City of Merced Housing Rehabilitation Program Guidelines 1 CITY OF MERCED
SINGLE-FAMILY HOUSING
REHABILITATION
ASSISTANCE PROGRAMS
(HOME, CDBG, CalHome)
PROGRAM DESIGN AND PROCESS
HCD Version 2/2022
CalHome Approved 2.21.23)
CalHome Revised ( date)
CDBG Ap proved (date)
HOME Approved (date)
ATTACHMENT 7
City of Merced Housing Rehabilitation Program Guidelines 2 CITY OF MERCED
HOUSING REHABILITATION
PROGRAM GUIDELINES
TABLE OF CONTENTS
1.0. GENERAL
1.1. PROGRAM OUTREACH AND MARKETING
1.2. APPLICATION PROCESS AND SELECTION
1.3. LOAN PROCESS
1.4. CONFLICT OF INTEREST REQUIREMENTS
2.0. APPLICANT QUALIFICATIONS
2.1. INCOME LIMITS
2.2. INCOME QUALIFICATION CRITERIA
2.3. HOMEOWNER ELIGIBILITY & RESIDENCY REQUIREMENTS
3.0. PROPERTY ELIGIBLITY
3.1. CONDITIONS
3.2. ANTI-DISPLACEMENT POLICY AND RELOCATION ASSISTANCE
3.3. NOTIFICATIONS AND DISCLOSURES
4.0. THE PROGRAM LOAN
4.1. MAXIMUM AMOUNT OF PROGRAM ASSISTANCE
4.2. AFFORDABILITY PARAMETERS FOR HOMEOWNERS
4.3. RATES AND TERMS
4.4. GRANTS
4.5. APPRAISAL
4.6. INSURANCE
5.0. PROGRAM LOAN SERVICING AND MAINTENANCE
5.1. PAYMENTS ARE VOLUNTARY
5.2. RECEIVING LOAN REPAYMENTS
5.3. LOAN SERVICING POLICIES AND PROCEDURES
5.4. LOAN MONITORING PROCEDURES
5.5. DEFAULT AND FORECLOSURE
5.6. SUBORDINATIONS
6.0. CONSTRUCTION
6.1. STANDARDS
6.2. ELIGIBLE CONSTRUCTION COSTS
6.3. ELIGIBLE PROJECT COSTS
6.4. REPAIR CALLBACKS
7.0. EXCEPTIONS AND SPECIAL CIRCUMSTANCES
7.1. AMENDMENTS
7.2. EXCEPTIONS
8.0. DISPUTE RESOLUTION AND APPEALS PROCEDURES
8.1. PROGRAM COMPLAINT AND APPEAL PROCEDURE
8.2. GRIEVANCES BETWEEN PARTICIPANTS AND CONSTRUCTION
CONTRACTOR
City of Merced Housing Rehabilitation Program Guidelines 3 CITY OF MERCED
HOUSING REHABILITATION
PROGRAM GUIDELINES
ATTACHMENTS TABLE OF CONTENTS
ATTACHMENT A: 24 CFR PART 5 ANNUAL INCOME INCLUSIONS AND EXCLUSIONS – FOR CDBG & HOME
ATTACHMENT A-1: TITLE 25 SECTION 6914 GROSS INCOME INCLUSIONS – FOR
CALHOME
ATTACHMENT B: ANNUAL INCOME NET FAMILY ASSET INCLUSIONS AND EXCLUSIONS – FOR CDBG & HOME
ATTACHMENT B-1: TITLE 25 SECTION 6914 GROSS INCOME EXCLUSIONS – FOR
CALHOME
ATTACHMENT C: HOME PROGRAM HOMEOWNERSHIP VALUE LIMITS; HOME PER-UNIT SUBSIDY LIMITS; CURRENT INCOME LIMITS;
BEDROOM & BATHROOM ADDITION STANDARDS
ATTACHMENT D: MARKETING PLAN
ATTACHMENT E: RESIDENTIAL ANTIDISPLACEMENT AND RELOCATION
ASSISTANCE PLAN
ATTACHMENT F: LOAN SERVICING POLICIES AND PROCEDURES
ATTACHMENT G: FORECLOSURE POLICY
ATTACHMENT H: CERTIFICATION OF OCCUPANCY
ATTACHMENT I: LEAD-BASED PAINT NOTICE OF PRESUMPTION AND HAZARD
REDUCTION FORM
City of Merced Housing Rehabilitation Program Guidelines 4 CITY OF MERCED
HOUSING REHABILITATION
PROGRAM GUIDELINES
Adopted date
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 housing rehabilitation programs. The rehabilitation program described herein and hereinafter referred to as the “Program” is designed to provide assistance to eligible homeowners for correction of health and safety items, as well as code violations, located within the Program’s eligible a rea, as described in Section 3.0. The Program provi des this assistance in the form of deferred payment loans used to finance the cost of necessary repairs that will provide the homeowner with a healthy, safe, sanitary and code compliant home, referred to herein as “housing unit”. The Program will be administered by Self -Help Enterprises, hereinafter referred to as 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.
A Fair Housing Marketing Plan can be found as Attachment D. 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 homeownership education classes to help educate homeowners about credit, budgeting, predatory lending, foreclosure prevention and home maintenance, as well as future responsibilities.
B. 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 to ensure effective communication with disabled housing applicants, residents and City of Merced Housing Rehabilitation Program Guidelines 5 members of the public.
1.2. APPLICATION PROCESS AND SELECTION
A. Waiting List/Homeowner Contact
The Sponsor will utilize a waiting list. In response to a homeowner’s request, the homeowner is placed on the waiting list. Homeowners are offered the opportunity to qualify for assistance by waiting list priority (a first-come, first served basis).
The Program Operator will contact homeowners by mail and/or by telephone to advise of funding availability. The homeowner has 30 days to complete and return the loan application and supporting documentation. Should a homeowner fail to respond to the initial contact for assistance or to provide any of the required documentation within the 30-day period, the homeowner’s name will be removed from the waiting list. If the homeowner desires assistance at a later time, he/she will be placed on the waiting list at that time.
Should the waiting list be exhausted, the Program will be marketed in accordance with the Sponsor’s Marketing Plan. See Attachment D.
B. Application/Interview
An application packet is provided to the homeowner for completion and submittal to the Program Operator, along with supporting documentation. An interview is scheduled with the applicant. The Program is fully explained; application forms and documentation are reviewed. Verifications are obtained for income, assets, employment, benefits, and mortgage. Title report and appraisals are also obtained.
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.
C. Household Selection
Households selected for participation in the Sponsor’s Housing Rehabilitation Program are those determined eligible upon completion of processes described in A. and B. above.
D. Initial Inspection/Work Write-Up/Estimate
Prospective units are inspected by the Program Operator, a certified housing inspector, or a Sponsor representative to determine eligibility and acceptability of properties for participation in the Program.
If the home is a pre -1978 unit, the initial inspection will also include paint testing by a certified Lead-Based Paint (LBP) inspector/assessor or presumption of LBP.
City of Merced Housing Rehabilitation Program Guidelines 6 Code deficiencies will be corrected and if presumption is used or lead hazards are found they will be properly treated according to HUD regulations (Section 6.1.E & F) and cleared by a certified LBP inspector/assessor. Note: CalHome -funded projects do not require LBP compliance. CDBG projects shall refer to Chapter 20, Lead -Based Paint Requirements for guidance in the CDBG Grant Management Manual.
Measurements and observations are noted about the property, including special conditions with potential cost consequences (dilapidated outbuildings, absence of curb and gutter when required by code, etc.). A floor plan and site plan, as needed, are drawn for the home and property, including all appurtenances.
Findings are noted on an inspection form, and later used by the Program Operator to prepare the work write -up. Estimated costs are determined by the Program Operator who has years of experience in the building industry, and in reviewing contractor bids and verifying cost with materials suppliers. The homeowner reviews the completed work write-up and cost estimate, and the approved write-up is incorporated into bid documents.
E. Bid Solicitation
A bid walk-through date and time are scheduled. The homeowner may choose to solicit his/her own bids or request that the Program Operator solicit bids on his/her behalf. Invitations to bid are mailed to all eligible contractors selected by the homeowner from the Active Contractor List provided by the Program Operator in efforts to obtain three reasonable bids. Homeowners are required to select a minimum of six contractors from the Active Contractor List and may add to the list as long as the contractor meets the requirements outlined in the Housing Rehabilitation/Reconstruction Program Contractor Guidelines and Information Sheet (see Attachment K). Contractors will be notified via telephone and/or in writing (email, fax, etc.) at least one week prior to each bid tour.
Bid results will be provided to
participating contractors.
Contractors must be licensed and bonded by the State of California Contractors Licensing Board. Contractors must also provide Program Operator with evidence of Workers’ Compensation Insurance and Comprehensive General Liability and Property Damage Insurance with Combined Single Limits of at least $1,000,000.
Recruitment for eligible contractors is done on an ongoing basis, via local advertising, website notification, and program marketing. It is the goal of the Program Operator to maintain an Active Contractor List of eligible, interested contractors located in the Sponsor’s County. A pplications are available for those seeking to participate by calling the Program Operator or visiting the Program Operator’s website. The Program Operator will send notices to contractors on the Active Contractor List annually, which will request each contractor contact the Program Operator to confirm his or her interest in remaining on the Active Contractor List. Contractors who do not respond will be moved to the Inactive Contractor List.
City of Merced Housing Rehabilitation Program Guidelines 7 Cost reasonableness is determined by comparing the bids received with the cost estimate prepared by the Program Operator. Bids should be within 10% of the Program Operator’s cost estimate, otherwise an explanation must be provided to the file for any bid selected exceeding 10% of the estimate. The homeowner is encouraged to accept the lowest reasonable bid.
The Program Operator determines eligibility of the contractor by contacting the State Contractors License Board and checking the Federal List of Debarred Contractors. The contractor is also required to provide a self -certification stating that he/she is not on the Federal debarred list. Once determined eligible, the contractor is then notified of provisional award of bid (pending loan approval).
Notices of non-award are mailed to participating contractors.
F. Loan Request/Approval
A report and loan request are prepared on behalf of the homeowner by the Program Operator. The loan request includes the cost of construction, a contingency fund, and other project costs (listed in Section 6.3.). Note: For HOME and CDBG, the project costs listed in Section 6.3 are considered activity delivery costs to be paid by the Sponsor and may not be charged to the homeowner’s loan. A Loan Review Committee meeting is scheduled to hear the loan request. Section 1.3 provides additional information on the loan approval process. Once approved, loan documents are executed and the loan is funded.
G. Pre-Construction Conference
A pre -construction conference is scheduled with homeowner, contractor, and Program Operator. The Program Operator reviews the Owner -Contractor Construction Contract, including the work write -up, start date, pay schedule, and date of completion, with the homeowner and contractor. The construction contract and Notice to Proceed are executed.
H. Start-Up/Field Inspections
The Program Operator monitors date of start-up and performs field inspections on a regular basis. The Program Operator will visit the job site regularly in order to check the scope of work, inspect materials, and to confirm the job is on schedule and within budget. The Program Operator works with the Sponsor’s Building Inspector to ensure the work meets building codes, while not exceeding funding limits.
The Program Operator reviews the work status with the homeowner and with the contractor in order to remedy any developing problems quickly and to ensure that both are satisfied with the construction process. At the completion of each phase, the Program Operator inspects the work and the homeowner authorizes contractor payments.
The Program Operator will refer back to original plans and specifications to verify the work was completed as contracted.
City of Merced Housing Rehabilitation Program Guidelines 8 I. Change Orders
Written change orders are required when the homeowner requests any changes in the write -up, such as eliminating an item completely, eliminating one item and substituting another, or adding items. The change order will state the change and dollar value for the change. The change order must be signed by both the contractor and the homeowner, and submitted to the Program Operator for approval. If the change order exceeds the approved financing, the homeowner will be asked to provide additional funds or a report and request for additional funds may be presented to the Sponsor’s Loan Review Committee for approval prior to Program Operator signing-off on the change order.
J. Progress Payments
Ninety percent (90%) of the contract amount is distributed to the contractor in the form of progress payments during construction. The final ten-percent (10%) of the contract amount is set aside as a retention payment. The contractor requests a progress payment from the homeowner and notifies the Program Operator that he/she has done so. Upon favorable inspection by the homeowner, Program Operator, and Sponsor or Sponsor’s Building Inspector, the payment authorization is signed by the homeowner and submitted for payment.
K. Final Inspections/Notice of Completion/Final Payment When the project is completed, the Program Operator inspects the work item by item with the homeowner, the contractor, and/or the Sponsor. The Sponsor’s Building Inspector performs a final inspection. Any corrections or deficiencies are noted and corrected by the contractor. Upon favorable final inspections, a Notice of Completion is prepared, signed by the homeowner, and then recorded. The final ten-percent (10%) retention payment is released 35 days after the recording of the Notice of Completion.
1.3. LOAN PROCESS
The Sponsor’s Loan Review Committee must approve all loans and grants. The Loan Review Committee may approve assistance with CDBG financing exceeding 100 percent of after -rehabilitation value as needed in cases where no other financial resources are available to cover the cost of the repairs and where clear and convincing documentation exists, justifying why the exception is needed.
However, if the project is CalHome -funded, the total financing cannot be more than 105 percent of the after - rehabilitation value. For HOME -funded loans, the total financing cannot be more than 100 percent of the after -rehabilitation value, unless per HOME Management Memorandum 13- 01 at http://www.hcd.ca.gov/grants-funding/active-
funding/home.shtml#memos the entire HOME assistance amount is granted rather than loaned, due to a lack of any equity after rehabilitation, based on existing loans on the property and an after -rehabilitation value appraisal. In addition, the amount of HOME assistance, including Sponsor’s claimed Activity Delivery Costs, cannot exceed the Sponsor’s County HOME Per-Unit Subsidy Limits at
http://www.hcd.ca.gov/grants-
City of Merced Housing Rehabilitation Program Guidelines 9 funding/income-limits/state-and-federal-income-limits.shtml, and the after -rehabilitation value cannot exceed the HOME Homeownership Value Limits. See Attachment C for current limits.
In order to obtain financing, applicants must meet all property and eligibility guidelines in effect at the time the application is considered. Homeowners will be provided written notification of approval or denial. Any reason for denial will be provided to the applicant in writing.
1.4. 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. Section
92.356 of the HOME Final Rule shall be followed for HOME assistance. For CalHome - funded Programs, the applicable Conflict of Interest requirements of Public Contract Code sections 10410, 10411, and 10430 (e) shall be followed.
For HOME assistance, Section 92.356 of the HOME Final Rule shall be followed, 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 i nformation 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 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 job. Such a contractor may act as owner/builder, subject to standard construction procedures.
Owner/builders are reimbursed for materials purchased which are verified by City of Merced Housing Rehabilitation Program Guidelines 10 invoice/receipt and used on the job. 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.
2.0. APPLICANT QUALIFICATIONS
2.1. INCOME LIMITS
All homeowners 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 each year. See Attachment C.
The link to the official HCD -maintained income limits for HOME - and CDBG -funded activities is: http://www.hcd.ca.gov/grants-funding/income- limits/state-and-federal- income-limits.shtml (for HOME and CDBG, choose “State CDBG, HOME and NHTF – Income, Value and Rent Limits”; for CalHome -funded activities choose “Official State 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.
2.1.1 OWNER-OCCUPIED REQUIREMENTS
Owner-Occupant - to be eligible, household income must be equal to or less than the applicable HCD income limits. Owner will be required to provide income documentation.
Refer to Income Inclusions and Exclusions for further guidance to the types of incomes to be included or excluded when calculating gross annual income. See Attachment A for HOME and CDBG. See Attachment A-1 for CalHome. Refer to Asset Inclusions and Exclusions for further guidance to the types of assets to be included or excluded when calculating gross annual income. See Attachment B.
Owner-occupants housing and/or debt ratios are not considered, nor is a credit report required, as the funding provided creates no additional monthly financial obligation. If an owner-occupant has a mortgage, it is verified that all payments are current and that no late payments have been received in the past twelve months.
2.2. INCOME QUALIFICATION CRITERIA
Projected annual gross income of the applicant household will be used to determine whether they are above or below the published HCD income limits. Income qualification criteria for HOME and CDBG, 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 City of Merced Housing Rehabilitation Program Guidelines 11 household’s annual gross income. 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 of 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.
Housing and/or debt ratios are not considered as the funding provided creates no additional monthly financial obligation. If a homeowner has a mortgage, creditworthiness is verified by ensuring that all payments are current and that no late payments have been received in the past twelve months.
See Attachment A: HOME and CDBG 24 CFR Part 5 Annual Income Inclusions and Exclusions and Attachment A -1: CalHome Title 25 Section 6914 Annual Income inclusions and Exclusions (State)
B. ASSETS:
There is no asset limitation for participation in the Program. Income from assets is, however, 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: 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.
See Attachment B: Part 5 Annual Income Net Family Asset Inclusions and Exclusions
2.3. HOMEOWNER ELIGIBILITY AND RESIDENCY REQUIREMENTS
The Sponsor’s Housing Rehabilitation Program allows for owner-occupied properties to City of Merced Housing Rehabilitation Program Guidelines 12 participate in the Program. Owner-occupied units must be the owner’s principal place of residence. A photocopy of a recent utility bill will verify proof of occupancy. No unit to be rehabilitated will receive financial assistance if it is currently occupied by an over - income household or does not meet the eligibility standards outlined in these guidelines.
2.3.1 OWNER-OCCUPIED
A. Continued residency is monitored annually per Attachment F for the term of the loan. Occupancy will be verified by the submission of the following:
1. Proof of occupancy in the form of a copy of a current utility bill; and
2. Statement of unit's continued use as primary residence of the owner.
B. In the event that an homeowner sells, transfers title, or discontinues residence in the rehabilitated property for any reason, the loan becomes due and payable, unless the following conditions are met:
The homeowner who received the loan dies and the heir to the property meets income requirements and intends to occupy the home as his/her principal residence.
Upon approval of the Sponsor, the heir may be permitted to assume the loan at the rate and terms the heir qualifies for under current participation guidelines. If the heir does not meet applicable eligibility requirements, the loan is due and payable.
Note: Loans provided by CalHome are not assumable.
C. If a homeowner converts the property to a rental unit, or any commercial or non- residential use, the loan is due and payable, unless the loan was funded with CDBG and tenant and homeowner meet eligibility requirements as described in Section
2.3.2. below.
If the loan is funded with a CalHome Loan it is not transferable except under the following limited circumstances:
(a) The transfer of the Property to the surviving joint tenant by devise, descent or operation of the law, on the death of a joint tenant;
(b) A transfer of the Property where the spouse becomes an owner of the property; (c) A transfer of the Property resulting from a decree of dissolution of marriage, legal separation or from an incidental property settlement agreement by which the spouse becomes an owner of the Property; or
(d) A transfer to an inter vivos trust in which the Borrower is and remains the beneficiary and occupant of the property.
3.0. PROPERTY ELIGIBILITY
3.1. CONDITIONS
City of Merced Housing Rehabilitation Program Guidelines 13 A. No unit will be eligible if a household’s income exceeds the prescribed income limits listed in Attachment C.
B. Units to be rehabilitated must be located within the city limits of the City of Merced.
C. Property must contain a legal residential structure intended for continued residential occupancy.
D. All repair work will meet Local Building Code standards. At a minimum, health and safety hazards must be eliminated. For CDBG the priority will be the elimination of health and safety hazards. Sponsor may also require elimination of code deficiencies. When HOME funds are used for housing rehabilitation, the property must meet all applicable current codes, rehabilitation standards, ordinances, and zoning ordinances at the time of project completi on. However, if certain components of the house are sound and were built to code prescribed at the time of installation, no repair or alteration will be made to those c omponents.
Section 8 Housing Quality Standards may be required on rentals by Sponsor when CDBG funds are used.
3.2. ANTI-DISPLACEMENT POLICY AND RELOCATION ASSISTANCE
Tenants will be informed of their eligibility for temporary relocation benefits if occupancy during rehabilitation constitutes a danger to health and safety of occupants or public danger or is otherwise undesirable because of the nature of the project. Relocated persons will receive increased housing costs, payment for moving and related expenses and appropriate advisory services, as detailed in the Sponsor's "Residential Anti -displacement and Relocation Assistance Plan" (Attachment E).
Owner-occupants are not eligible for temporary relocation benefits, unless health and safety threats are determined to exist by the Program Operator. In cases where relocation is determined to be necessary by the Sponsor/Program Operator, assistance may be provided for actual costs incurred from the applicant’s loan proceeds or as a grant (see Section 4.4. for allowable grants) . HOME-funded projects will provide relocation assistance in the form of a grant, which shall be included in the maximum assistance amount.
Note: Relocation benefits are not a requirement under CalHome, but are acceptable and may be covered by loan proceeds.
City of Merced Housing Rehabilitation Program Guidelines 14 3.3. NOTIFICATION AND DISCLOSURES - Not required by CalHome
A. Occupants of units constructed prior to 1978 will receive proper notification of Lead-Based Paint (LBP) hazards as follows:
The Lead Hazard Information Pamphlet published by the EPA/HUD/Consumer Product Safety Commission will be given to all owners regardless of the cost of rehabilitation or paint test findings. If lead-based paint is found through testing or if presumed, a Notice of Lead Hazard Evaluation or Presumption will also be supplied.
When Lead hazards are present, a Notice of Lead Hazard Reduction Activity and a Lead Hazard Evaluation Report will also be provided (Attachment I).
B. Tenants located in properties that will receive housing rehabilitation will be provided a notice outlining their relocation rights and benefits (Attachment E).
4.0. THE PROGRAM LOAN
4.1. MAXIMUM AMOUNT OF PROGRAM ASSISTANCE
An eligible homeowner may qualify for the full cost of rehabilitation/reconstruction work needed to comply with State and local codes and ordinances. Maximum assistance shall not exceed the Sponsor’s County HOME Per-Unit Subsidy Limits at http://www.hcd.ca.gov/grants-funding/income-limits/state-and-federal-income-
limits.shtml.
See Attachment C for current limits. For CDBG-funded programs, the maximum assistance for rehabilitation/reconstruction will not exceed $320,000.
4.2. AFFORDABILITY PARAMETERS FOR HOMEOWNERS
A. Total indebtedness against property shall not exceed 100 percent of after-rehabilitation value as determined by “Estimates of value” or an appraisal, for CDBG or HOME projects. The exception for HOME loans is per HOME Management Memorandum 13-01 at http://www.hcd.ca.gov/grants-funding/active-funding/home.shtml#memos wherein the entire HOME assistance amount is granted rather than loaned, due to a lack of any after-rehabilitation equity based on existing loans on the property. An estimate of after-rehab value will be made prior to making a commitment of funds using the method outlined in Section 4.5. Note: This does not apply to CalHome projects.
B. HOME-funded units’ after-rehabilitation values shall not exceed the HOME Program’s Homeownership Value Limits for Sponsor’s County as updated by HUD and published on the HCD Website at http://www.hcd.ca.gov/grants-funding/income- limits/state- and-federal-income-limits.shtml. See Attachment C for current limits, which may reflect temporary waivers not published on the HCD Website.
For CalHome-funded Programs, the maximum after-rehab value of a home shall be set at 100% of the current median sales price of a single family home located in the county the CalHome Program is serving, which is established by comparable sales or information provided by the California Real Estate Association. https://www.car.org/en/marketdata/data/countysalesactivity
City of Merced Housing Rehabilitation Program Guidelines 15 C. Total indebtedness against property shall not exceed 105 percent of the after - rehabilitation value as determined by an appraisal for CalHome projects. An estimate of After-Rehab Value will be made prior to making a commitment of funds using the method outlined in Section 4.5. Note: This does not apply to HOME or CDBG projects.
D. Costs may be supplemented with personal financing, or with other loan or grant programs, which are sources of leverage for the Sponsor.
E. Any bid within 10% of the Program Operator’s estimate may be selected, otherwise an explanation must be provided to the file for a bid selected exceeding 10% of the estimate.
4.3. RATES AND TERMS
4.3.1. OWNER-OCCUPANTS
A. Homeowners are eligible for Deferred Payment Loans (DPL), at zero interest, evidenced by a Promissory Note and secured by a Deed of Trust, with no payback required for 30 years unless the borrower sells or transfers title or discontinues residence in the dwelling.
Payments may be made voluntarily on a DPL. Note: If it is determined by the Sponsor that repayment of a CalHome or CDBG 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;
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.
B. If the homeowner dies, and if the heir(s) to the property live(s) in the house and is/are income eligible, the heir(s) may be permitted, upon approval of the Sponsor, to assume the loan at the rate and terms the heir(s) qualifies for under current participation guidelines.
Note: CalHome loans are not assumable.
C. If the homeowner dies and the heir(s) is/are not income eligible, the loan becomes all due and payable.
D. If a homeowner converts the rehabilitated property to any residential-rental, commercial or non-residential use, the loan becomes all due and payable, unless they meet requirements outlined in Section 2.3.2.
E. As specified in the Rehabilitation Loan Agreement, all applicants who participate in the Program must maintain the property at post -rehabilitation conditions for the term of the loan. Should the property not be maintained accordingly, the loan shall be considered in default and becomes all due and payable, and if necessary, foreclosure proceedings will be initiated. A method of inspection will be established by the Sponsor.
City of Merced Housing Rehabilitation Program Guidelines 16 F. 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:
4.4. GRANTS
(i) a transfer where the spouse becomes an owner of the property; (ii) 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 (iii) a transfer into an inter vivos trust in which the Borrower is and remains the beneficiary and occupant of the property.
A. CDBG-funded programs may provide grants as follows:
1. A grant of up to $50,000 is available for any one of the following qualifying factors:
a) Senior Citizen - at least 62 years old; or
b) Handicapped – for only handicap modifications to a house with one or more physically handicapped occupants who would function more independently if such modifications were installed; or
c) Lowest Targeted Income Group – with gross annual income less than 50 percent of County median income; or
d) Equity maintenance – if financing rehabilitation entirely with a loan would cause indebtedness to exceed 100% of after-rehabilitation value; or
e) Curb, gutter and sidewalk – when curb, gutter and/or sidewalk are required by City code; or
f) Building permit, school fees, appraisals, property report/title insurance, building permits, termite report, land survey, grading plans, recording fees and/or flood insurance; or
g) Emergencies – failure of a major household component that would require the participant to live without basic plumbing, electrical, heating, cooling, or security. (These funds are not for use during a normal rehabilitation, they are for true emergency situations, such as a failed sewer line or water heater, blown electrical panel, etc.) City of Merced Housing Rehabilitation Program Guidelines 17 2. Grants of up to $10,000 are available for Fire Sprinkler installation and associated costs – for reconstruction projects, as required by CCR, Title 24, Part
2.5 of the 2010 California Residential Code.
3. Grants are available for the repair, replacement, or abandonment of domestic water wells and/or associated costs (such as water pump lowering) based on invoices from contracted well drillers and/or water pump installers. The Program Operator must approve a total cost estimate from a contracted well driller and/or water pump installer prior to financing approval to ensure cost reasonableness.
4. Grants of up to $7,500 are available for Asbestos containment and/or removal.
B. HOME and CDBG provide grants for all actual costs of lead-based paint evaluation and reduction activities.
C. HOME and CDBG provide grants for relocation assistance. See Relocation Assistance Plan, Attachment E.
1. Owner-Occupant – Limit of $5,000.
2. Residential Tenant – Assistance will be provided at the level necessary to comply with the Uniform Relocation Act (URA) and Section 104(d) of the Housing and Community Development Act of 1974. Note: HOME funds cannot be used for tenant-occupied units.
D. HOME-funded projects include grants, if necessary, to cover the costs of financing in excess of available equity. Available equity will be determined by subtracting the current total indebtedness from the after -rehabilitation value. Grants provided may be up to 25 percent of the applicable HUD Per -Unit Subsidy Limits established pursuant to 24 CFR 92.250 (a). This grant amount is in addition to any grant funds provided pursuant to Section 4.4.B. and 4.4.C.
E. Grants are not available in CalHome-funded programs.
4.5. APPRAISAL
A. The After-Rehab Value for rehabilitation projects is determined using the “Estimates of value” method. The Sponsor or Program Operator determines estimates of value based on the sale prices of at least three (3) comparable properties, sold within the last six months (within one year of the assistance date, which is the date the promissory note is signed), and located within one mile of the subject property. The participants’ file will include the estimate of value and document the basis for the value estimates.
The purpose of the “Estimates of value” is to determine that the After -Rehabilitation Value Limit of the housing unit will not exceed the permitted amount per HCD Program regulations (See Attachment C). If three comparable properties cannot be found, or if there is any question regarding the After-Rehab Value, the ARV will be determined by a licensed appraiser, as described in Section 4.5.B. below.
B. A licensed appraiser determines the After -Rehab Value for rehabilitation projects, when the “Estimates of value” method cannot be used. For rehabilitation projects the appraiser determines the value of the unit with the rehabilitation building plans and City of Merced Housing Rehabilitation Program Guidelines 18 specifications included. For HOME only, the cost of the appraisal will be paid by the Sponsor, not by the homeowner. The purpose of the appraisal is to determine that the after-rehabilitation value of the housing unit will not exceed the permitted amount per HCD Program regulations (See Attachment C), and that the combined loans will not exceed the maximum combined loan- to-value limit, as described in Section 4.2.A above.
C. The After -Rehab Value for reconstruction projects is determined by a licensed appraiser. The After -Rehab Value for reconstruction projects is determined by an appraisal completed off the building plans and specifications for the new home . For HOME only, the cost of the appraisal will be paid by the Sponsor, not by the homeowner. The purpose of the appraisal is to determine that the After-Rehabilitation Value Limit of the housing unit will not exceed the permitted amount per HCD Program regulations (See Attachment C).
4.6. INSURANCE
4.6.1. FIRE INSURANCE
The homeowner shall maintain fire insurance on the property for the duration of the Program loan(s). This insurance must be an amount adequate to cover all encumbrances on the property. The insurer must identify the Sponsor as Loss Payee for the amount of the Program loan(s). Evidence of this shall be provided to the Sponsor.
In the event the applicant fails to make the fire insurance premium payments in a timely fashion, the Sponsor at its option, may make such payments for a period not to exceed 60 days. The Sponsor may, in its discretion and upon the showing of special circumstances, make such premium payments for a longer period of time. Should the Sponsor make any payments, it may, in its sole discretion, add such payments to the principal amount that the applicant is obligated to repay the Sponsor under this Program. The premium may be paid by the Program loan for one year. Note: HOME and CDBG funds cannot be used to pay insurance cost beyond those identified as initial loan costs. Note: CalHome funds can not be used to pay insurance at any time.
4.6.2. FLOOD INSURANCE
For homes in a 100- year flood zone, the owner is required to maintain flood insurance in an amount adequate to secure the Program loan and all other encumbrances. This policy must designate the Sponsor as Loss Payee and a binder shall be provided to the Sponsor and maintained in the borrowers file. The premium may be paid by the Program loan for one year. Note: HOME funds cannot be used to pay insurance cost beyond those identified as initial loan costs. Note: CalHome funds can not be used to pay insurance at any time.
4.7. LOAN SECURITY
A. Loan security for all owner-occupied rehabilitation stick-built homes will be secured by the real property and improvements, and will also include a Deed of Trust, Promissory Note and Loan Agreement in favor of the Sponsor.
City of Merced Housing Rehabilitation Program Guidelines 19 B. A manufactured home in a mobile home park or on leased land that is not on a permanent foundation will be secured by an HCD 480.7 or an HCD 484 Statement of Lien, and will also include a Promissory Note and Loan Agreement.
C. Entering a subordinate lien is acceptable. However, the Sponsor will not subordinate a first lien position once established.
5.0. PROGRAM LOAN SERVICNG AND MAINTENANCE
5.1. PAYMENTS ARE VOLUNTARY
Borrowers may begin making voluntary payments at any time.
5.2. RECEIVING LOAN REPAYMENTS
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 recapture 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 appropriate Program Income Account, as required by all three HCD programs. The Program Sponsor will accept loan payments from borrowers prepaying deferred loans, from borrowers making payments in full upon sale or transfer of the property, and homeowners of tenant -occupied units. 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.
5.3. LOAN SERVICING POLICIES AND PROCEDURES
See Attachment F 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.
5.4. LOAN MONITORING PROCEDURES
Homeowners will be required to submit each of the following to the Sponsor at the time of annual occupancy verification per Attachment F:
• Proof of occupancy in the form of a copy of a current utility bill; City of Merced Housing Rehabilitation Program Guidelines 20 • Statement of unit's continued use as a residence;
• Declaration that other title holders do not reside on the premises; • Verification that Property Taxes are current; and
• Verification of current required insurance policies.
5.5. DEFAULT AND FORECLOSURE
If an owner defaults on a loan, and foreclosure procedures are instituted, they may be carried out according to the Program Foreclosure Policy adopted by the Sponsor, and attached to these guidelines as Attachment G.
5.6. SUBORDINATIONS
The Sponsor may approve a request to subordinate a loan, in order for the owner to refinance the property, under the following conditions:
A. The lien position of the Sponsor loan will remain the same or be advanced.
B. The new primary loan is no greater than the balance of the loan being refinanced, except the costs of refinancing the loan may be added to the principal balance.
C. The purpose of the new primary loan is to reduce the interest rate being paid and/or reduce the owner's payment.
D. The refinanced loan must have an impound account for taxes and insurances.
E. The refinancing terms must be acceptable to the Sponsor.
F. CDBG allows refinancing with CDBG funds in conjunction with only rehabilitation of the unit.
6.0. CONSTRUCTION
6.1. STANDARDS
A. All repair work will meet Local Building Code standards. At a minimum, health and safety hazards must be eliminated. For CDBG and CalHome the priority will be the elimination of health and safety hazards. Sponsor may also require elimination of code deficiencies. When HOME funds are used for housing rehabilitation, the property must meet all applicable current codes, rehabilitation standards, ordinances, and zoning ordinances at the time of project completion. However,
if certain components of the house are sound and were built to code prescribed at the time of installation, no repair or alteration will be made to those components.
Section 8 Housing Quality Standards may be required on rentals by Sponsor when CDBG funds are used.
City of Merced Housing Rehabilitation Program Guidelines 21 B. Contracting Process
1. Contracting will be done on a competitive basis.
2. The homeowner will be the responsible agent, but the Sponsor and/or its Program Operator will prepare the work write-up, prepare and advertise the bid package, and assist the owner in negotiating the construction contract.
3. The Sponsor does not warrant any construction work, or provide insurance coverage.
C. Approved Contractors
1. Contractors are required to be licensed with the State of California, and be active and in good standing with the Contractors’ License Board.
2. Contractors will be checked against HUD’s list of federally debarred contractors. No award will be granted to a contractor on this list.
3. Contractors must have public liability and property damage insurance, and worker’s compensation, unemployment and disability insurance, to the extent required by State law.
4. Contractor must agree to comply with all federal and state regulations.
D. Occupants of units constructed prior to 1978 will receive proper notification of Lead- Based Paint (LBP) hazards as identified in Section 3.3.A. Note: Units funded solely with CalHome funds are not required to comply with LBP regulations.
E. Units constructed prior to 1978 will also be inspected according to the following HUD regulations. Note: Units funded solely with CalHome funds are not required to comply with LBP regulations . For CDBG-funded programs, please refer to Chapter 20, Lead- Based Paint Requirements for guidance in the CDBG Grant Management Manual.
1. If the total amount of Federal assistance or the total amount of rehabilitation hard cost is up to and including $5,000, the following is required:
(a) Paint testing or presume LBP;
(b) Clearance of disturbed work areas; and
(c) Notifications listed in Section 3.3.A.
2. If the amount of Federal assistance or the total amount of rehabilitation hard cost is more than $5,000 up to and including $25,000, the following is required:
(a) Paint testing or presume LBP;
(b) Risk assessment; and
(c) Clearance of unit.
If LBP hazards are identified, interim controls will be implemented. This level will also require a notice of “Abatement of Lead Hazards Notification” at least five days prior to starting work.
3. If the amount of Federal assistance or the total amount of rehabilitation hard cost City of Merced Housing Rehabilitation Program Guidelines 22 is more that $25,000, the following is required:
(a) Items (a), (b), and (c) of 2. above;
(b) Abatement of all LBP hazards identified or produced; (c) Use of interim controls on exterior surfaces not disrupted by rehab; and all notices listed above in Sections 3.3.A. and 6.1.F.2.
4. All paint tests that result in a negative finding of lead-based paint are exempt from any and all additional requirements. If defective paint surfaces are found, they will be properly treated or abated. A State-certified Inspector/Assessor will perform all paint testing, risk assessments, and clearances. A trained supervisor may oversee interim controls; however, a certified supervisor and workers will perform all abatement.
6.2. ELIGIBLE CONSTRUCTION COSTS
“Rehabilitation” means, in addition to the definition in Section 50096 of the Health and Safety Code, repairs and improvements to a manufactured home necessary to correct any condition causing the home to be substandard pursuant to Section 1704 of Title 25, California Code of Regulations. Rehabilitation also includes room additions to alleviate overcrowding. Rehabilitation also means repairs and improvements where necessary to meet any locally-adopted standards used in local rehabilitation programs. Rehabilitation does not include replacement of personal property.
Rehabilitation includes reconstruction. Federal law and policy allows the use of HOME funds to demolish and reconstruct owner-occupied residential structures. Reconstruction is defined as the demolition and construction of a structure. The Sponsor and/or Program Operator must document that the reconstruction costs are less than the cost to rehabilitate the existing substandard housing. This will be done using the State’s CDBG Test for Reconstruction, for projects funded with CDBG funds; or, using the State’ s HOME Test for Reconstruction, for projects funded with HOME funds.
Additionally, the Sponsor must determine that the project’s value after reconstruction (housing and land combined) is less that the HOME Homeownership Value Limits for the Sponsor’s jurisdiction (see Attachment C).
The residential structure to be reconstructed must be a structure with cooking, eating, sleeping, and sanitation facilities which has been legally occupied as a residence within the preceding 12 months. Fifth wheels or recreational vehicles, for example, are not considered dwellings and therefore are not eligible under this Program.
Like for like requires that the structure being demolished must be replaced with a like structure (replace manufactured housing with manufactured housing, for example).
However, additions may be approved by the HCD Program when required by Codes/Ordinances or to alleviate overcrowding (see Attachment C).
Temporary relocation benefits must be planned for and budgeted into the total allowable subsidy for the project, but if required would be in the form of a grant.
City of Merced Housing Rehabilitation Program Guidelines 23 Depending on the outcome of the Statutory Worksheet (Environmental test), a reconstructed project may require Authority from the State before funds are committed to the project.
Allowable rehabilitation\reconstruction costs include:
A. Cost of building permits and other related government fees.
B. Cost of architectural, engineering, and other consultant services which are directly related to the rehabilitation of the property.
C. For CDBG and CalHome, costs associated with the repair, replacement, or abandonment of domestic water wells and/or associated costs (such as water pump lowering).
D. Rehabilitation or Replacement of a manufactured home not on a permanent foundation. Rehabilitation of a manufactured home may include the replacement of the unit with a used manufactured home and the cost to repair it, as long as the unit has been occupied and not used as a demonstration model. Should the unit meet the criteria for reconstruction a new manufactured home can be used for replacement and all cost associated with the purchase and transportation can be added to the loan. For CalHome and CDBG, manufactured housing on permanent foundations may be replaced by stick- built structures, only when the cost of the stick built is equal to or less than the replacement unit. All such request require prior approval by CalHome.
CalHome requires the following for manufactured housing/mobile home to stick-built replacements:
1) Verification that the owner of the mobile home is also the landowner. The registration certificate and a preliminary title report. Any past due registration fees must be paid.
2) Provide written justification as to why the mobile home is being replaced and not repaired, once approved by CalHome.
3. Ensure the new structure is “reasonable” for the size of the current household.
E. Owner-occupied rehabilitation activity delivery fees, pursuant to Section 7733(f), as reimbursement to the Sponsor for the actual costs of services rendered to the homeowner that are incidentally but directly related to the rehabilitation work (e.g. planning, engineering, construction management, including inspections and work write-ups).
F. Rehabilitation will address the following issues in the order listed.
Eligible costs are
included for each item.
1. Health and Safety Issues
Eligible costs include, but are not limited to, energy- related improvements, lead-based paint hazard evaluation and reduction activities, improvements for handicapped accessibility, and repair or replacement of major housing systems.
City of Merced Housing Rehabilitation Program Guidelines 24 Per the federal HOME Regulations at 24 CFR Part 92.251(b), Major Systems are:
• structural support
• roofing
• cladding and weatherproofing (e.g., windows, doors, siding, gutters) • plumbing
• electrical
• heating, ventilation, and air conditioning.
Upon project completion, each of the major systems must have a remaining useful life for a minimum of five (5) years, so these systems must be rehabilitated or replaced as part of the rehabilitation work in order to achieve this requirement.
A driveway may be considered part of rehabilitation if it is determined to be a health and safety issue or required by local ordinance.
2. Code and Regulation Compliance
Eligible costs include, but are not limited to, additional work required to rehabilitate and modernize a home to bring it into compliance with current building codes and regulations. Painting and weatherization are included.
3. Demolition
Eligible costs include, but are not limited to, the tear down and disposal of dilapidated structures when they are a part of the reconstruction of an affordable housing unit. If a garage or carport is detached, it may not be rehabilitated but may be demolished, if it is determined to be a health and safety issue.
4. Upgrades
Eligible costs include additional bedrooms and bathrooms if the need can be demonstrated per HUD’s or Sponsor’s overcrowding guidelines listed in Attachment C. The Program will not fund additions to a home for a den or family room, or for any luxury items.
The CalHome Program’s requirement is that a bedroom or bathroom can be added to omit overcrowding, and this is up to the Recipient to decide what is overcrowding. Overcrowding is defined in
https://www.hcd.ca.gov/community-development/building-blocks/housing-
needs/overpayment-overcrowding.shtml, as described in Attachement C.
5. General Property Improvements
Eligible costs include, but are not limited to: addition or replacement of an oven, stove, dishwasher, or fixture; replacing floor coverings; painting; and repair or City of Merced Housing Rehabilitation Program Guidelines 25 installation of fencing Determined to be health and safety issues or local ordinance.
All improvements must be physically attached to the property and permanent in nature. Non- code general property improvements (including fencing, landscaping, driveway, etc.) will be limited to 15 percent of the rehabilitation loan amount. Any cash contribution by the property owner will be considered a general property improvement and be included in this percentage. Luxury items are not permitted. Items such as stoves and dishwashers that are not built -in may be replaced due only to incipient failure or documented medical condition of the homeowner, and must be of moderate quality. (not applicable to CalHome)
For HOME and CalHome, replacement of a refrigerator is not allowed. For CalHome, repair or installation of fencing and/or general property improvements are not allowed unless they are health and safety or local ordinance related.
6. Rehabilitation Standards
All repair work related to health and safety conditions will meet Local Building Code standards. The priority will be the elimination of all health and safety hazards and code compliance, which is required for HOME-funded projects.
6.3. ELIGIBLE PROJECT COSTS
Examples of eligible project costs for all administrative expenses related to the paperwork for processing and insuring a loan application are listed below. For HOME, these costs are considered activity delivery costs and may not be charged to the homeowner’s loan.
• Appraisal
• Property Report/Title Insurance
• Building Plan
• Termite Report
• Land Survey
• Grading Plan
• Recording Fees
• Fire/Course of Construction Insurance
• Flood Insurance, as applicable (not allowed with CalHome or HOME funds)
Costs are based on charges currently incurred by the Sponsor, or its Program Operator, for these products and/or services. Except for HOME loans, any cost increases charged to the Sponsor/Program Operator for these products and/or services will be passed on to the homeowner and included in the loan. All fees are subject to change and are driven by the market.
City of Merced Housing Rehabilitation Program Guidelines 26 6.4. REPAIR CALLBACKS
Contractors will comply with State law regarding all labor and material warranties. All labor and material shall meet FHA minimum specifications.
7.0. EXCEPTIONS AND SPECIAL CIRCUMSTANCES
7.1. AMENDMENTS
The Sponsor may make amendments to these Participant Guidelines. Any changes made shall be in accordance with federal and state regulations, shall be approved by the Sponsor’s Loan Committee and/or local governing body and submitted to HCD for approval.
7.2. EXCEPTIONS
Any case to which a standard policy or procedure, as stated in the guidelines, does not apply or an applicant treated differently from others of the same class would be an exception.
7.2.1 PROCEDURES FOR EXCEPTIONAL CIRCUMSTANCES
A. The Sponsor or its Program Operator may initiate consideration of an exception and prepare a report. This report shall contain a narrative, including the Sponsor’s/Program Operator’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 decision.
8.0. DISPUTE RESOLUTION AND APPEALS PROCEDURES
8.1. PROGRAM COMPLAINT AND APPEAL PROCEDURE
Complaints concerning the Sponsor’s Rehabilitation Program should be made to the Program Operator first. If unresolved in this manner, the complaint or appeal shall be made in writing and filed with the Sponsor. The Sponsor will then schedule a meeting with the Sponsor’s 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 local governing body. Final appeal may be filed in writing with HCD within one year after denial or the filing of the Project Notice of Completion.
City of Merced Housing Rehabilitation Program Guidelines 27 8.2. GRIEVANCES BETWEEN PARTICIPANTS AND CONSTRUCTION
CONTRACTOR
Contracts signed by the contractor and the participant include the following clause, which provides a procedure for resolution of grievances:
Any controversy arising out of or relating to this Contract, or the breach thereof, shall be submitted to binding arbitration in accordance with the provisions of the California Arbitration Law, Code of Civil Procedure 1280 et seq., and the Rules of the American Arbitration Association. The arbitrator shall have the final authority to order work performed, to order the payment from one party to another, and to order who shall bear the costs of arbitration. Costs to initiate arbitration shall be paid by the party seeking arbitration. Notwithstanding, the party prevailing in any arbitration proceeding shall be entitled to recover from the other all attorney's fees and costs of arbitration.
City of Merced Housing Rehabilitation Program Guidelines 28 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 authorized 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);
(6) Welfare assistance payments.
City of Merced Housing Rehabilitation Program Guidelines 29 (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;
City of Merced Housing Rehabilitation Program Guidelines 30 (5) Income of a live-in aide, as defined in §5.403;
(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;
City of Merced Housing Rehabilitation Program Guidelines 31 (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 F
EDERAL REGISTER and distributed to PHAs and housing
owners 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.
City of Merced Housing Rehabilitation Program Guidelines 32 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,
(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 living in the dwelling) who is head of the family or spouse.
City of Merced Housing Rehabilitation Program Guidelines 33 ATTACHMENT B
PART 5 ANNUAL INCOME NET FAMILY ASSET INCLUSIONS AND EXCLUSIONS
This table presents the 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).
Statements from 24 CFR Part 5 – Last Modified: 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 Housing Rehabilitation Program Guidelines 34 ATTACHMENT B-1
Title 25 Section 6914 Gross Income Inclusions – For CalHome activities
(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 a 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).
City of Merced Housing Rehabilitation Program Guidelines 35 ATTACHMENT C
HOME PROGRAM HOMEOWNERSHIP VALUE LIMITS FOR MERCED COUNTY (HOME Value Limits as of 06/1/2022)
COUNTY NAME One-Family
MERCED 321,000
CALHOME MAXIMUM SALES PRICE / VALUE LIMIT
1 as established by comparable sales or information provided by the California Real Estate Association. https://www.car.org/en/marketdata/data/countysalesactivity
HOME PER-UNIT SUBSIDY LIMITS FOR MERCED COUNTY
(Limits are effective 3/17/2022)
O-BDR 1-BDR 2-BDR 3-BDR 4-BDR
$159,754 $183,132 $222,694 $288,094 $316,236
CALHOME SUBSIDY LIMIT (as of 5/30/2024 Administrative Notice No. 24-02) Maximum assistance per unit is established by Administrative Notice No. 24-02, the most current CalHome NOFA. Current limits are $200,000 for housing rehabilitation, and $250,000 for reconstruction projects.
HOME PROGRAM HOUSEHOLD INCOME LIMITS FOR MERCED COUNTY* State and Federal Income, Rent, and Loan/Value Limits California Department of Housing and Community Development
(Limits are effective 06/15/2022)
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
HCD 2022 INCOME LIMITS FOR CALHOME
ADJUSTED FOR FAMILY SIZE FOR MERCED COUNTY
Income
Level
Household Size
1 2 3 4 5 6 7 8
80% $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 and HOME Income, Value and Rent Limits”; for CalHome income limits, choose “Official State Income Limits”).
City of Merced Housing Rehabilitation Program Guidelines 36 SPONSOR STANDARDS FOR BEDROOM AND BATHROOM ADDITIONS TO
ALLEVIATE OVERCROWDING
Maximum No.
of Persons in
the Household
Number of
Bedrooms
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 3
10 5-BR 3
12 6-BR 4
• Opposite sex children under 6 years of age may share a bedroom, up to 2 children per bedroom.
• Opposite-sex children 6 years of age and older may have their own bedroom. • Children shall be permitted a separate bedroom from their parents. • Same-sex children of any age may share a bedroom, up to 2 children per bedroom. • Adults not in a partner relationship may have their own bedroom. • 4 or more people – a second bathroom may be added.
• 8 or more people – a third bathroom may be added.
• Same rules apply to mobile home units.
The chart above is used as a guide to overcrowding.
City of Merced Housing Rehabilitation Program Guidelines 37 ATTACHMENT D
HOUSING REHABILITATION MARKETING PLAN
SUMMARY
The Sponsor will continue its efforts to market the Housing Rehabilitation Program in a manner that will reach all community members.
All marketing related to the Housing Rehabilitation Program is publicized in both English, Spanish, and Hmong. All marketing materials include information identifying the Sponsor’s commitment to fair housing laws and affirmative marketing policy, and are widely distributed. Equal opportunity is emphasized in written materials and oral presentations. A record is maintained by the Sponsor identifying what marketing materials are used, and when and where they are distributed.
Forms of marketing may include fliers, brochures, newspaper ads, articles and public service announcements. Fliers and brochures are distributed at local government buildings, other public buildings and through the mail, as well as to businesses that assist those not likely to apply without special outreach.
Advertisements and articles are published in newspapers that are widely circulated within the community.
Established working relationships with local lending agencies also aid in informing the public by facilitating the distribution of informational fliers to households seeking financial assistance for repairs that are unable to obtain conventional financing.
Informational meetings are offered to potential participants to explain Program requirements. Often, minimal formal outreach efforts are required as the need for assistance generally exceeds funds available. However, marketing measures are actively performed in order to maintain a healthy interest list.
Characteristics on all applicants and participants are collected and compared with the Sponsor’s demographics. Should the Sponsor find that there are underserved segments of the population, a plan to better serve them will be developed and implemented.
MARKETING FORMS
Fliers
Brochures
Newspaper Ads and Articles
Public Service Announcements
Public Informational Meetings
MARKETING VENUES
Local Government Buildings
Local Public Services Buildings
Private Businesses
Lending Agencies
Real Estate Offices
Newspaper
Radio
Mail
City of Merced Housing Rehabilitation Program Guidelines 38 ATTACHMENT E
RESIDENTIAL ANTI-DISPLACEMENT AND TEMPORARY RELOCATION PLAN Version 2
The Housing and Community Development Act of 1974, as amended, and the National Affordable Housing Act of 1990, require all grantees of Community Development Block Grant (CDBG) funds or Home Investment Partnership (HOME) funds to follow a written Residential Anti -displacement and Relocation Assistance Plan (Plan) for any activities which could lead to displacement of occupants whose property is receiving funds from these or other federal funding source. Having been developed in response to both aforesaid federal legislations, this Plan is intended to inform the public of the compliance of the City of Merced (Sponsor) with the requirements of federal regulations 24 CFR 570.606 under state recipient requirements and Section 104(d) of the Housing and Community Development Act of 1974 and 24 CFR 92 of the HOME federal regulations. The Plan will outline reasonable steps, which the Sponsor will take to minimize displacement and ensure compliance with all applicable federal and state relocation requirements. The Sponsor’s governing body has adopted this plan via a formal resolution.
This Plan will affect rehabilitation activities funded by the U.S. Department of Housing and Urban Development (HUD) under the following program titles: HOME, CDBG, Urban Development Action Grant (UDAG), Special Purpose Grants, Section 108 Loan Guarantee Program, and such other grants as HUD may designate as applicable, which take place with in the Sponsor’s jurisdiction limits.
The Sponsor will provide permanent relocation benefits to all eligible “displaced” households either owner-occupied or renter-occupied units which are permanently displaced by the housing rehabilitation program (See Section E below.). In addition, the Sponsor will replace all eligible occupied and vacant occupiable low-income group dwelling units demolished or converted to a use other than low income group housing as a direct result of rehabilitation activities. This applies to all units assisted with funds provided under the Housing and Community Development Act of 1974, as amended, and as described in the Federal Regulations 24 CFR 570.496(a), Relocation, Displacement and Acquisition: Final Rule dated July 18, 1990 (Section 104(d)) and 49 CFR Part 24, Uniform Relocation Assistance (URA) and Real Property Acquisition Regulations Final Rule and Notice (URA) dated March 2, 1989.
All Sponsor programs/projects will be implemented in ways consistent with the Sponsor’s commitment to Fair Housing. Participants will not be discriminated against on the basis of race, color, religion, age, ancestry, national origin, sex, familial status, or handicap. The Sponsor will provide equal relocation assistance available 1) to each targeted income group household displaced by the demolition or rehabilitation of housing or by the conversion of a targeted income group dwelling to another use as a direct result of assisted activities; and 2) to each separate class of targeted income group persons temporarily relocated as a direct result of activities funded by HUD programs.
A. Minimizing Permanent Displacement and Temporary Relocation Resulting from Housing Rehabilitation or Reconstruction Activities
Consistent with the goals and objectives of activities assisted under the Act, the Sponsor will take the following steps to minimize the displacement of persons from their homes during housing rehabilitation or reconstruction funded by HUD programs:
1. Provide proper notices with counseling and referral services to all tenants so that they understand their relocation rights and receive the proper benefits. When necessary assist City of Merced Housing Rehabilitation Program Guidelines 39 permanently displaced persons to find alternate housing in the neighborhood.
2. Stage rehabilitation of assisted households to allow owner occupants and/or tenants to remain during minor rehabilitation.
3. Encourage owner investors to temporarily relocate tenants to other available safe and sanitary vacant units on the project site area during the course of rehabilitation or pay expenses on behalf of replaced tenants.
4. Work with area landlords, real estate brokers, and/or hotel/motel managements to locate vacancies for households facing temporary relocation.
5. When necessary, use public funds, such as CDBG funds, to pay moving costs and provide relocation/displacement payments to households permanently displaced by assisted activities.
B. Lead Based Paint Mitigation Which Causes Temporary Relocation:
On September 15, 2000, the Final Rule for Lead Based Paint Hazard Control went into effect. Among other things, it requires that federally -funded rehabilitation must use safe work practices so that occupants and workers can be protected from lead hazards. At no time should the tenant - occupant(s) be present in work areas or designated adjacent areas while LHC activities are taking place in any dwelling unit interior, common area, or exterior. As such, occupants may not be allowed to remain in their units during the time that lead-based paint hazards are being created or treated. Once work that causes lead hazards has been completed, and the unit passes clearance, the occupants can return. The tenant-occupants may not reoccupy a work area or adjacent area until post-lead hazard reduction clearance standards have been achieved and verified with laboratory results. The final rule allows for certain exceptions: programs:
1. The work will not disturb lead-based paint, or create dust-lead or soil-lead hazard; or
2. The work is on exterior only and openings are sealed to prevent dust from entering the home, the work area is cleaned after the work is completed, and the residents have alternative lead free entry; or
3. The interior work will be completed in one period of less than 8-daytime hours and the work site is contained to prevent the release of dust into other areas of the home; or
4. The interior work will be completed within five (5) calendar days, the work site is contained to prevent the release of dust, the worksite and areas within 10 feet of the worksite are cleaned at the end of each day to remove any visible dust and debris, and the residents have safe access to kitchen and bath and bedrooms.
If temporary relocation benefits are not provided because the Sponsor believes that the project meets one of the above criteria, then proper documentation must be provided in the rehabilitation project file to show compliance. It is up to the Sponsor to ensure that the owner occupant or tenant in the project does not get impacted by lead paint mitigation efforts. In most cases where lead paint mitigation is taking place, occupants (tenants or owners) will be strongly encouraged to relocate even for just a few days until a final lead clearance can be issued by a certified lead based paint assessor.
Occupants who are temporarily relocated because of lead based paint mitigation are entitled to the same relocation benefits as those who are relocated because of substantial rehabilitation or City of Merced Housing Rehabilitation Program Guidelines 40 reconstruction activities.
C. Temporary Relocation of Owner Occupants:
Owner occupants are not allowed to stay in units which are hazardous environments during lead based paint mitigation. When their home is having lead based paint mitigation work done which will not make it safe to live in, then they are eligible for temporary relocation benefits up to $5,000, which will be provided as a grant. In the same way, a unit requiring substantial rehabilitation (with or without lead based paint mitigation) which will not allow the family to access a bath or kitchen facility, or if the unit is being demolished and reconstructed, then the family will be eligible for temporary relocation benefits up to $5,000, which will be provided as a grant. In no case shall the grant for temporary relocation exceed $5,000 for any one owner occupant.
Owner occupants will be encouraged to move in with family or friends during the course of rehabilitation, since they are voluntarily participating in the Program. The housing rehabilitation loan specialist and/or the rehabilitation construction specialist will complete a temporary relocation benefits form (See Appendix C) to document that the owner occupant understands that they must relocate during the course of construction and what benefits they wish to be reimbursed for as part of their relocation.
D. Temporary Relocation of Residential Tenants:
If continued occupancy during rehabilitation is judged to constitute a substantial danger to health and safety of the tenant or the public, or is otherwise undesirable because of the nature of the project, the tenant may be required to relocate temporarily. The contract administrator or rehabilitation specialist will make determination of the need for temporary relocation. The temporary relocation period will not exceed 180 days. All conditions of temporary relocation will be reasonable. Any tenant required to relocate temporarily will be helped to find another place to live which is safe, sanitary and of comparable value and they have the first right to move back into the original unit being rehabilitated at the same rent or lower. He or she may move in with family and friends and still receive full or partial temporary assistance based on eligible cost incurred. The housing rehabilitation loan specialist and/or the rehabilitation specialist will ensure that each tenant-occupied unit under the Program will receive a General Information Notice (GIN) (as soon as possible after a loan application is received) and the tenant will receive a Notice of Non-displacement (after loan approval), and each tenant-occupied unit will have a temporary relocation benefits form completed for them. (See Appendix C). These notices will document that each tenant understands what their relocation rights are, and if they must relocate during the course of construction, that they receive the proper counseling and temporary relocation benefits.
A tenant receiving temporary relocation shall receive the following:
1. Increased housing costs (e.g. rent increase, security deposits) and
2. Payment for moving and related expenses, as follows:
a. Transportation of the displaced persons and personal property within 50 miles, unless the grantee determines that farther relocation is justified; b. Packing, crating, unpacking, and uncrating of personal property; c. Storage of personal property, not to exceed 12 months, unless the grantee determines that City of Merced Housing Rehabilitation Program Guidelines 41 a longer period is necessary;
d. Disconnection, dismantling, removing, reassembling, and reinstalling relocated household appliances and other personal property;
e. Insurance for the replacement value of personal property in connection with the move and necessary storage;
f. The replacement value of property lost, stolen or damaged in the process of moving (not through the fault of the displaced person, his or her agent, or employee) where insurance covering such loss, theft or damage is not reasonably available;
g. Reasonable and necessary costs of security deposits required to rent the replacement dwelling;
h. Any costs of credit checks required to rent the replacement dwelling; i. Other moving related expenses as the grantee determines to be reasonable and necessary, except the following ineligible expenses:
1) Interest on a loan to cover moving expenses; or
2) Personal injury; or
3) Any legal fee or other cost for preparing a claim for a relocation payment or for representing the claimant before the Grantee; or
4) Costs for storage of personal property on real property already owned or leased by the displaced person before the initiation of negotiations.
E. Rehabilitation Activities Requiring Permanent Displacement The Sponsor’s rehabilitation program will not typically trigger permanent displacement and permanent displacement activities fall outside of the scope of this plan. If a case of permanent displacement is encountered, then the staff responsible for the rehabilitation program will consult with Sponsor’s legal counsel to decide if they have the capacity to conduct the permanent displacement activity. If local staff does not have the capacity, then a professional relocation consultant will be hired to do the counseling and benefit determination and implementation. If local staff does wish to do the permanent displacement activity then they will consult and follow the HUD Relocation Handbook 1378.
F. Rehabilitation Which Triggers Replacement Housing
If the Sponsor’s rehabilitation program assists a property where one or more units are eliminated then under Section 104 (d) of the Housing and Community Act of 1974, as amended applies and the Sponsor is required to replace those lost units. An example of this would be a duplex unit which is converted into a single family unit. In all cases where rehabilitation activities will reduce the number of housing units in the jurisdiction, then the Sponsor must document that any lost units are replaced and any occupants of reduced units are given permanent relocation benefits. (This does not apply to reconstruction or replacement housing done under a rehabilitation program where the existing unit(s) is demolished and replaced with a structure equal in size without in loss number of units or bedrooms.)
Replacement housing will be provided within three years after the commencement of the demolition City of Merced Housing Rehabilitation Program Guidelines 42 or conversion. Before entering into a contract committing the Sponsor to provide funds for an activity that will directly result in such demolition or conversion, the Sponsor will make this activity public (through a noticed public hearing and/or publication in a newspaper of general circulation) and submit to the California Department of Housing and Community Development or the appropriate federal authority the following information in writing:
1. A description of the proposed assisted activity;
2. The location on a map and the approximate number of dwelling units by size (number of bedrooms) that will be demolished or converted to a use other than as targeted income group dwelling units as a direct result of the assisted activity;
3. A time schedule for the commencement and completion of the demolition or conversion;
4. The location on a map and the approximate number of dwelling units by size (number of bedrooms) that will be provided as replacement dwelling units;
5. The source of funding and a time schedule for the provision of the replacement dwelling units;
6. The basis for concluding that each replacement dwelling unit will remain a targeted income group dwelling unit for at least 10 years from the date of initial occupancy; and,
7. Information demonstrating that any proposed replacement of dwelling units with smaller dwelling units (e.g., a two- bedroom unit with two one- bedroom units) is consistent with the housing needs of targeted income group households in the jurisdiction.
The Program Operator for the Sponsor is responsible for tracking the replacement of housing and ensuring that it is provided within the required period. The Sponsor is responsible for ensuring requirements are met for notification and provision of relocation assistance, as described in Section 570.606, to any targeted income group displaced by the demolition of any dwelling unit or the conversion of a targeted income group dwelling unit to another use in connection with an assisted activity.
G. Record Keeping and Relocation Disclosures/Notifications The Sponsor will maintain records of occupants of federally -funded rehabilitated, reconstructed or demolished property from the start to completion of the project to demonstrate compliance with section 104(d), URA and applicable program regulations. Each rehabilitation project, which dictates temporary or permanent or replacement activities, will have a project description and documentation of assistance provided. (See sample forms in HUD Relocation Handbook 1378, Chapter 1, Appendix 11, form HUD-40054)
Appropriate advisory services will include reasonable advance written notice of (a) the date and approximate duration of the temporary relocation; (b) the address of the suitable, decent, safe, and sanitary dwelling to be made available for the temporary period; (c) the terms and conditions under which the tenant may lease and occupy a suitable, decent, safe, and sanitary dwelling.
Notices shall be written in plain, understandable primary language of the persons involved. Persons who City of Merced Housing Rehabilitation Program Guidelines 43 are unable to read and understand the notice (e.g. illiterate, foreign language, or impaired vision or other disability) will be provided with appropriate translation/communication. Each notice will indicate the name and telephone number of a person who may be contacted for answers to questions or other needed help.
The notices and process below is for only temporary relocation. If permanent relocation is involved then other sets of notice and noticing process and relocation benefits must be applied (See HUD relocation handbook 1378 for those forms and procedures) The Temporary Relocation Advisory Notices to be provided are as follows:
1. General Information Notice: As soon as feasible when an owner investor is applying for Federal financing for rehabilitation, reconstruction, or demolition, the tenant of a housing unit will be mailed or hand delivered a General Information Notice that the project has been proposed and that the tenant will be able to occupy his or her present house upon completion of rehabilitation.
The tenant will be informed that the rent after rehabilitation will not exceed current rent or 30 percent of his or her average monthly gross household income. The tenant will be informed that if he or she is required to move temporarily so that the rehabilitation can be completed, suitable housing will be made available and he or she will be reimbursed for all reasonable extra expenses. The tenant will be cautioned that he or she will not be provided relocation assistance if he or she decides to move for personal reasons. See Appendix A for sample notice to be delivered personally or by certified mail.
2. Notice of Non Displacement: As soon as feasible when the rehabilitation application has been approved, the tenant will be informed that they will not be permanently displaced and that they are eligible for temporary relocation benefits because of lead based paint mitigation or substantial rehabilitation, or reconstruction of their unit. The tenant will also again be cautioned not to move for personal reasons during rehabilitation, or risk losing relocation assistance. See Appendix B for sample notice to be delivered personally or by certified mail.
3. Dis
closure to Occupants of Temporary Relocation Benefits: This form is completed to document that the Sponsor is following it’s adopted temporary relocation plan for owner occupants and tenants. See Appendix C for a copy of the disclosure form.
4. Other Relocation/Displacement Notices: The above three notices are required for temporary relocation. If the Sponsor is attempting to provide permanent displacement benefits then there are a number of other forms which are required. Staff will consult HUD’s Relocation Handbook 1378 and ensure that all the proper notices are provided for persons who are permanently displaced as a result of housing rehabilitation activities funded by CDBG or other federal programs.
City of Merced Housing Rehabilitation Program Guidelines 44 APPENDIX A
Dear ,
On (date) , (property owner) submitted an application to the for financial assistance to rehabilitate the building which you occupy at (address) .
This notice is to inform you that, if the assistance is provided and the building is rehabilitated, you will not be displaced. Therefore, we urge you not to move anywhere at this time. (If you do elect to move for reasons of your choice, you will not be provided relocation assistance.)
If the application is approved and Federal assistance is provided for the rehabilitation, you will be able to lease and occupy your present apartment (or another suitable, decent, safe and sanitary apartment in the same building) upon completion of the rehabilitation. Of course, you must comply with standard lease terms and conditions.
After the rehabilitation, your initial rent, including the estimated average monthly utility costs, will not exceed the greater of (a) your current rent/average utility costs, or (b) 30 percent of your gross household income. If you must move temporarily so that the rehabilitation can be completed, suitable housing will be made available to you for the temporary period, and you will be reimbursed for all reasonable extra expenses, including all moving costs and any increase in housing costs.
Again, we urge you not to move. If the project is approved, you can be sure that we will make every effort to accommodate your needs. Because Federal assistance would be involved, you would be protected by the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended.
This letter is important and should be retained. You will be contacted soon. In the meantime, if you have any questions about our plans, please contact (name) , (title) , at (telephone number), (address) .
Sincerely,
(name)
(title)
City of Merced Housing Rehabilitation Program Guidelines 45 APPENDIX B
(date)
Dear :
On (date) , we notified you that the owner of your building had applied for assistance to make extensive repairs to the building. On (date) , the owner's request was approved, and the repairs will begin soon.
This is a notice of non- displacement. You will not be required to move permanently as a result of the rehabilitation. This notice guarantees you the following:
1. You will be able to lease and occupy your present apartment [or another suitable, decent, safe and sanitary apartment in the same building/complex] upon completion of the rehabilitation. Your monthly rent will remain until after construction is completed. If increased after construction is done, your new rent and estimated average utility costs will not exceed local fair market rents for your community. Of course, you must comply with all the other reasonable terms and conditions of your lease.
2. If you must move temporarily so that the repairs can be completed, you will be reimbursed for all of your extra expenses, including the cost of moving to and from the temporarily occupied unit and any additional housing costs. The temporary unit will be decent, safe and sanitary, and all other conditions of the temporary move will be reasonable.
Since you will have the opportunity to occupy a newly rehabilitated apartment, I urge you not to move. (If you do elect to move for your own reasons, you will not receive any relocation assistance.) We will make every effort to accommodate your needs. Because Federal assistance is involved, you are protected by the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended.
If you have any questions, please contact (name) , (title), at (phone #) , (address) .
Remember; do not move before we have a chance to discuss your eligibility for assistance. This letter is important to you and should be retained.
Sincerely,
(name and title)
City of Merced Housing Rehabilitation Program Guidelines 46 APPENDIX C
DISCLOSURE TO OCCUPANT OF TEMPORARY RELOCATION BENEFITS Top to be completed at time of loan application submittal or Home Visit
Property Address:
Rental Unit Owner-Occupied Unit
The rehabilitation loan specialist working on behalf of the City/County of has explained the temporary relocation services and benefits available under the current rehabilitation program relocation plan.
I/we have been advised that the City/County of rehabilitation construction specialist will inform me if I need to be temporarily relocated and will to assist me with scheduling any necessary moves and answer any questions about assistance as needed.
Acknowledged:
Occupant Signature Date Occupant Signature Date
Complete this at time of acceptance of Work Write Up with initials by occupant
The rehabilitation construction specialist for the City/County of has explained the Rehabilitation Scope of Work for our house and I/we agree that it will:
N ot require I/we to be relocated. (If initialed then STOP here and sign bottom.) Yes, I/we need to be temporarily relocated. (Complete rest of form if initialed.) Start date and duration of relocation:
Starting on or about we will move for all or part of the rehabilitation project.
Approximate length of temporary relocation: Number of days.
For temporary relocation, I/We elect to (check all that apply):
Relocate with friends and family.
Relocate into a suitable temporary housing unit identified by rehab specialist.
Relocate furnishings only into a temporary storage unit.
I/We have been told what our relocation benefits are and elect Not to be reimbursed for any eligible relocation expenses.
I/We have been told what our relocation benefits are and want to be reimbursed for:
By signing, occupant(s) acknowledge receipt of copy of this form:
Occupant Signature Date Occupant Signature Date
City of Merced Housing Rehabilitation Program Guidelines 47 ATTACHMENT F
LOAN SERVICING POLICIES AND PROCEDURES
FOR THE CITY OF MERCED
The City of Merced, hereafter called “Sponsor,” has adopted these policies and procedures in order to preserve its financial interest in properties, whose “Borrowers” have been assisted with public funds. The Sponsor 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 Sponsor 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 follow 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 Sponsor 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 Sponsor 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 Sponsor as loss payee. Except for HOME -funded loans, if Borrower fails to maintain the necessary insurance, the Sponsor 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 at time of installation of Borrower’s new insurance.
When a property is located in a 100-year floodplain, the Borrower will be required to carry the necessary flood insurance. A certificate of insurance for flood and for standard property insurance naming the Sponsor as a lender loss payee will be required at close of escrow. The Sponsor 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 Sponsor 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 City of Merced Housing Rehabilitation Program Guidelines 48 funded with HOME). Wherever possible, the Sponsor encourages Borrower to have impound accounts set up with their first mortgagee wherein they pay their taxes and insurance as part of their monthly mortgage payment.
3. Required Request for Notice of Default:
When the Borrower’s loan is in second position behind an existing first mortgage, it is the Sponsor's policy to prepare and record a "Request for Notice of Default" for each senior lien in front of Sponsor’s loan. This document requires any senior lienholder listed in the notice to notify the Sponsor of initiation of a foreclosure action. The Sponsor will then have time to contact the Borrower and assist them in bringing the first loan current. The Sponsor 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 Sponsor 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 Sponsor may require that Borrowers submit utility bills and/or other documentation annually to prove occupancy during the term of the loan. For CDBG, some loans may have income and housing cost evaluations, which require a household to document that they are not able to make repayments, 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.
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 Sponsor in writing of any change. Sponsor 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 may move and turn the property into a rental unit without notifying the Sponsor. 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 Sponsor’s Loan Committee (depends on the HCD program).
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 City of Merced Housing Rehabilitation Program Guidelines 49 property and is not low-income, the balance of the loan is due and payable. If the heir intends to act as an owner -investor, the balance of the loan may be converted to an owner/investor interest rate of three percent (3%) and loan term not to exceed twenty years and a rent limitation agreement is signed and recorded on title. All such changes are subject to the review and approval of the Sponsor’s Loan Committee.
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 Sponsor 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.
6. Requests for Subordinations:
When a Borrower wishes to refinance the property, they must request a subordination request to the Sponsor. The Sponsor will subordinate their loan only when there is no “cash out” as part of the refinance. 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 encumbrance on the property above traditional refinance transaction costs. Furthermore, the refinance should lower the housing cost of the household with a lower interest rate and the total indebtedness on the property should not exceed the current market value.
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 Sponsor.
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; or 4) default on senior loans, the Sponsor will send out a letter to the Borrower notifying them of the default situation. If the default situation continues, the Sponsor may start a formal process of foreclosure.
When a senior lienholder starts a foreclosure process and the Sponsor is notified via a Request for Notice of Default, the Sponsor, 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. Sponsor 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 Sponsor may cure the foreclosure and add the costs to the balance of the loan with a Notice of Additional Advance on the existing City of Merced Housing Rehabilitation Program Guidelines 50 note. HOME funds may not be used for this purpose, however.
If the Sponsor 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 sen ior lienholder in total and restructure the debt such that the unit is made affordable to the Borrower. If the Sponsor 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 Sponsor can afford to pay for the foreclosure process and pay off the senior lienholder and retain some or all of their investment.
If the Sponsor 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 Sponsor 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 Sponsor determines the reinstatement and maintenance of the property not to be cost effective and allows the senior lienholder to complete foreclosure, the Sponsor's lien may be eliminated due to insufficient sales proceeds.
Sponsor as Senior Lienholder
When the Sponsor 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 Sponsor may consider foreclosure. Sponsor’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 Sponsor?
3) Can the Borrower sell the property and pay off the Sponsor?
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 Sponsor 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 City of Merced Housing Rehabilitation Program Guidelines 51 to be remitted to the Sponsor to prevent foreclosure (such as, funds to bring a delinquent BMIR current or pay off a DPL).
At the end of thirty days, the Sponsor 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 Sponsor 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 Sponsor 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 Sponsor 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 Sponsor could contract with a local real estate broker to list and sell the home and use those funds for Program income-eligible uses.
City of Merced Housing Rehabilitation Program Guidelines 52 ATTACHMENT G
CITY OF MERCED
FORECLOSURE POLICY
Sponsor As Junior Lienholder
It is the City of Merced ’s (Sponsor’s) policy to prepare and record a "Request for Notice" on all junior liens (any lien after the first position) placed on properties financed by a loan.
This document requires any senior lienholder to notify the Sponsor of initiation (recordation of a "Notice of Default") of a foreclosure only. This is to alert the junior lienholder that they are to monitor the foreclosure with the senior lienholder. When the Sponsor is in a third position and receives notification of foreclosure from only one senior lienholder, it would be in their best interest to contact both senior lienholders regarding the status of their loans.
The junior lienholder may cancel the foreclosure proceedings by "reinstating" the senior lienholder. The reinstatement amount must be obtained by contacting the senior lienholder.
This amount will include all delinquent payments, late charges, advances (fire insurance premiums, property taxes, property protection costs, etc.), and foreclosure costs (fees for legal counsel, recordings, certified mail, etc.)
Once the Sponsor has the information on the reinstatement amount, staff must then determine if it is cost effective to protect their position by reinstating the senior lienholder, keeping them current by submitting a monthly payment thereafter, foreclosing on the property possibly resulting in owning the property at the end of foreclosure, protecting the property against vandalism, and paying marketing costs (readying the home for marketing, paying for yard maintenance, paying a real estate broker a sales commission).
If the Sponsor 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 Sponsor 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 Sponsor determines the reinstatement and maintenance of the property not to be cost effective and allows the senior lienholder to complete foreclosure, the Sponsor's lien may be eliminated due to insufficient sales proceeds.
Sponsor As Senior Lienholder
When the Sponsor is in a first position, or the 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 City of Merced Housing Rehabilitation Program Guidelines 53 the Sponsor may consider foreclosure. Sponsor staff will consider the following factors before initiating foreclosure:
- Can the loan be cured (brought current or paid off) by the owner without foreclosure?
- Can the owner refinance with a commercial lender and pay off the Sponsor?
- Can the owner sell the property and pay off the Sponsor?
- Does the balance warrant foreclosure? (If the balance is under $5,000, the expense to foreclose may not be worth pursuing.)
- 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 Sponsor may opt to initiate foreclosure. The owner 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 Sponsor to prevent foreclosure (such as, funds to bring a delinquent BMIR current or pay off a DPL).
At the end of thirty days, the Sponsor 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 Sponsor 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 Sponsor 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 Sponsor would then contact a real estate broker to market the home.
City of Merced Housing Rehabilitation Program Guidelines 54 ATTACHMENT H
CERTIFICATION OF OCCUPANCY
CITY OF MERCED
I/we declare as follows:
(Please Print Occupant’s Name(s))
That I/we am/are currently occupying as my/our principal place of residence the real property commonly known as:
(Address)
(City, State, Zip code)
Daytime Phone Number:
Executed on , 20 , at , CA
(Date) (City)
I/we declare under penalty of perjury that the foregoing is true and correct.
Signature(s) of all occupants:
Occupant:
Occupant:
Occupant:
Occupant:
Occupant:
City of Merced Housing Rehabilitation Program Guidelines 55 ATTACHMENT I
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. For multi-family housing, list at least the housing unit numbers and common areas and building components (including type of room or space, and the material underneath the paint).
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: For multi-family housing, list at least the housing unit numbers and common areas, bare soil locations, dust-lead location, and or building components (including type of room or space, and the materials underneath the paint) of lead-based paint and/or hazards presumed to be present.
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. For multi-family housing, list at least the housing unit numbers and common areas (for multifamily housing), bare soil locations, dust–lead locations, and/or building components (including type of room or space, and the material underneath the paint), and the types of lead-based paint hazard reduction activities performed at the location listed.
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 and Acknowledgement of Receipt of pamphlet Protection Your Family from Lead in Your Home.
Printed Name: Signature: Date:
Section 6: Contact Information Organization:
Contact Name: Contact Signature:
Date: Address: Phone: