification letter to Program Operator. The purchase and sale agreement will be contingent on the household and housing unit meeting Program eligibility requirements and receiving Program loan approval. Program Operator verifies applicant eligibility, housing unit and loan eligibility and amount of assistance to be provided consistent with these guidelines.
D. Program Operator, where Program Operator is not the Sponsor, submits recommendation to the Sponsor for approval or denial, including the reasons for the recommendation. Sponsor determines Applicant’s approval or denial, and instructs Program Operator to notify Applicant. Program Operator provides written notification to Applicant of approval or denial with reason and, if denied, a copy of the Program’s appeal procedures.
E. When Primary Lender requirements are met, Program funds are deposited into escrow, with required closing instructions and loan documents.
F. At the time of escrow closing, the Sponsor shall be named as an additional loss payee on fire, flood (if required), and extended coverage insurance for the length of the loan and in an amount sufficient to cover all encumbrances or full replacement cost of the housing unit. A policy of Title Insurance naming the Sponsor as insured is also required.
1.4. HOMEBUYER COSTS
A. Eligible households must document that they have the funds necessary for down payment and closing costs as required by the Primary Lender and the Sponsor. The Program’s down payment requirement (below) is in place even if the Primary Lender has a lower down payment requirement. If the Primary Lender has a higher down payment requirement, there is no additional down payment requirement required by the Program.
B. Homebuyer must contribute a minimum down payment of one percent (1%) of the purchase price, but may contribute more if desired.
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C. Sponsor will not provide a subsidy that is greater than the amount of the primary mortgage. The subsidy will write down the cost of the primary lender’s loan so that the payments of principal, interest, taxes, insurance, and mortgage insurance and HOA dues, if any, are within approximately 25 to 35% of the gross monthly household income. The Program Operator will determine the level of subsidy and affordability during underwriting of the Program’s loan to make sure that it conforms to the requirements of the HCD funding Program.
1.5. HOMEBUYER EDUCATION
Buying a home can be one of the most confusing and complicated transactions anyone can make. Providing the future homebuyer with informative homebuyer education training can bring success to the Sponsor, Program Operator, the Program and most importantly, the homebuyer. It has been documented that first -time homebuyers that have had homebuyer counseling have the ability to handle problems that occur with homeownership.
All Program participants are required to receive housing counseling prior to Program approval, provided by a HUD-certified housing counselor who works for an organization certified by HUD to perform housing counseling. A list of such counseling entities can be accessed here:
https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?searchstate=CA&filterLng=&filterSvc=
&filterMultiState=&searchName=&searchCity=&searchZip=&searchService=PPC&searc hLang=&searchAffiliation=&webListAction=Search.
See Section 1.2.B. above for housing counseling requirements.
1.6. CONFLICT OF INTEREST REQUIREMENTS
When the Sponsor’s program contains Federal funds, the applicable Conflict of Interest requirements of 24 CFR Section 570.611 shall be followed for CDBG assistance, and for CalHome-funded programs, the applicable Conflict of Interest requirements of Public Contract Code sections 10410, 10411, and 10430 (e) shall be followed.. Section 92.356 of the HOME Final Rule shall be followed for HOME assistance, as follows:
(a) Conflicts prohibited. No persons described in paragraph (b) of this section who exercises or has exercised any functions or responsibilities with respect to activities assisted with HOME funds or who are in a position to participate in a decision making process or gain inside information with regard to these activities, may obtain a financial interest or benefit from a HOME-assisted activity, or have a financial interest in any contract, subcontract or agreement with respect to the HOME-assisted activity, or the proceeds from such activity, either for themselves or those with whom they have business or immediate family ties, during their tenure or for one year thereafter. Immediate family ties include (whether by blood, marriage or adoption) the spouse, parent (including stepparent), child (including stepchild), brother, sister (including a stepbrother or stepsister), grandparent, grandchild and in-laws of a covered person.
(b) Persons covered. The conflict of interest provisions of paragraph (a) of this section apply to any person who is an employee, agent, consultant, officer, or elected official or City of Merced Homebuyer Program Guidelines Page 10
appointed official of the participating jurisdiction, State recipient, or subrecipient which are receiving HOME funds.
(c) Exceptions: Threshold requirements. Upon the written request of the participating jurisdiction to HCD, HUD may grant an exception to the provisions of paragraph (a) of this section on a case-by-case basis when it determines that the exception will serve to further the purposes of the HOME Investment Partnerships Program and the effective and efficient administration of the participating jurisdiction's program or project. See 24 CFR
92.356(d)(1-6) for details on the documentation needed in order to submit an exception request to HUD.
A contractor with a vested interest in the property cannot bid on a rehabilitation project.
Such a contractor may act as owner/builder, subject to standard construction procedures.
Owner/builders are reimbursed for materials purchased which are verified by invoice/receipt and used on the project. Reimbursement occurs after the installation is verified by the Program Operator to be part of the scope of work. Owner/builders are not reimbursed for labor.
1.7. NON-DISCRIMINATION REQUIREMENTS
The Program will be implemented in ways consistent with the Sponsor’s commitment to non-discrimination. No person shall be excluded from participation in, denied the benefit of, or be subject to discrimination under any program or activity funded in whole or in part with State funds on the basis of his or her religion or religious affiliation, age, race, color, creed, gender, sexual orientation, marital status, familial status (children), physical or mental disability, national origin, or ancestry, or other arbitrary cause.
2.0 APPLICANT QUALIFICATIONS
2.1. CURRENT INCOME LIMITS FOR THE AREA, BY HOUSEHOLD SIZE All applicants must certify that they meet the household income eligibility requirements for the applicable HCD program(s) and have their household income documented. The income limits in place at the time of loan approval will apply when determining applicant income eligibility. All applicants must have incomes at or below 80% of the County’s area median income (AMI), adjusted for household size, as published by HCD. (See Attachment C for current income limits).
Household: Means one or more persons who will occupy a housing unit. Unborn children: count in family size determination. For CalHome, unborn children are not counted.
Annual Income: Generally, the gross amount of income of all adult household members that is anticipated to be received during the coming 12-month period.
2.2. INCOME QUALIFICATION CRITERIA
Projected annual gross income of the applicant household will be used to determine whether City of Merced Homebuyer Program Guidelines Page 11
they are above or below the published HCD income limits. Income qualification criteria, as shown in the most recent HCD program-specific guidance at http://www.hcd.ca.gov/grants-funding/income-limits/income-calculation-and- determination-guide.shtml, will be followed to independently determine and certify the household’s annual gross income. The Program Operator should compare this annual gross income to the income the Primary Lender used when qualifying the household. The Primary Lender is usually underwriting to FHA or conventional guidelines and may not calculate the household income or assets in the same way as required by the Program. Income will be verified by reviewing and documenting tax returns, copies of wage receipts, subsidy checks, bank statements and third-party verification of employment forms sent to employers. All documentation shall be dated within six months prior to loan closing and kept in the applicant file and held in strict confidence.
A. HOUSEHOLD INCOME DEFINITION:
Household income is the annual gross income of all adult household members that is projected to be received during the coming 12 -month period, and will be used to determine program eligibility. Refer to Income Inclusions and Exclusions for further guidance to the types of incomes to be included or excluded when calculating gross annual income. For those types of income counted, gross amounts (before any deductions have been taken) are used. Two types of income that are not considered would be income of minors and live -in aides. Certain other household members living apart from the household also require special consideration. The household’s projected ability to pay must be used, rather than past earnings, when calculating income.
See Attachment A: 24 CFR Part 5 Annual Income Inclusions and Exclusions
B. ASSETS:
There is no asset limitation for participation in the Program. Income from assets, however, is recognized as part of annual income under the Part 5 definition. An asset is a cash or non-cash item that can be converted to cash. The value of necessary items such as furniture and automobiles are not included. (Note: it is the income earned – e.g. interest on a savings account – not the asset value, which is counted in annual income.)
An asset’s cash value is the market value less reasonable expenses required to convert the asset to cash, including, for example, penalties or fees for converting financial holdings, and costs for selling real property. The cash value (rather than the market value) of an item is counted as an asset. For CalHome, the market value of an item is counted as an asset.
See Attachment B: Part 5 Annual Income Net Family Asset Inclusions and Exclusions
2.3. DEFINITION OF AN ELIGIBLE HOMEBUYER
For CDBG, an eligible homebuyer means an individual or individuals or an individual and his or her spouse who meets the income eligibility requirements and is/are not currently on City of Merced Homebuyer Program Guidelines Page 12
title to real property. Persons may be on title of a manufactured home unit, who are planning to sell the unit as part of buying a home located on real property. Documentation of homebuyer status will be required for all homebuyers.
HOME and CalHome -funded programs are required to use the following definition of an eligible homebuyer, which is a “first -time homebuyer” from 8201(m) Title 25 California Code of Regulations:
“First-time homebuyer” means an individual or individuals or an individual and his or her spouse who have not owned a home during the three -year period before the purchase of a home with subsidy assistance, except that the following individual or individuals may not be excluded from consideration as a first-time homebuyer under this definition:
1. a displaced homemaker who, while a homemaker, owned a home with his or her spouse or resided in a home owned by the spouse. A displaced homemaker is an adult who has not, within the preceding two years, worked on a full -time basis as a member of the labor force for a consecutive twelve- month period and who has been unemployed or underemployed, experienced difficulty in obtaining or upgrading employment and worked primarily without remuneration to care for his or her home and family;
2. a single parent who, while married, owned a home with his or her spouse or resided in a home owned by the spouse. A single parent is an individual who is unmarried or legally separated from a spouse and has one or more minor children for whom the individual has custody or joint custody or is pregnant; or
3. an individual or individuals who owns or owned, as a principal residence during the three -year period before the purchase of a home with assistance, a dwelling unit whose structure is:
a. not permanently affixed to a permanent foundation in accordance with local or state regulations; or
b. not in compliance with state, local, or model building codes and cannot be brought into compliance with such codes for less than the cost of constructing a permanent structure.
3.0. HOUSING UNIT ELIGIBILITY
3.1. LOCATION AND CHARACTERISTICS
A. Housing units to be purchased must be located within the eligible area. The eligible area is described as follows: “Within the City of Merced.”
B. Housing unit types eligible for the homebuyer Program are new or previously owned single-family residences; condominiums; or manufactured homes in mobilehome parks, in common-interest developments or on a single-family lot and placed on a City of Merced Homebuyer Program Guidelines Page 13
permanent foundation system. HOME does not allow manufactured homes unless on a permanent foundation system.
C. All housing units must be in compliance with State and local codes and ordinances.
D. Housing units located within a 100-year flood zone will be required to provide proof of flood insurance with an endorsement naming the Sponsor as loss payee in order to close escrow.
E. Housing must be “modest”, in accordance with the federal HOME regulations at 24 CFR Part 92.254(a)(2).
3.2. CONDITIONS
A. Construction Inspection and Determining Need for Repairs.
Once the participating homebuyer has executed a purchase agreement for a housing unit, and prior to a commitment of Program funds, the following steps must be taken for the housing unit to be eligible for purchase under the Program:
1) When the Sponsor’s Program utilizes Federal funds and if the housing unit was constructed prior to 1978 then the lead- based paint requirements of Section 3.2.C will apply.
2) The Program Operator, a certified housing inspector, or a Sponsor representative will walk through the housing unit, determine if it is structurally sound, and identify any code related and health and safety deficiencies that need to be corrected. A list of code related repair items will be given to the homebuyers and their Realtor to be negotiated with the seller. Only new construction and homes built within the previous 12 months and not previously occupied are not subject to a home inspection.
If there are one or more health and safety deficiencies, and/or violations of applicable building codes noted in the written report, the Sponsor will approve the subsidy only if:
a. Repair prior to close of escrow. The buyer and seller agree to make necessary repairs to the dwelling unit prior to transfer of property ownership at their own expense; or [
b. H
OME acquisition and rehabilitation loan. If HOME funds are available, the buyer may use some of the Sponsor’s First-Time Homebuyer loan and other funds to make necessary and other repairs, to a maximum of 100% combined loan-to-value, unless up to 105% based on the purchase transaction. All health and safety hazards and code violations must be addressed under this option. Examples of allowable expenses include, but are not limited to: foundation repair, electrical repair or rewiring, plumbing or sewer repair, roof repair or replacement, heating and cooling City of Merced Homebuyer Program Guidelines Page 14
system installation or repair, water damage repair, and repair of structurally-significant damaged wood. Weatherization, energy-related improvements and General Property Improvements are allowable, but General Property Improvements are limited under the HOME Program to a maximum of 15% of the overall rehabilitation cost. Buyers should note that the use of any Program funds for rehabilitation on a home built before 1978 may incur additional lead-based paint testing. Hiring of a contractor and completion of repairs will be conducted in accordance with the section entitled “Acquisition with Rehabilitation Process” below.
3) With the exception of 1)b. above, upon completion of all work required by the Program Operator, Sponsor, appraiser, pest inspector and/or certified housing inspector, a final inspection will be conducted prior to close of escrow. The inspector will sign off on all required construction work assuring that each housing unit receiving Program assistance is in compliance with local codes and health and safety requirements at the time of purchase and prior to occupancy.
B. Per Section 8208 of the State HOME regulations, no additional HOME assistance, including rehabilitation funds, may be provided during the period starting one year following the filing of the Project Completion Report through the end of the Affordability Period.
The HOME Affordability Period is as follows (amount does not include Activity Delivery Costs paid to the State Recipient by HCD):
Amount of HOME Assistance Period of Affordability in Years Under $15,000 5 years
$15,000 to $40,000 10 years
Over $40,000 15 years
C. Lead-Based Paint Hazards: All housing units built prior to 1978 for which HOME or CDBG funding is anticipated are subject to the requirements of this section 3.2.C.
Such homes must undergo a visual assessment by a person who has taken HUD’s online Visual Assessment course. Deteriorated paint must be stabilized using work safe methods. Clearance must be obtained after paint stabilization by a DHS certified LBP Risk Assessor/Inspector. HOME and CDBG general administrative and activity delivery funds may be used to pay for lead-based paint visual assessments, and if lead mitigation and clearance costs are incurred, these programs may incorporate the costs into the calculation of Program assistance.
The following requirements must be met:
1) Notification: a) Prior to homebuyer’s obligation to purchase a pre-1978 home, the Buyer will be given the most recent copy of and asked to read the EPA pamphlet “Protect Your Family From Lead in Your Home”. (EPA 747-K-94-001). A signed receipt of the pamphlet will be kept in the Sponsor’s homebuyer file; b) A notice to residents is required following a risk assessment/inspection using form DHS 8552, which is provided by the DHS-certified Risk Assessor/Inspector; c) a notice to City of Merced Homebuyer Program Guidelines Page 15
residents is required following lead- based paint mitigation work using Visual Assessment and Lead -based Paint Notice of Presumption and Hazard Reduction form, LBP – 1 (Attachment H).
2) Disclosure: Prior to the homebuyer’s obligation to purchase a pre -1978 housing unit, the HUD disclosure (Attachment E), “Seller’s Lead -based Paint Disclosure” notice must be provided by the seller to the homebuyer. 3) Inspections: The Inspector shall conduct a “Visual Assessment” of all the dwelling unit’s painted surfaces in order to identify deteriorated paint. All deteriorated paint will be stabilized in accordance with CFR 35.1330 (a) and (b); and a Clearance shall be made in accordance with CFR 35.1340.
4) Mitigation: If stabilization is required, the contractor performing the mitigation work must use appropriately trained workers. Prior to the contractor starting mitigation work the Program Operator shall obtain copies of the contractor’s and workers’ appropriate proof of LBP training, as applicable to the job in order to assure that only qualified contractors and workers are allowed to perform the mitigation.
The Program Operator will: 1) confirm that the housing unit is within the eligible area, 2) will review each proposed housing unit to ensure that it meets all eligibility criteria before funding, and 3) ensure a completed Lead Compliance Document Checklist is placed in each purchaser’s file (see Attachment I).
3.4. ANTI-DISPLACEMENT POLICY AND RELOCATION ASSISTANCE
Eligible homes will be those that are currently owner-occupied or have been vacant for three months prior to the acceptance of a contract to purchase. A unit is ineligible if its purchase would result in the displacement of a tenant. It is not anticipated that the implementation of the Program will result in the displacement of any persons, households, or families.
However, if tenant -occupied homes are included in the Program and relocation becomes necessary, the activity will be carri ed out in compliance with Sponsor’s relocation plan, which describes how those permanently displaced will be relocated and paid benefits in accordance with the following Federal laws.
A. Uniform Relocation Assistance (URA) and Real Property Acquisition Policies Act of 1970
The federal URA and Real Property Acquisition Policies, as amended by the URA Amendments of 1987, contains requirements for carrying out real property acquisition or the displacement of a person, regardless of income status, for a project or program for which HUD financial assistance (including CDBG and HOME) is provided. Requirements governing real property acquisition are described in Chapter VIII. The implementing regulations, 49 CFR Part 24, require developers and owners to take certain steps in regard to tenants of housing to be acquired, rehabbed or demolished, including tenants who will not be relocated even temporarily.
City of Merced Homebuyer Program Guidelines Page 16
B. Section104(d) of the Housing and Community Development Act of 1974
Section 104(d) requires each contractor (CHDO or State Recipient), as a condition of receiving assistance under HOME or CDBG, to certify that it is following a residential anti-displacement plan and relocation assistance plan. Section 104(d) also requires relocation benefits to be provided to low -income persons who are physically displaced or economically displaced as the result of a HOME or CDBG assisted project, and requires the replacement of low -income housing, which is demolished or converted. The implementing regulations for Section 104(d) can be found in 24 CFR Part 570(a).
3.5. PROPER NOTIFICATION AND DISCLOSURES
A. Upon selection of a housing unit, a qualified seller and homebuyer will be given the necessary disclosures for the Program. The homebuyer must have read and signed all Program disclosure forms. Any and all property disclosures must be reviewed and signed by the homebuyer and seller.
B. All owners who wish to sell their housing units must receive an acquisition notice (Attachment F) prior to submission of the homebuyer’s original offer. This notice will be included in the contract and must be signed by all owners on title. The disclosure must contain the items listed in 1.3.B. (required for federally-funded programs).
4.0 PURCHASE PRICE LIMITS
For HOME, the purchase price limits for this Program shall not exceed the HOME Homeownership Value Limit for Sponsor’s County as updated by HCD.
Note: For CalHome-funded loans, the home purchase price is limited as follows: The purchase price cannot exceed 100% of the area median purchase price as established by comparable sales or information provided by the California Real Estate Association at https://www.car.org/en/marketdata/data/countysalesactivity
Attachment C: HOME HOMEOWNERSHIP VALUE LIMIT *Sponsor will update these limits annually as HCD provides new information.
5.0 THE PRIMARY LOAN
Prior to obtaining a loan from the Sponsor, a homebuyer must provide evidence of approval for the maximum amount the Primary Lender is willing to loan (the “primary loan”), which is limited by the maximum debt-to-income ratio identified herein.
5.1 QUALIFYING RATIOS
The front-end (housing) debt -to-income ratio shall be between 25% and 35% and is the percentage of a borrower’s gross monthly income (before deductions) that would cover the cost of the loan principal and interest payment, property taxes, property insurance, mortgage City of Merced Homebuyer Program Guidelines Page 17
insurance, and HOA dues, if any.
The back -end (total) debt- to-income ratio shall be between 28% and 42% and is the percentage of a borrower’s gross monthly income that would cover the cost of housing as described in the paragraph above, plus any other monthly debt payments like car or personal loans and credit card debt, as well as child support and alimony payments.
Note: Qualifying ratio guidelines can be somewhat flexible depending on the loan-to- value ratios. The higher the LTV, the more conservative the ratios should be. A qualifying ratio higher than the guidelines may be acceptable if there are compensating factors. Some examples of compensating factors are: 1) the prospective homebuyer has successfully demonstrated that over a minimum 12-month period the ability to pay housing costs equal to or greater than the proposed monthly housing costs for the home to be purchased; 2) the prospective homebuyer is a limited user of credit and they show a history of being able to save money; 3) there will be no more than a 5% increase in the prospective homebuyer’s housing expense. These exceptions will be approved by the Sponsor’s loan committee and documented for the file.
5.2 INTEREST RATE
As is required by the HOME NOFA, the primary loan must have a fixed interest rate that does not exceed, by greater than one percent, the FNMA 90-day rate, found at:
https://singlefamily.fanniemae.com/pricing-execution/historical-daily-required-net-yields.
The applicable FNMA rate should be from the date the primary mortgage rate was locked, or else the date of HOME loan approval. No temporary interest rate buy- downs are permitted.
5.3 LOAN TYPE AND TERM
The primary loan shall be fully amortized and have a term “all due and payable” in no fewer than 30 years. There shall not be a balloon payment due before the maturity date of the Program loan.
5.4 IMPOUND ACCOUNT
All households will be required to have impound accounts for the payment of taxes and insurance to ensure they remain current.
6.0 THE PROGRAM LOAN
6.1. MAXIMUM AMOUNT OF PROGRAM ASSISTANCE
For HOME, the amount of Program assistance to a homebuyer toward purchase of a home shall not exceed the maximum HOME subsidy limit for Sponsor’s County per bedroom per the HCD website at http://www.hcd.ca.gov/grants-funding/income-limits/state-and-federal-
income-limits.shtml and shall never exceed the amount of the primary mortgage, City of Merced Homebuyer Program Guidelines Page 18
without prior HCD programmatic approval . See Attachment C of these Program Guidelines for current limits. Any approved “grant” amount for lead-based paint evaluation and reduction activities or for relocation assistance shall be included in this amount, as shall Activity Delivery Costs.
6.2 NON-RECURRING CLOSING COSTS
Non-recurring costs such as credit report, escrow, closing and recording fees, and title report and title insurance, title updates and/or related costs may be included in the Program loan.
6.3 AFFORDABILITY PARAMETERS FOR HOMEBUYERS
The actual amount of a buyer’s Program subsidy shall be computed according to the housing ratio parameters specified in Section 5.0.A.. Each borrower shall receive only the subsidy needed to allow them to become homeowners (“the Gap”) while keeping their housing costs affordable. The Program Operator will use the “front -end ratio” of housing-expense- to- income to determine if the amount of the proposed primary loan is acceptable and, ultimately, the Program subsidy amount required, bridging the gap between the acquisition cost (purchase price plus closing costs) less down payment, and the amount of the primary loan.
6.4 RATE AND TERMS FOR PROGRAM LOAN
All Program assistance to individual households shall be made in the form of deferred payment (interest and principal) loan (DPL).
For HOME and CDBG, the Program loan’s term shall be for 30 years. For CalHome, the Program loan’s term shall be for 30 years. The interest rate shall be 0% simple interest.
Note – If it is determined by the Sponsor that repayment of a CalHome Program loan at the maturity date causes a hardship to the homeowner, the Sponsor may opt the following:
1. Amend the note and deed of trust to defer repayment of the amount due at maturity, that is balance of the original principal plus the accrued interest, for up to an additional 30 years (at 0% additional interest). This may be offered one time, or;
2. Convert the debt at loan maturity; that is the balance of the original principal plus any accrued interest, to an amortized loan, repayable in 15 years at 0% additional interest.
All Program loan payments shall be deferred because the borrowers will have their repayment ability fully utilized under the primary loan. Loan principal shall not be forgiven, and the loan period cannot be extended, except for loans that are resubordinated when a rate and term refinance is approved, per Attachment D.
6.5 COMBINED LOAN-TO-VALUE RATIO
For CalHome, the loan-to-value ratio for a Program loan, when combined with all other City of Merced Homebuyer Program Guidelines Page 19
indebtedness to be secured by the property, shall not exceed 100 percent of the sales price, plus a maximum of up to 5 percent of the sales price, to cover actual, non-recurring closing costs.
For HOME and CDBG, the loan-to-value ratio for a Program loan, when combined with all other indebtedness to be secured by the property, shall not exceed 100 percent of the sales price plus a maximum of up to 5 percent of the sales price to cover actual closing costs.
7.0 PROGRAM LOAN REPAYMENT
7.1. PAYMENTS ARE VOLUNTARY
Borrowers may begin making voluntary payments at any time, without penalty.
7.2. RECEIVING LOAN PAYMENTS
A. Program loan payments will be made to:
City of Merced
678 W. 18th Street
Merced, CA 95340
B. The Sponsor will be the receiver of loan payments or recaptured funds and will maintain a financial record -keeping system to record payments and file statements on payment status. Payments shall be deposited and accounted for in the Sponsor’s Program Income Account, as required by HCD programs. The Program lender will accept loan payments from borrowers prepaying deferred loans, and from borrowers making payments in full upon sale or transfer of the property. All loan payments are payable to the Sponsor. The Sponsor may at its discretion, enter into an agreement with a third party to collect and distribute payments and/or complete all loan servicing aspects of the Program.
7.3. DUE UPON SALE OR TRANSFER
In the event that an owner sells, transfers title, or discontinues residence in the purchased property for any reason, the principal balance of the DPL is due and payable, except:
A. For CalHome, loans are not assumable. The following transfers of interest shall not require the repayment of the CalHome Program loan:
1) transfer to a surviving joint tenant by devise, descent, or operation of law on the death of a joint tenant;
2) a transfer, in which the transferee is a person who occupies or will occupy the property, which is:
a. a transfer where the spouse becomes an owner of the property; City of Merced Homebuyer Program Guidelines Page 20
b. a transfer resulting from a decree of dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement by which the spouse becomes an owner of the property; or c. a transfer into an inter vivos trust in which the borrower is and remains the beneficiary and occupant of the property.
B. For HOME and CDBG, if the owner of the property dies, and the heir to the property meets income requirements, the First-Time Homebuyer definition, and intends to occupy the home as a principal residence, the heir may be permitted, upon approval of the Sponsor, to assume the loan at the rate and terms the heir qualifies for under the current participation guidelines. If the property owner dies and the heir does not meet eligibility requirements, the loan is due and payable.
C. If an owner wants to convert the property to a rental unit, or any commercial or non-residential use, the loan is due and payable.
D. The loan will be in default if the borrower fails to maintain required fire or flood insurance or fails to pay property taxes. See Attachment D on loan defaults for further information on property restrictions.
7.4. LOAN SERVICING POLICIES AND PROCEDURES
See Attachment D for local loan servicing policies and procedures. While the attached policy outlines a system that can accommodate a crisis that restricts borrower repayment ability, it should in no way be misunderstood: The loan must be repaid. All legal means to ensure the repayment of a delinquent loan as outlined in the Loan Servicing Policies and Procedures will be pursued.
7.5. LOAN MONITORING PROCEDURES
Sponsor will monitor Borrowers and their housing units annually to ensure adherence to Program requirements including, but not limited to, the following:
A. Owner-occupancy
B. Property tax payment
C. Hazard insurance coverage
D. Good standing on Primary loans
E. General upkeep of housing units
8.0 PROGRAM LOAN PROCESSING AND APPROVAL
A. Loan Processing
All homebuyers or their representatives will be sent out an eligibility packet with all the necessary forms, disclosures, information, and application. They should submit a complete application packet with all the Sponsor’s Program loan documents executed as well as all the information from the Primary Lender. The Primary City of Merced Homebuyer Program Guidelines Page 21
Lender should submit: 1) accepted property sales contract with proper seller notification; 2) mortgage application with good faith estimates and first mortgage disclosures; 3) full mortgage credit report and rent verification; 4) current third-party income verifications and verifications of assets; 5) homeownership education certificate, if applicable; and 6) signed underwriting transmittal summary and final signed loan application, both from primary lender. Staff will work with local lenders to ensure qualified participants receive only the benefit from the Sponsor’s Program needed to purchase the housing unit and that leveraged funds will be used when possible.
B. Creditworthiness
Qualifying ratios are only a rough guideline in determining a potential borrower’s creditworthiness. Many factors such as excellent or poor credit history, amount of down payment, and size of loan will influence the decision to approve or disapprove a particular loan. The borrower’s credit history will be reviewed by the Sponsor and documentation of such maintained in the loan file. The Sponsor may elect to obtain a credit report or rely on a current copy obtained by the primary lender.
C. Documents from Primary Lender
After initial review of the qualified homebuyer's application packet, the Program Operator will request any additional documents needed. Documents may be faxed, but originals shall be received through the mail before Program funds are committed to escrow. Based on receipt and review of the final documents, the Program Operator will do an income certification (using most recent HCD program’s guidance on income calculation and determination), and homebuyer certification (review of credit report and income taxes). Documentation of affordability will then be verified, and the subsidy requirement determined.
D. Disclosure of Program and Loan Information to Homebuyers The Program’s application and disclosure forms will contain a summary of the loan qualifications of the borrower with and without Program assistance. Housing ratios with and without Program assistance are also outlined in these guidelines.
Information on the Program’s application will be documented with third- party verifications in the file. For example, the sales contract will provide the final purchase price and outline how much of the closing costs are to be paid by the seller, etc. The appraisal, termite and title report will provide information to substantiate the information in the sales contract and guide the construction inspection. The Program loan application will provide current debt and housing information and will be documented by the credit report and income/asset verifications. The Primary Lender’s approval letter and estimated closing cost statement should reflect all the information in the loan package and show any contingencies of loan funding.
Reviewing t he Primary Lender’s loan underwriting documentation will provide basic information about the qualification of the applicant and substantiate the affordability provided by the Program loan. By reviewing and crosschecking all the Primary Lender information, the final Program loan amount approved will fall City of Merced Homebuyer Program Guidelines Page 22
within the affordability parameters of the Program.
8.1. COMPLETION OF UNDERWRITING AND APPROVAL OF PROGRAM LOAN
Once the loan approval package has been completed the Program Operator will submit it to the Sponsor for approval. Sponsor will review the request and may approve it with or without conditions. Upon approval, a final closing date for escrow is set and Program funds are accessed for the homebuyer.
8.2. PRIMARY AND PROGRAM LOAN DOCUMENT SIGNING
The homebuyer(s) sign promissory notes, loan agreements, deeds of trust, and statutory lending notices (Truth In Lending (TIL), etc.); the Deeds of Trust are recorded with the County Clerk/Recorder at the same time, and the request(s) for copy of Notice of Default are also recorded with the County Clerk/Recorder.
8.3. ESCROW PROCEDURES
The escrow/title company shall review the escrow instruction provided by the Program lender and shall issue a California Land Title Association (CLTA) and the American Land Title Association (ALTA) after closing. The CLTA policy is issued to the homebuyer and protects them against failure of title based on public records and against such unrecorded risks as forgery of a deed. The ALTA is issued to each lender providing additional coverage for the physical aspects of the property as well as the homebuyer’s title failure. These aspects include anything which can be determined by only physical inspection, such as correct survey lines; encroachments; mechanics liens; mining claims and water rights. The Program lender instructs the escrow/title company in the escrow instructions as to what may show on the policy; the amount of insurance on the policy (all liens should be covered) and the loss payee (each lender should be listed as a loss payee and receive an original ALTA).
9.0 SUBORDINATE FINANCING
Subordinate loans may be used to cover mortgage subsidy costs that exceed the Program maximum loan amount. All subordinate liens must have the payments deferred and the term must be for at least as long as the term of the Program loan.
10.0 EXCEPTIONS AND SPECIAL CIRCUMSTANCES
The Sponsor may make amendments to these Participation Guidelines. Any changes shall be made in accordance with regulations and approved by the Sponsor’s HOME Program Representative or Program Manager. If internally required, the Sponsor’s Loan Committee and/or governing body would then need to approve said changes.
10.1. DEFINITION OF EXCEPTION
Any case to which a standard policy or procedure, as stated in the guidelines, does not apply City of Merced Homebuyer Program Guidelines Page 23
or an applicant treated differently from others of the same class would be an exception.
10.2. PROCEDURES FOR EXCEPTIONAL CIRCUMSTANCES
A. The Sponsor or its agent may initiate consideration of an exception and prepare a report.
This report shall contain a narrative, including the Sponsor's recommended course of action and any written or verbal information supplied by the applicant.
B. The Sponsor shall make a determination of the exception based on the recommendation of the Program Operator. The request can be presented to the Sponsor’s loan committee and/or governing body for a decision.
11.0 DISPUTE RESOLUTION AND APPEALS PROCEDURE
Any applicant denied assistance from the Program has the right to appeal. Complaints concerning the Program should be made to the Program Operator first. If unresolved in this manner, the complaint or appeal must be made in writing and filed with the Sponsor. The Sponsor will then schedule a meeting with the Loan Review Committee. Their written response will be made within thirty (30) working days. If the applicant is not satisfied with the Committee's decision, a request for an appeal may be filed with the Sponsor’s governing body. Final appeal must be filed in writing with HCD within one year after denial.
City of Merced Homebuyer Program Guidelines Page 24
ATTACHMENT A
24 CFR Part 5 ANNUAL INCOME INCLUSIONS AND EXCLUSIONS
24 CFR Part 5 Annual Income Inclusions
§5.609 Annual income.
(a) Annual income means all amounts, monetary or not, which:
(1) Go to, or on behalf of, the family head or spouse (even if temporarily absent) or to any other family member; or
(2) Are anticipated to be received from a source outside the family during the 12-month period following admission or annual reexamination effective date; and (3) Which are not specifically excluded in paragraph (c) of this section. (4) Annual income also means amounts derived (during the 12-month period) from assets to which any member of the family has access.
(b) Annual income includes, but is not limited to:
(1) The full amount, before any payroll deductions, of wages and salaries, overtime pay, commissions, fees, tips and bonuses, and other compensation for personal services; (2) The net income from the operation of a business or profession. Expenditures for business expansion or amortization of capital indebtedness shall not be used as deductions in determining net income. An allowance for depreciation of assets used in a business or profession may be deducted, based on straight line depreciation, as provided in Internal Revenue Service regulations. Any withdrawal of cash or assets from the operation of a business or profession will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested in the operation by the family;
(3) Interest, dividends, and other net income of any kind from real or personal property.
Expenditures for amortization of capital indebtedness shall not be used as deductions in determining net income. An allowance for depreciation is permitted only as author ized in paragraph (b)(2) of this section. Any withdrawal of cash or assets from an investment will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested by the family. Where the family has net family assets in excess of $5,000, annual income shall include the greater of the actual income derived from all net family assets or a percentage of the value of such assets based on the current passbook savings rate, as determined by HUD; (4) The full amount of periodic amounts received from Social Security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts, including a lump-sum amount or prospective monthly amounts for the delayed start of a periodic amount (except as provided in paragraph (c)(14) of this section); (5) Payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay (except as provided in paragraph (c)(3) of this section); City of Merced Homebuyer Program Guidelines Page 25
(6) Welfare assistance payments.
(i) Welfare assistance payments made under the Temporary Assistance for Needy Families (TANF) program are included in annual income only to the extent such payments:
(A) Qualify as assistance under the TANF program definition at 45 CFR 260.31; and
(B) Are not otherwise excluded under paragraph (c) of this section. (ii) If the welfare assistance payment includes an amount specifically designated for shelter and utilities that is subject to adjustment by the welfare assistance agency in accordance with the actual cost of shelter and utilities, the amount of welfare assistance income to be included as income shall consist of:
(A) The amount of the allowance or grant exclusive of the amount specifically designated for shelter or utilities; plus
(B) The maximum amount that the welfare assistance agency could in fact allow the family for shelter and utilities. If the family's welfare assistance is ratably reduced from the standard of need by applying a percentage, the amount calculated under this paragraph shall be the amount resulting from one application of the percentage.
(7) Periodic and determinable allowances, such as alimony and child support payments, and regular contributions or gifts received from organizations or from persons not residing in the dwelling;
(8) All regular pay, special pay and allowances of a member of the Armed Forces (except as provided in paragraph (c)(7) of this section).
(9) For section 8 programs only and as provided in 24 CFR 5.612, any financial assistance, in excess of amounts received for tuition and any other required fees and charges, that an individual receives under the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), from private sources, or from an institution of higher education (as defined under the Higher Education Act of 1965 (20 U.S.C. 1002)), shall be considered income to that individual, except that financial assistance described in this paragraph is not considered annual income for persons over the age of 23 with dependent children. For purposes of this paragraph, “financial assistance” does not include loan proceeds for the purpose of determining income.
24 CFR Part 5 Annual Income Exclusions
(c) Annual income does not include the following:
(1) Income from employment of children (including foster children) under the age of 18 years; (2) Payments received for the care of foster children or foster adults (usually persons with disabilities, unrelated to the tenant family, who are unable to live alone); (3) Lump-sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker's compensation), capital gains and settlement for personal or property losses (except as provided in paragraph (b)(5) of this section); (4) Amounts received by the family that are specifically for, or in reimbursement of, the cost of medical expenses for any family member;
(5) Income of a live-in aide, as defined in §5.403;
City of Merced Homebuyer Program Guidelines Page 26
(6) Subject to paragraph (b)(9) of this section, the full amount of student financial assistance paid directly to the student or to the educational institution; (7) The special pay to a family member serving in the Armed Forces who is exposed to hostile fire; (8) (i) Amounts received under training programs funded by HUD; (ii) Amounts received by a person with a disability that are disregarded for a limited time for purposes of Supplemental Security Income eligibility and benefits because they are set aside for use under a Plan to Attain Self-Sufficiency (PASS); (iii) Amounts received by a participant in other publicly assisted programs which are specifically for or in reimbursement of out-of-pocket expenses incurred (special equipment, clothing, transportation, child care, etc.) and which are made solely to allow participation in a specific program;
(iv) Amounts received under a resident service stipend. A resident service stipend is a modest amount (not to exceed $200 per month) received by a resident for performing a service for the PHA or owner, on a part-time basis, that enhances the quality of life in the development. Such services may include, but are not limited to, fire patrol, hall monitoring, lawn maintenance, resident initiatives coordination, and serving as a member of the PHA's governing board. No resident may receive more than one such stipend during the same period of time;
(v) Incremental earnings and benefits resulting to any family member from participation in qualifying State or local employment training programs (including training programs not affiliated with a local government) and training of a family member as resident management staff. Amounts excluded by this provision must be received under employment training programs with clearly defined goals and objectives, and are excluded only for the period during which the family member participates in the employment training program;
(9) Temporary, nonrecurring or sporadic income (including gifts); (10) Reparation payments paid by a foreign government pursuant to claims filed under the laws of that government by persons who were persecuted during the Nazi era; (11) Earnings in excess of $480 for each full-time student 18 years old or older (excluding the head of household and spouse);
(12) Adoption assistance payments in excess of $480 per adopted child; (13) [Reserved]
(14) Deferred periodic amounts from supplemental security income and Social Security benefits that are received in a lump sum amount or in prospective monthly amounts, or any deferred Department of Veterans Affairs disability benefits that are received in a lump sum amount or in prospective monthly amounts.
(15) Amounts received by the family in the form of refunds or rebates under State or local law for property taxes paid on the dwelling unit;
(16) Amounts paid by a State agency to a family with a member who has a developmental disability and is living at home to offset the cost of services and equipment needed to keep the developmentally disabled family member at home; or
(17) Amounts specifically excluded by any other Federal statute from consideration as income for purposes of determining eligibility or benefits under a category of assistance programs that includes assistance under any program to which the exclusions set forth in 24 CFR 5.609(c) apply.
A notice will be published in the FEDERAL REGISTER and distributed to PHAs and housing owners City of Merced Homebuyer Program Guidelines Page 27
identifying the benefits that qualify for this exclusion. Updates will be published and distributed when necessary. [See https://www.federalregister.gov/documents/2014/05/20/2014- 11688/federally-mandated-exclusions-from-income-updated-listing for most recent notice] (d) Annualization of income. If it is not feasible to anticipate a level of income over a 12-month period (e.g., seasonal or cyclic income), or the PHA believes that past income is the best available indicator of expected future income, the PHA may annualize the income anticipated for a shorter period, subject to a redetermination at the end of the shorter period.
ATTACHMENT A-1
Title 25 Section 6914 Gross Income Inclusions – For CalHome activities “Gross income” shall mean the anticipated income of a person or family for the twelve-month period following the date of determination of income.
“Income” shall consist of the following:
(a) Except as provided in subdivision (b), “Exclusions”, all payments from all sources received by the family head (even if temporarily absent) and each additional member of the family household who is not a minor shall be included in the annual income of a family. Income shall include, but not be limited to:
(1) The gross amount, before any payroll deductions, of wages and salaries, overtime pay, commissions, fees, tips and bonuses;
(2) The net income from operation of a business or profession or from rental or real or personal property (for this purpose, expenditures for business expansion or amortization of capital indebtedness shall not be deducted to determine the net income from a business);
(3) Interest and dividends;
(4) The full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts;
(5) Payments in lieu of earnings, such as unemployment and disability compensation, worker’s compensation and severance pay;
(6) Public Assistance. If the public assistance payment includes any amount specifically designated for shelter and utilities which is subject to adjustment by the public assistance agency in accordance with the actual cost of shelter and utilities, the amount of public assistance income to be included as income shall consist of:
(A) The amount of the allowance or grant exclusive of the amount specifically designated for shelter and utilities, plus
(B) The maximum amount which the public assistance agency could in fact allow for the family for shelter and utilities,
City of Merced Homebuyer Program Guidelines Page 28
(7) Periodic and determinable allowances such as alimony and child support payments, and regular contributions or gifts from persons not residing in the dwelling; All regular pay, special pay and allowances of a member of the Armed Forces (whether or not o is head of the family or spouse.
Title 25 Section 6914 Gross Income Exclusions
(b) The following items shall not be considered as income:
(1) Casual, sporadic or irregular gift items;
(2) Amounts which are specifically for or in reimbursement of the cost of medical expenses;
(3) Lump-sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker’s compensation), capital gains and settlement for personal or property losses;
(4) Amounts of educational scholarships paid directly to the student or to the educational institution, and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books and equipment. Any amounts of such scholarships, or payments to veterans not used for the above purposes of which are available for subsistence are to be included in income;
(5) The special pay to a serviceman head of a family away from home and exposed to hostile fire;
(6) Relocation payments made pursuant to federal, state, or local relocation law;
(7) Foster child care payments;
(8) The value of coupon allotments for the purchase of food pursuant to the Food Stamp Act of 1964 which is an excess of the amount actually charged the eligible household;
(9) Payments received pursuant to participation of the following volunteer programs under the ACTION Agency:
(A) National Volunteer Antipoverty Programs which include VISTA, Service Learning Programs and Special Volunteer Programs.
(B) National Older American Volunteer Program for persons aged 60 and over which include Retired Senior Volunteer Programs, Foster Grandparent Program, older American Community Services Program, and National Volunteer Program to Assist Small Business Experience, Service Corps of Retired Executive (SCORE) and Active Corps of Executives (ACE).
HCD Version 06/2021
City of Merced Homebuyer Program Guidelines Page 30
ATTACHMENT B
PART 5 ANNUAL INCOME NET FAMILY ASSET INCLUSIONS AND EXCLUSIONS This table presents the 24 CFR Part 5 asset inclusions and exclusions as stated in the HUD Technical Guide for Determining Income and Allowances for HOME Program (Third Edition; January 2005).
Inclusions
1. Cash held in savings accounts, checking accounts, safe deposit boxes, homes, etc. For savings accounts, use the current balance.
For checking accounts, use the average 6-month balance. Assets held in foreign countries are considered assets.
2. Cash value of revocable trusts available to the applicant.
3. Equity in rental property or other capital investments. Equity is the estimated current market value of the asset less the unpaid balance on all loans secured by the asset and all reasonable costs (e.g., broker fees) that would be incurred in selling the asset.
Under HOME, equity in the family's primary residence is not considered in the calculation of assets for owner-occupied rehabilitation projects.
4. Cash value of stocks, bonds, Treasury bills, certificates of deposit and money market accounts.
5. Individual retirement, 401(K), and Keogh accounts (even though withdrawal would result in a penalty).
6. Retirement and pension funds.
7. Cash value of life insurance policies available to the individual before death (e.g., surrender value of a whole life or universal life policy).
8. Personal property held as an investment such as gems, jewelry, coin collections, antique cars, etc.
9. Lump sum or one-time receipts, such as inheritances, capital gains, lottery winnings, victim's restitution, insurance settlements and other amounts not intended as periodic payments.
10. Mortgages or deeds of trust held by an applicant.
Exclusions
1. Necessary personal property, except as noted in number 8 of Inclusions, such as clothing, furniture, cars and vehicles specially equipped for persons with disabilities.
2. Interest in Indian trust lands.
3. Assets not effectively owned by the applicant. That is, when assets are held in an individual's name, but the assets and any income they earn accrue to the benefit of someone else who is not a member of the household and that other person is responsible for income taxes incurred on income generated by the asset.
4. Equity in cooperatives in which the family lives.
5. Assets not accessible to and that provide no income for the applicant.
6. Term life insurance policies (i.e., where there is no cash value).
7. Assets that are part of an active business. "Business" does not include rental of properties that are held as an investment and not a main occupation.
City of Merced Homebuyer Program Guidelines Page 31
ATTACHMENT C
HOME HOMEOWNERSHIP VALUE LIMITS FOR MERCED COUNTY
(Limits became effective 6/1/2022)
EXISTING
CONSTRUCTION
NEW
CONSTRUCTION (less
than 12 months old)
$321,000 $321,000
For CalHome the purchase price is limited as follows: The purchase price cannot exceed 100% of the area median purchase price as established by comparable sales or information provided by the California Real Estate Association which can be found at the following link https://www.car.org/en/marketdata/data/countysalesactivity
CALHOME MAXIMUM SUBSIDY LIMIT
Maximum assistance is identified in the most current NOFA. The Current CalHome Program loan maximum for Homebuyer Assistance is 40% of the purchase price not to exceed $200,000.
For Mortgage Assistance provided as part of a Homeownership Project Development Loan, the maximum Loan amount by an Award recipient to a Borrower will be 40 percent of the Borrower’s purchase price for the property, up to a maximum of $250,000.
HOME PROGRAM SUBSIDY LIMITS PER UNIT FOR MERCED COUNTY
(Limits became effective 3/17/2022)
O-BDR 1-BDR 2-BDR 3-BDR 4-BDR
$159,754 $183,132 $222,694 $288,094 $316,236
INCOME LIMITS FOR MERCED COUNTY*
(Limits became effective 6/15/2022)
Number of Persons in Household
1 2 3 4 5 6 7 8
80% of
AMI
$43,650 $49.850 $56,100 $62,300 $67,300 $72,300 $77,300 $82,250 *Sponsor will insert the limits for the county in which the Program is located, and will update the income limits annually as HCD provides new information. The link to the official, HCD-maintained Value, Subsidy, and Income limits is:
http://www.hcd.ca.gov/grants-funding/income-limits/state-and-federal-income-
limits.shtml
(for HOME and CDBG limits, choose “State CDBG, HOME and NHTF - Income, Value and Rent Limits”; for CalHome income limits, choose “Official State Income Limits”)
City of Merced Homebuyer Program Guidelines Page 32
City of Merced Homebuyer Program Guidelines Page 33
SPONSOR STANDARDS FOR BEDROOMS AND BATHROOMS TO PREVENT
OVERCROWDING
Maximum No. of
Persons in the
Household
Number of Bedrooms Minimum Number of
Bathrooms
1 SRO 1
1 0-BR 1
2 1-BR 1
4 2-BR 2
6 3-BR 2
8 4-BR 2
10 5-BR 3
12 6-BR 3
SEE ADDITIONAL OCCUPANCY FACTORS ON THE FOLLOWING PAGE
• Children may share a bedroom, up to 2 children per bedroom. • Children shall be permitted a separate bedroom from their parents. • Adults not in a partner relationship may have their own bedroom. • Same rules apply to mobile home units.
The chart on the page above is used as a guide to overcrowding.
City of Merced Homebuyer Program Guidelines Page 34
ATTACHMENT D
LOAN SERVICING POLICIES AND PROCEDURES
FOR CITY OF MERCED
The City of Merced , hereafter called “Lender,” has adopted these policies and procedures in order to preserve its financial interest in properties whose “Borrowers” have been assisted with public funds. The Lender will to the greatest extent possible follow these policies and procedures, but each loan will be evaluated and handled on a case-by-case basis. The Lender has formulated this document to comply with state and federal regulations regarding the use of these public funds and any property restrictions, which are associated with them.
The policies and procedures are broken down into the following areas: 1) making required monthly payments or voluntary payments on a loan’s principal and interest; 2) required payment of property taxes and insurance; 3) required Request for Notice of Default on all second mortgages; 4) loans with annual occupancy restrictions and certifications 5) required noticing and limitations on any changes in title or use of property; 6) required noticing and process for requesting a subordination during a refinance; 7) processing of foreclosure in case of default on the loan.
1. Loan Repayments:
The Lender will collect monthly payments from those borrowers who are obligated to do so under Notes which are amortized promissory notes.
For Notes which are deferred payment loans, the Lender must accept voluntary payments on the loan. Loan payments will be credited to principal. The Borrower may repay the loan balance at any time with no penalty.
2. Payment of Property Taxes and Insurance:
As part of keeping the loan from going into default, borrower must maintain property insurance coverage naming the Lender as loss payee. If Borrower fails to maintain the necessary insurance, the Lender may take out force placed insurance to cover the property while the Borrower puts a new insurance policy in place. All costs for installing the necessary insurance will be added to the loan balance, except for HOME-funded loans, at time of installation of Borrower’s new insurance.
When a property is located in a 100-year flood plain, the Borrower will be required to carry the necessary flood insurance. A certificate of insurance for flood and for standard property insurance with an endorsement naming the City as lender loss payee will be required at close of escrow. The lender will verify the insurance on an annual basis.
Property taxes must be kept current during the term of the loan. If the Borrower fails to maintain payment of property taxes then the lender may pay the taxes current and add the balance of the tax payment plus any penalties to the balance of the loan (not permissible when funded with HOME).
To prevent these issues, the Lender requires the Borrower to have impound accounts set up with their first mortgagee, wherein they pay their property taxes and homeowner’s insurance as part of their monthly mortgage payment.
City of Merced Homebuyer Program Guidelines Page 35
3. Required Request for Notice of Default:
When the Borrower’s loan is in second position behind an existing first mortgage, it is the Lender's policy to prepare and record a "Request for Notice of Default" for each senior lien in front of Lender’s loan. This document requires any senior lienholder listed in the notice to notify the lender of initiation of a foreclosure action. The Lender will then have time to contact the Borrower and assist them in bringing the first loan current, if possible. The Lender can also monitor the foreclosure process and go through the necessary analysis to determine if the loan can be made whole or preserved. When the Lender is in a third position and receives notification of foreclosure from only one senior lienholder, it is in their best interest to contact any other senior lienholders regarding the status of their loans.
4. Annual Occupancy Restrictions and Certifications:
On owner-occupant loans, the Lender will require that Borrowers submit utility bills and/or other documentation annually to prove occupancy during the term of the loan. For CDBG, loan terms may have income and housing cost evaluations, which require a household to document that they are not able to make amortized loan payments, typically every five years. These loan terms are incorporated in the original Note and Deed of Trust. On HOME-funded loans, annual occupancy verification will occur yearly for the term of the loan.
Occupancy will be verified, reviewed and certified by the submission of the following:
A. Proof of occupancy in the form of a copy of a current utility bill; and B. Statement of unit's continued use as primary residence of the owner.
C. Declaration that other title holders do not reside on the premises; D. Verification that Property Taxes are current; and
E. Verification of current required insurance policies.
5. Required Noticing and Restrictions on Any Changes of Title or Occupancy:
In all cases where there is a change in title or occupancy or use, the Borrower must notify the Lender in writing of any change. Lender and Borrower will work together to ensure the property is kept in compliance with the original Program terms and conditions such that it remains available as an affordable home for low-income families. These types of changes are typical when Borrowers do estate planning (adding a relative to title) or if a Borrower dies and property is transferred to heirs or when the property is sold or transferred as part of a business transaction. In some cases, the Borrower might move and turn the property into a rental unit without notifying the Lender.
Changes in title or occupancy must be in keeping with the objective of benefit to low-income households (below 80 percent of AMI).
Change from owner-occupant to owner-occupant occurs at a sale. When a new owner-occupant is not low-income, the loan is not assumable and the loan balance is immediately due and payable. If the new owner-occupant qualifies as low-income, the purchaser may either pay the loan in full or assume all loan repayment obligations of the original owner-occupant, subject to the approval of the Lender’s Loan Committee (depends on the HCD program). Note – CalHome loans are not assumable.
If a transfer of the property occurs through inheritance, the heir (as owner-occupant) may be provided the opportunity to assume the loan at an interest rate based on household size and household income, provided the heir is income eligible. If the heir intends to occupy the property and is not low-income, the balance of the loan is due and payable. All such changes are subject to City of Merced Homebuyer Program Guidelines Page 36
the review and approval of the Lender’s Loan Committee. Note – CalHome loans are not assumable.
Change from owner-occupant to owner-investor occurs when an owner-occupant decides to move out and rent the assisted property, or if the property is sold to an investor. If the owner converts any assisted unit from owner-occupied to rental, the loan is due in full.
Conversion to use other than residential use is not allowable where the full use of the property is changed from residential to commercial or other. In some cases, Borrowers may request that the Lender allow for a partial conversion where some of the residence is used for a business but the household still resides in the property. Partial conversions can be allowed if it is reviewed and approved by any and all agencies required by local statute. If the use of the property is converted to a fully non-residential use, the loan balance is due and payable.
For CalHome, the following transfers of interest shall not require the repayment of the CalHome Program loan:
A. transfer to a surviving joint tenant by devise, descent, or operation of law on the death of a joint tenant;
B. a transfer, in which the transferee is a person who occupies or will occupy the property, which is:
1) a transfer where the spouse becomes an owner of the property; 2) a transfer resulting from a decree of dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement by which the spouse becomes an owner of the property; or
3) a transfer into an inter vivos trust in which the Borrower is and remains the beneficiary and occupant of the property.
6. Requests for Subordinations:
When a Borrower wishes to refinance their existing first mortgage, they must submit a subordination request to the Lender. The Lender will subordinate their loan only when there is no “cash out” as part of the refinance. No cash out means there are no additional charges on the transaction above loan and escrow closing fees. There can be no third-party debt payoffs or additional encumbrances on the property above traditional refinance transaction costs. The refinance should lower the existing housing cost of the household. The total indebtedness on the property should not exceed the current market value except when the borrower is obtaining a HARP II or other similar federally approved refinance loan. If the HARP II or other similar financing is approved and meets all other requirements, Combined Loan-To-Value will not be considered when reviewing the subordination request.
Also, the loan must:
1. be fully amortized and have a fixed interest rate that does not exceed the current market rate, as established by an index identified in the most recent NOFA;
2. not have a temporary interest rate buy-down;
3. have a term “all due and payable” that matures prior to or concurrently with the maturity date of the Promissory Note. Therefore, the maturity date of the existing Promissory Note should be modified to coincide with the maturity date of the new first mortgage; and,
4. not have a balloon payment due before the maturity date of the Program loan.
City of Merced Homebuyer Program Guidelines Page 37
Upon receiving the proper documentation from the refinance lender, the request will be considered by the loan committee for review and approval. Upon approval, the escrow company will provide the proper subordination document for execution and recordation by the Lender.
7. Process for Loan Foreclosure:
Upon any condition of loan default: 1) non-payment; 2) lack of insurance or property tax payment; 3) change in title or use without approval; 4) default on senior loans, the Lender will send out a letter to the Borrower notifying them of the default situation. If the default situation continues then the Lender may start a formal process of foreclosure.
When a senior lienholder starts a foreclosure process and the Lender is notified via a Request for Notice of Default, the Lender, who is the junior lienholder, may cancel the foreclosure proceedings by "reinstating" the senior lienholder. The reinstatement amount or payoff amount must be obtained by contacting the senior lienholder. This amount will include all delinquent payments, late charges and fees to date. Lender must confer with Borrower to determine if, upon paying the senior lienholder current, the Borrower can provide future payments. If this is the case, then the Lender may cure the foreclosure and add the costs to the balance of the loan with a Notice of Additional Advance on the existing note. HOME funds may not be used for this purpose.
If the Lender determines, based on information on the reinstatement amount and status of Borrower, that bringing the loan current will not preserve the loan, then staff must determine if it is cost effective to protect their position by paying off the senior lienholder in total and restructure the debt such that the unit is made affordable to the Borrower. If the Lender does not have sufficient funds to pay the senior lienholder in full, then they may choose to cure the senior lienholder and foreclose on the property themselves. As long as there is sufficient value in the property, the Lender can afford to pay for the foreclosure process and pay off the senior lienholder and retain some or all of their investment.
If the Lender decides to reinstate, the senior lienholder will accept the amount to reinstate the loan up until five (5) days prior to the set "foreclosure sale date." This "foreclosure sale date" usually occurs about four (4) to six (6) months from the date of recording of the "Notice of Default." If the Lender fails to reinstate the senior lienholder before five (5) days prior to the foreclosure sale date, the senior lienholder would then require a full pay off of the balance, plus costs, to cancel foreclosure. If the Lender determines the reinstatement and maintenance of the property not to be cost effective and allows the senior lienholder to complete foreclosure, the Lender's lien may be eliminated due to insufficient sales proceeds.
8. Lender as Senior Lienholder
When the Lender is first position as a senior lienholder, active collection efforts will begin on any loan that is 31 or more days in arrears. Attempts will be made to assist the homeowner in bringing and keeping the loan current. These attempts will be conveyed in an increasingly urgent manner until loan payments have reached 90 days in arrears, at which time the Lender may consider foreclosure. Lender’s staff will consider the following factors before initiating foreclosure:
1) Can the loan be cured and can the rates and terms be adjusted to allow for affordable payments such that foreclosure is not necessary?
2) Can the Borrower refinance with a private lender and pay off the Lender? City of Merced Homebuyer Program Guidelines Page 38
3) Can the Borrower sell the property and pay off the Lender?
4) Does the balance warrant foreclosure? (If the balance is under $5,000, the expense to foreclose may not be worth pursuing.)
5) Will the sales price of home "as is" cover the principal balance owing, necessary advances, (maintain fire insurance, maintain or bring current delinquent property taxes, monthly yard maintenance, periodic inspections of property to prevent vandalism, etc.) foreclosure, and marketing costs?
If the balance is substantial and all of the above factors have been considered, the Lender may opt to initiate foreclosure. The Borrower must receive, by certified mail, a thirty-day notification of foreclosure initiation. This notification must include the exact amount of funds to be remitted to the Lender to prevent foreclosure (such as, funds to bring a delinquent BMIR current or pay off a DPL).
At the end of thirty days, the Lender should contact a reputable foreclosure service or local title company to prepare and record foreclosure documents and make all necessary notifications to the owner and junior lienholders. The service will advise the Lender of all required documentation to initiate foreclosure (Note and Deed of Trust usually) and funds required from the owner to cancel foreclosure proceedings. The service will keep the Lender informed of the progress of the foreclosure proceedings.
When the process is completed, and the property has "reverted to the beneficiary" at the foreclosure sale, the Lender could sell the home themselves under a homebuyer program or use it for an affordable rental property managed by a local housing authority or use it for transitional housing facility or other eligible use. The Lender could contract with a local real estate broker to list and sell the home and use those funds for program income eligible uses.
9. Process Demands and Payoffs:
Requests for demands and payoffs will be processed within the timeframe allowed by law. Sponsor or its designated Loan Servicing Agent is proficient in performing the related calculations. Reconveyance and lien releases would be prepared by the City of Merced and sent for processing to a qualified Title Company.
City of Merced Homebuyer Program Guidelines Page 39
ATTACHMENT E
SELLERS LEAD-BASED PAINT DISCLOSURE
Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards Lead Warning Statement
Every purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory.
Lead poisoning also poses a particular risk to pregnant women. The seller of any interest in residential real property is required to provide the buyer with any information on lead-based paint hazards from risk assessments or inspections in the seller’s possession and notify the buyer of any known lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase.
Seller’s Disclosure
(a) Presence of lead-based paint and/or lead-based paint hazards (check (i) or (ii) below):
(i) Known lead-based paint and/or lead-based paint hazards are present in the housing (explain).
(ii) Seller has no knowledge of lead-based paint and/or lead-based paint hazards in the housing. (b) Records and reports available to the seller (check (i) or (ii) below):
(i) Seller has provided the purchaser with all available records and reports pertaining to Lead-based paint and/or lead-based paint hazards in the housing (list documents below). ————————————————————————————————————————
(ii) Seller has no reports or records pertaining to lead-based paint and/or lead-based paint hazards in the housing.
Purchaser’s Acknowledgment (initial)
(c) Purchaser has received copies of all information listed above. (d) Purchaser has received the pamphlet Protect Your Family from Lead in Your Home. (e) Purchaser has (check (i) or (ii) below):
(i) received a 10-day opportunity (or mutually agreed upon period) to conduct a risk assessment or inspection for the presence of lead-based paint and/or lead-based paint hazards; or (ii) waived the opportunity to conduct a risk assessment or inspection for the presence of Lead-based paint and/or lead-based paint hazards (NOT PERMISSIBLE FOR HOME AND CDBG).
Agent’s Acknowledgment (initial)
(f) Agent has informed the seller of the seller’s obligations under 42 U.S.C. 4852d and is aware of his/her responsibility to ensure compliance.
Certification of Accuracy
The following parties have reviewed the information above and certify, to the best of their knowledge, that the information they have provided is true and accurate.
—————————— —————————— ————————— —————————
Seller Date Seller Date
—————————— —————————— ————————— —————————
Purchaser Date Purchaser Date
—————————— —————————— ————————— —————————
Agent Date Agent Date
City of Merced Homebuyer Program Guidelines Page 40
ATTACHMENT F
Disclosure to Seller with Voluntary, Arm's Length Purchase Offer
DECLARATION
This is to inform you that would like to purchase the property, located at , if a satisfactory agreement can be reached. We are prepared to pay $ for a clear title to the property under conditions described in the attached proposed contract of sale.
Because Federal funds may be used in the purchase, however, we are required to disclose to you the following information:
1. The sale is voluntary. If you do not wish to sell, the buyer, , thru the agency, will not acquire your property. The buyer does not have the power of eminent domain to acquire your property by condemnation (i.e. eminent domain) and the agency/Sponsor
will not use the power of eminent domain to acquire the property.
2. Th e estimated fair market value of the property is $ and was estimated by , to be finally determined by a
professional appraiser prior to close of escrow.
Since the purchase would be a voluntary, arms length, transaction you would not be eligible for relocation payments or other relocation assistance under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA), or any other law or regulation. Also, as indicated in the contract of sale, this offer is made on the condition that no tenant will be permitted to occupy the property before the sale is completed.
Again, please understand that if you do not wish to sell your property, we will take no further action to acquire it. If you are willing to sell the property under the conditions described in the attached contract of sale, please sign the contract and return it to us at:
. If you have any questions about
this matter, please contact at .
Sincerely,
Title
Buyer Date
Buyer Date
Form continues on next page with Seller’s Acknowledgment City of Merced Homebuyer Program Guidelines Page 41
Disclosure to Seller with Voluntary, Arm's Length Purchase Offer (Page 2) Acknowledgement
As the Seller I/we understand that the will inspect the property for health and safety deficiencies. I/we also understand that public funds may be involved in this transaction and, as such, if the property was built before 1978, a lead-based paint disclosure must be signed by both the buyer and seller, and that a Visual Assessment will be conducted to determine the presence of deteriorated paint.
As the Seller, I/we understand that under the City’s program, the property must be currently owner- occupied, vacant for three months at the time of submission of purchase offer, new (never occupied), or renter purchasing the unit. I/we hereby certify that the property is:
Vacant at least 3 months; Owner-occupied; New; or Being Purchased by Occupant I/we hereby certify that I have read and understand this “Declaration” and a copy of said Notice was given to me prior to the offer to purchase. If received after presentation of the purchase offer, I/We choose to withdraw or not to withdraw, from the Purchase Agreement.
Seller Date
Seller Date
City of Merced Homebuyer Program Guidelines Page 42
ATTACHMENT G
CITY OF MERCED
INSTRUCTIONS TO HOMEBUYER
1. Persons interested in purchasing a home should contact the Program Operator’s Homebuyer Counseling and Education (HCE) Department at 559-802-1672 to enroll in education classes, and if needed or required by the Program, also enroll in an individual counseling session. Upon completion of eight (8) hours of homebuyer education, the HCE Department will issue certificates of completion to the participants.
2. Participant should contact the Program Operator’s First-Time Homebuyer Loan Processor at 559-802-1649 to verify funding availability. The participant’s name is added to Sponsor’s interest list if there is no funding available, or will be moved directly into the workload.
3. Participant will select a Mortgage Company (primary lender) of his or her choice to determine financing eligibility. Upon successful prequalification with a primary lender, primary lender will submit a complete loan application package to Program Operator for review. This package must be submitted along with a completed Submission Form and Lender Cover Letter, provided by the Program Operator via the Program Operator’s website.
Items to be included are proof of income, credit history, and household size.
4. During the financing and Program eligibility review by Program Operator, household size, income, and Sponsor loan amount are determined. Prior to issuance of the prequalification letter to the family, the following must occur:
a. Application package must be reviewed and signed by Program Operator b. Application package must be reviewed and signed by Sponsor Upon completion by all parties, Program Operator will issue a prequalification letter to the participant and primary lender on behalf of the Sponsor. Program Operator will contact or meet with qualified applicant to provide information relative to Program requirements and the lending process. In addition, Program Operator will issue a condition list to both parties requesting additional income and asset documentation, including verification of employment and all income sources.
5. Participant works with Licensed Real Estate broker to find a property. Properties are subject to the following requirements:
a. Properties must meet the modest housing standards
b. Properties must be located within the Sponsor’s eligible area (Program Operator will verify)
c. Properties must meet maximum sales price limits, as applicable d. Properties must be owner-occupied or vacant for at least three (3) months
Upon approval of the individual properties by the Sponsor, applicant will submit an offer and, once accepted, forward copies to Program Operator for review.
City of Merced Homebuyer Program Guidelines Page 43
6. Applicant will work with primary lender to provide Program Operator all terms on the conditions list. The items include, but are not limited to:
a. Income documentation (paystubs, tax returns, child support, etc.) b. Income documentation (paystubs, tax returns, child support, etc.) c. Asset documents (bank statements, 401K, etc.)
d. Property information (appraisal with photos, preliminary title report, termite report and clearance, etc.)
e. Real Estate Sales Contract (contingent upon receiving Program loan approval)
f. Residential loan application and credit report, paystubs, tax returns and W-2’s, and all verifications of employment and rent g. Disclosure statement
7. Program Operator, upon receipt of appraisal, will order a home inspection to be completed by the Program Operator, a certified housing inspector, or a Sponsor representative. Home inspections will document health & safety and code compliance as well as conduct Lead- Based Paint Inspections. Seller must correct all deficiencies prior to the close of escrow.
8. Upon receipt of all conditions, Program Operator will prepare participant file for final loan approval with Sponsor. The primary lender should request the date of loan approval one week prior to the date of anticipated loan signing. At loan approval, Program Operator will present the application to Sponsor for review. Following loan approval, Program Operator will give loan documents to Sponsor for signatures. Loan documents are then forwarded to escrow company to coordinate loan signing.
9. Signed documents are returned to Program Operator for review. Upon review and confirmation of all conditions of final funding, Program Operator will issue a check to the Title Company or may wire funds to escrow.
10. Once loan is funded and recorded, escrow company provides a copy of all documents to Program Operator. Program Operator then closes out the loan file.
City of Merced Homebuyer Program Guidelines Page 44
ATTACHMENT H
LEAD-BASED PAINT
VISUAL ASSESSMENT, NOTICE OF PRESUMPTION, AND HAZARD REDUCTION FORM
Section 1: Background Information
Property Address: No LBP found or LBP exempt
Select one: Visual Assessment Presumption Hazard Reduction
Section 2: Visual Assessment. Fill out Sections 1, 2, and 6. If paint stabilization is performed, also fill out Sections 4 and 5 after the work is completed.
Visual Assessment Date: Report Date:
Check if no deteriorated paint found
Attachment A: Summary where deteriorated paint was found.
Section 3: Notice of Presumption. Fill out Sections 1, 3, 5, and 6. Provide to occupant w/in 15 days of presumption.
Date of Presumption Notice:
Lead-based paint is presumed to be present and/or Lead-based paint hazards are presumed to be present Attachment B: Summary of Presumption:
Section 4: Notice of Lead-Based Paint Hazard Reduction Activity. Fill out Sections 1, 4, 5, and 6. Provide to occupant w/in 15 days of after work completed.
Date of Hazard Reduction Notice:
Initial Hazard Reduction Notice? Yes No Start & Completion Dates:
If “No”, dates of previous Hazard Reduction Activity Notices:
Attachment C: Activity locations and types.
Attachment D: Location of building components with lead-based paint remaining in the rooms, spaces or areas where activities were conducted.
Attachment E: Attach clearance report(s), using DHS form 8552 (and 8551 for abatement activities)
Section 5: Resident Receipt of Notice for Presumption or Lead-Based Paint Hazard Reduction Activity Printed Name: Signature: Date:
Section 6: Contact Information Organization:
Contact Name: Contact Signature:
Date: Address: Phone:
City of Merced Homebuyer Program Guidelines Page 45
ATTACHMENT I
Homebuyer Program Lead Compliance Document Checklist
The following documents should be in each Homebuyer unit file to document compliance with the lead requirements:
Document Name Purpose
Lead Safe Housing Rule Screening Sheet Documents
exemptions
Physical inspection form (HQS or equivalent) Documents visual assessment results
Seller Certification Seller certifies that
paint was stabilized
by qualified workers
and that safe work
practices were
followed during paint
stabilization
Clearance Report and Clearance Review Worksheet Documents that unit passed clearance
Disclosure Form Documents that
buyer received
disclosure and
pamphlet.
Lead Hazard Reduction Notice Documents that
buyer received
required lead hazard
reduction notification.
This was taken from the HUD Website at:
http://portal.hud.gov/hudportal/documents/huddoc?id=20264_leadcompliance.doc City of Merced Homebuyer Program Guidelines Page 46
STANDARD CONTRACT LANGUAGE:
ALL CONTRACTS AND SUBCONTRACTS
1. The Civil Rights, HCD, and Age Discrimination Acts Assurances:
During the performance of this Agreement, the Grantee assures that no otherwise qualified person shall be excluded from participation or employment, denied program benefits, or be subjected to discrimination based on race, color, national origin, sex, age, or handicap, under any program or activity funded by this contract, as required by Title VI of the Civil Rights Act of 1964, Title I of the Housing and Community Development Act of 1974, as amended, and the Age Discrimination Act of 1975, and all implementing regulations.
2. Rehabilitation Act of 1973 and the “504 Coordinator” The Grantee further agrees to implement the Rehabilitation Act of 1973, as amended, and its regulations, 24 CFR Part 8, including, but not limited to, for Grantees with 15 or more permanent full or part time employees, the local designation of a specific person charged with local enforcement of this Act, as the “504 Coordinator”.
3. The Training. Employment and Contracting Opportunities for Business and Lower Income Persons Assurance of Compliance:
a) The grant activity to be performed under this Agreement is on a project assisted under a program providing direct federal financial assistance from the Department of Housing and Urban Development and is subject to the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C 1701u. Recipients, contractors and subcontractors shall direct their efforts to provide, to the greatest extent feasible, training and employment opportunities generated from the expenditure of Section 3 covered assistance to Section 3 residents in the order of priority provided in 24 CFR 135.34(a)(2). b) The parties to this Agreement will comply with the provisions of said Section 3 and the regulations issued pursuant thereto by the Secretary of Housing and Urban Development set forth in 24 CFR Part 135, and all applicable rules and orders of the Department issued thereunder prior to the execution of this contract. The parties to this contract certify and agree that they are under no contractual or other disability which would prevent them from complying with these requirements.
c) The Grantee will include these Section 3 clauses in every contract and subcontract for Work in connection with the grant activity and will, at the direction of the State, take appropriate action pursuant to the contract or subcontract upon a finding that the Grantee or any contractor or subcontractor is in violation of regulations issued by the Secretary of Housing and Urban Development, 24 CFR Part 135 and, will not let any contract unless the Grantee or contractor or subcontractor has first provided it with a preliminary statement of ability to comply with the requirements of these regulations.
d) Compliance with the provisions of Section 3, the regulations set forth in 24 CFR Part 135, and all applicable rules and orders of the Department issued thereunder prior to the execution of the Agreement shall be a condition of the federal financial assistance provided to the project, binding upon the Grantee, its successors and assigns. Failure to fulfill these requirements shall subject the Grantee, its contractors and subcontractors, its successors and assigns to those sanctions specified by the grant or contract through which federal assistance is provided, and to such sanctions as are specified by 24 CFR Part 135.
4. Assurance of Compliance with Requirements Placed on Construction Contracts of $10,000 or more
City of Merced Homebuyer Program Guidelines Page 47
The Grantee hereby agrees to place in every contract and subcontract for construction exceeding $10,000 the Notice of Requirement for Affirmative Action to ensure Equal Employment Opportunity (Executive Order 11246), the Standard Equal Employment Opportunity, and the Construction Contract Specifications. The Grantee furthermore agrees to insert the appropriate Goals and Timetables issued by the U.S. Department of Labor in such contracts and subcontracts.
5. State Nondiscrimination Clause:
a) During the performance of this contract, contractor and its subcontractors shall not unlawfully discriminate, harass, or allow harassment against any employee or applicant for employment because of sex , race, color, ancestry, religious creed, national origin, physical disability (including HIV and AIDS), mental disability, medical condition (cancer), age (over 40) marital status, and denial of family care leave. Contractors and subcontractors shall ensure that the evaluation and treatment of their employees and applicants for employment are free of such discrimination and harassment. Contractors and subcontractors shall comply with the provisions of the Housing Act (Government Code, Section 12990 (a-f) et seq.) and the applicable regulations promulgated thereunder (California Code of Regulations, Title 2, Section 7258 et seq.) The applicable regulations of the Fair Employment and Housing Commission implementing Government Regulations, are incorporated into this contract by reference and made a part hereof as if set forth in full. Contractor and its subcontractors shall give written notice of their obligations under this clause to labor organizations with which they have a collective bargaining or other agreement.
b) Contractor shall include the nondiscrimination and compliance provisions of this clause in all subcontracts to perform work under the contract.
6. Labor Standards –Federal Labor Standards Provisions
The Grantee shall cause or require to be inserted in full, in all such contracts subject to such regulations, provisions meeting the requirements of:
Davis-Bacon Act (40 USC 276a-276a-5) requires that workers receive no less than the prevailing wages being paid for similar work in their locality. Prevailing wages are computed by the Department of Labor and are issued in the form of Federal wage decisions for each classification of work. The law applies to most construction, alteration, or repair contracts over $2,000.
Copeland “Anti-Kickback” Act (47 USC 276(c) requires that workers be paid at least once a week without any deductions or rebates except permissible deductions.
Contract Work Hours and Safety Standards Act – CWHSSA (40USC 327-333) requires that workers receive “overtime” compensation at a rate of 1-1/2 times their regular hourly wage after they have worked 40 hours in one week.
Title 29, Code of Federal Regulations, Subtitle A, P arts 1, 3 and 5 are the regulations and procedures issued by the Secretary of Labor for the administration and enforcement of the Davis-Bacon Act, as amended.
NOTICE TO OWNER
"Under the California Mechanics' Lien Law, any contractor, subcontractor, laborer, supplier, or other person or entity who helps to improve your property, but is not paid for his or her work or supplies, has a right to place a lien on your home, land, or property where the work was performed and to sue you in court to obtain payment.
This means that after a court hearing, your home, land, and property could be sold by a court officer and the proceeds of the sale used to satisfy what you owe. This can happen even if you have paid your contractor in full if the contractor's subcontractors, laborers, or suppliers remain unpaid.
To preserve their rights to file a claim or lien against your property, certain claimants such as subcontractors or material suppliers are each required to provide you with a document called a "Preliminary Notice." Contractors and laborers who contract with owners directly do not have to provide such notice since you are aware of their existence as an owner. A preliminary notice is not a lien against your property. Its purpose is to notify you of persons or entities that may have a right to file a lien against your property if they are not paid. In order to perfect their lien rights, a contractor, subcontractor, supplier, or laborer must file a mechanics' lien with the county recorder which then becomes a recorded lien against your property. Generally, the maximum time allowed for filing a mechanics' lien against your property is 90 days after substantial completion of your project.
TO INSURE EXTRA PROTECTION FOR YOURSELF AND YOUR PROPERTY, YOU MAY WISH TO TAKE ONE OR MORE OF THE FOLLOWING STEPS:
(1) Require that your contractor supply you with a payment and performance bond (not a license bond), which provides that the bonding company will either complete the project or pay damages up to the amount of the bond. This payment and performance bond as well as a copy of the construction contract should be filed with the county recorder for your further protection. The payment and performance bond will usually cost from 1 to 5 percent of the contract amount depending on the contractor's bonding ability. If a contractor cannot obtain such bonding, it may indicate his or her financial incapacity. (2) Require that payments be made directly to subcontractors and material suppliers through a joint control.
Funding services may be available, for a fee, in your area which will establish voucher or other means of payment to your contractor. These services may also provide you with lien waivers and other forms of protection. Any joint control agreement should include the addendum approved by the registrar. (3) Issue joint checks for payment, made out to both your contractor and subcontractors or material suppliers involved in the project. The joint checks should be made payable to the persons or entities which send preliminary notices to you. Those persons or entities have indicated that they may have lien rights on your property; therefore, you need to protect yourself. This will help to insure that all person due are actually paid. (4) Upon making payment on any completed phase of the project, and before making any further payments, require your contractor to provide you with unconditional "Waiver and Release" forms signed by each material supplier, subcontractor, and laborer involved in that portion of the work for which payment was made. The statutory lien releases are set forth in exact language in Section 3262 of the Civil Code. Most stationery stores will sell the "Waiver and Release" forms if your contractor does not have them. The material suppliers, subcontractors, and laborers that you obtain releases from are those persons or entities who have filed preliminary notices with you. If you are not certain of the material suppliers, subcontractors, and laborers working on your project, you may obtain a list from your contractor. On projects involving improvements to a single-family residence or a duplex owned by the individuals, the person signing these releases lose the right to file a mechanics' lien claim against your property. In other types of construction, this protection may still be important, but may not be as complete.
HCD Version 9/2014
City of Merced Homebuyer Program Guidelines Page 48
To protect yourself under this option, you must be certain that all material suppliers, subcontractors, and laborers have signed the "Waiver and Release" form. If a mechanics' lien has been filed against your property, it can only be voluntarily released by a recorded "Release of Mechanics' Lien" signed by the person or entity that filed the mechanics' lien against your property unless the lawsuit to enforce the lien was not timely filed.
You should not make any final payments until any and all such liens are removed. You should consult an attorney if a lien is filed against your property."
Read and acknowledged:
Signature Dated
Signature Dated
City of Merced Homebuyer Program Guidelines Page 49
ATTACHMENT J
SELF-HELP ENTERPRISES
CONSTRUCTION PAYMENT REQUEST #
Date
Participant Project Job #
Project Address
Total Contract Amount $ Payment Amount $
Contractor: Construction Supervisor:
Items Completed:
I request payment for work in progress on the above property. I certify that the work itemized above has been completed as of this date.
Contractor's Signature Date
NOTE: Ten percent (10%) of the total contract amount (including all change orders) will be retained by Self -Help Enterprises until 35 days after Notice of Completion is recorded.
Self-Help Enterprises DATE Mail Pick-up
NOTES:
Distribution: WHITE:SHE YELLOW: Owner PINK: Contractor GOLDENROD: Supervisor
APPROVED FOR PAYMENT:
The items listed above have been completed satisfactorily.
Please release payment to Contractor as requested (or amended). OWNER'S SIGNATURE DATE