Turlock City Council
November 18, 2025

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required to do, or respecting the size of any payment to Contractor during the performance of the Contract, such dispute shall be decided by the City Engineer, and the decision of the latter shall be final and conclusive. The Parties agree to comply with the claims resolution procedures set forth in Public Contract Code section 9204 when applicable.

(a) Claims Processing. Any submission of a claim by Contractor must comply with the requirements of Public Contract Code section 9204. Upon receipt of a claim pursuant to this section, City shall conduct a reasonable review of the claim and, within a period not to exceed forty-five (45) days, shall provide Contractor a written statement identifying what portion of the claim is disputed and what portion is undisputed. Upon receipt of a claim, the Parties may, by mutual agreement, extend the time period provided in this subdivision. Contractor shall furnish reasonable documentation to support the claim. Any payment due on an undisputed portion of the claim shall be processed and made within sixty (60) days after City issues its written statement. If Contractor disputes City’s written response, or if City fails to respond to a claim issued pursuant to this section within the time prescribed, Contractor may demand in writing an informal conference to meet and confer for settlement of the issues in dispute.

(b) Meet-and-Confer Conference. Upon receipt of a demand in writing sent by registered mail or certified mail, return receipt requested, City shall schedule a meet-and-confer conference within thirty (30) days for settlement of the dispute. Within ten (10) business days following the conclusion of the meet-and-confer conference, if the claim or any portion of the claim remains in dispute, City shall provide the claimant a written statement identifying the portion of the claim that remains in dispute and the portion that is undisputed. Any payment due on an undisputed portion of the claim shall be processed and made within sixty (60) days after the City issues its written statement.

(c) Nonbinding Mediation. Any disputed portion of the claim, as identified by Contractor in writing, shall be submitted to nonbinding mediation, with the Parties sharing the associated costs equally. The Parties shall mutually agree to a mediator within ten (10) business days after the disputed portion of the claim has been identified in writing. If the Parties cannot agree upon a mediator, each party shall select a mediator and those mediators shall select a qualified neutral third party to mediate with regard to the disputed portion of the claim. Each Party shall bear the fees and costs charged by its respective mediator in connection with the selection of the neutral mediator. If mediation is unsuccessful, the parts of the claim remaining in dispute shall be subject judicial review pursuant to Section 23 of this Agreement.

Notwithstanding any claim, dispute, or other disagreement between the Parties regarding performance under the Contract, the scope of work hereunder, or any other matter arising out of or related to, in any manner, the Contract, Contractor shall proceed diligently with performance of the Services in accordance with City's written direction, pending any final determination or decision regarding any such claim, dispute, or disagreement.

10. Permits and Care of Work: Contractor shall, at Contractor's expense, obtain all necessary permits and licenses for the construction of each improvement, give all necessary notices and pay all fees and taxes required by law, except those City fees set forth in Section 1 of the Special Provisions.

Contractor has examined the Project site and is familiar with its topography and condition, location of property lines, easements, building lines, and other physical factors and limitations affecting the performance of the Contract. Contractor, at Contractor's expense, shall obtain any permission necessary for any operations conducted off the property owned or controlled by City. Contractor

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shall be responsible for the proper care and protection of all materials delivered and work performed until completion and final acceptance.

11. Public Works and Payment of Prevailing Wage:

(a) Monitoring and Enforcement. In accordance with the provisions of Sections 1725.5, 1771.1, 1771.3, and 1771.4 of the Labor Code, all work performed under the Contract is subject to compliance monitoring and enforcement by the Department of Industrial Relations (“DIR”). All work performed by Contractor or its subcontractors under the Contract is subject to the requirements of Labor Code section 1720 et seq. It is not a violation of this section for an unregistered contractor to submit a bid that is authorized by Section 7029.1 of the Business and Professions Code or by Section 10164 or 20103.5 of the Public Contract Code , provided the contractor is registered to perform public work pursuant to Section 1725.5 of the Labor Code at the time the contract is awarded.

Contractor and its subcontractors shall furnish the records specified in Section 1776 of the Labor Code directly to the Labor Commissioner, at least monthly, in the format prescribed by the Labor Commissioner.

In accordance with the provisions of Section 1773.3 of the Labor Code, City shall provide notice to DIR of the award of this Contract within thirty (30) working days of the award. The notice shall be transmitted electronically in a format specified by DIR and shall include the name of Contractor, any subcontractor listed on the successful bid, the bid and contract award dates, the contract amount, the estimated start and completion dates, Project location, and any additional information DIR specifies that aids in the administration and enforcement of Section 1720 et seq. of the Labor Code.

(b) Wages & Hours of Employment: In the performance of the Services under the Contract, eight (8) hours shall be the maximum hours of labor on any calendar day, and the minimum wages of compensation of persons performing labor in the execution of this agreement shall be the current prevailing scale of wages determined by DIR for the community. Contractor shall forfeit as penalty Twenty-five and no/100ths Dollars ($25.00) to be paid to City for each workman employed in the execution of the Contract by Contractor or its subcontractor(s), for each calendar day during which any workman is required or permitted to labor more than eight (8) hours, in violation of provisions of Labor Code section 1810 et seq. Contractor shall post prevailing wage rates at the Project no later than the first day Contractor commences performance of the Services under the Contract.

12. Superintendence by Contractor: Contractor shall give personal superintendence to the work on the Project or have a competent foreman or superintendent satisfactory to the City Engineer on the Project at all times during construction and performance of work under the Contract, with authority to act for Contractor.

13. Inspection and Testing by City: Contractor shall at all times maintain proper facilities and provide safe access for inspection by City to all parts of the work performed on the Project and to the shops wherein the work is in preparation. Contractor shall notify City with sufficient time in advance of the manufacture of production materials to be supplied by Contractor under the Contract in order for City to arrange for mill or factory inspection and testing of same. Any materials shipped by Contractor from factory prior to having satisfactorily passed such testing and inspection by City's representative or prior to the receipt of notice from such representative that such testing and inspection

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will not be required shall not be incorporated on the Project. Contractor shall also furnish to City, in triplicate, certified copies of all factory and mill test reports upon request.

14. Conformity with Law and Safety: Contractor shall observe and comply with all applicable laws, ordinances, codes, and regulations of governmental agencies, including federal, state, municipal, and local governing bodies having jurisdiction over any or all of the scope of Services, including all provisions of the Occupational Safety and Health Act of 1979 as amended, all California Occupational Safety and Health Regulations, the California Building Code, the American with Disabilities Act, any copyright, patent, or trademark law, and all other applicable federal, state, municipal, and local safety regulations, appropriate trade association safety standards, and appropriate equipment manufacturer instructions. All Services performed by Contractor or its subcontractors must be in accordance with these laws, ordinances, codes, and regulations.

Contractor’s failure to comply with any laws, ordinances, codes, or regulations applicable to the performance of the Services hereunder shall constitute a breach of contract. In cases where standards conflict, the standard providing the highest degree of protection shall prevail.

If a death, serious personal injury or substantial property damage occurs in connection with the performance of the Contract, Contractor shall immediately notify City's risk manager by telephone.

If any accident occurs in connection with the Contract, Contractor shall promptly submit a written report to City, in such form as City may require. This report shall include the following information:
(a) name and address of the injured or deceased person(s); (b) name and address of Contractor’s subcontractor, if any; (c) name and address of Contractor’s liability insurance carrier; and (d) a detailed description of the accident, including whether any of City's equipment, tools, or materials were involved.

If a release of a hazardous material, substance, or waste occurs in connection with the performance of the Contract, Contractor shall immediately notify City. Contractor shall not store hazardous materials or hazardous waste within City limits without a proper permit from City.

15. Other Contracts: City may award other contracts for additional work on the Project, and Contractor shall fully cooperate with such other contractors and carefully fit Contractor's own work to that provided under other contracts as may be directed by the City Engineer. Contractor shall not commit or permit any act which will interfere with the performance of work by any other contractor.

16. Bonds: Concurrently with the execution hereof, Contractor shall furnish, on the forms provided herein as Exhibits D and E, respectively, corporate surety bonds to the benefit of City, issued by a surety company acceptable to City and authorized and admitted to do business in the state of California, as follows:

(a) Faithful Performance Bond. In an amount equal to at least one hundred percent (100%) of the Contract Price as security for the faithful performance of the Contract. The bond shall contain a provision that the surety thereon waives the provisions of Sections 2819 and 2845 of the Civil Code.

(b) Payment Bond. In an amount equal to at least one hundred percent (100%) of the Contract Price as security for the payment of all persons performing labor and furnishing materials in connection with the Contract. The bond shall be in accordance with the provisions of Sections 3225, 3226, and 3247 through 3252, inclusive, of the Civil Code and Section 13020 of the

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Unemployment Insurance Code of California. Said bond shall also contain a provision that the surety thereon waives the provisions of Sections 2819 and 2845 of the Civil Code.

The surety companies shall familiarize themselves with all provisions and conditions of the Contract.

It is understood and agreed that the surety or sureties waive the right of special notification of any modification or alterations, omissions or reductions, extra or additional work, extensions of time, or any other act or acts by City or its authorized agents under the terms of this Contract and failure to so notify the surety or sureties of such changes shall in no way relieve the surety or sureties of their obligations under the Contract.

17. Indemnification:

(a) Indemnity for Professional Liability. When the law establishes a professional standard of care for Contractor’s Services, to the fullest extent permitted by law, Contractor shall indemnify, protect, defend, and hold harmless City and any and all of its elective and appointive boards, officers, officials, agents, employees or volunteers (“City’s Agents”) from and against any and all losses, liabilities, damages, costs, and expenses, including legal counsel’s fees and costs but only to the extent Contractor or its subcontractors are responsible for such damages, liabilities and costs on a comparative basis of fault between Contractor or its subcontractors and City in the performance of professional services under the Contract. Contractor shall not be obligated to defend or indemnify City for City’s own negligence or for the negligence of others.

(b) Indemnity for other than Professional Liability. Other than in the performance of professional services and to the full extent permitted by law, Contractor shall indemnify, defend, and hold harmless City and any and City’s Agents from and against any liability, including liability for claims, suits, actions, arbitration proceedings, administrative proceedings, regulatory proceedings, losses, expenses or costs of any kind, whether actual, alleged or threatened, including legal counsel’s fees and costs, court costs, interest, defense costs, and expert witness fees, where the same arise out of, are a consequence of, or are in any way attributable to, in whole or in part, the performance of the Contract by Contractor or by any individual or agency for which Contractor is legally liable, including, but not limited to, officers, agents, employees, or subcontractors of Contractor.

18. Contractor's Insurance: Concurrently with the execution hereof, Contractor shall furnish City with satisfactory proof of carriage of the insurance required under this section, and that Contractor shall give City at least thirty (30) days prior notice of the cancellation of any policy during the Term of this contract. Contractor shall not commence work under this Agreement until Contractor has obtained City’s approval regarding all insurance requirements, forms, endorsements, amounts, and carrier ratings, nor shall Contractor allow any subcontractor to commence work on a subcontract until all similar insurance required of the subcontractor shall have been so obtained and approved.

Contractor shall procure and maintain for the duration of the Contract insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the Services hereunder by Contractor, its agents, representatives, employees or subcontractors. Failure to maintain or renew coverage or to provide evidence of renewal may constitute a material breach of the Contract. Any available insurance proceeds in excess of the specified minimum limits and coverage shall be available to City. The City of Turlock shall be named as a certificate holder.

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(a) Commercial General Liability Insurance. Contractor shall maintain commercial general liability insurance with coverage at least as broad as Insurance Services Office form CG 00 01, in an amount not less than Two Million Dollars ($2,000,000.00) per occurrence, Four Million Dollars ($4,000,000.00) general aggregate, and Two Million Dollars ($2,000,000.00) products and completed operations for bodily injury, personal injury, and property damage, including, without limitation, blanket contractual liability and coverage for explosion, collapse, and underground property damage hazards. The general aggregate limit shall apply separately to this Project or the general aggregate shall be doubled. The policy shall contain, or be endorsed to contain, the following provisions:

(1) City, its elective and appointive boards, officers, agents, employees, and volunteers are to be covered as additional insureds with respect to liability arising out of work or operations performed by or on behalf of Contractor, including materials, parts or equipment furnished in connection with such work or operations. The coverage shall be provided in the form of an endorsement to Contractor’s insurance (at least as broad as CG 20 10 for ongoing operations and CG 20 37 for products/completed operations for construction services). The City shall be named as a certificate holder on the Certificate of Insurance.

(2) For any claims related to the Project, Contractor’s insurance coverage shall allow and be endorsed primary insurance as respects City and any insurance or self- insurance maintained by City shall be excess of Contractor’s insurance and shall not contribute with it.

(3) In the event of cancellation, non-renewal, or material change that reduces or restricts the insurance coverage afforded to City under the Contract, the insurer, broker/producer, or Contractor shall provide City with thirty (30) days’ prior written notice of such cancellation, non-renewal, or material change.

(4) Coverage shall not extend to any indemnity coverage for the sole negligence of the additional insured in any case where an agreement to indemnify the additional insured would be invalid under Subdivision (b) of Section 2782 of the Civil Code.

(b) Workers’ Compensation Insurance. Contractor shall maintain Workers’ Compensation Insurance (Statutory Limits) and Employer’s Liability Insurance with limits of at least One Million Dollars ($1,000,000.00) each accident, One Million Dollars ($1,000,000.00) by disease- policy limit, and One Million Dollars ($1,000,000.00) by disease-each employee. Contractor shall submit to City, along with the Certificate of Insurance a Waiver of Subrogation endorsement in favor of the City, its offices, agents, employees, and volunteers.

(c) Commercial Automobile Liability Insurance. Contractor shall maintain commercial automobile liability insurance using ISO Business Auto Coverage form CA 00 01, or the exact equivalent, with a limit of no less than One Million Dollars ($1,000,000.00) each accident for owned, leased, hired, non-owned, and borrowed automobiles. The policy shall provide and be endorsed that the City, its officials, officers, agents, employees, and volunteers are included or named as additional insureds. If Contractor owns no vehicles, this requirement may be met through a non-owned auto coverage or an endorsement to the CGL policy.

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(d) Builder’s Risk Insurance. [Intentionally Omitted]

(e) Contractors Pollution Insurance. Pollution Coverage shall be maintained on a Contractors Pollution Liability form, or other form acceptable to City, providing coverage for liability arising out of sudden, accidental, and gradual pollution and remediation. The policy limit shall be no less than Two Million Dollars ($2,000,000.00) per claim. All activities contemplated in the Contract shall be specifically scheduled on the policy as “covered operations.” The policy shall provide coverage for the hauling of waste from the Project site to the final disposal location, including non- owned disposal sites. The policy shall provide and be endorsed to include the City, its officials, officers, agents, employees, and volunteers as insureds.

(f) Professional Liability Insurance. [Intentionally Omitted]

(g) Umbrella or Excess Policy. Contractor may use Umbrella or Excess Policies to provide the liability limits as required in this agreement. This form of insurance will be acceptable provided that all of the Primary and Umbrella or Excess Policies shall provide all of the insurance coverages herein required. The Umbrella or Excess policies shall be provided on a true “following form” or broader coverage basis, with coverage at least as broad as provided on the underlying Commercial General Liability and Automobile Liability insurance. No coverage or insurance policies maintained by the Additional Insureds, whether primary or excess, and which also apply to a loss covered hereunder, shall be called upon to contribute to a loss until the Contractor’s primary and excess liability policies are exhausted.

(h) Deductibles and Self-Insured Retentions. Upon request of City, any deductibles or self-insured retentions must be declared to and approved by City. At the option of City, either: (1) the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects City and City’s Agents; or (2) Contractor shall provide a financial guarantee satisfactory to City guaranteeing payment of losses and related investigations, claim administration, and defense expenses.

(i) Acceptability of Insurers. Insurance is to be placed with insurers with a current A.M.

Best’s rating of no less than A-:VII or with an insurer to which City has provided prior approval.

(j) Verification of Coverage. Contractor shall furnish City with original certificates and amendatory endorsements or copies of the applicable policy language effecting coverage required by this Section 18. All certificates and endorsements are to be received and approved by City before work commences. However, failure to obtain the required documents prior to the work beginning shall not waive Contractor’s obligation to provide them. City reserves the right, at any time, to require complete, certified copies of all required insurance policies and endorsements.

(k) Waiver of Subrogation. With the exception of professional liability, Contractor hereby agrees to waive subrogation which any insurer of Contractor may acquire from Contractor by virtue of the payment of any loss. The commercial general liability policy, automobile liability policy, and workers’ compensation policy shall be endorsed to contain a waiver of subrogation in favor of City for all work performed by Contractor, its agents, employees, independent contractors and subcontractors. Contractor shall provide written proof of waiver of subrogation in the Certificate of Insurance. Additionally, Contractor agrees to obtain any available endorsements that may be necessary to effectuate this waiver of subrogation.

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(l) Subcontractors. Contractor shall ensure all subcontractors furnish separate certificates and endorsements for each subcontractor. All coverages for subcontractors shall be subject to all of the requirements stated herein.

19. Ownership of Work Product: Any and all work, artwork, copy, posters, billboards, photographs, videotapes, audiotapes, systems designs, software, reports, designs, specifications, drawings, diagrams, surveys, source codes, professional or technical information or data, photographs, notes, letters, emails, or any original works of authorship created by contractor or its subcontractors or subcontractors in connection with Services performed under the Contract (“Work Product”) shall be works for hire as defined under Title 17 of the United States Code, and all copyrights in such works are the property of City. In the event that it is ever determined that any Work Product created by Contractor or its subcontractors or subcontractors under the Contract are not works for hire under U.S. law, Contractor hereby assigns all copyrights to such Work Product to City. With the prior written approval of the City Engineer, Contractor may retain and use copies of such Work Product for reference and as documentation of its experience and capabilities.

All Work Product shall become the property of City irrespective of where located or stored and Contractor agrees to deliver all such documents and information to City, without charge and in whatever form it exists, upon the Final Completion Date, as may be extended. Contractor shall have no ownership interest in such Work Product.

All Work Product of Contractor under the Contract, including written information which City will cause to be distributed for either internal or public circulation, including both preliminary and final drafts, shall be delivered to City in both printed and electronic form, or as may be specific in Exhibit A.

When the Contract is terminated, Contractor agrees to return to City all documents, drawings, photographs, and other written or graphic material, however produced, that it received from City or City’s Agents, in connection with the performance of its Services under the Contract. All materials shall be returned in the same condition as received.

20. Taxes: Payment of any taxes, including California sales and use taxes, levied upon the Contract, the transaction, or the Services or goods delivered pursuant hereto, shall be the obligation of Contractor. Contractor shall cooperate with City to the full extent possible to maximize the local allocation of California sales and use tax to City. Such cooperation shall include, but not be limited to:
(a) Use Tax Direct Payment Permits. Contractor shall apply for, obtain, and utilize, to the maximum extent reasonable, a California Use Tax Direct Payment Permit.

(b) Purchases of $500,000 or More. Contractor shall require vendors and suppliers located outside California from whom Contractor makes purchases of $500,000 or more to allocate the use tax to City.

21. Independent Contractor: At all times during the Term of the Contract, Contractor shall be deemed to be an independent contractor and shall be wholly responsible for the manner in which Contractor performs the Services required under the Contract. Contractor shall be liable for its acts and omissions, and those of its employees, contractors, subcontractors, representatives, volunteers,

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and its agents. Nothing contained herein shall be construed as creating an employment, agency, or partnership relationship between City and Contractor. City shall have the right to control Contractor only insofar as the result of Contractor’s Services rendered pursuant to the Contract; however, City shall not have the right to control the means by which Contractor accomplishes Services rendered pursuant to the Contract.

22. Contractor Not Agent: Except as City may specify in writing, Contractor shall have no authority, express or implied, to act on behalf of City in any capacity whatsoever as an agent.

Contractor shall have no authority, express or implied, pursuant to the Contract to bind City to any obligation whatsoever.

23. Arbitration of Disputes: All claims, disputes, and other matters in question between City and Contractor arising out of, or relating to, this Contract or the breach thereof, including claims of Contractor for extra compensation of Services related to the project, shall be decided by arbitration before a single arbitrator in accordance with the provisions of Sections 1281 through 1284.2 of the Code of Civil Procedure (the “Arbitration Laws”) unless the Parties mutually agree otherwise. The provisions of Section 1283.05 of the Arbitration Laws apply to any arbitration proceeding except as otherwise provided in the Contract. The arbitrator shall have authority to decide all issues between the Parties including, but not limited to, claims for extras, delay, and liquidated damages, if any, provided for the Contract, matters involving defects in the Services performed by Contractor or its subcontractors, rights to payment, and whether the necessary procedures for arbitration have been followed. The award rendered by the arbitrator shall be final and judgment may be entered upon it in accordance with applicable law in any court having competent jurisdiction thereof.

Notice of the demand for arbitration shall be filed in writing with the other Party. The demand for arbitration shall be made within a reasonable time after the claim, dispute, or other matter in question has arisen, and in no event shall it be made after the date when institution of legal or equitable proceedings based on such claim, dispute, or other matter in question would be barred by the applicable statute of limitations.

The parties shall jointly appoint an arbitrator within fifteen (15) calendar days of the date of giving the notice of the demand for arbitration. If the Parties are unable to jointly agree upon the appointment of an arbitrator within said fifteen (15) calendar day period, and do not agree in writing to extend said period for a fixed period, then either Party may seek to have the arbitrator appointed by the Superior Court of Stanislaus County in accordance with the Arbitration Laws.

If any proceeding is brought to contest the right to arbitrate and it is determined that such right exists, the losing Party shall pay all costs and attorney’s fees incurred by the prevailing Party.

In addition to the other rules of law which may be applicable to any arbitration hereunder, the following shall apply:

(a) Promptly upon the filing of the arbitration, each Party shall be required to set forth in writing and to serve upon each other Party a detailed statement of its contentions of fact and law.

(b) All Parties to the arbitration shall be entitled to the discovery procedures provided under Section 1283.05 of the California Code of Civil Procedure.

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(c) The arbitration shall be commenced and conducted as expeditiously as possible consistent with affording reasonable discovery as provided herein.

(d) These additional rules shall be implemented and applied by the arbitrator.

The costs of arbitration shall be borne by the Parties as determined by the arbitrator, but each Party shall bear its own attorney’s fees associated with the dispute with the other Party and to the arbitration.

All administrative remedies required under Section 9 of this Agreement or pursuant to Public Contract Code section 9204, or required by any other law, shall be exhausted prior to commencement of any arbitration under this Section 23.

24. Provisions Cumulative: The provisions of the Contract are cumulative, and in addition to and not in limitation of, any other rights or remedies available to City.

25. Notices: All notices shall be in writing and delivered in person or transmitted by certified mail, postage prepaid. Any Party hereto may at any time, by giving ten (10) days’ written notice to the other Party hereto, designate any other address in substitution of the address to which such notice or communication shall be given. Such notices or communications shall be given to the Parties at their addresses set forth below.

If to City: City of Turlock
Attn: City Engineer
156 S. Broadway, Suite 150
Turlock, CA 95380-5461

With courtesy copies to: City of Turlock, City Attorney’s Office Attn: George A. Petrulakis, City Attorney
156 S. Broadway, Suite 230
Turlock, CA 95380-5456

If to Contractor: Machado & Sons Construction, Inc.

Attn: Michael J. Machado
1000 S Kilroy Rd
Turlock Ca 95380

If to Contractor’s Sureties: _____________________
_____________________
_____________________
_____________________

26. City Contract Administrator: The City’s contract administrator and contact person for this Agreement is:

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Oscar Molina, E.I.T.

City of Turlock Engineering Division
156 S. Broadway, Suite 150
Turlock, California 95380-5461
Telephone: (209) 668-5520
E-mail: [email protected]

27. Interpretation: As used herein, any gender includes each other gender, the singular includes the plural and vice versa.

28. Antitrust Claims: Contractor or its subcontractors offer and agree to assign to City all rights, title, and interest to any causes of action under Section Four of the Clayton Act and the Cartwright Act concerning antitrust claims.

29. Use of City Project Number: Contractor or its subcontractors agree to use the aforementioned City project number on all maps, drawings, submittals, billing, and written correspondence that involve City staff or contracted consultants. Nothing in this section shall preclude Contractor or its subcontractors from using their own project numbers for their own internal use.

30. No Conflict of Interest: Contractor represents that no conflict of interest will be created under state or federal law by entering into or in carrying out the Contract.

31. Confidentiality: Contractor understands and agrees that, in the performance of Services under the Contract, or in the contemplation thereof, Contractor may have access to private or confidential information that may be owned or controlled by City and that such information may contain proprietary or confidential details, the disclosure of which to third parties may be damaging to City (“Confidential Information”). Contractor shall not, either during or after the Term, disclose to any third party any Confidential Information without the prior written consent of City. If City gives Contractor written authorization to make any such disclosure, Contractor shall do so only within the limits and to the extent of that authorization. Contractor may be directed or advised by the City Attorney on various matters relating to the performance of Services on the Project or on other matters pertaining to the Project, and in such event, Contractor agrees that it will treat all communications between itself, its employees, and its subcontracts as being communications which are within the attorney-client privilege.

32. Modification. No alteration, amendment, modification, or termination of the Contract shall be valid unless made in writing and executed by all Parties to the Contract.

33. Waiver: No covenant, term, or condition or the breach thereof shall be deemed waived, except by written consent of the Party against whom the waiver is claimed, and any waiver of the breach of any covenant, term, or condition shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other covenant, term, or condition.

34. Assignment: No Party to the Contract shall assign, transfer, or otherwise dispose of this Agreement in whole or in party to any individual, firm, or corporation without the prior written

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consent of the other Party. Subject to the foregoing provisions, the Contract shall be binding upon, and inure to the benefit of, the respective successors and assigns of the Parties hereto.

35. Authority: All Parties to this Agreement warrant and represent that they have the power and authority to enter into this Agreement and the names, titles, and capacities herein stated on behalf of any entities, persons, states, or firms represented or purported to be represented by such entities, person, states, or firms and that all former requirements necessary or required by state or federal law in order to enter into the Contract have been fully complied with. Further, by entering into this Agreement, neither Party hereto shall have breached the terms or conditions of any other contract or agreement to which such Party is obligated, which such breach would have a material effect hereon.

36. Governing Law: The Contract shall be governed and construed in accordance with the laws of the state of California.

37. Severability: If the Contract in its entirety is determined by an arbitrator or a court of competent jurisdiction to be invalid or unenforceable, the Contract shall automatically terminate as of the date of final entry of judgment. If any provision of the Contract shall be determined to be invalid and unenforceable, or if any provision of the Contract is rendered invalid or unenforceable according the terms of any federal or state statute, which becomes effective after the Effective Date of this Agreement, the remaining provisions shall continue in full force and effect and shall be construed to give effect to the intent of this Agreement.

38. Execution and Counterparts: This Agreement may be executed simultaneously and, in several counterparts, each of which shall be deemed an original but together shall constitute one and the same instrument. The Parties agree that this Agreement and any other documents to be delivered in connection herewith may be electronically signed utilizing services such as DocuSign and Nitro Sign, or by transmitting signatures in pdf or similar format, and that any electronic signatures appearing on this Agreement or such other documents are the same as handwritten signatures for the purposes of validity, enforceability, and admissibility.

39. Mandatory and Permissive: “Shall” and “will” and “agrees” are mandatory. “May” and “can” are permissive.

40. Headings: Headings used in this Agreement are for reference purposes only and shall not be considered in construing this Agreement.

41. Attorney’s Fees and Costs: Except as expressly provided for in Section 23 of this Agreement, if any action at law or in equity, including action for declaratory relief, is brought to enforce or interpret the provisions of the Contract, the prevailing Party shall be entitled to reasonable attorney’s fees and costs, which may be set by the court in the same action or in a separate action brought for that purpose, in addition to any other relief to which such Party may be entitled.

42. Necessary Acts and Further Assurances: The Parties shall, at their own cost and expense, execute and deliver such further documents and instruments and shall take such other actions as may be reasonably required or appropriate to evidence or carry out the intent and purposes of the Contract.

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43. Recitals: The recitals set forth above (“Recitals”) are true and correct and are hereby incorporated into and made part of this Agreement by this reference. In the event of any inconsistency between the Recitals and Section 1 through 43 of this Agreement, Sections 1 through 43 shall prevail.

[Signatures on Following Page]

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IN WITNESS WHEREOF, two identical counterparts of this agreement, consisting of a total of 38 pages, each of which counterparts shall for all purposes be deemed an original of said agreement, have been duly executed by the parties hereinabove named, on the day and year first herein above written.

MACHADO & SONS CITY OF TURLOCK, a municipal
CONSTRUCTION, INC., corporation
a California corporation

By: ____________________________ By: _____________________________ Susan E. Borrego, Interim City Manager
_______________________________
Print Name Date: ____________________________

Address:_________________________
_______________________________ APPROVED AS TO SUFFICIENCY:
_______________________________
Phone: __________________________ By: _____________________________ William D. Morris, RCE, PLS, City Engineer
Date: ___________________________
By: _____________________________
Christopher Fisher, Municipal Services
Director

Federal Tax ID or Social Security No:

APPROVED AS TO FORM:
_______________________________
By: _____________________________
George A. Petrulakis, City Attorney
DIR Registration Number:

_______________________________ ATTEST:

Affix Contractor’s Seal Here By: _____________________________ Nichole Fiez, City Clerk

CITY CONTRACT NO. 2026-071 22
CITY PROJECT NO. 25-041
Rev. 08/2025

EXHIBIT A
CONTRACTOR’S PROPOSAL FOR SERVICES

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CITY PROJECT NO. 25-041
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EXHIBIT B

PAYMENT BY FORCE ACCOUNT

For work paid by force account, the City Engineer compares City’s records to Contractor’s daily force account work report. When the City Engineer and Contractor agree on the contents of the daily force account work reports, the City Engineer accepts the report and City pays for the work. If the records differ, City pays for the work based only on the information shown on City’s records. If a subcontractor performs work at force account, work paid at force account will be accepted at an

CITY CONTRACT NO. 2026-071 29
CITY PROJECT NO. 25-041
Rev. 08/2025
additional 2 percent (2%) markup to the total cost of that work, including markups, as reimbursement for additional administrative costs. The markups specified in labor, materials, and equipment includes compensation for all delay costs, overhead costs, and profit. If an item's unit price is adjusted for work-character changes, City excludes Contractor’s cost of determining the adjustment. Payment for owner-operated labor and equipment is made at the market-priced invoice submitted.

A. Labor. Labor payment is full compensation for the cost of labor used in the direct performance of the work plus a fifteen percent (15%) markup, as set forth below, and consistent with California Labor Code section 1770 et seq. Force account labor payment consists of:

1. Employer payment to the worker for:

1.1 Basic hourly wage

1.2 Health and welfare

1.3 Pension

1.4 Vacation

1.5 Training

1.6 Other State and federal recognized fringe benefit payments

2. Labor surcharge percentage in Labor Surcharge and Equipment Rental Rates current during the work paid at force account for:

2.1 Workers' compensation insurance

2.2 Social security

2.3 Medicare

2.4 Federal unemployment insurance

2.5 State unemployment insurance

2.6 State training taxes

3. Subsistence and travel allowances paid to the workers

4. Employer payment to supervisors, if authorized

The fifteen percent (15%) markup consists of payment for all overhead costs related to labor but not designated as costs of labor used in the direct performance of the work including:

(a) Home office overhead
(b) Field office overhead
(c) Bond costs
(d) Profit
(e) Labor liability insurance
(f) Other fixed or administrative costs that are not costs of labor used in the direct performance of the work

B. Materials. Material payment is full compensation for materials the Contractor furnishes and uses in the work. The City Engineer determines the cost based on the material purchase price, including delivery charges, except:

CITY CONTRACT NO. 2026-071 30
CITY PROJECT NO. 25-041
Rev. 08/2025

1. A fifteen percent (15%) markup is added;

2. Supplier discounts are subtracted whether the Contractor takes them or not;

3. If the City Engineer believes the material purchase prices are excessive, City pays the lowest current wholesale price for a similar material quantity;

4. If Contractor procured the materials from a source Contractor wholly or partially own, the determined cost is based on the lower of the:

4.1 Price paid by the purchaser for similar materials from that source on Contract items; and

4.2 Current wholesale price for those materials;

5 If Contractor does not submit a material cost record within thirty (30) days of billing, the determined cost is based on the lowest wholesale price:

5.1 During that period

5.2 In the quantities used

C. Equipment Rental. Equipment rental payment is full compensation for:

1. Rental equipment costs, including moving rental equipment to and from the change order work site using its own power.

2. Transport equipment costs for rental equipment that cannot be transported economically using its own power. No payment is made during transport for the transported equipment.

3. Fifteen percent (15%) percent markup.

If Contractor wants to return the equipment to a location other than its original location, the payment to move the equipment must not exceed the cost of returning the equipment to its original location.

If Contractor uses the equipment for work other than work paid by force account, the transportation cost is included in the other work.

Before moving or loading the equipment, Contractor must obtain authorization for the equipment rental's original location.

The City Engineer determines rental costs:

1. Using rates in Labor Surcharge and Equipment Rental Rates:

1.1. By classifying equipment using manufacturer's ratings and manufacturer- approved changes.

1.2. Current during the work paid by force account.

CITY CONTRACT NO. 2026-071 31
CITY PROJECT NO. 25-041
Rev. 08/2025

1.3. Regardless of equipment ownership but City uses the rental document rates or minimum rental cost terms if:

1.3.1. Rented from equipment business Contractor does not own.

1.3.2. The Labor Surcharge and Equipment Rental Rates hourly rate is $10.00 per hour or less.

2. Using rates established by the City Engineer for equipment not listed in Labor Surcharge and Equipment Rental Rates. Contractor may submit cost information that helps the City Engineer establish the rental rate but City uses the rental document rates or minimum rental cost terms if:

2.1. Rented from equipment business Contractor does not own.

2.2. The City Engineer establishes a rate of $10.00 per hour or less.

3. Using rates for transport equipment not exceeding the hourly rates charged by established haulers.

Equipment rental rates include the cost of:

1. Fuel 7. Repairs and maintenance

2. Oil 8. Depreciation

3. Lubrication 9. Storage

4. Supplies 10. Insurance

5. Small tools that are not consumed by use 11. Incidentals

6. Necessary attachments

City pays for small tools consumed by use. The City Engineer determines payment for small tools consumed by use based on Contractor-submitted invoices.

The City Engineer may authorize rates in excess of those in the Labor Surcharge and Equipment Rental Rates if:

1. Contractor submits a request to use rented equipment

2. Equipment is not available from Contractor’s normal sources or from one of Contractor’s subcontractors

3. Rented equipment is from an independent rental company

4. Proposed equipment rental rate is reasonable

5. The City Engineer authorizes the equipment source and the rental rate before Contractor uses the equipment

D. Equipment on the Job Site. For equipment on the job site at the time required to perform work paid by force account, the time paid is the time:

1. To move the equipment to the location of work paid by force account plus an equal amount of time to move the equipment to another location on the job site when the work paid by force account is completed

2. To load and unload equipment

CITY CONTRACT NO. 2026-071 32
CITY PROJECT NO. 25-041
Rev. 08/2025

3. Equipment is operated to perform work paid by force account and:

3.1. Hourly rates are paid in 1/2-hour increments

3.2. Daily rates are paid in 1/2-day increments

E. Equipment Not on the Job Site Required for Original-Contract Work. For equipment not on the job site at the time required to perform work paid by force account and required for original- Contract work, the time paid is the time the equipment is operated to perform work paid by force account and the time to move the equipment to a location on the job site when the work paid by force account is completed.

The minimum total time paid is:

1. 1 day if daily rates are paid

2. 8 hours if hourly rates are paid

If daily rates are recorded, equipment:

1. Idled is paid as 1/2 day

2. Operated four (4) hours or less is paid as 1/2 day

3. Operated four (4) hours or more is paid as one (1) day

If the minimum total time exceeds eight (8) hours and if hourly rates are listed, City rounds up hours operated to the nearest 1/2-hour increment and pays based on the hours shown in the following table.

The table does not apply when equipment is not operated due to breakdowns, in which case rental hours are the hours the equipment was operated.

Equipment Rental Hours
Hours
operated
Hours
paid

0.0 4.00

0.5 4.25

1.0 4.50

1.5 4.75

2.0 5.00

2.5 5.25

3.0 5.50

3.5 5.75

4.0 6.00

4.5 6.25

5.0 6.50

5.5 6.75

6.0 7.00

6.5 7.25

7.0 7.5

7.5 7.75
≥8.0 hours
used

CITY CONTRACT NO. 2026-071 33
CITY PROJECT NO. 25-041
Rev. 08/2025

F. Equipment Not on the Job Site Not Required for Original-Contract Work. For equipment not on the job site at the time required to perform work paid by force account and not required for original-Contract work, the time paid is the time:

1. To move the equipment to the location of work paid by force account plus an equal amount of time to return the equipment to its source when the work paid by force account is completed

2. To load and unload equipment

3. Equipment is operated to perform work paid by force account

G. Non-Owner-Operated Dump Truck Rental. Contractor shall submit the rental rate for non- owner-operated dump truck rental to City. The City Engineer shall determine the payment rate.

Payment for non-owner-operated dump truck rental is for the cost of renting a dump truck, including its driver. For the purpose of markup payment only, the non-owner-operated dump truck is rental equipment and the owner is a subcontractor.

The above markups shall constitute full compensation for all home office overhead, field office overhead, bond costs, profit, labor liability insurance, and other fixed or administrative costs that are not costs specifically designated as cost or equipment rental as stated above. The total payment made as provided above shall be deemed to be the actual cost of the work and shall constitute full compensation therefor.

When extra work to be paid for on a force account basis is performed by a subcontractor, an additional markup of 2 percent (2%) will be added to the total cost of that extra work including all markups specified in this Section. The additional 2 percent (2%) markup shall reimburse Contractor for additional administrative costs, and no other additional payment will be made by reason of performance of the extra work by a subcontractor.

CITY CONTRACT NO. 2026-071 34
CITY PROJECT NO. 25-041
Rev. 08/2025

EXHIBIT C
WORKERS’ COMPENSATION INSURANCE CERTIFICATION

Pursuant to Section 18(b) of the Agreement, Contractor certifies as follows:

I am aware of the provisions of Section 3700 of the Labor Code which require every employer to be insured against liability for worker’s compensation or to undertake self-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the work of this contract.

Signed: Date:

(Typed or Printed Name)

Business Address (Street Address, City, State & Zip Code):

Business Phone: ( )

CITY CONTRACT NO. 2026-071 35
CITY PROJECT NO. 25-041
Rev. 08/2025

EXHIBIT D

PERFORMANCE BOND

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the City of Turlock, State of California, has awarded to Machado & Sons Construction, Inc., hereinafter designated as the “Principal,” a contract for Project No. 25-41, “City Utility Trench Repair 2025”; and,

WHEREAS, said Principal is required under the terms of said contract to furnish a bond for the faithful performance of said contract.

NOW, THEREFORE, we the Principal, and as Surety, are held and firmly bound unto the City of Turlock in the penal sum of _____________________________________ ($_____________), lawful money of the United States for the payment of which sum well and truly to be made, we bind ourselves, our heirs, executors, administrators, successors, or assigns jointly and severally, firmly by these presents.

THE CONDITION OF THIS OBLIGATION IS SUCH, that if the above bounden Principal, or Principal’s heirs, executors, administrators, successors, or assigns, shall in all things stand to and abide by, and well and truly keep and perform the covenants, conditions, and agreements in said contract and any alteration thereof made as therein provided, on the Principal’s part, to be kept and performed at the time and in the manner therein specified and in all respects according to their true intent and meaning; and shall defend, indemnify and save harmless the City of Turlock, its officers and agents as therein stipulated, then this obligation shall become null and void; otherwise it shall be and remain in full force and virtue.

And the Surety, for value received hereby stipulates and agrees that, in accordance with the Plans, Standard Specifications, Special Provisions, and other contract documents, no change, extension of time, alteration, or addition to the terms of the contract, or to the work to be performed hereunder, or to the specifications accompanying the same shall in anywise affect its obligations on this bond, and it does hereby waive notice of any such change, extension of time, alteration of additions to the terms of the Contract to the work, or to the specifications.

The City of Turlock reserves the right to refuse use of any Contractor assigned by any surety to complete the work.

[Signatures on Following Page]

CITY CONTRACT NO. 2026-071 36
CITY PROJECT NO. 25-041
Rev. 08/2025
IN WITNESS WHEREOF, the above-bound parties have executed this instrument under their seals this __________ day of _______________, 20__, the name and corporate seals of each corporate party being hereto affixed and these presents duly signed by its undersigned representative, pursuant to authority of its governing body.

(Corporate Seal) Principal

By

Title

(Attach Notarial Acknowledgment)

(Corporate Seal) Surety

Address

Phone No.: ( ) Fax No.: ( )

By
Attorneys-in-Fact

Title

(Attach Notarial Acknowledgment)

NOTE TO SURETY COMPANY: There must be submitted a certified copy of unrevoked resolution of authority for the attorneys-in-fact.

(Seal) Witness

Approved as to form:

Risk Manager

CITY CONTRACT NO. 2026-071 37
CITY PROJECT NO. 25-041
Rev. 08/2025

EXHIBIT E

PAYMENT BOND

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the City of Turlock, a municipal corporation, has awarded to Machado & Sons Construction, Inc., hereinafter designated as the “Principal”, a contract for Project No. 25-041, “City Utility Trench Repair 2025”; and

WHEREAS, said Principal is required to furnish a bond in connection with said contract, to secure payment of claims of laborers, mechanics, or materialmen employed on work under said contract, as provided by law.

NOW, THEREFORE, we the undersigned Principal and Surety are held and firmly bound unto the City of Turlock in the sum of ____________________________________________ ($_________), said sum being equal to the estimated amount payable by said City of Turlock under the terms of the contract, for which payment well and truly to be made, we bind ourselves, our heirs, executors, administrators, successors, or assigns jointly and severally, firmly by these presents.

THE CONDITIONS OF THIS OBLIGATION ARE SUCH that if said Principal, or Principal’s heirs, executors, administrators, successors, or assigns, or subcontractors shall fail to pay for any material, provisions, provender, or other supplies, implements, or machinery used in, upon, for or about the performance of the work contracted to be done, or for any work or labor thereon of any kind, or for amounts due under the Unemployment Insurance Code with respect to such work or labor, or for any amounts required to be deducted, withheld, and paid over to the Franchise Tax Board from these wages of employees of the Contractor and Contractor’s subcontractors pursuant to the Revenue and Taxation Code, with respect to such work and labor, the Surety or Sureties hereon will pay for the same in an amount not exceeding the sum specified in this bond, otherwise the above obligation shall be void. In case suit is brought upon this bond, said Surety will pay a reasonable attorney’s fee to be fixed by the court.

This bond shall inure to the benefit of any and all persons, companies, and corporations entitled to file claims under Section 3138 of the Civil Code of the State of California so as to give a right of action to them or their assigns in any suit brought upon this bond.

Said Surety, for value received, hereby stipulates and agrees that, in accordance with the Plans, Standard Specifications, Special Provisions, and other Contract Documents, no change, extension of time, alteration or addition to the terms of the contract, or to the work to be performed there under, or to the specifications accompanying the same, shall in anywise affect its obligations on this bond, and it does hereby waive notice of any such change, extension of time, alteration or addition to the terms of the contract, or to the work, or to the specifications.

[Signatures on Following Page]

CITY CONTRACT NO. 2026-071 38
CITY PROJECT NO. 25-041
Rev. 08/2025
IN WITNESS WHEREOF, the above-bound parties have executed this instrument under their seals this ___________ day of ________________, 20__, the name and corporate seals of each corporate party being hereto affixed and these presents duly signed by its undersigned representative, pursuant to authority of its governing body.

(Corporate Seal) Principal

By

Title

(Attach Notarial Acknowledgment)

(Corporate Seal) Surety

Address

Phone No.: ( ) Fax No.: ( )

By
Attorneys-in-Fact

Title

(Attach Notarial Acknowledgment)

NOTE TO SURETY COMPANY: There must be submitted a certified copy of unrevoked resolution of authority for the attorneys-in-fact.

(Seal) Witness

Approved as to form:

Risk Manager

City Council Staff Report
November 18, 2025

From: Christopher Fisher, Municipal Services Director
Prepared by: Janine Lee, Associate Engineer
Agendized by: Susan E. Borrego, Interim City Manager

1. ACTION RECOMMENDED:

Motion: Approving Contract Change Order No. 2 between the City of Turlock and SoCal Pacific Construction, Corp. dba National Coating & Lining Company for City Project No. 23- 027, “Secondary Clarifier No. 4 Recoating” in the amount of $16,937.00 bringing the contract total to $290,510.00

2. NARRATIVE:

The Regional Water Quality Control Facility includes five secondary clarifiers. The secondary clarifiers are used to separate microorganisms so that just clear water remains.

The clear water that flows out of the top of the clarifier is sent along for disinfection.

Secondary Clarifier No. 4 was constructed approximately 30 years ago. The corrosive wastewater environment has resulted in corrosion of various metal surfaces associated with Secondary Clarifier No. 4. The scope of City Project No. 23-027 "Secondary Clarifier No. 4 Recoating" includes:
• Remove by abrasive blasting the existing coating system on the interior metal work (rake arms, skimmer arms, bridge, etc)
• Spot repair and overcoat all exterior metal work (surfaces above immersion) • Apply new coating system to all clarifier interior metal work, above grade piping and valves within the clarifier, and all piping associated with the scum box • Apply new coating system on all exterior surfaces of the Return Activated Sludge (RAS) pump station above-ground equipment

The project specifications required that above-ground equipment surfaces be prepared by water blasting. During construction, staff observed that surface preparation by water blasting alone was not sufficient to remove the existing asphaltic coating on the equipment. Full removal of the existing coating system is needed to provide proper adhesion of the specified protective coating.

Change Order No. 2 in the amount of $16,397.00 includes additional work by National Coating & Lining (NCL) to perform abrasive blasting on the above-ground equipment in order to remove the existing asphaltic coatings. An additional seven (7) working days are also requested by the Contractor in order to perform the new work.

It is necessary to approve this change order item to ensure that the above-ground equipment is coated properly with a new coating system.

Project Summary:

Agenda Staff Report
11/18/2025

The approved contingency amount for change orders was $21,764 at the time of the award of bid. Change Order No. 2 exceeds the approved contingency amount and requires City Council approval in accordance with the change order policy established in Council Resolution No. 2025-007.

3. FISCAL IMPACT / BUDGET AMENDMENT:

No General Fund money was used for this project.

The total estimated project costs are displayed below:

The project account is 410-51-534.43363. There are sufficient funds in the project account for Change Order No. 2.

4. ENVIRONMENTAL DETERMINATION:

This project is exempt from California Environmental Quality Act (CEQA) pursuant to Section 15301 (Existing Facilities) as this project involves negligible or no expansion or use of the existing facilities.

5. ATTACHMENTS:

1. Change Order No. 2

Susan Borrego, Interim City Manager

City Council Staff Report
November 18, 2025

From: Christopher Fisher, Municipal Services Director
Prepared by: Christopher Fisher, Municipal Services Director Agendized by: Susan E. Borrego, Interim City Manager

1. ACTION RECOMMENDED:

Motion: Authorizing the Interim City Manager to execute a Memorandum of Understanding with the Stanislaus Regional Water Authority regarding the preparation of a Joint 2025 Urban Water Management Plan

2. NARRATIVE:

Staff recommends that the Council authorize the Interim City Manager to enter into a Memorandum of Understanding (MOU) with the Stanislaus Regional Water Authority (SRWA) for the preparation of a Joint 2025 Urban Water Management Plan (UWMP), to be completed by West Yost Associates (West Yost).

In accordance with the State of California Water Code Section 10620 et seq., every urban water supplier must prepare, adopt, and/or update its UWMP every five years—by July 1 of years ending in six or one—and submit it to the Department of Water Resources (DWR).

Each agency’s UWMP must include the following items:
• An assessment of the reliability of water sources over a 20-year planning time frame • A description of demand management measures
• A water shortage contingency plan
• A discussion of the use and planned use of recycled water On May 25, 2021, the Turlock City Council formally adopted the 2020 Urban Water Management Plan, completing the update as a single-agency submission, which will require the next update in 2026.

3. FISCAL IMPACT / BUDGET AMENDMENT:

SRWA will serve as the contracting agency with West Yost for preparation of the Joint UWMP. All work described in the MOU is already included within the scope of services under SRWA’s existing Program Management Services contract with West Yost.

The total cost for City of Turlock for preparing a Joint UWMP is $99,401, which will be expensed to Fund 420 (Water), account number 420-52-550.43320 "Special Services/Projects". By preparing a Joint UWMP, the SRWA and the City of Turlock anticipate saving a collective $51,226. Turlock will specifically save $41,525 by participating in the Joint Turlock/SRWA UWMP.

4. ENVIRONMENTAL DETERMINATION:

This action is not subject to the provisions of the California Environmental Quality Act

Agenda Staff Report
11/18/2025

(CEQA) in accordance with Section 15378(b)(5) of the CEQA guidelines because it consists of “organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment” and therefore is not considered a project.

5. ATTACHMENTS:

1. MOU with SRWA for the UWMP

MEMORANDUM OF UNDERSTANDING

Between the Stanislaus Regional Water Authority and the City of Turlock Regarding the Preparation of a Joint 2025 Urban Water Management Plan This Memorandum of Understanding (MOU) is entered into this ___ day of ____________, 2025, by and between the Stanislaus Regional Water Authority (SRWA), a joint powers authority organized under California law, and the City of Turlock, a California municipal corporation, collectively referred to as the “Parties” and individually as a “Party.”

1. Purpose
The purpose of this MOU is to document the intent of SRWA and the City of Turlock to jointly prepare a single 2025 Urban Water Management Plan (UWMP), herein referred to as the “Joint UWMP”, in accordance with the Urban Water Management Planning Act (California Water Code §§ 10610–10657).

This joint effort is intended to increase efficiency, reduce redundancy, and realize cost savings.

2. Background
SRWA, formed by the Cities of Ceres and Turlock, is a wholesale water supplier providing treated Tuolumne River water to its member agencies. SRWA began delivering water in November 2023 and was required to prepare its first UWMP, the 2020 UWMP, within one year of initial operations. This 2020 UWMP for SRWA was completed by West Yost Associates (West Yost) in October 2024. West Yost is currently the program manager and engineering consultant to SRWA and has provided a scope and budget to prepare the Joint UWMP for both SRWA and the City of Turlock.

The City of Turlock is a retail water supplier and required to prepare a 2025 UWMP. The previous two UWMPs prepared for the City of Turlock, the 2015 UWMP and the 2020 UWMP, were prepared by West Yost.

3. Benefits of a Joint Plan
A Joint UWMP will:
• Promote regional water resource coordination and planning. • Provide a comprehensive assessment of shared surface water and groundwater supply conditions.
• Reduce duplicated efforts in data preparation, public outreach, and documentation. • Improve alignment of projected demands, reliability assessments, and drought risk evaluation.

Memorandum of Understanding
September 2025

4. Consultant and Scope
West Yost will prepare the Joint UWMP for the Parties. The Joint UWMP will satisfy all Department of Water Resources (DWR) requirements for individual and joint urban water suppliers, including the coordination of supply and demand analyses, water shortage contingency planning, and compliance with SB X7-7 (as applicable to the City of Turlock).

5. Cost of Preparation
West Yost’s cost to prepare the Joint UWMP is estimated to cost $160,000 as shown in Table 1. For comparison, West Yost previously estimated the costs to prepare separate UWMPs for both Turlock only and SRWA only. As shown in Table 1, these costs were estimated to be $131,226 and $80,000, respectively.

Table 1. West Yost’s UWMP Estimated Costs
Turlock Only UWMP SRWA Only UWMP Joint UWMP
Task Estimated Budget Estimated Budget Estimated Budget Task 1. Attend Meetings 8,577 5,229 10,458
Task 2. Collect and Review Data 8,023 4,891 9,782
Task 3. Prepare Administrative Draft
2025 UWMP 66,556 40,575 81,150
Task 4. Prepare Public Draft
2025 UWMP 11,834 7,214 14,429
Task 5. Support for the Draft 2025
UWMP Public Hearings 9,892 6,031 12,061
Task 6. Prepare Final 2025 UWMP 12,056 7,350 14,700
Task 7. Respond to Questions/
Comments from DWR 2,094 1,277 2,553
Task 8. Project Management
and Coordination 10,696 6,521 13,041
Direct Costs 1,498 913 1,826
Total Project Budget $131,226 $80,000 $160,000

Table 2 shows the cost of the Joint UWMP along with the cost share expected from the City of Turlock, recognizing that a portion of the Joint UWMP is specific to the City of Turlock and a portion is specific to the SRWA. 100 percent of the Turlock portion of the Joint UWMP shall be paid for by the City of Turlock while the SRWA portion of the Joint UWMP shall be paid equally by SRWA member agencies, namely the City of Turlock and City of Ceres. The City of Turlock and the City of Ceres comprise the only two agencies responsible for funding SRWA’s operations.

Memorandum of Understanding
September 2025

Table 2. Joint UWMP Cost
Joint UWMP Cost, dollars Turlock Cost Share
100% Turlock Portion of Joint UWMP 99,401 $99,401
50% SRWA Portion of Joint UWMP 60,599 $30,299
Total Cost 160,000 $129,701

Preparing a single Joint UWMP will save costs for both Parties. Absent a Joint UWMP, the costs for an SRWA-only UWMP would have been $80,000 as shown in Table 3.

Table 3. Turlock Only and SRWA Only UWMP Costs
Joint UWMP Cost, dollars Turlock Cost Share
100% Turlock Only UWMP 131,226 $131,226
50% SRWA Only UWMP 80,000 $40,000
Total Cost 211,226 $171,226

By preparing a Joint UWMP, the SRWA and the City of Turlock anticipate saving a collective $51,226.

Turlock will specifically save $41,525 by participating in the Joint Turlock/SRWA UWMP.

Each City shall contribute to the Joint UWMP cost as follows:
• Ceres: $30,299 (City’s share of SRWA’s preparation costs only) • Turlock: $129,701 (total of SRWA share and City-only share of preparation costs) This allocation reflects the greater level of detailed analysis required for Turlock’s retail components, including compliance with SB X7-7 and water use targets.

Memorandum of Understanding
September 2025

6. Roles and Responsibilities
Each Party shall:
• Coordinate with West Yost to provide the necessary data and information. • Participate in joint meetings, public hearings, and review sessions. • Ensure compliance with noticing, adoption, and DWR submittal requirements for their respective jurisdictions.

SRWA will serve as the contracting agency with West Yost for the purposes of the Joint UWMP.

7. Term
This MOU shall remain in effect until the Joint 2025 UWMP is adopted by both Parties and submitted to DWR, or until earlier terminated by mutual agreement.

8. Payment
SRWA shall pay West Yost’s invoices for the Joint 2025 UWMP. The City of Turlock shall reimburse SRWA for Turlock’s share of the cost associated with the Joint UWMP (i.e. 81% of total cost as described in Section 5). SRWA shall invoice Turlock on a quarterly basis.

9. Amendments
Amendments to this MOU must be made in writing and executed by both Parties.

10. Entire Agreement
This MOU and any amendments to it constitute the entire MOU between the Parties concerning the subject matter hereof.

11. Authorization
The signatories below represent that they are authorized to execute this MOU on behalf of their respective agencies.

12. Counterparts
SRWA and Turlock agree that this MOU may be executed and delivered in counterparts which, when taken together, shall constitute a fully-executed document. In addition, this MOU may be executed via electronic pdf transmission, and any such pdf signature shall be deemed to be an original signature.

[Signatures on Following Page]

Memorandum of Understanding
September 2025

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by and through their respective officers’ thereunto duly authorized.

CITY OF TURLOCK, STANISLAUS REGIONAL
a municipal corporation WATER AUTHORITY,
a Joint Powers Authority

By: _______________________________ By: _______________________________ Susan E. Borrego, Christopher Fisher,
Interim City Manager SRWA General Manager

Date: _____________________________ Date: _____________________________

APPROVED AS TO FORM: APPROVED AS TO FORM:

By: _______________________________ By: _______________________________ George A. Petrulakis, City Attorney Joshua Horowitz, SRWA Legal Counsel

City Council Staff Report
November 18, 2025

From: Sue Borrego, Interim City Manager
Prepared by: Jennifer Figueroa, Housing Program Manager Agendized by: Susan E. Borrego, Interim City Manager

1. ACTION RECOMMENDED:

Motion: Adopting the updated Housing Rehabilitation Program and the First Time Homebuyer Secondary Financing Program Policies and Procedures Manuals for the Housing Program Services Division.

2. NARRATIVE:

The Housing Division administers a Housing Rehabilitation Program designed to expand the supply of decent, safe, sanitary, and affordable housing through correcting health and safety hazards in deteriorating housing for income-eligible individuals and families, as well as a First Time Homebuyer Program aimed at making homeownership more accessible and affordable for households with low to moderate incomes.

To ensure compliance with the requirements of U.S. Department of Housing and Urban Development (HUD) and California Department of Housing and Community Development (HCD), the Housing Division must draft and update various policies and procedures for all housing programs.

Staff continuously review existing policies and procedures and recommend the following revisions to the Housing Rehabilitation Policies and Procedures:

1. Section 3, add the following:
• Section 3-G City-Owned Property
“Any rehabilitation work performed on a city-owned property must be completed in accordance with prevailing wage requirements.

Prior to issuing a bid invitation for a city-owned property, staff must consult with the Engineering Department to ensure all current requirements are met and that all bid and contract documents include the required language.”

2. Under Section 4N-Grants, add the following:
• “B. May be awarded for stick-built homes by the Loan Committee on a case-by- case basis, up to $30,000, when the owner does not qualify for a forgivable loan.” • Under the Eligibility subsection, add,” Stick homes up to $30,000 on a case-by- case basis.”
• “D. Homeowner's insurance is not required for grant-funded projects.”

To streamline efficiencies, staff recommend adding the following verbiage to both the

Agenda Staff Report
11/18/2025

Rehabilitation Program and the First Time Homebuyer Secondary Financing Program policies and procedures in the introduction:
• "Administrative and regulatory modifications to this policy and procedure manual may be approved by the City Manager or designee. "

The recommended Housing Rehabilitation Program and First Time Homebuyer Secondary Financing Program policies and procedures are included as Attachment A, with all proposed updates showing in track changes for ease of review.

3. FISCAL IMPACT / BUDGET AMENDMENT:

There is no fiscal impact.

4. ENVIRONMENTAL DETERMINATION:

This action is not subject to the provisions of the California Environmental Quality Act (CEQA) in accordance with Section 15378(b)(5) of the CEQA guidelines. This action consists of “organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment” and therefore is not considered a project.

5. ATTACHMENTS:

1. Housing Policies and Procedures

Housing Rehabilitation Program

Policies and Procedures Manual

City of Turlock
Housing Program Services
156 South Broadway, Suite 140, Turlock CA 95380 (209)
668-5610, Fax (209) 668-5120, TDD 1 (800) 735-2929
www.cityofturlock.org

Approved by City Council on June 11, 2024 by resolution 2024-087, Superseded by Approval on August 26, 2025 by resolution 2025-173

These Policies and Procedures supersede any previously adopted Policies. These policies and procedures are subject to change in accordance with revisions made by the State of California and or Housing and Urban Development.

City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

Table of Contents

Page No.

Introduction................................................................................................................. . iv

1. Overview

1-A. Purpose of Manual........................................................................................ 1 1-B. Program Summary.................................... .................................................... 1 1-C. General Definitions ....................................................................................... 1

2. Program Eligibility Requirements

2-A. Eligible Property Requirements............................................................... ...... 6 2-B. Occupancy Requirements............................................................................. 6 2-C. Income Eligibility and Verification........................................... ....................... 7

3. Rehabilitation Work

3-A. Rehabilitation Standards............................................................................... 10 3-B. Eligible Rehabilitation Work ..................................................... ..................... 11 3-C. Ineligible Rehabilitation Work............................................................... ......... 13 3-D. Eligible Related Expenses ............................................................................ 13 3-E. Contractor Requirements.............................................................................. 14 3-F. Owner Builder............................................................................................... 16 3-G. City-Owned Property…………………………………………………………….. 16

4. Underwriting Requirements

4-A. Overview ............................................................................................... ....... 17 4-B. Combined Loan-to-Value (CLTV) Limits ....................................................... 17 4-C. Loan/Grant Funding Limits............................................................................ 17 4-D Maximum Loan/Grant Amount ............................................................... ....... 17 4-E. Borrower Income Verification ............................................................... ........ 18 4-F. Tenant Income Verification ........................................................................... 18 4-G Income of Co-Borrower................................................................................. 18 4-H. Borrower and Tenant Assets ............................................................... ......... 19 4-I. Borrower Documentation ........................................................... ................... 19 4-J. Verification of Ownership Status ............................................................... .... 19 4-K. Lien Positions ............................................................................................... 19 4-L. Credit Criteria ............................................................................................... 19 4-M. Loan Documentation..................................................................................... 20 4-N. Loan and Grant Types, Terms & Conditions ................................................ 20 4-O. Repayment ............................................................................................... .... 25 4-Q. Assumability and Transfer of Interest............................................................ 26 4-R. Delinquencies ............................................................................................... 27 4-S. Affordability Period................................................................... ..................... 28

5. Energy Efficiency Program

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City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

Table of Contents i Formatted: Indent: Left: 0"

City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

5-A. Overview ............................................................................................... ....... 29 5-B. Procedures ............................................................................................... .... 29

6. Forgivable Loan Program
6-A. Overview ............................................................................................... ....... 31 6-B. Procedures ............................................................................................... .... 31

7. CalHome Secondary Financing with Rehabilitation Program

7-A. Overview ............................................................................................... .......

32 7-B. Procedures ............................................................................. ...................... 32

8. Application and Delivery Process

8-A. Overview ............................................................................................... ....... 34 8-B. Procedure for all Loans ................................................................................ 34 8-C. Loan Committee ........................................................................................... 42 8-D. Applicant Waiting List ...................................................... ............................. 43

9. Loan Servicing

9-A. Overview ............................................................................................... ....... 44 9-B. Payment of Property Taxes and Insurance ................................................... 44 9-C. Owner-Occupancy Verification............................................................... ....... 44 9-D. Tenant-Occupancy Verification ............................................................... ...... 44 9-E. Required Noticing and Restrictions on Any Changes of Title or Occupancy.. 45 9-F. Subordination ............................................................................................... 46 9-G. Demand/Pay-Off................................................... ........................................ 46 9-H. Request for Notice of Default............................................................... ......... 47 9-I. Foreclosure by Senior Lien Holder.............................................................. .. 47 9-J. Recapture Provision .................................................................................... 48 9-K. Foreclosure by City....................................................................................... 48 9-L. Use of Third-Party Agent .............................................................................. 49 9-M. First Mortgage Underwriting Requirements .................................................. 49 9-N. Cash Out of Escrow ..................................................................................... 50 9-O. Title Insurance ............................................................................................. 50 9-P. Hazard Insurance .............................................................. .......................... 50

10. Federal Regulatory Provisions

10-A. Conflict of Interest.........................................................................................

51 10-B. Fair Housing and Non-Discrimination............................................................ 51 10-C. Relocation of Displaced Tenants ............................................................... ... 52 10-D. Consistency ...................................................................................... ............ 52 10-E Environmental Review .................................................................................. 52 10-F. Matching............................................................................................... ........ 52 10-G. Program Income and Reuse Account ........................................................... 52

11. Exhibits

Table of Contents ii

City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

11-A. Rehab Specifications Manual “A Guide to Rehabilitation Standards” ………. 54 11-B. Summary of General Program Guidelines…………………………………… ... 55

Table of Contents iii

City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

Introduction

This Manual sets forth policies and procedures for the City of Turlock’s Housing Rehabilitation Program (hereinafter “Program”). This program is designed to expand the supply of decent, safe, sanitary, and affordable housing; to correct health and safety hazards in deteriorating housing and extend the useful life of existing housing units for income eligible individuals and families.

The Program is a partnership between the City of Turlock (hereinafter “City”), State and Federal Governments to help maintain and upgrade the housing stock within the City, particularly in older neighborhoods.

Funds for this program may come from various local, state, and federal sources including but not limited to: Community Development Block Grant (CDBG), Home Investment Partnership Program (HOME), Permanent Local Housing Allocation (PLHA) and CalHome.

The City will comply with all city, state, and federal regulations and guidelines. In the event that the City assisted applicant combines two or more City assistance programs/funding sources, the homeowner and the property shall meet the strictest underwriting criteria and guidelines of each program/funding source.

Use of funds is subject to change and shall be in accordance with the requirements of the State of California Department of Housing and Community Development Division, United States Department of Housing and Urban Development, and other laws and regulations governing the funding for these programs as such laws and regulations may be amended from time to time.

Administrative and regulatory modifications to this policy and procedure manual may be approved by the City Manager or designee.

Rehabilitation Loan Program Address:

City of Turlock
Housing Program Services Division
156 South Broadway, Suite 140
Turlock, CA 95380

Telephone: (209) 668-5610
Fax: (209) 668-5120
TDD: (800) 735-2929 (Speech and hearing impaired only) City of Turlock website: www.cityofturlock.org

City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

Introduction iv Formatted: Indent: Left: 0"

City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

1. Overview

1-A. Purpose of Manual

The purpose of the Policies and Procedures Manual is to describe the Program and set forth the roles of the City, the program applicants and b orrowers. These Policies and Procedures contain the regulations, general requirements and processing procedures.

Funds available for this program may come from various local, state, and federal funding sources including but not limited to: Community Development Block Grant1 (CDBG), Home Investment Partnership Program2 (HOME), CalHome3, and Permanent Local Housing Allocation4 (PLHA).

The City is continually searching for new funding sources to further affordable housing activities. The intent of the Program is to provide eligible homeowners and investors a funding opportunity, that would not otherwise be available, to rehabilitate substandard and deteriorating homes.

1-B. Program Summary

The City has established the Program to assist eligible homeowners and investors with the funding to rehabilitate their home or rental properties. The Program staff will assist the Borrower to ensure a successful and timely completion of the rehabilitation process.

To maximize the effectiveness of the Program as a vehicle for enhancing affordability, Borrowers may be eligible for deferred payment loans, fully amortized loans, forgivable loans and or grants.

1-C. General Definitions

As used in the Policies and Procedures and all program documents, unless context requires otherwise, the following words and terms have the meanings set forth below:

Affordable: In reference to housing costs, means that the financial obligation can be paid by the person or household, along with all other financial responsibilities of that person or household, without endangering the financial stability of the household.

1 Authorized under Title I of the Housing and Community Development Act of 1974, as amended. The regulations implementing the CDBG Program are found at 24 CFR Part 570. CDBG funds are administered by the United State Department of Housing and Urban Development (HUD).
2 Authorized under the HOME Investment Partnerships Act at title II of the Cranston-Gonzalez National Affordable Housing act, as amended, 42 U.S.C. 12701 et seq. The regulations implementing the Home Investment Partnerships (HOME) Program are found at 24 CFR Part 92. HOME funds are administered by the United State Department of Housing and Urban Development (HUD). 3 Authorized by and pursuant to Chapter 6 of Part 2 of Division 31 of Health and Safety Code, commencing with Section 50650 (“California Statutes”) and regulations found in Title 25 of the California Code of Regulations, Division 1, Chapter 7, Subchapter 9 commencing with Section 7715 (“CalHome Regulations”), all as amended and in effect from time to time. CalHome funds are administered by the State Department of Housing and Community Development. 4 Authorized by The California Senate Bill 2 (SB2), also known as the Building Homes and Jobs Act, Chapter 364, Statutes of 2017.

PLHA funds are administered by the State Department of Housing and Community Development (HCD).

Section 1 - Overview 1

AMI: Area Median Income, as established by HUD.

Amortized Loan:

A loan payable over a certain time period which includes principal and interest payments.

Applicant:

Any person who applies for a Housing Rehabilitation loan under the Program.

Assisted unit:

A unit rehabilitated with loan(s) and or grant(s) funded under this Program.

Borrower:

The recipient who has or will receive financing for the rehabilitation of an eligible property.

Certification:

A written statement of fact filed in connection with the Program and subject to penalties of perjury.

City:

The City of Turlock, California.

Code Violations:

Infractions against the applicable codes referenced in the Housing Rehabilitation Standards.

Contractor:

A general building contractor, licensed by the State of California.

Deferred Payment
Loan:

A loan in which no monthly installments are required. Full loan amount plus interest will be due and payable at the end of the specified loan term.

Equity:

The value of a unit(s) after subtracting all claims or liens against the unit value.

First Mortgage:

A mortgage which is in first lien position, taking priority over all other mortgages or deeds of trust.

General Property
Improvements
(GPI):

Improvements other than code violations made to improve the visual quality of the unit.

Gross Income:

The anticipated income of a person, family or household for the 12-month period following the date of determination of income.

Household:

All the persons who occupy a housing unit. The occupants may be a single family, one person living alone, two or more families living together, or any other group of related or unrelated persons who share living arrangements.

HUD:

The United States Department of Housing and Urban
Development.

Interest:

The fees associated with the borrowing of money.

Section 1 - Overview 2 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

Lien: A form of encumbrance against the property which provide security for the payment of a debt, discharge, or an obligation.

Examples: judgment liens, taxes, mortgage, deed of trust, mechanics liens.

Low- and Moderate-
income (LMI):

A family or household having an income equal to or less than the Section 8 Low-income limit, (80% of the area median income) as established by HUD.

Manufactured
Housing Unit:

Manufactured housing unit, either on a permanent foundation or on an alternate foundation system, located on a rented space in a mobile home park, on leased land or on property owned by borrower
Maturity Date: The date upon which a loan comes due and payable in full in accordance with the regulations pertaining to the funding source(s) used.

Mixed-Use:

A property occupied by residential and non-residential uses such as a business and residents or tenant(s).

Moderate Income
Household:

Persons and families whose gross incomes do not exceed 120% of the area median income adjusted for household size in accordance with adjustment factors adopted by HUD in
establishing income limits for lower income families.

Mortgage:

A deed of trust used to secure a lien on real property or, in the case of some manufactured housing, another security interest acceptable to the City and the State of California Department of Housing and Community Development.

Multi-Family units:

Five or more residential units.

Non-Conforming
Residential Uses
and Structures:

Those residential uses and structures which are not permitted but exist in any given zone by reason of use, improper setback or improper lot size.

Owner-Builder:

A home owner who is a licensed contractor performing work on his/her own property, as qualified by the Housing Rehabilitation Specialist.

Owner-Occupant:

A family or individual, regardless of family ties, who occupies and owns a unit of residential property.

Owner-Occupied
Residence:

A housing unit intended and used for occupancy by the owner of the property.

Owner-Investor:

A family or individual, regardless of family ties, who owns a unit or units of residential property and who rents these units to a tenant(s).

Section 1 - Overview 3 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

Ownership Interest: Any of the following interests in residential real property:
• Fee simple estate
• Joint tenancy
• Tenancy in common
Ownership does not include a remainder interest, a lease with or without an option to purchase or any interest acquired on the execution of the purchase contract.

Principal Residence:

A property occupied by the Borrower as his primary residence.

Ratio:

Income/Expenses:

The percentage of annual gross income to housing expenses.

Ratio:

Monthly Housing
Expenses:

The maximum percentage of monthly gross income spent for housing.

Reconstruction:

The rebuilding, on the same lot, of housing standing on a site at the time of project commitment. The number of housing units on the lot may not be d ecreased or increased as part of the reconstruction project, but the number of rooms per unit may be increased or decreased. (HUD 24 CFR Part 92.2)

Rehabilitation Costs:

The total cost of repair, improvements and other costs to be incurred by the Borrower that are included in the loan and or grant.

Rehabilitation
Specifications
Manual:

The City of Turlock Housing Program Services Division Manual titled “A Guide to Rehabilitation Standards”, which identifies City codes and ordinances applicable to residential rehabilitation and other environmental deficiencies to be co rrected during the rehabilitation process not identified in, or required by, City codes.

Second Mortgage:

A mortgage that is junior or subordinate to a first mortgage.

Single-Family
Dwelling:

A one-to four-family residence, condominium unit, cooperative unit, combination of manufactured h ousing and lot, or
manufactured housing lot.

Sub-Contractor:

Any licensed trade contractor that is not the General Contractor, i.e. Electrical, Plumbing or Mechanical contractor.

Unit:

A s ingle o wner-occupied or rental u nit, providing complete, independent living facilities for one or more persons including permanent provisions of living, sleeping, e ating, co oking and sanitation. Unit, as used in these policies, shall not include hotel or motel rooms, rooming and/or boardinghouses. Further, those single-family units that have been converted to house additional families or single persons may, on a pproval of the City staff, qualify as a unit. Also known as a dwelling unit.

Section 1 - Overview 4 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

Section 1 - Overview
City of Turlock Housing Rehabilitation Program Policies and Procedures Manual 5 Utilities: Refers to gas, electricity, water, sewage disposal, and refuse collection. Does not include telephone or cable.

Section 2 – Program Eligibility Requirements 6 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

2. Program Eligibility Requirements

2-A. Eligible Property Requirements

1. The applicants(s) must be the owner(s) of record of the property to be rehabilitated.

2. Property must be located in:

` a. City limits of Turlock excluding county pockets for CDBG, PLHA, and CalHOME funding. Within Consortium area of Stanislaus County for HOME funding.

b. Target area census tracts as designated by funding source requirements.

3. Property type must be:

a. Single-family housing; or
b. Condominium unit; or
c. A town home unit; or
d. Multi-family units; or
e. Mixed-use property.
1) CDBG funded: For structures containing non-residential and residential uses, program funds can be used only for the residential portion of the structure, except when conditions exist in the non-residential portion which will adversely affect the residential portion of the structure. In no case shall the commercial portion of the rehabilitation exceed 25% of the total amount of the loan or grant.

2) HOME, and PLHA funded: For structures containing non-residential a nd residential uses, program funds can be used only for the residential portion of the structure.

3) Other funding restrictions may apply.
f. Mobile Home
1) CDBG funded: Mobile homes must be part of the City’s permanent housing stock (24 CFR 570.202(a)(5). If the mobile home is located in a permitted mobile home park, it will be considered part of the City’s permanent housing stock and eligible for CDBG funding.

2-B. Occupancy Requirements

1. Eligible property must have the following occupancy characteristics:

Section 2 – Program Eligibility Requirements 7 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

a. The applicant(s) must be the primary occupant(s) of the property to be rehabilitated; or

b. If a rental property, occupied by income eligible tenants throughout the entire term of the loan or the affordability period; or

c. Vacant. Unit(s) will be required to be occupied by income-eligible tenants throughout the entire term of the loan or the affordability period.

See section for “Affordability Period" information, page 28.

2-C. Income Eligibility and Verification

1. Owner occupied:

To be eligible to receive funds, the Borrowers must be income eligible.

a. The City must verify a Borrower’s income in accordance with the following:

1) Borrowers must have an annual gross income equal to or less than 80% of the area median income as adjusted for household size. See Exhibit B for the Area Median Income (AMI) limits.

i. Income limits used to determine eligibility for CalHome and PLHA funding must be those published by the State of California Department of Housing and Community Development and available from the Administrator or the City.

ii. Income limits used to determine eligibility for HOME, CDBG, and NSP funding must be those p ublished by the U.S. Department of Housing and Urban Development and available from the City.

2) Household size is determined by counting all members of the household, regardless of age, who will be permanent residents in the h ome. The following household members are not counted to determine household size for income limits purposes:
foster children, unborn children and children being pursued for legal custody or adoption who are not currently living with the household. A child, who is subject to as shared-custody agreement in which the child resides with the household at least 50% of the time, can be counted.

3) Income from all adult household members 18 years of age or older shall be counted to determine household income eligibility. Household income will be used to determine loan eligibility.

b. The Borrower’s gross annual income must then be projected by the City over the upcoming 12-month period and judged to not exceed the applicable income limit. City shall determine annual gross income in accordance with the Code of F ederal Regulations (CFR), Title 24, Part 5, Section 5.609(b) attached hereto as Exhibit A.

1) Income from assets is recognized as part of annual income under 24 CFR Part

5. City shall determine income from assets in accordance with 24 CFR 5.

Section 2 – Program Eligibility Requirements 8 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

2) Include as Borrowers, all persons who are on title to the property.

3) If documentation is provided by the Borrower that his or her current circumstances may be about to change, this information must be used in the projection of gross annual income.

4) The City shall determine the Borrower’s annual gross income by o btaining source documentation verifying income and asset inclusions in accordance with Part 5 Income Inclusions as stated in the Code of Federal Regulations Statement from 24 CFR 5.609(b).

i For self-employed borrowers, source documentation shall also include but not necessarily be limited to:

(1) 3 years federal tax returns. (A minimum of the two most recent years must show income as self-employed)

(2) A profit and loss statement prepared by an accountant or bookkeeper.

The City reserves the right to request an audited Profit and Loss statement by a Certified Accountant/Bookkeeper.

ii. For Borrower’s who are employees, source documentation shall also include but not necessarily be limited to:

(1) 3 years federal tax returns. If the Borrower has not yet filed his/her Federal income tax return for the preceding year, the Borrower will be required to provide W-2's and 1099's for the year in question and provide proof that taxes were filed, once filed. If Borrower is exempt, they will provide an exemption letter from the IRS.

2. Investor and Non-Profit Owned properties

To be eligible to receive funds, the rental unit(s) must be occupied by income eligible tenants. Tenant occupied properties are not eligible for the CalHome Secondary Financing with Rehabilitation Program.

a. The City must verify a Tenant’s income in accordance with the following:

1) Tenant must have an annual gross income equal to or less than 80% of the area median income as adjusted for household size.

i. Income limits used to determine eligibility for CalHome and PLHA funding must be those published by the State of California Department of Housing and Community Development and available from the Administrator or the City.

ii. Income limits used to determine eligibility for HOME, CDBG, and NSP funding must be those published by the U.S. Department of Housing and Urban Development and available from the City.

Section 2 – Program Eligibility Requirements 9 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

2) Household size is determined by counting all members of the household, regardless of age, who will be permanent residents in the home. The following household members are not counted to determine household size for income limits purposes: foster children, unborn children and children being pursued for legal custody or adoption who are not currently living with the household. A child, who is subject to as shared-custody agreement in which the child resides with the household at least 50% of the time, will be counted.

3) Income from all adult household members 18 years of age or older shall be counted to determine household income eligibility.

b. The Tenant’s gross annual income must then be projected by the City over the upcoming 12-month period and judged to not exceed the applicable income limit. City shall determine annual gross income in accordance with the Code of Federal Regulations (CFR), Title 24, Part 5, Section 5.609(b) attached hereto as Exhibit A.

1) Income from assets is recognized as part of annual income under 24 CFR Part

5. City shall determine income from assets in accordance with 24 CFR 5.

2) Include as Borrowers, all persons who are on title to the property.

3) If documentation is provided by the Tenant that his or her current circumstances may be about to change, this information must be used in the projection of gross annual income.

4) The City shall determine the Tenant’s annual gross income by obtaining source documentation verifying income and asset inclusions listed in 24 CFR Part 5 income inclusions as stated in the Code of Federal Regulations Statement from 24 CFR 5.609 (b).

i. For self-employed tenants, source documentation shall also include but not necessarily be limited to:

(1) 3 years federal tax returns and proof of filing. (A minimum of the two most recent years must show income as self-employed)

(2) A profit and loss statement prepared by an accountant or bookkeeper.

The City reserves the right to request an audited Profit and Loss statement by a Certified Accountant/Bookkeeper.

ii. For tenant’s who are employees, source documentation shall also include but not necessarily be limited to:

(1) 3 years federal tax returns. If the Borrower has not yet filed his/her Federal income tax return for the preceding year, the Borrower will be required to provide W-2's and 1099's for the year in question.

3. If the Investor rental unit is vacant, rent limitations will be placed on each assisted unit. See Tenant Occupancy Verification on page 43.

Section 3 – Rehabilitation Work 10 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

3. Rehabilitation Work

3-A. Rehabilitation Standards

All improvements to residential properties, including the residential portion of a mixed- use project, in the City shall comply with the applicable standards set forth in all appropriate City statutes, codes, and ordinances as well as the Housing Program Services Division Rehabilitation Standards, “A Guide to Rehabilitation Standards” (see Exhibit C) which relate to the use, maintenance, facilities, and occupancy of residence (dwellings), including, but not limited to, the following most recently adopted codes and ordinances:

The following standards shall be utilized to determine the scope of rehabilitation projects:

1. The Housing Quality Standards at 24 CFR 982.401 and 24 CFR Part 574, B574.310 (b), B882.404 (c) (3): and CPD-94-05.

2. The lead-based paint regulations at 24 CFR Part 35 and as amended thereafter.

3. The latest editions of the following codes and or other codes as adopted by the City but not limited to:

a. Uniform Housing Code
b. National Electric Code
c. Uniform Building Code
d. Uniform Mechanical Code
e. Uniform Plumbing Code
f. California Historical Building Code
g. California Building Code

Note: For CDBG and PLHA funded projects, existing conditions that are not included in the scope of work for a project are exempt from complying with the current editions of the codes referenced in section 3a-3g above, as long as there is not health and safety risks, or existing code violations.

For HOME funded projects, all of the above codes and all property standards as identified in 24 CFR 92.251 must be met AND all major systems, such as structural support, roofing, cladding, weatherproofing (e.g. windows, doors, siding, gutters), plumbing, electrical, heating, ventilation, and air conditioning, must have a remaining useful life of a minimum of 5 years.

Section 3 – Rehabilitation Work 11 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

3-B. Eligible Rehabilitation Work

A primary objective of this Program is the elimination of life-threatening hazards, improvement of energy efficiency and the correction of health and safety deficiencies.

1. The following items are eligible for purchase and installation, and repair or replacement:

a. Foundations, compaction tests as required and other structural building components

b. Roof sheathing, attic ventilation as required and new shingles c. Electrical systems
d. Plumbing systems

e. HVAC system and required duct testing
f. Windows, interior and exterior doors
g. Interior and exterior paint

h. Kitchen, bathroom and kitchen fixtures, and equipment considered to be permanent fixtures

i. Energy conservation measures
j. Pest eradication measures
k. Accessibility accommodations

l. Utility connections (water/sewer connection from unit to street)

m. Drywall repairs and texture

n. Removal and replacement of floor coverings

o. Removal and backfill of unsafe or deteriorated swimming pools

p. Fire sprinkler system on all reconstruction or as required by California Building Code or Fire Code.

q. Removal and installation of gas and electric lines and meters. r. Removal and installation of water and sewer lines. s. Reconnection fees for any utilities.

Section 3 – Rehabilitation Work 12 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

2. Reconstruction involves demolishing an existing residential unit and rebuilding another on the same site. Often, reconstruction occurs because the cost of rehabilitation is prohibitive or is more than the cost to build a new unit. The Housing Rehabilitation Specialist will determine eligibility.

3. Costs to abate toxic materials such as the ones listed below are also eligible, if such materials are known or discovered to exist and pose a hazard to the occupants.

a. Asbestos.

b. Lead-based paint.

4. Garages, walkways, fences, and gates are eligible for the correction of health, safety, and building code violations. The program will not pay to correct illegal non-conforming violations of the zoning code. In addition, any of these types of violations must be brought into compliance with all applicable zoning laws prior to the execution of a rehabilitation loan. Owners will be responsible to remove all illegal structures prior to participating in the program.

Note: Conversion of a garage or other accessory structure to an accessory dwelling unit is not permitted.

5. Additions, alterations and enlargements to existing structures are eligible providing that the action accomplishes one of the following goals:

a. Elimination of severe overcrowding

b. Ensure safe and sanitary living conditions

c. Alleviate barriers to the mobility and accessibility of an elderly person or persons with disabilities

d. Facilitate the care and accommodation of a physically and/or mentally impaired occupant

6. General Property Improvements (GPI)

After the property has been rehabilitated to conform to the current Housing Uniform Code and/or applicable codes, additional loan money not to exceed Two Thousand Five Hundred Dollars ($2,500) may be used for, but not limited to, the following General Property Improvements (GPI):

a. Minor remodeling may be done in order to make a dwelling more functional or attractive

b. Repairs that are not code violations

c. To improve the visual quality of the neighborhood environment, landscaping may be provided. Where the quality or quantity of landscaping is below that generally found in the City, the following may be provided:

Section 3 – Rehabilitation Work 13 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

1) A maximum of three (3) trees

2) A maximum of six (6) shrubs

3) Grass, ivy, or other ground cover

4) New wood fencing, (no wrought iron or brick material)

5) Additional items may be approved by the Housing Rehabilitation Specialist

7. Building Permits: As required by the City Building Department. Re-construction permits also include marking of property pins.

3-C. Ineligible Rehabilitation Work

The following costs are not eligible for a rehabilitation loan:

1. New construction or the finishing of such construction, unless otherwise stated in this text. (Expansion of the structure must be approved by the Housing Program Services Division Manager as per these policies and shall not be considered new construction)

2. Acquisition of land

3. Purchase, installation or repair of furnishings or fixtures (such as intercom systems, rugs, portable fans, etc.)

4. Fireplaces (other than repairs required to existing fireplace)

5. Barbecue pits

6. Bathhouses

7. Greenhouses

8. Swimming pools, saunas or spas, or their heating systems

9. Any costs deemed unnecessary by Housing Program Services Division Manager as per these policies

10. Decreasing or increasing window or door openings for aesthetics

11. Relocation of doors and windows for aesthetics

12. Alarm systems

13. Conversion of a garage or other accessory structure to an accessory dwelling unit is not permitted.

3-D. Eligible Related Expenses

Section 3 – Rehabilitation Work 14 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

1. In addition to the property rehabilitation work, the following expenses, which are related to the actual property rehabilitation work, are eligible for inclusion in the prope rty rehabilitation loan or grant.

a. Permit fees.

b. Contracted architectural, design, and engineering services. c. Contracted appraisal fee.
d. Preliminary title report and title insurance.
e. Recording and filing fees.
f. Credit reports.

g. Termite inspection reports.
h. Contingency allowance.
i. Soils reports.

j. Soils excavation in regard to engineered foundations or septic tanks. k. Archaeological survey and excavation costs.
l. Relocation costs.

m. Private lender loan processing fees.

o. Probation of wills when required to obtain title insurance.

p. Lead-based paint detection, assessment and mitigation fees. q. Storage container.
r. Portable bathrooms.

2. If an applicant withdraws from the program after any of the above-specified additional costs have been incurred by the City in connection with the prop erty owner's rehabilitation application, the property owner shall reimburse the City for such incurred costs. This reimbursement requirement d oes not apply if the property o wner's withdrawal from the program is based on disapproval of the loan application, or if the lowest bid received exceeds the cost estimate previously provided by the City by 25% or more, or if circumstances occur beyond the control of the applicant.

3-E. Contractor Requirements

The City Housing Program Services Division compiles and maintains an eligible contractors list. The City Housing Program Services Division shall review the list of

Section 3 – Rehabilitation Work 15 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

contractors on a regular basis and may remove contractors from the list for any reason.

Contractors must complete work in accordance with the Housing Program Services Rehabilitation Specifications Manual “A Guide to Rehabilitation Standards” (see Exhibit A). Inclusion of contractors on the City list does not represent a guarantee of the work performed by a contractor. To be eligible to be added to the list, the contractors must meet the following requirements:

a. License: The contractor must be a General Contractor, licensed by the California State Contractors Board (CSLB). The license must be current, active and be in good standing verified by the CSLB (http://www.cslb.ca.gov/).

b. Insurance: The Contractor must carry the following insurance:

1) Pursuant to Turlock Municipal Code Section 1-6-01.

2) Workers Compensation Insurance Policy.

3) Current Contractors Bond.
4) Other insurance as required by the City and or funding sources. c. References:

Previous construction work references will be verified by Housing Rehabilitation Specialist.

d. Federal debarment and suspension: The contractor must not presently be debarred, proposed for debarment, suspended, declared ineligible, or voluntarily excluded from participation in the covered transaction or in any proposal submitted in connection with the covered transaction per the United States Department of Labor. The website, provided by the Office of Federal Contract Compliance Program (OFCCP) https://www.sam.gov/; provides information on parties that are excluded from receiving Federal contracts, certain subcontracts, and certain Federal financial and nonfinancial assistance and benefits, pursuant to the provisions of 31 U.S.C. 6101, note, E.O. 12549, E.O. 12689, 48 CFR 9.404, and each agency's codification of the Common Rule for Non-procurement suspension and debarment.

e. All new contractors will be limited to a maximum of one (1) City Housing Rehabilitation project until the Rehabilitation Specialist determines that the contractor has the capacity, (both financial and workmanship) to sustain two (2) City Housing Rehabilitation projects.

f. All City Housing Rehabilitation projects and contractors will be evaluated by the Rehabilitation Specialist to ensure an equal performance guideline by contractor.

g. Removal from contractors list:

Removal from the eligible Contractor’s list will occur when:

1) No longer meets eligibility requirements, as listed above. 2) Contractor’s license is no longer current and active. 3) Poor workmanship-will not be able to bid on projects for a period of one (1) year.

Section 3 – Rehabilitation Work 16 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

4) Does not complete the work in the allotted timeframe- will not be able to bid on projects for a period of one (1) year.
5) Is placed on the Federal debarment and suspension list. 6) Contractor has received 2 customer complaints or has had issues documented on two (2) separate jobs, as identified by the Housing Rehabilitation Specialist/Inspector.

a. Upon receiving the first customer complaint or upon a report from the Housing Rehab Specialist/Inspector, Housing Division staff will meet with the contractor to review and discuss reported issues. Following the meeting, a formal letter/email will be issued to the contractor summarizing the discussion. The letter will also state that the contractor is being placed on probation for the duration of the next job that they are awarded and any further complaints or identified issues during the probationary period will result in the contractor being removed from the eligible list for a period of one (1) year.

h. Subcontractor's Licenses: All contractors must make sure that all subcontractors are properly licensed, including City business license. The Housing Division will require contractors to show proof of such licenses.

3-F. Owner Builder

In order to qualify, applicant must meet the contractor requirements in Section 3E. All work performed by the Owner-Builder must meet the same requirements set forth above, including basic industry standards. See the Housing Quality Standards at 24 CFR 982.401 and 24 CFR Part 574, B574.310 (b), B882.404 (c) (3): and CPD-94-05. Some exclusion may apply.

3-G. City-Owned Property

Any rehabilitation work performed on a city-owned property must be completed in accordance with prevailing wage reguirements. Prior to issuing a bid invitation for a city- owned property, staff must consult with the Engineering Department to ensure all current requirements are met and that all bid and contract documents include the required language.

Contractors bidding on city-owned rehabilitation projects must be registered with the Department of Industrial Relations prior to submitting a bid.

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4. Underwriting Requirements

4-A. Overview

Program staff will review eligibility on the applicant based on the information that is provided and verified.

4-B. Combined Loan-to-Value (CLTV) Limits

The combined loan-to-value (CLTV) ratio, when combined with all other indebtedness to be secured by the property, shall not exceed 100% of the estimated after rehabilitation value. Under the CalHome Secondary Financing with Rehabilitation Program CLTV limits shall not exceed 105% of the after-rehabilitation value. See “Forgivable Loan Program” section for an exception to this requirement.

4-C. Loan/Grant Funding Limits

These limits include any City grant or loan not to exceed the after rehabilitation combined loan-to-value (CLTV) for CDBG, and PLHA. This limit does not include temporary relocation grants. Maximum loan amounts will also be limited by the individual funding source guidelines and limitations.

For HOME funded projects, the after-rehabilitation value of a home must not exceed 95% of the area’s median purchase price for a single-family house, as determined by HUD.

Below are the City funding limits not to exceed funding source regulations. Exceptions to the City limits can be made by City Council within funding source guidelines.

1. Owner-Occupied single-family stick home:
a. $80,000 per housing unit for CDBG and PLHA funded projects. May go up to CLTV limits on a case-by-case basis.

b. Rehabilitation as needed not to exceed CLTV limits for HOME funded projects.

c. Reconstruction up to $150.00 per square foot (includes permits, fire sprinkler system) on a case-by-case basis based on health and safety.

a. CalHome funded: See FTHB Policies and Procedures for CalHome Secondary Financing with Rehabilitation Program per unit limits.

2. Owner-Investor and Non-Profit Owned properties (single or multi-family projects):
$75,000 per housing unit.

3. Owner-Builder (single family projects): $75,000 per housing unit.

4 Mixed-Use (Owner-occupied or Rental): $75,000 per housing unit.

a. CDBG funded: For structures co ntaining non-residential and residential uses, program funds can be used only for the residential portion of the structure, except when conditions exist in the non-residential portion which will adversely affect the

Section 4 – Underwriting R equirements 18 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

residential portion of the structure. In no case shall the commercial portion of the rehabilitation exceed 25% of the total amount of the loan or grant.

b. HOME funded: For structures containing non-residential and residential uses, program funds can be used only for the residential portion of the structure.

c. Other funded: Will follow funding source guidelines.

5. Mobile Homes: $30,000 per housing unit
a. The project will not be considered if the cost of rehabilitation exceeds 75% of the current estimated value of the property, as determined by an appraisal/Housing Financial Specialist

b. If additional Health and Safety repairs are discovered after the project commences that will exceed $30,000, staff may bring a recommendation forward on a case-by- case basis to the Loan Committee for an exception.

4-D. Maximum Loan/Grant Amount

Staff will determine the maximum amount of loan which an applicant may receive to cover rehabilitation costs and still remain within the applicant’s ability to pay. Evaluation of the applicant’s complete file, will establish the limits of work to be accomplished and the limits and conditions of the loans. Final recommendation will be presented to the Housing Program Services Division Loan Committee. The maximum loan amount cannot exceed the loan funding limits and the combined loan-to-value limits for all housing units with the exception of mobile homes. The maximum amount for mobile homes is $30,000.

City Manager has delegated authority to approve exceptions to increases in program loan and grant limits when additional repairs are needed to mitigate health and safety issues.

4-E. Borrower Income Verification

See section “Income Eligibility and Verification” on page 7.

4-F. Tenant Income Verification

See section “Income Eligibility and Verification” on page 7.

4-G. Income of Co-Borrower

1. If a co-Borrower will be on the title and or the deed of trust, his or her gross annual income must be included in determining income eligibility for the program.

2. The income of any other person expected to both live in the residence and be secondarily liable for the mortgage must be counted and verified as noted above.

3. Co-signers and co-mortgagors who do not intend to occupy the property are prohibited from participation in the program.

Section 4 – Underwriting R equirements 19 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

4-H. Borrower and Tenant Assets

This will apply to Borrowers and tenant’s assets.

1. All income from assets must be included in the calculations determining the Borrower’s or Tenant’s gross annual income.

2. When the cash value of all of a Borrower’s or Tenant’s assets exceeds $5,000 annual gross income shall include the greater of:

a. The actual amount of income, if any, derived from all household assets; or

b. 2.5% or the current HUD Passbook Rate, whichever is lower, of the cash value of all such assets.

c. As with income, the value of a Borrower’s or Tenant’s assets must be projected over the following 12-month period and judged to not exceed the applicable income limit.

4-I. Borrower Documentation

Borrower shall authorize City in writing to obtain any documentation from third party sources containing Borrower’s income, assets, liabilities and credit worthiness.

4-J. Verification of Ownership Status

1. The applicant(s) must be the owner(s) of record of the property to be rehabilitated.

2. The applicant(s), of owner-occupied units, must be the primary occupant(s) of the property to be rehabilitated.

4-K. Lien Positions

1. City’s lien will be either in first or second position. In rare instances, exceptions can be made to allow the City to be in third position, with City Council approval. CalHome Secondary Financing with Rehabilitation Program loans will be placed in second and/or third position. Approval will be obtained by loan committee.

2. In the event that the City will make the exception to take a third position lien, the property must be owner occupied. Forgivable loans will not be permitted in third position.

3. The combined loan-to-value (CLTV) ratio, when combined with all other indebtedness to be secured by the property, shall not exceed 100% of the estimated after rehabilitation value. CalHome Secondary Financing with Rehabilitation Program loans will be permitted to have a combined loan-to-value (CLTV) ratio not to exceed 105%.

4. Lines of credit will need to show closed in order for the City to provide a loan.

4-L. Credit Criteria

Section 4 – Underwriting R equirements 20 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

1. A credit report will be obtained at time of application by the City for every person applying for a loan through the Program. For married couples, credit reports will be required of both spouses, to determine credit worthiness and household debt, even if one spouse is not on title.

For purposes of qualifying Borrower for City funding, credit worthiness criteria shall be:

a. No late payments 1 year prior to date of applying.
b. No outstanding collections, judgments or liens.
d. Bankruptcy discharge with no additional collections must have been a minimum of three (3) years prior to the date of application.

e. Foreclosure must have been a minimum of three (3) years prior to the date of application.

f. Owner-investor properties: Owner(s) must show ability to repay the loan without including contribution from rent payments.

4-M. Loan Documentation

1. All City loans shall be evidenced by the following documents and provisions.

a. Promissory Note(s) payable to City in the principal amount of the loan and stating the terms and rate of interest.

b. Deed of Trust(s) securing the Note; this deed shall be recorded and shall secure City’s financial interest in the property.

c. Other appropriate security instrument naming City as beneficiary. d. Request for Notice of Default on superior loans.
e. Rental projects will require Covenants and Conditions regarding the occupancy and rent restrictions.

4-N. Loan and Grant Types, Terms and Conditions

Below is a list of the different loans and grant available to borrowers.

1. Forgivable Loan

a. For owner-occupied and mixed-use owner-occupied stick homes, this loan requires no monthly payments for the term of the loan. For stick homes, the secured loan will be comprised of the first $40,000 in rehabilitation costs, to be forgiven at a rate of thirty-three percent (33%) annually for 2 years and thirty-four percent (34%) for the final year as long as the owner continues to occupy the unit as their primary residence for a total of 3 years. Any amounts over $40,000 will be in a deferred loan.

Section 4 – Underwriting R equirements 21 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

1) For CDBG, CalHOME, PLHA funded projects, loans shall be repaid when the property title is transferred to a person other than the current owner(s), sold, rented or no longer occupied by the Borrower before the 3-year term for the forgivable loan. The loan may continue to the end of the term in the instance where the property transfer is to a spouse (as owner-occupied) or a disabled dependent who will reside in the property as their primary residence. Any other transfer is not permissible and the loan balance, at the time of transfer, will be due in full.

b. Eligibility

1) A Forgivable Loan is available to residential owner-occupied and mixed-use owner-occupied borrowers for single family units that are not considered a mobile home.

2.) Not available to owner-investor.

3.) Not available to mixed-use tenant occupied units.

4.) Not eligible for CalHome Secondary Financing with Rehabilitation Program

c. The balance of the pro-rata share of the loan shall be repaid at a rate of 2% interest for the remaining term balance when property title is transferred to a person other than the current owner(s), sold, rented or no longer occupied by the Borrower before the 5-year term. The loan may be continued to the end of the term in the instance where the property transfer is to a spouse (as owner-occupied) or a d isabled dependent who will reside in the property as their primary residence. Any other transfer is not permissible and the loan balance, at time of transfer, will be due in full.

d. City loan lien position must be in either first or second position.

2. Grants

a. For mobile homes up to a maximum of $30,000 in rehabilitation costs. b. May be awarded for stick homes by the loan committee on a case-by- case basis up to $30,000 when project does not qualify for a forgivable loan.
cb. Eligibility
1) Only available for mobile homes up to $30,000 .

2 Stick homes up to $30,000 on a case by case basis.

d. Homeowner’s iinsurance not required for grant funded projects.

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Section 4 – Underwriting R equirements 22 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

3. Amortized Loan

a. For owner-investor and mixed-use tenant occupied, loan is payable over a 20-year term at 3% simple interest.
b. Eligibility

1.) Not available to owner-occupied.

Section 4 – Underwriting R equirements 23 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

2.) Eligible for CalHOME Secondary Financing with Rehabilitation Program

c. Shall be repaid when property title is transferred to a person other than the Borrower(s), sold, rented, or no longer occupied by the Borrower before the loan has been paid in full. The loan may continue to the end of the term in the instance where the property transfer is to a spouse (as owner-occupied) or a disabled dependent who will reside in the property as their primary residence. Any other transfer is not permissible and the loan balance, at time of transfer, will be due in full.

d. City loans lien position will be either in first or second position.

4. Deferred Loan

a. For owner-occupied, this 20-year loan requires no monthly payments for the term of the loan at a simple interest rate of 0% for the first 10 years, followed by simple 2% simple interest for the remaining 10 years with the entire amount of the loan, plus accrued interest, due at loan maturity.

b. Eligibility

1.) Available to owner-occupied.

2.) Not available to owner-investor.

3.) Not available to mixed-use tenant occupied units.

4.) Available for CalHOME Secondary Financing with Rehabilitation Program.

c. Shall be repaid when property title is transferred to a person other than the Borrower(s), sold, rented or no longer occupied by the Borrower before the 20- year term. The loan may be continued to the end of the term in the instance that a property transfer is to a spouse (as owner-occupied) or a disabled dependent who will reside in the property as their primary residence. Any other transfer is not permissible and the loan balance, at time of transfer, will be due in full.

d. City loans lien position will be either in first or second position.

5. Optional Temporary Relocation Grants

CDBG and HOME funds may be used for optional temporary relocation payments and assistance to persons who are temporarily relocated by a rehab activity that is not subject to the displaced persons requirements found at 24 CFR Part 570.606. The City makes every effort to not temporarily displace occupants during rehabilitation. However, in some instances, this may be unavoidable due to the scope of work. For example, if a unit will be without water for 24 hours during repairs, this would result in the occupant having to temporarily reside elsewhere while repairs are completed. The temporary relocation grant is used in such instances for temporarily relocating occupants of properties that are to be rehabilitated. There is a maximum allowance of $1,000 per unit. In general, all reasonable costs associated with the provision of decent, safe and

Section 4 – Underwriting R equirements 24 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

sanitary housing are eligible. Relocation grants are not included as part of the City per unit maximum loan amount(s).

Relocation expenses are the responsibility of the owner, but to alleviate this burden the City offers up to $1,000 to assist with relocation and/or storage costs. The Temporary Relocation grant is used to assist the owner with the associated costs. In the event that the owner is unable to pay for the out of pocket relocation expenses, the City can assist the owner by providing additional funds to the loan to cover these expenses.

The combined loan-to-value limits apply to these funds.

a. Eligibility

1) Temporary Relocation Grants are available to owner occupied borrowers.

2) Not eligible for CalHome Secondary Financing with Rehabilitation Program Borrowers.

3) Not eligible for Investor or non-profit borrowers.
b. Assistance Guidelines:
1). The City will provide certain moving assistance to aid owner occupants who voluntarily apply for consideration for assistance under the Homeowner Rehabilitation Program. This may include removal and storage of furniture, packing expenses and/or moving and storage expense.

2) The City may provide temporary relocation assistance to aid owner occupants who voluntarily apply for consideration for assistance under the Homeowner Rehabilitation Program in such instances where the household is unable to remain in the home. Eligible expenses include a hotel or motel stay.

A temporary relocation grant is not a stand-alone activity and is considered a project cost. Additionally, relocation of occupants is not subject to the Uniform Relocation Assistance and Real Property Acquisition Act or the California Relocation Assistance Law due to the nature of the program. Participation in the rehabilitation program is voluntary and does not result in displacement.

6. Other Program Funding

The City may receive supplemental funding including, but not limited to local, state and federal sources. Policies and procedures for the disbursement of such funds including, but not limited to, interest rates, loan terms, and conditions as established by the funding source will be adhered to by program staff.

7. Rental Units

a. Rent limitations will be placed on each assisted unit to ensure affordable rents.

The maximum rent cannot exceed the High HOME rent limits as established by HUD based on the number of bedrooms per unit. When units become vacant during the affordability period, subsequent tenants must be income-eligible and

Section 4 – Underwriting R equirements 25 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

must be charged the applicable rent. HUD High HOME rent limits can be found at the HUD Exchange website at https://www.hudexchange.info/programs/home/home-rent-limits/ or contact housing staff for the limits.

b. Funding source conditions for rental units.

1) CDBG.

i. Residential rental projects of 8 or more units assisted with CDBG funds shall be subject to Davis-Bacon prevailing wage requirements. Prevailing wage and labor regulations can be found at Davis Bacon Act (40 U.S.C., Chapter 3, Section 276a-276a-5), 24 CFR Part 70 (Use of volunteers on projects), 29 CFR Parts 1, 3, 5, 6 and 7 (Labor), 24 CFR 92.354 (HOME), and 24 CFR 570.603 (CDBG).

ii. The City will require the Borrower to make assisted units available for occupancy to low-moderate income (defined as 80% or below of the AMI as adjusted for household size) tenants for the term of the loan or the affordability restrictions.

2) HOME.

i. Rental projects of 12 or more units assisted with HOME funds shall be subject to Davis-Bacon prevailing wage requirements. Prevailing wage and labor regulations can be found at Davis Bacon Act (40 U.S.C., Chapter 3, Section 276a-276a-5), 24 CFR Part 70 (Use of volunteers on projects), 29 CFR Parts 1, 3, 5, 6 and 7 (Labor), 24 CFR 92.354 (HOME), and 24 CFR 570.603 (CDBG).

ii. In projects with five or more HOME-assisted units, at least twenty percent (20%) of the HOME-assisted rental units must be occupied by families who have annual incomes that are fifty percent (50%) or less of median income.

These very-low-income tenants must occupy units with rents at or below the Low HOME Rental level (Project Rule). These income restrictions shall apply for the term of the affordability agreement and;

Ninety percent (90%) of the total families assisted through the rental program have incomes that do not exceed sixty percent (60%) of the area median income as adjusted for household size. The balance of rental units must assist tenants with incomes that do not exceed eighty percent (80%) of the area median income as adjusted for household size. This rule applies to all funds expended from each fiscal year allocation; it is not project specific (Program Targeting Rule). These income restrictions shall apply for the term of the agreement.

iii. Projects with fewer than five HOME-assisted units do not have to restrict any units to the Low HOME Rents or limit occupancy to tenants at fifty percent (50%) or below of the area median income.

Section 4 – Underwriting R equirements 26 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

iv. Properties must remain in standard condition throughout the affordability period and will require periodic on-site inspections. In order to verify compliance with property s tandards annual on-site inspections of City assisted units will be required.

v. Documentation will be required annually by the property owner.

Documentation includes information on tenants’ incomes, rents, and other HOME rental requirements during a project’s period of affordability. vi. Affordability period. See “Affordability Period” on page 28. vii. Rent for units in a project assisted with HOME funds shall be as determined by the U.S. Department of Housing and Urban Development on an annual basis. Conditions co venants and restrictions will be placed against the property to assure affordability for a specified length of time based on the amount of HOME funds invested per unit shall be recorded against the property (affordability period). Such length of time shall be as defined at 24 CFR 92.252(e).

viii. As required by the applicable regulatory or rent limitation agreement, all rental property owners shall submit to annual monitoring of affordability.

8. Mixed-use projects

a. Rental units of mixed-use projects follow the terms and conditions for Rental Units above.

b. Funding source conditions for mixed-use projects.

1) CDBG funded: For structures containing non-residential and residential uses, program funds can be used only for the residential portion of the structure, except when conditions exist in the non-residential portion which will adversely affect the residential portion of the structure. In no case shall the commercial portion of the rehabilitation exceed 25% of the total amount of the loan or grant.

2) HOME funded: For structures containing non-residential and residential uses, program funds can be used only for the residential portion of the structure.

4-O. Repayment

The following are the repayment options available: Cal Home Secondary Financing with Rehabilitation Program will follow the FTHB Policies and Procedures repayment guidelines.

1. Amortized and Deferred loans.

a. The loan principal and interest shall be due and payable upon:

1) Sale, transfer, rental, conveyance, or lease of the property.

Section 4 – Underwriting R equirements 27 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

2) Borrower’s failure to occupy the Property as Borrower’s principal residence (Borrower must certify occupancy annually).

3) The loan maturity date.

I. If it is determined by the Housing Program Services Division staff that repayment of the loan at maturity will cause a hardship to the Borrower, the Loan Committee may, at its option, elect to:

(1) Approve a one-time additional deferral period of up to 20 years in length at 0% additional interest, or;

(2) Convert the debt (principal and accrued interest) to a 15-year amortized loan at 0% additional interest.

Option is based on borrower qualifications and current guidelines.

4) Upon default under the City promissory note, deed of trust, covenants, or other recorded documents of record pertaining to the property.

5) Borrower’s cash-out refinance of any superior mortgages.

b. While the City will provide deferred payment loans, the City will accept voluntary payments on the loan. Loan payments will be credited to the principal first and then to interest. The borrower may repay the loan balance at any time with no pre- payment penalty.

2. Forgivable loans

a. The loan principal and interest shall be due and payable upon:

1) Sale, transfer, rental, conveyance, or lease of the property within the term of the loan.

i. In the event that a ny of the above mentioned occ ur the remaining outstanding balance of the loan will be due and payable immediately.

(1) Outstanding loan balance will be reported to credit bureaus.

2) Borrower’s failure to occupy the Property as Borrower’s principal place of residence (Borrower must certify occupancy annually).

3) Upon default under the City promissory note, deed of trust, covenants, or other recorded documents of record pertaining to the property.

4) Borrower’s cash-out refinance of any superior mortgages.

4-P. Assumability and Transfer of Interest

1. Assumability:

Section 4 – Underwriting R equirements 28 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

a. Loans are not assumable.

2. Transfer of Interest Exceptions:

a. Loans do not have transfers of interest exception.

4-Q. Delinquencies

In cases of amortized loans and upon the end of the deferment term, where either loan payments or payoff has not been received, the City staff will determine the necessary steps to cure the loan. 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 at tempts will be conveyed in an increasingly urgent manner until loan payments have reached 90 days in arrears, at which time the City may co nsider foreclosure. City’s staff will consider the following factors before initiating foreclosure:

1. Amortized and deferred loans

a. Can the loan be cured and can the rates and terms be adjusted to allow for affordable payments such that foreclosure is not necessary?

b. Can the Borrower refinance with a private lender and pay off the City?

c. Can the Borrower sell the property and pay off the City?

d. Does the balance warrant foreclosure? (If the balance is under $5,000, the expense to foreclose may not be worth pursuing.)

e. 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?

2. If the balance is substantial and all of the above factors have been considered, the City may opt to initiate foreclosure. The Borrower must receive, by certified mail, a thirty-day notification of foreclosure initiation. This notification must include the exact amount of funds to be remitted to the City to prevent foreclosure (such as, funds to bring a delinquent loan current or pay off a Deferred Payment Loan).

3. At the end of thirty days, the City will 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 lien holders. The service will advise the City of all required documentation to initiate foreclosure and funds required from the owner to cancel foreclosure proceedings. The service will keep the City informed of the progress of the foreclosure proceedings.

4. When the process is completed, and the property has "reverted to the beneficiary" at the foreclosure sale, the City could sell the home themselves under a homebuyer program, use it for an affordable rental property, use it for transitional housing facility or other eligible use.

Section 4 – Underwriting R equirements 29 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

5. Foreclosures are subject to the review and approval of the City Council.

6. Any delinquencies over 30 days will be reported to the credit bureaus.

4-R. Affordability Period

The affordability period is the minimum period of time a property is required to be affordable. Housing units that have been rehabilitated must remain the principal residence of the borrower for a minimum period as stipulated below. Homeowners will be required to submit certificates of occupancy and homeowner insurance verifications annually. The period of affordability depends on the funding sources and the term of the funding.

The Affordability Period will be:

1. CDBG and CDBG-R will be the term of the loan or until satisfied.

2. HOME-See Recapture Provisions, (Section 9-J)

a. Owner-occupied will be the term of the loan or until satisfied.

b. Owner-investor will be the term of the loan or a minimum of 15 years if satisfied prior to the end of the term, whichever is longer. The length of time will be based on the amount of HOME funds invested per unit and restrictions assuring affordability shall be recorded against the property. Such length of time shall be as defined at 24 CFR 92.252(e).

c. Multi-use owner occupied will be the term of the loan or until satisfied. If multi-use owner occupied project contains a HOME assisted rental unit, see multi-use tenant occupied information below.

d. Multi-use tenant occupied will be the term of the loan or a minimum of 15 years if satisfied prior to the end of the term, whichever is longer. The length of time will be based on the amou nt of HOME funds invested per unit and restrictions assuring affordability shall be recorded against the property. Such length of time shall be as defined at 24 CFR 92.252(e).

3. CalHome funding will follow related regulations and guidance.

4. Other funding will follow related regulations and guidance.

Section 5 – Energy Efficiency Program 29 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

5. Energy Efficiency Program

5-A. Overview

The Community Development Block Grant (CDBG) funding provides an energy efficiency program for and income eligible families through the upgrade of housing features such as windows and additional insulation which would provide greater energy savings for these residents on fixed and restricted incomes.

The City shall comply with the regulations and requirements of the grant.

5-B. Procedures

The program will follow all the procedures in these policies and procedures with the following exceptions:

1. Eligible applicants are limited to:

a. Income eligible: Applicants must be at or below low income. Low income is defined as a household having an income equal to or less than the Section 8 Very Low- Income Limit (50% of the area median income) as established by HUD. See Exhibit B for the Area Median Income (AMI) limits and;

b. Seniors (62 years and older). At least one person on title must be 62 years or older or;

c. Disabled. Proof of disability will be required.

2. Eligible units are limited to:

a. Single family owner-occupied units. Multi-use units are n ot e ligible for this program.

3. Funding:

a. Grant amount cannot exceed $20,000. Families are only eligible to receive funding once even if the maximum limit was not received.

b. Funding can be combined with other rehabilitation program funding.

4. Rehabilitation Work:

a. Housing Rehabilitation Specialist must approve all items to verify e nergy conservation goal. Rehabilitation work will be limited to the following energy efficiency items:

1) Window replacement.

2) Whole house fans.

Section 5 – Energy Efficiency Program 30 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

3) Attic insulation to code.

4) New exterior pre-hung doors.

5) Weather stripping for existing exterior doors.

6) New HVAC system and required duct testing.

7) New roofs.

8) Solar panels.

9) Trees.

10) Xeriscape landscaping replacement.

11) Water saver toilets.

12) Low flow shower heads.

13) Other energy efficiency items may be eligible as approved by the Housing Rehabilitation Specialist.

5. Terms and Conditions

See “Terms and Conditions” on page 20.

Section 6 – Forgivable Loan Program 31 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

6. Forgivable Loan Program

6-A. Overview

Loans are provided for rehabilitation work for emergency conditions that threaten public safety, health and safety improvements, remedy code violations and accessibility items for seniors, disabled and income eligible families.

6-B. Procedures

The program will follow all the procedures in this manual with the following exceptions:

1. Eligible applicants are limited to:

a. Income eligible: Applicants must be at or below 80% of the area median income as established by HUD.

b. Property loan debt in excess of current property value not to exceed 120% the combined loan-to-value (CLTV).

2. Eligible units are limited to:

a. Single family owner-occupied units. (Includes mobile homes).

3. Funding:

a. The Forgivable Loan amount cannot exceed $40,000. Families are only eligible to receive the Forgivable Loan funding once, even if the maximum limit was not received.

b. A forgivable Loan can be combined with a deferred loan

4. Rehabilitation Work:

a. Housing Rehabilitation Specialist must approve all items. Rehabilitation work will be limited to the following code violation and accessibility items:

1) Imminent health and safety items including but not limited to: electrical issues, leaking roof, mold remediation and dry rot repairs, heating and air conditioning repair and or replacement or new installation, plumbing issues, and hot water heater replacement a nd a ny work required to comply with the California Building Code.

2) ADA compliance items including but not limited to: grab bars, increasing door width for access, accessibility ramps, and shower and kitchen modifications.

5. Terms and Conditions: See “Terms and Conditions” on page 20.

Section 7 – CalHome Secondary Financing with Rehabilitation Program 32 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

7. CalHome Secondary Financing with Rehabilitation
Program

7-A. Overview

The CalHome Secondary Financing with Rehabilitation Program Loan is designed to assist new homeowners purchase a property that would, under the existing Secondary Financing Program, not pass basic housing quality standards. This program is only eligible for participants who are receiving CalHome Secondary Financing with assistance. F or CalHome participant eligibility see the First Time Homebuyer Secondary Financing Program (FTHB) Policies and Procedures. This section refers to the Rehabilitation component of the loan only.

7-B. Procedures

Eligible properties will be rehabilitated to correct all required health and safety hazards and existing damage in order to meet basic housing quality standards.

The program will follow all the procedures in this manual with the following exceptions:

1. Eligible applicants are limited to:

a. Income eligible: Applicants must be at or below 80% of the area median income as established by HUD.

2. Eligible units are limited to:

a. Single-family housing; or
b. Condominium unit; or
c. A town home unit; or
e. Multi-family units.

3. Funding:

a. Maximum rehabilitation funding limits will apply.

b. Loan funding cannot be combined with other City program funding.

4. Rehabilitation Work:

a. Housing Rehabilitation Specialist must approve all items.

1) City shall comply with the applicable standards set forth in all appropriate City statutes, codes, and ordinances as well as the Housing Program Services

Section 7 – CalHome Secondary Financing with Rehabilitation Program 33 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

Division Rehabilitation Standards, “A Guide to Rehabilitation Standards” (see Exhibit C) which relate to the use, maintenance, facilities, and occupancy of residence (dwellings), including, but not limited to, the most recently adopted codes and ordinances.

2) Rehabilitation will include correction to any health and safety hazards, existing damage and or any necessary items needed to prepare for occupancy. At a minimum the property must meet the Section 8 Housing Quality Standards, applicable building codes, zoning ordinances a nd cost-effective energy conservation standards.

5. Resale of the property:

a. No limitations will be placed for resale.

Section 8 – Application and Delivery Proces s 34 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

8. APPLICATION and DELIVERY PROCESS

8-A. Overview

Program staff works with applicants to ensure a smooth process in order to make certain that basic housing quality standards are met. The following procedures are a basic guide to the rehabilitation process.

8-B. Procedure for all Loans

1. Initial Property Owner Contact:

Contact with property owners is made as a result of program outreach and publicity, including mailings, press releases, p ublic meetings, neighborhood canvassing, newspaper advertisements, participation in c ommunity events, and referrals from community organizations.

Initial interview is conducted with property owner concerning program objectives, eligibility requirements for the property and applicant, eligible rehabilitation work, and terms and conditions under which loans are made. Applicant shall provide any other data which may be required to complete the application.

2. Review of Application:

Upon receipt of an application, program staff determines eligibility status. The Applicant must complete and sign the appropriate Program required documentation.

Each application will be given a status of the following;

a. Application processed:

1) Application complete.

2) Applicant/property meets eligibility requirements pertaining to type of loan requested.

3) Program funds and staff time available.
b. Application put on hold:
1) Application incomplete. If an application is determined to be incomplete, the applicant will have a maximum of 15 business days to provide the missing documentation. If this timeframe is not met the application will be rejected.

2) Lack of program funding.

3) Backlog of previous applications.
c. Application rejected:
1) Owner applicant over income.

Section 8 – Application and Delivery Proces s 35 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

2) Applicant not on title.

3) Condition of structure non-repairable within available resources.

4) Application eligibility requirements not met.

In the event that an application is rejected, the applicant will be informed in writing.

The applicant may correct or exhibit a valid explanation of these disqualifications and resubmit the a pplication. Upon resubmission, the application will be reevaluated. Further, an applicant whose loan application has been denied may, at their discretion, appeal such determination directly to the Housing Program Services Division Manager.

3. Verification:

Program staff verifies title, insurance, employment, income, assets, credit information and or any other verification necessary to determine eligibility of the applicant.

4. Property Appraisal:

Program Staff determines value of property by obtaining comparable sales information from real estate agents, certified appraisers or other methods it deems appropriate. If property is questionable in value, program staff will obtain a written appraisal of the property market value from a licensed appraiser.

In the event that an appraisal is required, an “as-is” appraisal will be secured by the Housing Finance Specialist to determine feasibility of rehabilitation and any cost of such appraisal shall be added to the borrower’s loan. Should a loan not be granted, the cost of such “as-is” appraisal shall be repaid to the City by the applicant.

5. Application funding review:

The Housing Finance Specialist will recommend the maximum amount of loan funding which the applicant may receive to cover rehabilitation costs and still remain within the applicant’s ability to pay. Evaluation of the applicant’s complete file, will establish the limits of work to be accomplished and the limits and conditions of the loans. Final recommendation will be presented to the Housing Program Services Division Loan Committee.

6. Environmental site Inspection

Arrange for the City Housing Rehabilitation Specialist to inspect the property and prepare a Tank & Site inspection report which will identify any underground fuel tanks or close proximity to existing gas stations. This report is used for the environmental clearance required on each project.

7. Scope of Work and Cost Estimate:

Section 8 – Application and Delivery Proces s 36 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

After the application has been completed and approved, the Housing Rehabilitation Specialist will conduct a full inspection with the homeowner(s). At that time a preliminary drawing will be made which later will be used for a computer drawing. Once the full inspection and drawing are complete the Housing Rehabilitation Specialist will prepare a work write-up and cost estimate based on the property inspection. Once the plans have been approved the Housing Rehabilitation Specialist will conduct a Bid Tour using a list of preapproved licensed Contractors.

A work write-up and cost estimate will be compiled, based on the property inspection report. All rehabilitation work to be done on the property will be itemized, and an estimate of the cost of each item will be included. The cost estimate shall be reasonable and shall reflect actual costs prevailing in the Turlock area for comparable work. Each item on the work write up will be place in one of the following categories;

A Mandatory repair items
B Potential Hazard items
C Neighborhood Upgrade items
D General Property Improvements
E Energy Saving items

This information is only used by Loan Committee as a general guideline of the repairs being made.

If the total estimated cost of the work exceeds the maximum amount of rehabilitation loan which the applicant could receive the Housing Rehabilitation Specialist shall eliminate or modify items in the work write-up as necessary to reduce estimate costs.

However, items or work necessary to meet the minimum Rehabilitation Standards dealing with basic health and safety shall not be eliminated.

As soon as possible, the City shall consult with the prospective applicant on the changes made to the original work write-up and cost estimate. As a result of the consultation and agreement between the City and the applicant on the work to be done, the City shall prepare any additions or revisions to the work write-up and prepare a final cost estimate.

8. Pest inspection report

A pest inspection report will be ordered, as determined by the Housing Rehabilitation Specialist/Inspector.

9. Lead-Based Paint (LBP):

All properties built prior to 1978 and assisted under this Program are subject to the lead-based paint regulations at 24 CFR Part 35, effective Sept. 15, 2000 and as amended thereafter. Staff will assume that all properties built prior to 1978 contain lead-based paint and will require a lead-based paint clearance from a certified lead assessor upon completion of project.

10. Owner Construction Document Approval:

Section 8 – Application and Delivery Proces s 37 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

Program staff prepares co nstruction documents consisting of Invitation to Bid, Bid Proposal, General Conditions, Specifications, and Work Estimate. Approval by owner authorizes program staff to issue invitations to bid.

11. Invitation to Bid:

Program staff solicits sealed bids from a current list of pre-qualified, licensed, insured general building contractors. Construction documents are made available to interested bidders at the job site walk-thru which is held for contractors in order to review the scope of work. All interested contractors or a company representative must attend a mandatory walk-thru in order to submit a bid. All bids must be turned in, at or prior to the date and time listed on the Invitation to Bid. Any bid submitted after the written deadline will not be accepted.

1) Based on work needed, housing staff may solicit bids in grouped project bids.

Ex: 3 households needing roof bids sent only to roofing companies for all 3 projects in bid.

12. Bid Opening and Selection of Contractor:

All bids received are publicly opened by program staff at the Housing Division office at the bid deadline. Upon review by program staff and owner, and verification of bidder's qualifications, the contract is awarded to the lowest responsible, and responsive bidder.

In the event that a single bid is received the project will be sent out for re-bid. In the event the property owner does not want to move forward with the lowest responsible, responsive bid, the homeowner has 10 business days to submit, in writing, why they do not want to proceed with the lowest bidder. If the homeowner’s reason for rejection of the lowest responsible, responsive bid is accepted by the Housing Program Manager, the next lowest responsible, and responsive bid will be chosen. If the Housing Program Manager rejects the homeowner’s reason for rejection of the lowest responsible, responsive bid, the homeowner can either accept the lowest responsible, responsive bid or request that all bids be rejected and the project be put out for re-bid.

Should the borrower opt not to accept the first 2 lowest reasonable, responsive bids, the project will be put out for re-bid. Property owner will have thirty (30) days to accept the lowest reasonable bid. Project will be placed for re-bid only once.

When the original scope of work is changed by more than twenty percent (20%) of the total costs the project will be placed for re-bid.

13. Temporary Relocation:

Housing Finance Specialist will work with the b orrower and Housing Rehabilitation Specialist to determine if the rehabilitation work will require temporary relocation of the occupants. A Temporary Relocation grant may be available to help cover relocation expenses to the Owner.

14. Program Staff Recommendation to Loan Committee:

Section 8 – Application and Delivery Proces s 38 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

Upon processing of the application, review of the scope of work and cost estimate, program staff will evaluate the project with respect to program criteria. A report containing the recommendation of program staff is presented to the Loan Committee.

15. Loan and or Grant Approval or Denial:

The City will complete loan processing and furnish applicant with a copy of the terms and conditions of the rehabilitation loan. The Housing Finance Specialist will furnish all paperwork, loan documentations and final recommendation to the Housing Rehabilitation Loan Committee for final loan approval.

16. Owner-Builder:

In certain instances, program staff may determine that the property owner is a qualified licensed general contractor. See “Contractor Requirements” in Section 3E.

The normal bid process will not be followed. Instead, the owner must agree to complete the work within the cost estimate prepared by program staff, with the exception that the owner-builder may not charge his/her personal labor costs to the project. Program staff will handle construction management.

The following conditions must be met for Owner-Builder projects

a. The property owner-builder must be a licensed general contractor.

b. The owner-builder must provide a current license, insurance information and other documentation normally required as part of the regular contractor qualification process.

c. The owner-contractor must submit bid proposal(s) on program forms.

d. Proposals from sub-contractors (if any) must be signed and submitted by owner- builder for review by program staff.

e. Program staff will review bid proposal(s) for compliance with program regulations.

f. The value of the owner-builder's labor may not be charged to the project, with one exception. The owner-builder may pay his or her employees reasonable wages or salaries and may include such payments in the cost of the project.

g. If proposal is over 10% of program staff estimate, Owner builder and program staff will review basis for proposal. Final loan approval shall be made by Loan Committee.

h. If no consensus for the total project costs can be reached, project must be released for competitive bid.

i. Construction monitoring on owner-builder projects shall be performed by program staff in accordance with these Guidelines.

Section 8 – Application and Delivery Proces s 39 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

j. Program staff has final authority regarding quality and acceptability of all work.

17. Loan Rehabilitation Contract Execution:

The City will prepare construction contract documents for applicant and obtain appropriate bids and proposals.

a. Written Contract- The rehabilitation construction work financed through this program shall be undertaken only through a written contract between a licensed contractor and the borrower.

b. Bid Obligation- A licensed contractor shall be obligated to honor his/her bid for a period of 90 days, or note otherwise on his/her bid.

c. Work Write-Up -The work write-up is prepared by the City Housing Rehabilitation Specialist/Inspector and shall be of sufficient detail to act as the contract specifications covering the specific rehabilitation work for each property.

Illustrative sketches or drawings shall be prepared by the City Housing Rehabilitation Specialist when necessary to show the scope of the work involved so that a fair bid for the work can be obtained, and to avoid misunderstandings with the contractors. The work write-up shall clearly establish the nature of the work to be done, the material and equipment to be installed. Known acceptable brands shall be identified by reference to manufacturers or association specifications, and provision shall be made for acceptance of “or equal” substitution, determinations to be made by the City Housing Rehabilitation Specialist.

d. Contract – The City shall prepare general conditions for use in all construction contracts for property rehabilitation. The construction contract between a licensed contractor and a borrower shall be signed by the contractor and accepted by the loan applicant following approval of the rehabilitation loan. It shall contain a bid and proposal and the general conditions as well as the specifications for the work to be performed.

e. Execution - Program staff prepares all loan and contract documents for execution. Owner, Contractor, and City execute documents that are deposited into escrow with City instructions for recordation, issuance of title and other applicable actions.

18. Order to Proceed

Upon expiration of the property owner's right of rescission period (three business days, this excludes holidays and weekends), program staff issues an Order to Proceed to the contractor.

19. Construction Monitoring:

Work is monitored and inspected by the Housing Rehabilitation Specialist in coordination with HUD guidelines.

20. Permits

Section 8 – Application and Delivery Proces s 40 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

All rehabilitation projects will be subject to the contractor or owner-builder obtaining proper City permits from the Building Department. All permits need to be posted at the job site. Original job cards will be submitted with the 100% payment once the Building Department has signed off on the Final.

21. Servicing of funds

Funds approved by loan committee and all documents necessary to secure the loan as established by escrow instructions have been assembled, recording instructions will be forwarded to the title company. The Title Company will inform the City when appropriate documents are recorded and such agency will issue title insurance, as per City’s request. The City shall not disburse funds from the Rehabilitation Loan Account until the borrower’s Right of Rescission has expired as required by law. Loan proceeds shall be used only to pay for costs of services and materials necessary to carry out the rehabilitation work for which the loan will be approved as per these policies.

Forgivable Loan will be serviced in house and will be monitored on an annual basis.

22. Payment for Work:

Program staff and borrowers authorize payments for work completed in a satisfactory manner. Checks for payments are made payable to the contractor.

Disbursements:

a. Owner-Contractor Method

1) Payments shall be made as set forth in Construction Agreement between owner and contractor. Invoices will be submitted monthly for work completed.

All requests for payments will require inspections by the Housing Rehabilitation Specialist and a detailed, itemized contractor invoice listing the items being submitted for payment. Payments shall not exceed 90 percent of the value of the work satisfactorily completed.

2) The final payment shall not be made until all work has been completed and accepted by the borrower, Housing Rehabilitation Specialist, inspected and finalized by the City of Turlock Building and Safety Division and all lien waivers have been obtained by Housing staff.

3) Final Payment of the 10% retention is authorized by program staff upon:

i. Completion of all work and punch list items by contractor. ii. Receipt by program staff of material and equipment warranties. iii. Lien waivers received from all sub-contractors, employees, and material suppliers for the rehabilitation work.
iv. Recording of the Notice of Completion by program staff. v. Expiration of a 35-day lien period.

b. Owner-Builder Method

Section 8 – Application and Delivery Proces s 41 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

1) payments shall be made as set forth in the Loan Agreement between owner and the City. Invoices will be submitted monthly for work completed. All requests for payments will require inspections by the Housing Rehabilitation Specialist and original receipts for installed materials being submitted for payment. payments shall not exceed 90 percent of the value of the work satisfactorily completed.

2) The final payment shall not be made until all work has been completed and accepted by the Housing Rehabilitation Specialist inspected and finalized by the City of Turlock Building and Safety Division and all lien waivers have been obtained by Housing staff.

3) Final Payment of the 10% retention is authorized by program staff upon:

i. Completion of all work and punch list items by owner/sub-contractor(s). ii. Lien waivers received from all sub-contractors, employees, and material suppliers for the rehabilitation work.
iii. Recording of the Notice of Completion by program staff. iv. Expiration of a 35-day lien period.

c. Advances

The City shall advance funds as necessary for appraisal, preliminary title report and termite inspection report. When the loan is approved, the City shall be reimbursed from the proceeds of the loan. If the loan is withdrawn or not approved, the applicant will not be charged for monies advanced.

d. Excess Funds; Upon completion of all rehabilitation work specified in the contract and upon charging the loan fund account with advances by the City, the balance of the account may be used, with the approval of the Housing Program Services Division Manager, for the purpose of making additional repairs not included in the contract documents but permissible by loan policy. If such additional repairs are not made, the balance shall be applied toward the principal loan balance.

23. Work Change Orders

Should there be any changes to the existing Work Write-Up, with or without any involvement of costs, a City Work Change Order form will be required. The change order will have to be approved and signed by the Owner, Contractor, Housing Finance Specialist and Housing Rehabilitation Specialist prior to any work being performed. In the event that work is completed without a signed authorized change order, the work may not be compensated.

24. Contract Disputes:

a. If any dispute arises relating to the quality or quantity of materials or workmanship or anything pertaining to the work, the Borrower and Contractor shall attempt to settle the dispute between themselves without litigation by first discussing said dispute with the City of Turlock Housing Rehabilitation Specialist within five (5) business days of the dispute. In the event that the dispute remains unresolved, then the Borrower and Contractor shall appeal such dispute to the Housing

Section 8 – Application and Delivery Proces s 42 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

Program Services Manager within five (5) business days of the above-referenced discussion with the Housing Rehabilitation Specialist. In the event that the dispute remains unresolved, then the Borrower and Contractor shall appeal such dispute to the Director of Development Services within five (5) business days of the above- referenced discussion. If the dispute is not resolved at this level, the parties may appeal such to the Turlock City Manager within five (5) business days.

b. If the parties are unable to reach settlement through their appeal to the City Manager, then they are free to pursue all of their legal remedies as provided by California law.

25. Notice of Completion:

Program staff files a Notice of Completion with the County Recorder upon final completion of the work and receipt from contractor of finalized building permits.

26. Evaluation:

Contractor will be evaluated at the end of each project. Evaluation will be discussed with contractor providing him/her a list of job concerns and compliments.

8-C. Loan Committee

1. The Housing Program Services Loan Committee serves as the decision-making body for the program.

2. The Loan Committee will be convened to approve or deny by majority vote the following:

a. Loans and Grants.

b. Subordination requests: The Loan Committee shall have the authority to permit subordination of any program loan if the subordination would be consistent with the purpose of the original loan, and the after-rehabilitation equity meets the minimum requirements set forth in these Manual.

c. Repayment moratoriums.

d. Other applicable requests or actions.
e. Hardship Requests

3. The Loan Committee may impose such conditions as necessary or desirable to ensure that all aspects related to the rehabilitation project are consistent with these Guidelines, and to reduce to the extent feasible any risk associated with the project. For example, any existing private "blanket" loan that encumbers more than the parcel containing units participating in the City's rehabilitation program should be divided proportionately so that the amount of an existing private loan affecting the property is reduced.

Section 9 – Loan Servicing 43 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

8-D. Applicant Interest List

Upon expenditure of all rehabilitation budget funds, an interest list will be established. It will be based on a first come-first serve basis. No priority will be given to any applicants.

Section 9 – Loan Servicing 44 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

9. Loan Servicing

9-A. Overview

These loan servicing policies and procedures are intended to preserve the City’s financial interest in properties assisted with funding through the Housing Rehabilitation Program.

9-B. Payment of Property Taxes and Insurance

1. Borrower must maintain property insurance coverage naming the City as loss payee when in first position or additional insured if the loan is a second mortgage. If borrower fails to maintain the necessary insurance, the City will contact the Borrower reminding them of the insurance requirement. The Borrower will have 30 days to provide proof of insurance. If verification of insurance is not received, the City may call the loan due.

2. If the Borrower fails to maintain required hazard insurance (including flood insurance if the property is located within a 100-year floodplain) the City may take out a “forced place” insurance policy to cover the property. City shall obtain a judgment for any amounts expended by City under this section, and shall record a judgment lien against the property. The City is currently not designated in a flood zone.

3. Property taxes must be kept current during the term of the loan. If the Borrower fails to maintain payment of property taxes, then the City may pay the taxes current and add the balance of the tax payment plus any penalties to the balance of the loan and may call the loan due.

9-C. Owner-Occupancy Verification

1. The Borrower shall be required to complete and submit an Annual Occupancy Certification. Such report shall include the following:

a. Evidence of Borrower’s occupancy of the Property as Borrower’s principal place of residence;

b. Evidence of payment of property taxes and hazard insurance. c. Other information reasonably required by the City. 9-D. Tenant-Occupancy Verification

Rent limitations will be placed on each assisted unit to ensure affordable rents. The maximum rent cannot exceed the High HOME rent limits as established by HUD based on the number of bedrooms per unit. When units become vacant during the affordability

Section 9 – Loan Servicing 45 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

period, subsequent tenants must be income-eligible and must be charged the applicable rent. HUD High HOME rent limits can be found at the HUD Exchange website at https://www.hudexchange.info/programs/home/home-rent-limits/ or contact housing staff for the limits.

1. The Owner shall be required to submit an Annual Tenant Occupancy Certification and documentation. Such report shall include the following:

a. Evidence of Tenant’s income and occupancy of the Property. See “Income Eligibility and Verification” on page 7 for information.

b. Evidence of payment of property taxes and hazard insurance. c. Other information reasonably required by the City.

2. Owner - Investor housing shall also be conditional on the following:

a.

b. The grantee enters into and records an agreement whereby the occupancy and rental obligation continue throughout the loan term or until satisfied. Occupancy and rental obligations will be based on the funding source.

c. Rent limitations will be placed on each assisted unit per 24 CFR 570.208(a)(3) to ensure affordable rents. The maximum rent cannot exceed the High HOME rent limits as established by HUD based on the number of bedrooms per unit. When units become vacant during the affordability period, subsequent tenants must be income-eligible and must be charged the applicable rent. HUD High HOME rent limits can be found at the HUD Exchange we bsite at https://www.hudexchange.info/programs/home/home-rent-limits/ or contact housing staff for the limits.

d. See Affordability Requirements for additional conditions on rental units.

9-E. Required Noticing and Restrictions on Any Changes of Title or Occupancy:

1. In all cases where there is a change in title or occupancy or use, the Borrower must notify the City in writing of any change. City and borrower will work together to ensure the property is kept in compliance with the original Housing Rehabilitation Program terms and conditions. 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.

2. If a change of ownership occurs at a sale, the loan is not assumable and the loan balance is immediately due and payable in full.

3. If a transfer of the property occurs through inheritance, property can only be transferred to the spouse (as owner-occupant) or disabled dependent who must reside at the home as the primary residence. Any other transfer is not permissible and loan will be due in full. In the event that the heir is neither a spouse nor a disabled

Section 9 – Loan Servicing 46 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

dependent, the heir will not be provided the opportunity to assume the loan. If the heir is a non-income eligible family, the balance of the loan is due and payable in full. If the heir intends to act as an owner-investor, the balance of the loan is due and payable in full. Other exceptions are subject to the review and approval of City council.

4. 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.

5. 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 City allow for a partial conversion where some of the residence is used for a business but the household still resides in the prope rty. 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.

9-F. Subordination

1. If the Borrower wishes to refinance any superior loans, the Borrower must submit a Request for Subordination to the City. Subordinations will be granted only under the following conditions:

a. “No cash-out” allowed. Cash out means there are no additional charges on the transaction above existing loan balance. Escrow closing fees are permitted.

b. No third-party debt pay-offs or additional encumbrance on the property above traditional refinance transaction costs.
c. The refinancing lowers the families housing cost with a lower interest rate d. Refinancing for a shorter term will be permitted as long as the increase in housing costs do not exceed allowable back and front-end ratios.

e. Total indebtedness secured by the property may not exceed the current market value of the property. In cases of economic crisis, the subordination request will be approved on a case-by-case basis.

2. The City Loan Committee will review and approve or deny the Request for Subordination and, if approved, the escrow company will provide the proper subordination documentation, including a new Request for Notice of Default for the City, for execution and recordation by the Lender.

9-G. Demand/Pay-off

1. Upon receiving a Notice of Demand/Pay-off, City’s Housing Program Services Division or their designated servicing agency, shall calculate the amount of principal and interest due, and transmit the payoff amount to the requesting party.

Section 9 – Loan Servicing 47 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

2. Upon receipt of all due principal and interest, City shall reconvey the mortgage deed of trust.

9-H. Request for Notice of Default

1. The City shall record a Request for Notice of Default for each lien senior to the City’s mortgage.

a. This document requires any senior lien holder listed in the notice to notify the City of initiation of a foreclosure action. The City will then have time to contact the Borrower and assist them in bringing the first loan current. The City can also monitor the foreclosure process and go through the necessary analysis to determine if the loan can be made whole or preserved.

9-I. Foreclosure by Senior Lien Holder

1. Upon any condition of loan default: 1) non-payment; 2) lack of insurance or property tax payment; 3) change in title or use without approval; 4) default on senior loans, the Lender will send out a letter to the Borrower notifying them of the default situation. If the default situation continues then the L ender may start a formal process of foreclosure.

2. When a senior lien holder starts a foreclosure process and the City is notified via a Request for Notice of Default, the City, who is the junior lien holder, may cancel the foreclosure proceedings by "reinstating" the senior lien holder. The reinstatement amount or payoff amount must be obtained by contacting the senior lien holder. This amount will include all delinquent payments, late charges and fees to date. City must confer with Borrower to determine if, upon paying the senior lien holder current, the Borrower can provide future payments. If this is the case then the City may cure the foreclosure and add the costs to the balance of the loan with a Notice of Additional Advance on the existing note. This action will be submitted to the loan committee for review and approval.

3. If the City determines, based on information on the reinstatement amount and status of borrower, that bringing the loan current will not preserve the loan, then staff must determine if it is cost effective to protect their position by paying off the senior lien holder in total and restructure the debt such that the unit is made affordable to the Borrower. If the City does not have sufficient funds to pay the senior lien holder in full, then they may choose to cure the senior lien holder and foreclose on the property themselves. As long as there is sufficient value in the property, the City can afford to pay for the foreclosure process and pay off the senior lien holder and retain some or all of their investment. This action will be submitted to the loan committee for review and approval.

4. If the City decides to reinstate, the senior lien holder 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 (3) to six (6) months from the date of recording of the "Notice of Default." If the City fails to reinstate the senior lien holder before five (5) days prior to the foreclosure sale date, the senior lien holder would then require a full pay off of the balance, plus costs, to cancel foreclosure. If the City determines the reinstatement and maintenance of the property not to be cost effective and allows the

Section 9 – Loan Servicing 48 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

senior lien holder to complete foreclosure, the City's lien may be eliminated due to insufficient sales proceeds.

9-J. Recapture Provision

1. The Recapture provision applies only to HOME funds.

a. When a loan is refinanced or the property is sold or the Applicant is no longer the principal resident or upon discovery of willful misrepresentation or fraud in connection with the program the money from the Housing Rehabilitation Program loan is instantly repayable.

b. The seller is entitled to a fair rate of return on his or her investment, including any documented improvements to the property.

2. The affordability period for funds depends on the amount of the City HOME investment in the property subject to recapture and the nature of the activity. If the HOME assistance is over $50,000, then the affordability period is 15 years.

Payments and payoffs that meet the affordability requirements are returned as Program Income to the city. Payments and payoffs that do not meet the affordability requirements are returned as Recaptured funds to the city.

3. The City imposes recapture requirements to recapture the entire amount of the City HOME investment from the homeowner, to ensure affordability. However, when the recapture requirement is triggered by a sale (voluntary or involuntary) of the housing unit, and there are no net proceeds or the net proceeds are insufficient to repay the City HOME investment due, the city can only recapture the net proceeds, if any. The net proceeds are the sales price minus superior loan repayment (other than City HOME funds) and any closing costs.

4. If the net proceeds are not sufficient to recapture the full City HOME investment plus enable the homeowner to recover the amount of the homeowner’s investment and any capital improvement investment made by the owner since purchase, the City will share the net proceeds. The net proceeds are the sales price minus loan repayment (other than City HOME funds) and closing costs. The net proceeds will be divided proportionally as set forth in the following mathematical formulas.

City HOME investment . X Net proceeds = City HOME amount (City HOME + homeowner investment to be recaptured

Homeowner investment . X Net proceeds = amount to homeowner (City HOME + homeowner investment)

9-K. Foreclosure by City

1. 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 City may consider foreclosure. City’s staff will consider the following factors before initiating foreclosure:

Section 9 – Loan Servicing 49 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

a. Can the loan be cured and can the rates and terms be adjusted to allow for affordable payments such that foreclosure is not necessary?

b. Can the Borrower refinance with a private lender and pay off the City?

c. Can the Borrower sell the property and pay off the City?

d. Does the balance warrant foreclosure? (If the balance is under $5,000, the expense to foreclose may not be worth pursuing.)

e. 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?

2. If the balance is substantial and all of the above factors have been considered, the City may opt to initiate foreclosure. The Borrower must receive, by certified mail, a thirty-day notification of foreclosure initiation. This notification must include the exact amount of funds to be remitted to the City to prevent foreclosure (such as, funds to bring a delinquent loan current or pay off a Deferred Payment Loan).

3. At the end of thirty days, the City will 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 lien holders. The service will advise the City 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 City informed of the progress of the foreclosure proceedings.

4. When the process is completed, and the property has "reverted to the beneficiary" at the foreclosure sale, the City could sell the home themselves under a homebuyer program, use it for an affordable rental property, use it for transitional housing facility or other eligible use.

5. Foreclosures are subject to the review and approval of the City Council.

9-L. Use of Third-Party Agent

Portions or all of the Housing Rehabilitation Program loan servicing shall be performed by City or, at City’s option, shall be performed by a third party under contract with City.

9-M. First Mortgage Underwriting Requirements

1. The following Housing Rehabilitation Program requirements shall apply to all applicants prior to obtaining a Program Loan or grant.

a. First mortgage loans shall not include provisions for negative amortization, principal increases, adjustable rate mortgages (ARM), balloon payments, deferred interest, or reverse mortgages.

b. Credit Worthiness Criteria

Section 9 – Loan Servicing 50 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

For purposes of qualifying Borrowers credit worthiness, criteria will be:

1) No late payments 1 year from date of application

9-N. Cash-Out of Escrow

1. Borrowers may not receive cash out of escrow from any loan package containing City financing. Loan proceeds shall be used only to pay for costs of services and materials necessary to carry out the rehabilitation work for which the loan will be approved as per these policies.

9-O. Title Insurance

1. ALTA title insurance policy in the amount of the City loan will be required at Borrower’s expense.

9-P. Hazard Insurance

1. Borrower must provide and maintain fire and flood (if the property is located in a 100- year floodplain) insurance in an amount at least equal to the replacement value of the improvements.

2. City must be named as an additional loss payee on the policy.

3. Course of construction insurance policy will be required upon beginning of rehab work.

Section 10 – Federal Regulatory Provisions 51 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

10. Federal Regulatory Provisions

10-A. Conflict of Interest

In accordance with Federal and State regulations no person who is an employee, agent, consultant, officer, or elected official or appointed official of the City who exercise or have exercised any functions or responsibilities with respect to CalHome, CDBG, HOME, or NSP assisted activities under this Program, or who are in a position to participate in a decision-making process or gain inside information with regard to such activities, may obtain a financial interest or benefit from this activity, or have a financial interest in any contract, subcontract, or agreement with respect to this activity, or with respect to the proceeds of this activity, either for themselves or those with whom they have business or immediate family ties, during their tenure or for one year thereafter.

10-B. Fair Housing and Non-Discrimination

Implementation of the program will be consistent with the City’s commitment to non- discrimination. No person shall be excluded from participation in, denied the benefit of, or be subject to discrimination under any program or activity funded in whole or in part with state and federal funds on the basis of religion or religious affiliation, age, race, color, creed, gender (sex), sexual orientation, marital status, familial status (children), physical or mental disability, national origin, or ancestry, or other arbitrary cause.

The City shall comply will all Federal and State Laws and Regulations pertaining to fair housing and equal opportunity including but not limited to the following references.

▪ Title VI of the Civil Rights Act of 1964, As Amended (422 U.S.C. 2000d et seq.) The provisions for HUD programs may be found in 24 CFR Part 1.

▪ Section 109 of the Housing and Community Development Act of 1974

▪ Age Discrimination Act of 1975, As Amended (42 U.S.C. 6101). Regulations found at 24 CFR Part 146.

▪ Section 504 of the Rehabilitation Act of 1973

▪ Americans with Disability Act (ADA) (42 U.S.C. 12131; 47 U.S.C. 155, 201, 218, and 225).

▪ Equal Employment Opportunity (Executive Order 11246, as amended) Implementing regulations may be found at 41 CFR Part 60.

▪ Equal Opportunity in Housing (Executive Order 11063, as amended by Executive Order 12259). Regulations may be found in 24 CFR Part 107.

▪ Title VIII of the Civil Rights Act of 1968, As Amended by the Fair Housing Amendments Act of 1988 (The Fair Housing Act).

Section 10 – Federal Regulatory Provisions 52 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

▪ Fair Housing Act (42 U.S.C. 3601-3620) Fair Housing Act implementing regulations for HUD programs may be found in 24 CFR Part 100-115.

10-C. Relocation of Displaced Tenants

It is not anticipated that the implementation of this Program will result in the displacement of any person, household or family. Every attempt will be made to avoid displacement in projects funded through this program. In the event displacement is unavoidable, it shall be subject to all applicable local, state, and federal laws, the federal Uniform Relocation Act, and all others as may apply.

10-D. Consistency

City Program regulations shall be consistent with and shall implement required regulations, and where different, due to changes or refinements made at the federal, state, or local levels or where questions arise which are not addressed by these policies.

10-E. Environmental Review

Environmental Review process will be completed as required by the applicable funding sources and regulations.

1. The environmental effects of activities carried out with Federal funds must be assessed in accordance with the provisions of the National Environmental Policy Act (NEPA).

2. The City shall conduct said environmental review in accordance with 24 CFR Part 58.

10-F Matching

Matching will follow the funding sources.

1. CDBG: No Matching requirements.

2. HOME: Matching is the commitment of non-federal funds to supplement HOME funds used to assist in the provision of affordable housing. HOME funding requires a matching contribution of not less than 25 percent of the funds drawn from the City’s HOME Investment Trust Fund Treas ury account in the c orresponding fiscal year, unless waived or reduced by HUD. Matching funds are calculated on a pr oject-by- project basis and applied on a program-wide basis.

3. CalHome: No Matching requirements.

4. PLHA: No matching requirements.

10-G. Program Income and Reuse Account

1. CDBG, HOME, and PLHA Program Income

Section 10 – Federal Regulatory Provisions 53 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

a. All repayments of loan principal and interest shall be received by City and deposited into a separate account maintained by City’s Finance Department.

b. The account shall be interest bearing into which all earned interest shall be deposited.

c. All funds deposited into the account shall be the property of the City.

d. A line item for reuse of funds will be inserted into City’s fiscal year budget allocating and approving use of funds for eligible activities.

e. All Program Income funds shall be expended in accordance with the regulations and the Agreement between the City and HUD or State.

2. CalHome Reuse Plan Account

The City has adopted this plan to govern the use of monies received as repayments of loan principal and/or loan interest resulting for activities funded under the State of California, CalHome Program. The City has formulated this document to comply with Article 2, Section 7724-Reuse Account requirements of the CalHome Program, Title 25 California Code of Regulations, Division 1, Chapter 7, Sub-Chapter 9, commending with Section 7715.

a. All repayments of CalHome loan principal and interest shall be received by City and deposited into a separate reuse account maintained by City’s Finance Department.

b. The reuse account shall be interest bearing into which all earned interest shall be deposited.

c. All funds deposited into the reuse account shall be the property of the City and are to be used for CalHome eligible activities.

d. A line item for reuse of CalHome funds will be inserted into City’s fiscal year budget allocating and approving use of funds for CalHome eligible activities.

e. All reuse funds shall be expended in accordance with the CalHome Regulations and the Standard a nd Monitoring Agreements between the City and the Department.

f. City shall allow the Department full access to the reuse account records for the purpose of determining City’s compliance with CalHome regulations. g. Target area restrictions are not applicable to reuse funds. h. Loan maximum subsidy limits will convert to Department program guidelines.

Section 11 – Exhibits 54 City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

11. Exhibits

11-A. Rehab Specifications Manual “A Guide to Rehabilitation Standards”

Rehabilitation Specifications Manual

“A Guide to Rehabilitation Standards”

See separate attachment

11-B. Summary of General Program Guidelines

Section 11 – Exhibits
City of Turlock Housing Rehabilitation Program Policies and Procedures Manual

55 55

Summary of General Program Guidelines

See specific sections for complete qualifications.

EXHIBIT B

Owner Occupied
(Single Family, includes)

Owner Occupied
(Owner-builder)
Owner-Investor/
Non-Profit
(single/multi-family)
Mixed-Use
(Owner and investor
occupied)
Property Location City Limits of Turlock
excluding county
pockets with the
exception of HOME.

City Limits of Turlock
excluding county
pockets with the
exception of HOME.

City Limits of Turlock
excluding county
pockets with the
exception of HOME.

City Limits of Turlock
excluding county
pockets with the
exception of HOME.
(See Eligible Property
Requirements on page 6)

Other Misc
Not Applicable
Owner must be a
licensed General
contractor

Not Applicable

Not Applicable

Occupancy

Owner occupied

Owner occupied

Occupied by income
eligible tenants
Owner occupied and
or occupied by
income eligible
tenants.

Requirements
Rent limitations

Not Applicable

Not Applicable

Rent limitations based
on funding source(s).

See Rental Units under Rent limitations
Terms & Conditions on
page 24.
based on funding
source(s).

Loan Funding Limits Up to $80,000 per unit
$30,000 per unit for
mobile home

$75,000 per unit

$75,000 per unit

$75,000 per unit See Loan Funding Limits
on page 17
Income eligibility
80% of AMI (owner)

80% of AMI (owner)

80% of AMI (tenant)

80% of AMI (tenant) Limits
(by Households)

Interest
Deferred at 0% for 1st 10
years, 2% for remaining
10 years

Deferred at 0% for 1st
10 years, 2% for
remaining 10 years

Amortized at 3%
Deferred: N/A

Amortized at 3%
Deferred: N/A
See Terms & Conditions
on page 20.

Terms
20 years

20 years

20 years

20 years See Terms & Conditions
on page 20.

Forgivable Loan and
Energy Efficiency
Program
Interest and Terms

Deferred at 0% for 1st 10
years, 2% for remaining
10 years

Deferred at 0% for 1st
10 years, 2% for
remaining 10 years

Not Applicable
Owner occupied only:

Deferred at 0% for 1st
10 years, 2% for
remaining 10 years
Temporary

Eligible for Maximum
$1,000 per unit

Eligible for Maximum
$1,000 per unit

Not Eligible

Not Eligible
Relocation Grant
See Temporary
Relocation Grant under
Loan types and Grants on
page 20

First Time Homebuyer Secondary
Financing Program

Policies and Procedures Manual

City of Turlock
Housing Program Services
156 South Broadway, Suite 250, Turlock CA 95380
(209) 668-5610, Fax (209) 668-5120, TDD 1 (800) 735-2929 Website: www.cityofturlock.org

Approved by City Council on October 13, 2009 by resolution 2009-196 with amendments on November 24, 2009 by resolution 2009-223, September 11, 2012 by resolution 2012-159,
January 11, 2014 by resolution 2014-009, and
July 8, 2025 by resolution 2025-135

These Policies and Procedures supersede any previously adopted Policies. These policies and procedures are subject to change in accordance with revisions made by the State of California and or Housing and Urban Development.

Table of Contents i
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

Table of Contents

Page No.

Introduction ................................ ................................ ................................ .................. v

1. Overview

1-A. Purpose of Manual................................ ................................ ........................ 1 1-B. Program Summary ................................ ................................ ........................ 1 1-C. General Definitions ................................ ................................ ....................... 1

2. CalHome Program Requirements

2-A. Overview ................................ ................................ ................................ ...... 6 2-B. Eligible Household ................................ ................................ ........................ 6 2-C. Eligible Property ................................ ................................ ........................... 7 2-D. Affordability Period ................................ ................................ ....................... 8 2-E. Loan Terms ................................ ................................ ................................ .. 8 2-F. Subordinate Financing to CalHome Loan ................................ ..................... 10 2-G. CalHome Target areas ................................ ................................ ................. 10 2-H. Reuse Account ................................ ................................ ............................ 10 2-I. Matching ................................ ................................ ................................ ....... 11

3. Community Development Block Grant (CDBG) Program Requirements

3-A. Overview ................................ ................................ ................................ ...... 12 3-B. Eligible Household ................................ ................................ ........................ 12 3-C. Eligible Property ................................ ................................ ........................... 13 3-D. Affordability Period ................................ ................................ ....................... 13 3-E. Loan Terms ................................ ................................ ................................ .. 13 3-F. Subordinate Financing to CDBG Loan ................................ .......................... 15 3-G. CDBG Target areas ................................ ................................ ...................... 15 3-H. Program Income ................................ ................................ .......................... 15 3-I. Matching ................................ ................................ ................................ ....... 16

4. HOME Program Requirements

4-A. Overview ................................ ................................ ................................ ...... 17 4-B. Eligible Household ................................ ................................ ........................ 17 4-C. Eligible Property ................................ ................................ ........................... 18 4-D. Affordability Period ................................ ................................ ....................... 19 4-E. Loan Terms ................................ ................................ ................................ .. 19 4-F. Subordinate Financing to HOME Loan ................................ .......................... 21 4-G. HOME Target areas ................................ ................................ ...................... 21 4-H. Program Income ................................ ................................ .......................... 21 4-I. Matching ................................ ................................ ................................ ....... 22

Table of Contents ii
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

5. Neighborhood Stabilization Program (NSP) Requirements

5-A. Overview ................................ ................................ ................................ ...... 23 5-B. Eligible Household ................................ ................................ ........................ 23 5-C. Eligible Property ................................ ................................ ........................... 24 5-D. Affordability Period ................................ ................................ ....................... 25 5-E. Loan Terms ................................ ................................ ................................ .. 25 5-F. Subordinate Financing to NSP Loan ................................ ............................. 27 5-G. NSP Target areas ................................ ................................ ........................ 27 5-H. Program Income ................................ ................................ ........................... 27 5-I. Matching ................................ ................................ ................................ ....... 27

6. Permanent Local Housing Allocation (PLHA)

6-A. Overview ................................ ................................ ................................ ...... 29 6-B. Eligible Household ................................ ................................ ........................ 29 6-C. Eligible Property ................................ ................................ ........................... 30 6-D. Affordability Period ................................ ................................ ....................... 30 6-E. Loan Terms ................................ ................................ ................................ .. 30 6-F. Subordinate Financing ................................ ................................ .................. 32 6-G. Target areas ................................ ................................ ................................ . 32 6-H. Program Income ................................ ................................ .......................... 32 6-I. Matching ................................ ................................ ................................ ....... 33

7. First Time Homebuyer Mortgage Underwriting Requirements (for all Funding Sources)

7-A. Overview ................................ ................................ ................................ ...... 34 7-B. Verification of Previous Ownership Status ................................ .................... 34 7-C. Verification of Borrower Income ................................ ................................ .... 35 7-D. Credit ................................ ................................ ................................ ............ 37 7-E. Purchase Price ................................ ................................ ............................. 37 7-F. Maximum Sales/Price Value Limits ................................ ............................... 37 7-G. Maximum Loan Amount ................................ ................................ ................ 38 7-H. Loan Documentation ................................ ................................ ..................... 38 7-I. Gift Funds ................................ ................................ ................................ ..... 38

8. Application and Delivery Process (for all Funding Sources)

8-A. Overview ................................ ................................ ................................ ...... 40 8-B. FTHB Mortgage Application Process ................................ ............................ 40 8-C. Application Handling Priority ................................ ................................ ......... 42 8-D. Property Standards ................................ ................................ ....................... 42 8-E. Lead Based Paint (LBP) ................................ ................................ ............... 43 8-F. Environmental Review ................................ ................................ ................. 45 8-G. Homebuyer Education Requirement ................................ ............................ 45 8-H City Mortgage Assistance Limit ................................ ................................ ..... 45 8-I. Transfer of FTHB Mortgage ................................ ................................ .......... 45 8-J. Transfer of FTHB Application to Substitute Lender ................................ ....... 45

Table of Contents iii
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

8-K. Pre-approval Letter from City ................................ ................................ ........ 46 8-L. Changing Properties during the FTHB Second Application Process ............. 46 8-M. Resubmittal of FTHB Second Application Returned or Rejected ................... 46 8-N. Changes Prior to Closing ................................ ................................ .............. 46 8-O. Conflict of Interest ................................ ................................ ......................... 47

9. First Time Homebuyer Mortgage Loan Servicing by City (for all Funding Sources)

9-A. Overview ................................ ................................ ................................ ...... 48 9-B. Payment of Property Taxes and Insurance ................................ ................... 48 9-C. Owner-Occupancy ................................ ................................ ........................ 48 9-D. Required Noticing and Restrictions on Any Changes of Title or Occupancy.. 48 9-E. Subordination ................................ ................................ ............................... 49 9-F. Demand/Pay-Off ................................ ................................ ........................... 50 9-G. Request for Notice of Default ................................ ................................ ........ 50 9-H. Foreclosure by Senior Lien Holder ................................ ................................ 50 9-I. Recapture Provision ................................ ................................ .................... 51 9-J. Foreclosure by City ................................ ................................ ....................... 52 9-K. Use of Third-Party Agent ................................ ................................ .............. 53 9-L. Loan-To-Value Limit ................................ ................................ .................... 53 9-M. Borrower Contribution ................................ ................................ .................. 53 9-N. First Mortgage Underwriting Requirements ................................ .................. 53 9-O. Appraisal ................................ ................................ ................................ ..... 54 9-P. Cash Out of Escrow ................................ ................................ ..................... 55 9-Q. Title Insurance ................................ ................................ ............................. 55 9-R. Hazard Insurance ................................ ................................ ........................ 55

10. Federal Regulatory Provisions (for all Funding Sources)

10-A. Conflict of Interest ................................ ................................ ......................... 56 10-B. Fair Housing and Non-Discrimination................................ ............................ 56 10-C. Relocation of Displaced Tenants ................................ ................................ .. 56

11. Exhibits

A. 24 CFR Part 5 Annual Income Inclusions and Exclusions B. Maximum Loan Amount
C. Income Limits
D. Homebuyer Education Curriculum

Section 1 - Overview iv
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

Introduction

This Manual sets forth policies and procedures for the City of Turlock’s First Time Home Buyer Secondary Financing (FTHB) Program. The FTHB Program is designed to seek new and creative ways to make home ownership a reality for income eligible households. The FTHB Program is a partnership between the City of Turlock, the State and Federal Government s, and local lending institutions to help make home ownership a reality and expand the availability of affordable housing for income eligible families in Turlock.

Most income eligible households do not qualify for a mortgage sufficiently large enough to purchase a house. The City of Turlock's FTHB Program provides funds to help make up the difference between the value of the primary loan, for which an income eligible Applicant qualifies, and the purchase price of the house. Essentially, the funds are u sed to boost the Applicant's down payment and are recorded as a silent second mortgage. The funds are not to exceed a set maximum loan amount by either a single or multiple city funding sources. FTHB Program funds help make home ownership a reality for income eligible households.

Funds available for this pro gram may come from various local, state, and federal sources including but not limited to: Home Investment Partnership Program (HOME), Rental Rehabilitation Program (RRP), Community Development Block Grant (CDBG), CalHome, and Permanent Local Housing Allocation (PLHA). The City will seek out additional funding sources to further affordable housing activities. The FTHB Program is designed to provide home ownership opportunities to income eligible buyers within the City of Turlock.

The City will comply with all city, state, and federal regulations and guidelines. In the event that the City assisted applicant combines two or more City funding sources, the homebuyer and the property shall meet the strictest underwriting criteria and guidelines of each program/funding source.

Use of funds is subject to change and shall be in accordance with the requirements of the State of California Department of Housing and Community Development Division and or the Housing and Urban Development and other regulations governing the funding for these programs, and any amendments or policy revisions thereto which shall become effective during the term of these Policies and procedures.

Administrative and regulatory modifications to this policy and procedure manual may be approved by the City Manager or designee.

FTHB Program Mailing Address: City of Turlock
Housing Program Services
156 South Broadway, Suite 140
Turlock, CA 95380

Telephone: (209) 668-5610
Fax: (209) 668-5120
TDD: (800) 735-2929 (Speech and hearing impaired only)
City of Turlock website: www.cityofturlock.org

Section 1 - Overview 1
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

1. Overview

1-A. Purpose of Manual

The purpose of the Policies and Procedures is to describe the First Time Homebuyer (FTHB) Program and set forth the roles of the City of Turlock, and the program applicants. These Policies and Procedures contain the regulations pertaining to specific funding sources and the Program’s general requirements and processing procedures.

The City is continually searching for new funding sources to further affordable housing activities. The intent of the FTHB Program is to be able to provide multiple layers of secondary mortgage financing to close the gap between eligible Borrowers’ financial resources and the cost of housing in the City of Turlock . The ultimate goal of the FTHB Program is to provide eligible Applicants with an affordable housing opportunity tha t would not otherwise be available.

1-B. Program Summary

The City of Turlock has established the FTHB Program to assist low- and moderate-income first-time homebuyers 1 with the purchase of a home. The home buying process can be overwhelming, especially to the inexperienced first -time homebuyer. The City’s FTHB Program staff will assist the Applicant to insure a successful and timely completion of the home purchase process.

To maximize the effectiveness of the FTHB Program as a vehicle for enhancing affordability, Borrowers pay no current principal or interest on the City’s mortgage during the deferment period. A mortgage in which payment of principal and interest is deferred is also known as a “silent second” mortgage.

Depending on t he funding source (s), principal and interest are due and payable upon a variety of conditions or circumstances, the most common one being the sale or transfer of the home.

1-C. General Definitions

As used in th e Policies and Procedures and all program documents, unless the context requires otherwise, the following words and terms have the meanings set forth below:

Affordable: In reference to housing costs, means that the financial obligation can be paid by the person or household, alo ng with all other financial responsibilities of that person or household, without endangering the financial stability of the household.

Affordability Period: The minimum period of time the property is required to be occupied by a Borrower as his/her pri ncipal place of residence under the regulations pertaining to the funding source(s) used.

1 NSP funding does not require the applicant to be a first-time home buyer. NSP and PLHA are the only funding sources to allow buyer to be up to moderate income.

Section 1 - Overview 2
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

Applicant:

Any person who applies for a FTHB loan under the Program.

Assisted unit: A unit purchased with loan(s) funded under this Program.

Borrower: A buyer who has or will receive financing under this Program for the purchase of an eligible property.

Capital
Improvements:

Expenditures for improvements to land or improvements and remodeling of existing buildings which increase the value, and extend the useful life of the property.

The identification of capital improvements shall be as set forth in IRS Publications 530 “Tax Information for First Time
Homeowners” and 551 “Basis of Assets”, included herein by reference.

Certification: A written statement of fact filed in connection with this Program and subject to penalties of perjury.

City:

The City of Turlock, California.

Current Sale Price: 1. In the event of a first sale or transfer after the date of a loan issued under this Program, the current sale price shall be defined as the amount received by Borrower as the sales price of the property plus amounts received but paid out to third parties for any closing costs and commissions paid by Borrower.

2. In the event of a default and subsequent foreclosure and acquisition of the property by a creditor, the current sale price shall be defined as the amount paid for the property upon the creditor’s acquisition of the property.

3. In the event of Borrower’s cash-out refinance of the property, the current sales price shall be defined as the market value as determined by an appraisal acceptable to City.

4. In the event of the first note and deed of trust becoming payable, the current sales price shall be defined as the market value of the property on the maturity date of the first note and deed, as determined by an appraisal acceptable to City.

5. In the event the property ceases to be Borrower’s principal place of residence, the current sales price shall be defined as the market value of the property on the date City
determines the Borrower does not occupy the property as his or her principal place of residence , as determined by an appraisal acceptable to City.,

Section 1 - Overview 3
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

Department: The State of California Department of Housing and Community Development.

Eligible Household: A household that is a first -time homebuyer and who meets applicable criteria specific to the funding source used.

First Mortgage: 1. A mortgage which is in first lien position, taking priority over all other liens and proceeds of which are used to finance the purchase or refinance the purchase price of an eligible property which meets the requirements set forth in this Manual.

First Time
Homebuyer:

A purchaser of a residential property who neither has, nor has had, a present ownership in a residence at any time during the three-year period prior to the date on which a mortgage pursuant to this Program is executed, except as otherwise allowed by the specific funding source(s) utilized.

Gap Financing/Funding: The difference between the amount of the primary loan, for which an income eligible Applicant qualifies, and the purchase price of the house.

Gross Income: The anticipated income of a person or household for the 12 - month period following the date of determination of income.

FTHB Second
Mortgage:

An extension of credit for which a Deed of Trust is recorded and is subordinate to the First Mortgage and possibly other sources of funding. Payments of both principal and interest may be deferred and payment in full plus interest as defined herein is due in accordance with the regulations pertaining to the funding source(s) used and loan documents.

First Time
Homebuyer
pre-approval:

A commitment to provide a FTHB Second Mortgage issued by the City of Turlock pursuant to the rules and regulations included in this Manual.

HUD: The United States Department of Housing and Urban
Development.

Income: To determine a Borrower’s eligibility for program assistance, income is determined using definitions specific to the particular funding source(s) utilized.

Lender: 1. A bank or trust company, mortgage banker, mortgage broker, federal or state-chartered savings and loan
association, state or federal governmental agency or credit union whose principal business is to originate, process, close and service loans for the purchase of property.

Section 1 - Overview 4
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

2. Nationwide institutions whose primary purpose is to develop housing and provide first mortgage financing to low- and moderate-income purchasers of the developed housing.

3. The provider of primary mortgage financing for the purchase of an eligible property assisted with secondary financing under this Program.

Manufactured
Housing Unit:

A home manufactured offsite and transported to a lot, and a mobile home as defined by Section 18007 of the California Health and Safety Code.

Maturity Date: The date upon which a mortgage loan comes due and payable in full in accordance with the regulations pertaining to the funding source(s) used and applicable loan documents.

Moderate Income
Household:

Persons and families who are not lower income households and whose gross incomes do not exceed 120% of the area median income adjusted for household size in accordance with
adjustment factors adopted by HUD in establishing income limits for lower income families.

Mortgage: A deed of trust used to secure a lien on real property or, in the case of some manufactured housing, another security interest acceptable to the City.

Mortgage
Assistance:

Permanent financing used towards homebuyer costs, up to the maximum limit stated in the regulations pertaining to the funding source(s) used.

Ownership Interest: Any of the following interests in residential real property:
• Fee simple estate
• Joint tenancy
• Tenancy in common

Ownership does not include a remainder interest, a lease with or without an option to purchase or any interest acquired on the execution of the purchase contract.

Principal Residence: A property occupied by the Borrower as the Borrower’s principal place of abode for a minimum of ten months out of each 12 - month period.

Related Person: As defined under the Internal Revenue Code and applicable regulations: siblings, spouses, ancestors and lineal descendants or any other related persons.

Remaining
Spouse/Partner:

A now single individual who, while married or during co - habitancy, owned a home with his or her spouse/partner or

Section 1 - Overview 5
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

resided in a home owned by the spouse/partner and has no ownership interest in a ny other residence other than th e residence financed by this program.

Second Mortgage: A mortgage that is junior or subordinate to a first mortgage.

Owner-Occupied
Residence:

A housing unit intended and used for occupancy by one
household which is the owner of the property.

Silent Second: A second mortgage in which payments of principal and interest are deferred.

Target Areas: Specific census tracts or designated areas in which specific modifications to the financing requirements apply.

Section 2 – CalHome Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

6 2. CalHome Program Requirements

2-A. Overview

The State of California Department of Housing and Community Development CalHome Program2 is one of several funding sources providing assistance to eligible Borrowers under this Program. These funds may be used for the acquisition and acquisition/rehabilitation of a home. The following applies to CalHome loans made under this Program.

2-B. Eligible Household

1. To be eligible to receive CalHome funds, an individual household shall:

a. Be a low-income household (income equal to or less than 80% of area median income as adjusted for household size) when considering the gross income of all household members 18 years old or older. The following household members are not counted to determine family size f or income limits purposes: foster children, unborn children and children being pursued for legal custody or adoption who are not currently living with the household. A child who is subject to as shared-custody agreement in which the child resides with the household at least 50% of the time, can be counted.

1) Gross income is as defined in the California Code of Regulations (CCR), Title 25, Section 6914 and is: “The anticipated income of a person or family for the twelve-month period following the date of determination of income.”

2) Income from assets is recognized as part of annual income under 24 CFR Part

5. City shall determine income from assets in accordance with 24 CFR 5.

b. Be a first-time homebuyer and occupy the property as a principal place of residence.

A first-time homebuyer is defined as a purchaser of a unit who neither has, nor has had, a present ownership in a l residence at any time during the three -year period prior to the date on which a mortgage pursuant to this Program is executed, except as otherwise allowed by the CalHome regulations as set forth below.

2. The following individual or individuals may not be excluded from consideration as a first- time homebuyer under this section:

a. A displaced homemaker, who while a homemaker, owned a home with his or her spouse or resided in a home owned by the spouse. A displaced homemaker is an adult who has not, within the preceding two years, worked on a full -time basis as a member of the labor force for a consecutive twelve-month period and who has been unemployed or underemployed, experienced difficulty in obtaining or upgrading employment and worked primarily without remuneration to care for his or her home and family;

2 Authorized by and pursuant to Chapter 6 of Part 2 of Division 31 of Health and Safety Code, commencing with Section 50650 (“California Statutes”) and regulations found in Title 25 of the California Code of Regulations, Division 1, Chapter 7, Subchapter 9 commencing with Section 7715 (“CalHome Regulations”), all as amended and in effect from time to time. CalHome funds are administered by the State Department of Housing and Community Development.

Section 2 – CalHome Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

7 b. A single parent who, while married, owned a home with his or her spouse or resided in a home owned by the spouse. A single parent is an individual who is unmarried or legally separated from a spouse and has one or more minor children for whom the individual has custody or joint custody or is pregnant; or

c. An individual or individuals who owns or owned, as a principal place of residence during the three -year period before the purchase of a home with CalHome assistance, a dwelling unit whose structure is:

1) Not permanently affixed to a permanent found ation in accordance with state or local regulations; or

2) Not in compliance with state, local or model building codes and cannot be brought into compliance with such codes for less than the cost of constructing a permanent structure.

3. For purposes of qualifying Borrower for a first mortgage, credit criteria shall be:

a. No late payments 1 year from date of applying.

b. No outstanding judgments or liens.

c. Outstanding collections may be paid out of closing not to be included as part of required down payment or from City funds.

d. Bankruptcy discharge must have been a minimum of two years prior to the date of purchase with no additional collections.

e. Foreclosure must have been a minimum of four years prior to the date of purchase.

2-C. Eligible Property

1. Property purchased with CalHome funds must be located in:

a. Census tracts will be determined by grant. If no limitations, property must be located within the City limits excluding county pockets.

2. Property type must be:

a. Single-family housing; or

b. Condominium unit; or

c. A town home unit.

d. Multi-family units.

3. Eligible property does not have any occupancy characteristics.

Section 2 – CalHome Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

8 4. Property must meet basic housing quality standards, unless funds will be used for both the acquisition and rehabilitation.

2-D. Affordability Period

1. CalHome regulations do not currently require an Affordability Period.

2-E. Loan Terms

1. Security:

a. CalHome loans shall be secured by the property.

b. The lien securing repayment of the CalHome loan shall be subject only to liens, encumbrances and other matters of record reviewed and approved by the City.

2. Deferment:

a. Principal and interest payments shall be deferred for 30 years.

3. Repayment:

a. The CalHome loan principal and interest shall be repayable upon:

1) Sale, transfer, rental, or lease of the property.

2) Borrower’s failure to occupy the property as Borrower’s principal place of residence (Borrower must certify occupancy annually).

3) The CalHome loan maturity date.

i. If it is determined by the Housing Program Services Division staff t hat repayment of the loan at maturity will cause a hardship to the Borrower, the FTHB Loan Committee may, at its option, elect to:

(1) Approve a one-time additional deferral period of up to 30 years in length at 0% additional interest, or;

(2) Convert the debt (principal and accrued interest) to a 15 year amortized loan at 0% additional interest.

4) The maturity date, or full repayment, of any debt secured by a lien on the Property that is senior to the CalHome deed of trust.

5) Upon default of the CalHome promissory note, deed of trust or other recorded documents of record pertaining to the property.

6) Borrower’s cash-out refinance of any superior mortgages.

Section 2 – CalHome Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

9 7) The Borrower may repay the loan balance at any time with no pre -payment penalty. Loan payments will be credited to the principal first and then to interest. .

4. Assumability:

a. CalHome loans are not assumable.

5. Transfer of Interest Exceptions:

a. The following transfers of interest shall not require repayment of the CalHome loan:

1) Transfer to a surviving joint tenant by devise, descent or operation of the 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:

i. A transfer in which 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.

3) A transfer into an inter vivo trust in which the Borrower is and remains the beneficiary and occupant of the property.

6. Loan Term:

a. The CalHome loan term shall be 30 years , except upon the occurrence of any condition requiring repayment as noted above.

b. When United States Department of Agriculture, Rural Housing Service (USDA-RHS) 502 mortgage loans are in first lien position, the CalHome loan term shall be the term of the 502 mortgage (30 to 38 years).

7. Prepayment:

a. A Borrower may prepay the CalHome loan, in part or whole, at any time without penalty.

8. Interest:

a. The loan shall be at zero (0%) percent interest for the initial 15 years followed by a 15-year period with 2% simple interest.

b.

d. The CalHome down payment assistance cannot be used for first position loans.

9. Restrictions on Sale:

Section 2 – CalHome Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

10 a. In any transaction in which the CalHome loan is the only public assistance, the Borrower cannot be restricted from selling the home at its fair m arket value at any time.

b. Subsequent buyers, unless assisted with a CalHome loan under this Program, do not need to meet the Eligible Household requirements set forth above.

c. Resale restrictions required by other secondary financing sources used in conjunction with a CalHome loan shall prevail.

2-F. Subordinate Financing to CalHome Loan

1. Fees and/or charges for subordinate loan financing shall be consistent with reasonable loan origination fees for first mortgage financing as determined by the City based on industry standards.

2. Balloon payments due before the maturity date of the CalHome loan are not permitted.

3. All subordinate financing shall defer principal and interest payments for the term of the CalHome loan.

2-G. CalHome Target areas

1. Census tracts will be determined by grant . If no census tract requirements , property must be located within the City limits excluding county pockets.

2-H. Re-Use Account

The City of Turlock has adopted this plan to govern the use of monies received as repayments of loan principal and/or loan interest resulting from activities funded under the State of California, CalHome Program. The City has formulated this document to comply with Article 2, Section 7724-Reuse Account requirements of the CalHome Program, Title 25 California Code of Regulations, Division 1, Chapter 7, Sub Chapter 9, commending with Section 7715.

1. All repayments of CalHome loan principal and interest shall be received by City and deposited into a separate reuse account maintained by City’s Finance Department.

2. The reuse account shall be interest bearing into which all earned interest shall be deposited.

3. All funds deposited into the reuse account shall be the property of the City and are to be used for CalHome eligible activities.

4. A line item for reuse of CalHome funds will be inserted into City’s fiscal year budget allocating and approving use of funds for CalHome eligible activities.

5. All reuse funds shall be expended in accordance with the CalHome Regulations and the Standard and Monitoring Agreements between the City and the Department.

Section 2 – CalHome Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

11 6. City shall allow the Department full access to the reuse account records for the purpose of determining City’s compliance with CalHome regulations.

7. Target area restrictions are not applicable to reuse funds.

8. Maximum loan amounts for loans from reuse funds shall be the greater of the loan limits of the NOFA under which the original CalHOME award was made, or the maximum loan amount in the most recent CalHOME NOFA.

9. All remaining funds from a rehabilitation loan will be placed into the reuse account. (Only applies when CalHome funds are used for the acquisition and rehabilitation loan)

2-I. Matching

No Matching requirements apply.

2-J/ Maximum Loan Amount

The maximum loan amount for a CalHOME first-time homebuyer, based on the current NOFA is 40% of the purchase price up to $100,000.

Section 3 – CDBG Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

12 3. CDBG Program Requirements

3-A. Overview

The Federal Community Development Block Grant (CDBG) Program3 is one of several funding sources providing assistance to eligible Borrowers under this Program. The following applies to CDBG loans made under this Program.

3-B. Eligible Household

1. To be eligible to receive CDBG funds, an individual household shall:

a. Be a low/moderate income household (income equal to or less than 80% of area median income as adjusted for household size) when considering the gross annual income of all household members 18 years old or older. Annual income is as defined in the Code of Federal Regulations, Title 24 Part 5 . The following household members are not counted to determine family size for income limits purposes: foster children, unborn children and children being pursued for legal custody or adoption who are not currently living with the household. A child who is subject to as shared- custody agreement in which the child resides with the household at least 50% of the time, can be counted.

1) City shall determine annual gross income in accordance with the Code of Federal Regulations (CFR), Title 24, Part 5, Section 5.609(b) attached hereto as Exhibit “A”.

2) Income from assets is recognized as part of annual income under 24 CFR Part

5. City shall determine income from assets in accordance with 24 CFR 5.

b. Include as Borrowers all persons who will be or are on title to the property. Co- signers and co-mortgagors who do not intend to occupy the property are prohibited.

c. Be a first-time homebuyer and occupy the property as a principal place of residence.

A first-time homebuyer is defined as a purchaser of a unit who neither has, nor has had, a present ownership in a residence at any time during the three -year period prior to the date on which a mortgage pursuant to this Program is executed, except as otherwise provided below

2. The following individual or individuals may not be excluded from consideration as a first- time homebuyer under this section:

a. A single parent or remaining spouse/partner who, while married or during co - habitancy, owned a home with his or her spouse or resided in a home owned by the spouse/partner, and has no ownership interest in a residence other than provided for in this Program. A single parent is an individual who is unmarried or legally separated from a spouse and has one or more minor children for whom the individual has custody or joint custody or is pregnant.

3 Authorized under Title I of the Housing and Community Development Act of 1974, as amended. The regulations implementing the CDBG Program are found at 24 CFR Part 570. CDBG funds are administered by the United State Department of Housing and Urban Development (HUD).

Section 3 – CDBG Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

13 3. For purposes of qualifying Borrower for a first mortgage, credit worthiness criteria shall be:

a. No late payments during the 12 months prior to applying.

b. No outstanding judgments or liens.

c. Outstanding collections may be paid out of closing not to be included as part of required down payment or from City funds.

d. Bankruptcy discharge must have been a minimum of two years prior to applying with no additional collections.

e. Foreclosure must have been a minimum of three years prior to applying.

3-C. Eligible Property

1. Property purchased with CDBG funds must be located in:

a. The City of Turlock city limits excluding county pockets.

2. Property type must be:

a. Single-family housing; or

b. Condominium unit; or

c. A town home unit or

3. Eligible property must have the following occupancy characteristics:

a. Currently occupied by the owner-seller of the property; or

b. If a rental property, sold only to the existing tenant; or

c. Vacant for four months or longer prior to submission of purchase offer by Borrower.

3-D. Affordability Period

1. CDBG regulations do not currently require an Affordability Period.

3-E. Loan Terms

1. Security:

a. CDBG loans shall be secured by the property.

b. The lien securing repayment of the CDBG loan shall be subject only to liens, encumbrances and other matters of record reviewed and approved by the City.

Section 3 – CDBG Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

14 2. Deferment:

a. Principal and interest payments shall be deferred for 30 years.

3. Repayment:

a. The CDBG loan principal and interest shall be due and payable upon:

1) Sale, transfer, rental or lease of the property.

2) Borrower’s failure to occupy the Property as Borrower’s principal place of residence (Borrower must certify occupancy annually).

3) The CDBG loan maturity date.

i. If it is determined by the Housing Program Services Division staff that repayment of the loan at maturity will cause a hardship to the Borrower, the FTHB Loan Committee may, at its option, elect to:

(1) Approve a one-time additional deferral period of up to 30 years in length at 0% additional interest, or;

(2) Convert the debt (principal and accrued interest) to a 15-year amortized loan at 0% additional interest.

4) The maturity date, or full repayment, of any debt secured by the Property that is senior to the CDBG deed of trust.

5) Upon default under the CDBG promissory note, deed of trust, the dee d of trust rider or the covenants, or other recorded documents of record pertaining to the property.

6) Borrower’s cash-out refinance of any superior mortgages.

7) The Borrower may repay the loan balance at any time with no pre - payment penalty. Loan payments will be credited to the principal first and then to interest.

4. Assumability:

a. CDBG loans are not assumable.

5. Transfer of Interest Exceptions:

a. CDBG loans do not have transfers of interest exceptions.

6. Loan Term:

Section 3 – CDBG Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

15 a. The CDBG loan term shall be 30 years, except upon the occurrence of any condition requiring repayment as noted above.

7. Prepayment Penalty:

a. A Borrower may prepay the CDBG loan, in part or whole, at any time without penalty.

8. Interest:

a. The loan shall be zero (0%) percent interest for the initial fifteen (15) years followed by a 15-year period with a two (2%) simple interest rate.

b.

d. The CDBG down payment assistance cannot be used for first position loans.

9. Restrictions on Sale:

a.

a. Subsequent buyers, unless assisted with a CDBG loan under this Program, do not need to meet the Eligible Household requirements set forth above.

b. Resale restrictions required by other secondary financing sources used in conjunction with a CDBG loan shall prevail.

3-F. Subordinate Financing to CDBG Loan

1. Fees and/or charges for subordinate loan financing shall be consistent with reasonable loan origination fees for first mortgage financing as determined by the City based on industry standards.

2. Balloon payments due before the maturity date of the CDBG loan are not permitted.

3. All subordinate financing shall defer principal and interest payments for the term of the CDBG loan.

3-G. CDBG Target Areas

No target areas defined.

3-H. Program Income

1. All repayments of CDBG loan principal and interest shall be received by City and deposited into a separate account maintained by City’s Finance Department.

2. The account shall be interest bearing into which all earned interest shall be deposited.

3. All funds deposited into the account shall be the property of the City.

Section 3 – CDBG Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

16 4. A line item for reuse of CDBG funds will be inserted into City’s fiscal year budget allocating and approving use of funds for CDBG eligible activities.

5. All Program Income funds shall be expended in accordance with the CDBG regulations and the CDBG Agreement between the City and HUD.

3-I. Matching

No Matching requirements apply.

3-J. Maximum Loan Amount

1. The maximum loan amount for a CDBG first-time homebuyer is $100,000.

Section 4 – HOME Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

17 4. HOME Program Requirements

4-A. Overview

In 1999, the City of Turlock and Stanislaus County, serving as an Urban County entitlement jurisdiction for the purposes of the Community Development Block Grant (CDBG), entered into an intergovernmental agreement for t he F ederal Home Invest ment Partnerships (HOME) Program4 funds creating the City of Turlock/Stanislaus County HOME Consortium (Consortium). The Stanislaus Urban County is comprised of the unincorporated areas of Stanislaus County, and the cities of Ceres, Hughson, Newman, Oakdal e, Patterson, Riverbank, Turlock, and Waterford. The City of Turlock served as the lead entity for the Consortium from July 1999 through June 2023. Beginning July 2023, Stanislaus County assumed the role of lead entity for the Consortium.

HOME is one of several funding sources providing assistance to eligible Borrowers under this Program. The following applies to HOME funded loans made under this Program.

Specifically, these policies and procedures will be utilized for any new projects funded with 2022 and earlier HOME funds still under the City of Turlock’s purview. Rental Rehabilitation Program funding will follow HOME program guidelines and will be used for matching.

4-B. Eligible Household

1. To be eligible to receive HOME funds, an individual household shall:

a. Be a low-income household (income equal to or less than 80% of area median income as adjusted for household size) when considering the gross annual income of all household residents 18 years old or older. Annual income is as defined in the Code of Federal Regulations, Title 24 Part 5. The following household members are not counted to determine family size for income limits purposes: foster children, unborn children and children being pursued for legal custody or adoption who are not currently living with the household. A child who is subject to as shared-custody agreement in which the child resides with the household at least 50% of the time, can be counted.

1) City shall determine annual gross income in accordance with the Code of Federal Regulations (CFR), Title 24, Part 5, Section 5.609(b) attached hereto as Exhibit “A”.

2) Income from assets is recognized as part of annual income under 24 CFR Part

5. City shall determine income from assets in accordance with 24 CFR 5.

b. Include as Borrowers all persons who will be or are on title to the property. Co - signers and co-mortgagors who do not intend to occupy the property are prohibited.

c. Be a first- time homebuyer and occupy the property as a principal place of residence.

A first-time homebuyer is defined as a purchaser of a unit who neither has, nor has

4 Authorized under the HOME Investment Partnerships Act at title II of the Cranston-Gonzalez National Affordable Housing act, as amended, 42 U.S.C. 12701 et seq. The regulations implementing the Home Investment Partnerships (HOME) Program are found at 24 CFR Part 92. HOME funds are administered by the United State Department of Housing and Urban Development (HUD).

Section 4 – HOME Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

18 had, a present ownership in a principal residence at any time during the three -year period prior to the date on which a mortgage pursuant to this Program is executed, except as otherwise allowed by the specific funding source(s) utilized.

2. The following individual or individuals may not be excluded from consideration as a first- time homebuyer under this section:

a. A single parent or remaining spouse/partner who, while married or during co - habitancy, owned a home with his or her spouse or resided in a home owned by the spouse/partner, and has no ownership interest in a residence other than provided for in this Program. A single parent is an individual who is unmarried or legally separated from a spouse and has one or more minor children for whom the individual has custody or joint custody or is pregnant.

3. For purposes of qualifying Borrower for a first mortgage, credit worthiness criteria shall be:

a. No late payments for the 12-month period prior to applying.

b. No outstanding judgments or liens.

c. Outstanding collections may be paid out of closing not to be included as part of required down payment or from City funds.

d. Bankruptcy date of discharge must be a minimum of two years prior to the date of applying with no additional collections.

e. Foreclosure must have been a minimum of three years prior to the date of applying.

4-C. Eligible Property

1. Property purchased with HOME funds must be located in:

a. The City of Turlock city limits excluding county pockets.

2. Property type must be:

a. Single-family housing; or

b. Condominium unit; or

c. Townhome unit; or

d. One to four units of residential properties.

3. Eligible property must have the following occupancy characteristics:

a. Currently occupied by the owner-seller of the property; or

b. If a rental property, sold only to the existing tenant; or

Section 4 – HOME Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

19 b. Vacant for four months or longer prior to submission of purchase offer by Borrower.

4. Eligible property must:

a. Meet property standards as identified in 24 CFR 92.251.

b. Each of the major systems must have a remaining useful life of a minimum of 5 years:

a. Major systems are structural support, roofing, cladding, weatherproofing (e.g. windows, doors, siding, gutters); plumbing, electrical and heating, ventilation, and air conditioning.

5. Eligible property must have an initial value not exceeding 95% of the area median purchase price for the housing type as established by HUD.

4-D. Affordability Period

1. Housing purchased with HOME funds under this program must remain the principal place of residence of the Borrower for a minimum period of time as defined by the amount of HOME funds invested and as shown below:

HOME Funds Invested Minimum Period of Affordability

Under $25,000

5 years
$25,000 to $50,000 10 years
Over $50,000 15 years

2. Failure of Borrower to occupy the HOME-assisted unit as his or her principal place of residence for the applicable period shall cause the HOME loan to become immediately due and payable.

4-E. Loan Terms

All loan terms clearly communicated in loan agreement, promissory note and regulatory agreement and a deed restriction is enforced to ensure period of affordability.

1. Security:

a. HOME loans shall be secured by the property.

b. The lien securing repayment of the HOME loan shall be subject only to liens, encumbrances and other matters of record reviewed and approved by the City.

2. Deferment:

a. Principal and interest payments shall be deferred for the term of the HOME loan.

Section 4 – HOME Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

20 3. Repayment:

a. The HOME loan principal and interest shall be due and payable upon:

1) Sale, transfer, rental or lease of the property.

2) Borrower’s failure to occupy the Property as Borrower’s principal place of residence (Borrower must certify occupancy annually).

3) The HOME loan maturity date.

i. If it is determined by the Housing Program Services Division staff that repayment of the loan at maturity will cause a hardship to the Borrower, the FTHB Loan Committee may, at its option, elect to:

(1) Approve a one-time additional deferral period of up to 30 years in length at 0% additional interest, or;

(2) Convert the debt (principal and accrued interest) to a 15-year amortized loan at 0% additional interest.

4) The maturity date, or full repayment, of any debt secured by the Property that is senior to the HOME deed of trust.

5) Upon default under the HOME promissory note, deed of trust, the deed of trust rider or the covenants, or other recorded documents of record pertaining to the property.

6) Borrower’s cash-out refinance of any superior mortgages.

7)The Borrower may repay the loan balance at any time with no pre-payment penalty. Loan payments will be credited to the principal first and then to interest.

4. Assumability:

a. HOME loans are not assumable.

5. Transfer of Interest Exceptions:

a. HOME loans do not have transfers of interest exceptions.

6. Loan Term:

a. The HOME loan term shall be 30 years, except upon the occurrence of any condition requiring repayment as noted above.

7. Prepayment Penalty:

Section 4 – HOME Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

21 a. A Borrower may prepay the HOME loan, in part or whole, at any time without penalty.

However, prepayment does not void the period of affordability as stipulated above.

8. Interest:

a. The loan shall be at zero percent (0%) interest for the initial fifteen (15) years followed by a 15 -year period with a two percent (2%) simple interest rate for thirty (30) years and;

b. In instances where the City loan would be in first position, the loan will become a 30 year fully amortized loan at 3% simple interest.

9. Restrictions on Sale:

a. Subsequent buyers, unless assisted with a HOME loan under this Program, do not need to meet the Eligible Household requirements set forth above.

b. Resale restrictions required by other secondary financing sources used in conjunction with a HOME loan shall prevail.

10. Recapture of HOME Funds:

a. In the event of any event requiring repayment as defined above, the entire amount of the original HOME loan principal and any contingent interest due shall be recaptured by C ity. If the loan is paid in full prior to the end of the affordability period, funds will be recorded as recaptured funds and deposited into the HOME account. After the affordability period, funds will be recorded as program income and deposited into HOME account.

4-F. Subordinate Financing to HOME Loan

1. Fees and/or charges for subordinate loan financing shall be consistent with reasonable loan origination fees for first mortgage financing as determined by the City based on industry standards.

2. Balloon payments due before the maturity date of the HOME loan are not permitted.

3. All subordinate financing shall defer principal and interest payments for the term of the HOME loan.

4-G. HOME Target Areas

No target areas defined.

4-H. Program Income

1. All repayments of HOME loan principal and interest shall be received by City and deposited into a separate account maintained by City’s Finance Department.

2. The account shall be interest bearing into which all earned interest shall be deposited.

Section 4 – HOME Program Requirements
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

22 3. All funds deposited into the account shall be the property of the City.

4. A line item for Program Income of HOME funds will be inserted into City’s fiscal year budget allocating and approving use of funds for HOME eligible activities.

5. All Program Income funds shall be expended in accordance with the HOME regulations and the HOME Agreement between the City and HUD.

4-I. Matching

Matching is the commitment of non-federal funds to supplement HOME funds used to assist in the provision of affordable housing. HOME funding requires a matching contribution5 of not less than 25 percent of the funds drawn from the City’s HOME Investment Trust Fund Treasury account in that fiscal year, unless waived or reduced by HUD. Matching funds are calculated on a project-by-project basis and applied on a program-wide basis.

4-J. Maximum Loan Amount

1. The maximum loan amount for a HOME first-time homebuyer is $100,000.

5 Defined at 24 CFR 92.218

Section 5 – Neighborhood Stabilization Program Requirements City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

23 5. Neighborhood Stabilization Program Requirements

5-A. Overview

The Neighborhood Stabilization Program (NSP)6 is one of several funding sources providing assistance to eligible Borrowers under this Program. The following applies to NSP loans made under this Program.

5-B. Eligible Household

1. To be eligible to receive NSP funds, an individual household shall:

a. Be a low to moderate- or middle-income household (income equal to or less than 120% of the area median income as adjusted for household size) when considering the gross annual income of all household residents 18 years old or older. In the event that the City is awarded NSP set-a-side funds, these funds will be limited to applicants not exceeding 50% of the Median Area Income. Annual income is as defined in the Code of Federal Regulations, Title 24 Part 5. The following household members are not counted to determine family size for income limits purposes: foster children, unborn children and children being pursued for legal custody or adoption who are not currently living with the household. A child who is subject to as shared- custody agreement in which the child resides with the household at least 50% of the time, can be counted.

1) City shall determine annual gross income in accordance with the Code of Federal Regulations (CFR), Title 24, Part 5, Section 5.609(b) attached hereto as Exhibit “A”.

2) Income from assets is recognized as part of annual income under 24 CFR Part

5. City shall determine income from assets in accordance with 24 CFR 5.

b. Include as Borrowers all persons who will be or are on title to the property. Co - signers and co-mortgagors who do not intend to occupy the property are prohibited.

c. Occupy the property as a principal place of residence. Applicant does not have to be a first-time home buyer.

2. (Section held for future use)

3. For purposes of qualifying Borrower for a first mortgage, credit worthiness criteria shall be:

a. No late payments in the 12 months prior to applying.

b. No outstanding judgments or liens.

6 The program is authorized under Title III of the Housing and Economic Recovery Act (HERA) of 2008 and is administered by the California Department of Housing and Community Development.

NSP Program guidelines include CDBG regulations at 24 CFR Part 570.

Section 5 – Neighborhood Stabilization Program Requirements City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

24 c. Outstanding collections may be paid ou t of closing not to be included as part of required down payment or from City funds.

d. Bankruptcy date of discharge must have been a minimum of two years prior to the date of applying with no additional collections.

e. Foreclosure must have been a minimum of three years prior to date of applying.

5-C. Eligible Property

1. Property purchased with NSP funds must be located in:

a. City limits of Turlock within the following Census tracts will be identified as the primary areas of concentration. County pockets within these Census Tracts are excluded as eligible properties.

36.02 (Block groups 1 and 2)

37.00 (Block group 1)

38.01 (Block groups 1, 2, 3 and 4)

38.02 (Block groups 1, 2, 3, and 4)

38.03 (Block group 1)

39.04 (Block groups 1, 2, 3, and 4)

39.05 (Block group 4)

39.06 (Block groups 2 and 3)

39.07 (Block group 2)

39.08 (Block groups 1 and 2)

39.09 (Block groups 2 and 4)

b. City Limits of Turlock within the following Census Tracts will serve as secondary or additional areas of concentration if no eligible properties are available in the primary areas. County pockets within these Census Tracts are excluded as eligible properties.

36.02 (Block group 3)

36.03 (Block group 3)

36.04 (Block groups 3 and 5)

37.00 (Block group 2)

38.03 (Block group 2)

39.05 (Block groups 1, 2, and 3)

39.06 (Block group 1)

39.07 (Block groups 1, 3, and 4)

39.09 (Block groups 1 and 3)

2. Property type must be:

a. Single-family housing; or

b. Condominium unit; or

c. A town home unit or

Section 5 – Neighborhood Stabilization Program Requirements City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

25 3. Eligible property must have the following occupancy characteristics:

a. Property must be either foreclosed or abandoned. Abandonment is defined by NSP as a property whose mortgage or tax foreclosure proceedings have been initiated, no mortgage or tax payments have been made by the property owner for at least 90 days, AND the property has been vacant for at least 90 days. Foreclosed is defined as when the mortgage or tax foreclosure is complete under state or local law.

b. Property must be purchased at a discount 7 rate of at least 1% from the current market appraised value8.

5-D. Affordability Period

1. Housing purchased with NSP funds under this program must remain the principal place of residence of the Borrower for a minimum period of time as defined by the amount of NSP funds invested and as shown below:

NSP Funds Invested Minimum Period of Affordability

Under $15,000

5 years
$15,000 to $40,000 10 years
Over $40,000 15 years

2. Failure of Borrower to occupy the NSP -assisted unit as his or her principal place of residence for the applicable period shall cause the NSP loan to become immediately due and payable.

5-E. Loan Terms

1. Security:

a. NSP loans shall be secured by the property.

b. The lien securing repayment of the NSP loan shall be subject only to liens, encumbrances and other matters of record reviewed and approved by the City.

2. Deferment:

a. Principal and interest payments shall be deferred for 30 years.

3. Repayment:

a. The NSP loan principal and interest shall be due and payable upon:

1) Sale, transfer, rental or lease of the property.

7 Section 2301(d)(1) of Housing and Economic Recovery Act (HERA) limits the purchase price of the home. 8 The Current Market Appraised Value means the value of a foreclosed upon home or residential property that is established through an appraisal made in conformity with the appraisal requirements of the URA at 49 CFR 24.103 and completed within 60 days prior to an offer made for the property.

Section 5 – Neighborhood Stabilization Program Requirements City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

26 2) Borrower’s failure to occupy the Property as Borrower’s principal place of residence (Borrower must certify occupancy annually).

3) The NSP loan maturity date.

i. If it is determined by the Housing Program Services Division staff that repayment of the loan at maturity will cause a hardship to the Borro wer, the FTHB Loan Committee may, at its option, elect to:

(1) Approve a one-time additional deferral period of up to 30 years in length at 0% additional interest, or;

(2) Convert the debt (principal and accrued interest) to a 15-year amortized loan at 0% additional interest.

4) The maturity date, or full repayment, of any debt secured by the Property that is senior to the NSP deed of trust.

5) Upon default under the NSP promissory note, deed of trust, the deed of trust rider or the covenants, or other recorded documents of record pertaining to the property.

6) Borrower’s cash-out refinance of any superior mortgages.

7) The Borrower may repay the loan balance at any time with no pre - payment penalty. Loan payments will be credited to the principal first and then to interest.

4. Assumability:

a. NSP loans are not assumable.

5. Transfer of Interest Exceptions:

a. NSP loans do not have transfers of interest exceptions.

6. Loan Term:

a. The NSP loan term shall be 30 years, except upon the occurrence of any condition requiring repayment as noted above.

7. Prepayment Penalty:

a. A Borrower may prepay the NSP loan, in part or whole, at any time without penalty.

8. Interest:

a. The loan shall be at zero percent (0%) interest for the initial fifteen (15) years followed by a 15-year period with a two percent (2%) simple interest rate.and;

Section 5 – Neighborhood Stabilization Program Requirements City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

27 .

b. The NSP down payment assistance cannot be used for first position loans.

9. Restrictions on Sale:

.

a. Subsequent buyers, unless assisted with a NSP loan under this Program, do not need to meet the Eligible Household requirements set forth above.

b. Resale restrictions required by other secondary financing sources used i n conjunction with an NSP loan shall prevail.

5-F. Subordinate Financing to NSP Loan

1. Fees and/or charges for subordinate loan financing shall be consistent with reasonable loan origination fees for first mortgage financing as determined by the City b ased on industry standards.

2. Balloon payments due before the maturity date of the NSP loan are not permitted.

3. All subordinate financing shall defer principal and interest payments for the term of the NSP loan.

5-G. NSP Target Areas

a. City limits of Turlock within Census tracts 38.02, 39.04, 39.06 and 39.08 will be identified as the primary areas of concentration. Census Tracts 36.02, 37.00, 38.01, 38.03, 39.05,

39.07 and 39.09 will serve as secondary or additional areas of concentration if no eligible properties are available in the primary areas. County pockets within these Census Tracts are excluded as eligible properties.

5-H. Program Income

1. All repayments of NSP loan principal and interest shall be received by City and deposited into a separate account maintained by City’s Finance Department.

2. The account shall be interest bearing into which all earned interest shall be deposited.

3. All funds deposited shall follow NSP program income guidelines.

4. A line item for NSP program income funds will be inserted into City’s fiscal year budget allocating and approving use of funds for NSP eligible activities.

5. All funds shall be expended in accordance with the regulations and the NSP Agreement between the City and HCD.

5-I. Matching

Section 5 – Neighborhood Stabilization Program Requirements City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

28 No Matching requirements apply.

5-J. Maximum Loan Amount

1. The maximum loan amount for a first-time homebuyer loan funded with NSP is $25,000.

Must be combined with other funding sources if need is greater than $25,000, with a maximum limit of $100,000.

Section 6 – Permanent Local Housing Allocation
City of Turlock FTHB Program Policies and Procedures Manual Updated: 7-8-2025

29 6. Permanent Local Housing Allocation (PLHA)

6-A. Overview

The Permanent Local Housing Allocation (PLHA) Program, administered by the California Department of Housing and Community Development (HCD), is one of several funding sources providing assistance to eligible borrowers under this program.

6-B. Eligible Household

1. To be eligible to receive PLHA funds, a household shall:

a. Be a low- to moderate-income household, defined as income equal to or less than 120% of the area median income as adjusted for household size, when considering the gross income of all household residents 18 years of age or older. The following household members are not counted to determine family size for income limits purposes: foster children, unborn children, and children being pursued for legal custody or adoption who are not currently living in the household. A child who is subject to a shared -custody agreement in which the child resides with the household at least 50% of the time, can be counted.

i. Gross income is defined in the California Code of Regulations (CCR), Title 25, Section 6914 and is: “The anticipated income of a person or family for the twelve-month period following the date of determination of income.”

ii. Income from assets is included as part of annual income in accordance with 24 CFR Part 5. The City will calculate income derived from assets in accordance with 24 CFR Part 5.

b. Include as Borrowers all persons who will be on the title of the property.

c. Be a first-time homebuyer and occupy the property as a principal place of residence.

A first-time homebuyer is defined as a purchaser of a unit who neither has, nor has had, a present ownership in a residence at any time during the three -year period prior to the date on which a mortgage pursuant to this Program is executed, except as otherwise allowed by the specific funding source(s) utilized.

2. For purposes of qualifying a Borrower for a first mortgage, credit worthiness criteria shall be determined by the following:

a. No late payments in the 12-month period prior to applying.

b. No outstanding judgements or liens.

c. Outstanding collections may be paid at closing but cannot be included as part of the required down payment or paid using City funds.

d. Bankruptcy date of discharge must be a minimum two (2) years prior to the date of applying with no additional collections.