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HomeMy WebLinkAboutPR 19516: EDC DOWN PAYENT ASSISTANCE PROGRAM POLICIES AND PROCEDURES Interoffice MEMORANDUM To: Mayor, City Council, City Manager From: Floyd Batiste, CEO --1-73 Date: October 11, 2016 Subject: P. R. No. 19516; Council Meeting of October 18, 2016 ATTACHED IS PROPOSED RESOLUTION NO. 19516 APPROVING THE CITY OF PORT ARTHUR SECTION 4A ECONOMIC DEVELOPMENT CORPORATION DOWN PAYMENT ASSISTANCE PROGRAM POLICIES AND PROCEDURES P.R. NO. 19516 10/06/2016 KVM RESOLUTION NO. A RESOLUTION APPROVING THE CITY OF PORT ARTHUR SECTION 4A ECONOMIC DEVELOPMENT CORPORATION DOWN PAYMENT ASSISTANCE PROGRAM POLICIES AND PROCEDURES WHEREAS, the citizens of the City of Port Arthur approved Proposition 2 allowing the City of Port Arthur Section 4A Economic Development Corporation (the "PAEDC") to allocate $300,000 per year of its sales and use tax for affordable housing in a target area of the City; and WHEREAS, PAEDC has contracted the services of a consultant to manage the Down Payment Assistance Program and furnish certain homeownership program services; and WHEREAS, PAEDC has developed Policies and Procedures as a guideline for the Down Payment Assistance Program; and WHEREAS, at their regular Board meeting on September 6, 2016, the PAEDC Board of Directors approved the Policies and Procedures for the Down Payment Assistance Program. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR, TEXAS: Section 1. That the facts and opinions in the preamble are true and correct. Section 2. That the City Council of the City of Port Arthur approves PAEDC Down Payment Assistance Program Policies and Procedures. Section 3. That a copy of the caption of this Resolution be spread upon the Minutes of the City Council. READ, ADOPTED AND APPROVED on this day of A.D., 2016, at a Meeting of the City Council of the City of Port Arthur, Texas, by the following vote: AYES: Mayor Councilmembers , NOES: . Derrick Freeman, Mayor ATTEST: Sherri Bellard, City Secretary APPROVED: C---/ Floyd Batiste, PAEDC EO APPROVES AST: FORM: . 1 Guy N. Goodson, PAEDC Attorney APPROVED AS TO FORM: Valecia R. i_...-1.7E. _...' E. 1 rney #1305698 Page 2 EXHIBIT " A " • Port Arthur Economic Development Corp. Down Payment Assistance Program Policies and Procedures Introduction and Purpose The purpose of the Port Arthur Economic Development Down Payment Assistance Program PAEDC - (DPA) is to increase home ownership in neighborhood bounded by Atlanta Street on the west, 8th Street on the north, Nashville Street on the east and 5th Street on the south, is to assist low and moderate income households with home purchases, and to leverage private funds for these purposes with PAEDC funds. It is the goal of the PAEDC DPA program to serve the maximum number of people with the most serious needs within funding availability limitations. The policies and procedures set forth herein are subject to review by the PAEDC Board, based on recommendations by City Housing Division staff members. The vote of the citizens of Port Arthur has determined the amount of funding availability for grants and loans provided under the program, and the allocation of funds to particular programs and activities is subject to approval by the PAEDC Board. Authority for Program/Administration of Program The Down Payment Assistance Program is funded by PAEDC. Down Payment Assistance is an eligible activity under Section 501.153 of the Local Government Code (Type B Economic Development Corporation). The PAEDC Board, authorized and appointed by the Port Arthur City Council, is responsible for funding recommendations and community relations issues. PAEDC CEO is responsible for oversight and implementation of policies and procedures that have been reviewed by the City Housing Division and PAEDC Board. Eligible Applicants An applicant's gross annual household income may not exceed current income limits for low to moderate income households, as established and periodically revised by HUD. Applicant income is calculated for program eligibility utilizing the standards and methods required by HUD (24 CFR, Subpart E §92.203), and PAEDC Consultant Housing must collect all applicable source information, as prescribed by HUD rules. Gross annual household income may not exceed 120% of the HUD-provided Area Median Income, adjusted for family size. Income that is calculated for program eligibility is separate and different from income amounts calculated for home affordability, as calculated by the City Housing Division Staff and/or for any lender pre-qualification. Eligibility approval is valid for 180 days following receipt of program approval. Updated documentation must be provided for each semi-annual renewal of eligibility, and such documentation is subject to review by the City Housing Division Staff for continued program participation. All members of an applicant household must provide documentation of assets and income, including but not limited to: • Three full months of paycheck stubs for each working member of the household,age 18 or older • Verification of any other sources of income for all family members (Social Security, SSI, Medicaid, Child Support(12 month history),Alimony(12 month history), retirement, etc.) • Prior two year's tax returns (three years if self-employed), including all addendums and W-2 forms,for every working member of the household age 18 or older Port Arthur Economic Development Corp. Down Payment Assistance Program Policies and Procedures • Complete, most recent two months(60 days) of bank statements for savings accounts • Complete, most recent six months(180 days) of bank statements for checking accounts. • Documentation of retirement accounts, 401k accounts, IRAs, or other financial assets • Verifiable documentation for any other sources of income and/or assets A letter of explanation, along with documentation supporting the explanation, is required to be included for all unusual deposits and large cash withdrawals reflected in bank statements. All pages of any bank statement will be required, and computer screen printouts will not meet this requirement. Upon review of income and asset documentation, staff may request additional information to be used to explain or further document income and asset eligibility. While an applicant is not required to live in the City of Port Arthur at the time of application, any home purchased through the DPA program must be located in target area in Port Arthur, Texas, and all applicants must be U.S. citizens or permanent legal residents. Documentation of residency and citizenship for all household members will be required as part of the application, including current government-issued photo identification from the applicant and the co-applicant. Prior to receiving assistance, the prospective applicant must have attended a homebuyer education certification course and be pre-approved by a preferred lender. Documentation of lender pre-approval will be required as part of the application submittal documents. If an applicant has received written pre- approval from a lender prior application, the lender must be willing to follow the processes and requirements of the preferred lender program (covered later in this document). Other eligibility requirements include: • An applicant cannot apply for assistance after signing a sales contract. • Verification of home owner's insurance, paid property taxes, and homestead is required to be submitted to PAEDC CEO annually for the period of affordability, as dictated by the grant agreement signed by the applicant prior to home closing. • An applicant must provide a minimum of $2,000 investment for the purchase of a newly constructed home, which can be used to assist with closing costs and private inspection costs. The minimum investment must come from the applicant's own funds. • The assisted home buyer will be required to sign a Grant Agreement and Deed of Trust with the PAEDC that is subordinate one to the first mortgage. • In order to receive assistance through the DPA program, an applicant must purchase a home that does not exceed the affordable mortgage amount as described in the section of these policies titled Calculating Amount of Assistance. • Any applicant whose application has been deemed ineligible may reapply for assistance no sooner than 60 days following denial notification. New applications will require updated documentation to reflect the most current information. 2 Port Arthur Economic Development Corp. Down Payment Assistance Program Policies and Procedures Applicant/Home Buyer Responsibilities and Obligations As this assistance program is funded through a significant financial commitment of public funds, there are several requirements of applicants. An interested party must attend a Homebuyer Certification Course and obtain pre-approval from a lender prior to submitting an application for assistance. All eligibility information must be submitted within 30 days of application submittal; this includes all additional information requested during staff's initial review. Any changes to household income, status, location, etc. must be communicated to the PAEDC Consultant within 10 days of the change, and all changes to eligibility and affordability must be appropriately documented and verified prior to closing. The applicant should make reasonable accommodations to the schedules of the City of Port Arthur Staff for the purposes of inspections. Each applicant must attend and complete a Homebuyer Education class and provide documentation of completion to the PAEDC CEO, before assistance approval. The applicant has the responsibility of reviewing, executing, and understanding the grant agreement, deed of trust, and associated documents to meet the Grant Agreement and Deed of Trust requirements. The applicant should notify PAEDC CEO of any questions and/or concerns during the application process and home buyer education period. A person purchasing a home through the PAEDC DPA program must adhere to the following policies regarding the fulfillment of his or her lien agreement: • The applicant must, for a minimum of the affordability period following his or her purchase of property, continuously use the residence located on the property as the applicant's principal residence. The applicant will, on an annual basis, execute such certifications as the PAEDC may require to confirm the applicant's compliance with this requirement. • The applicant must agree that if: (i) the property is sold within the affordability period and such purchaser does not meet the requirements of 24 C.F.R. §92.254; or (ii) the applicant fails to continuously use the residence located on the property as his or her principal residence for the entire affordability period; or(iii)the applicant fail to honor any of his or her other obligations to the PAEDC; collectively, "Defaults"; that the applicant, at the PAEDC's option, is required to repay the Down Payment Loan Amount, either immediately or in monthly installments in an amount necessary to fully amortize the outstanding down payment loan amount. In the event of default, the down payment loan amount that is to be repaid will be the difference between the down payment loan amount and any forgiven portion of the loan. Type of Assistance The PAEDC offers assistance for the purchase of new homes. The PAEDC provides down payment, closing cost, and buy-down assistance to eligible home buyer assistance applicants. Assistance is provided in the form of a deferred,forgivable loan with a lien in accordance with the information below: • A loan in an amount up to$15,000 requires a five-year lien period. 3 Port Arthur Economic Development Corp. Down Payment Assistance Program Policies and Procedures • A loan in an amount above $15,000 but less than or equal to $30,000 requires a ten- year lien period. • Liens are forgiven proportionately on an annual basis, unless the applicant receives direct construction subsidy, in which case the full amount of the construction subsidy is forgiven at the end of the lien period. • A PAEDC DPA lien must be in first or second position. • Loans are subject to project delivery costs. Purchasers of newly constructed homes may receive assistance for construction subsidy, down payment, closing costs up to $30,000, and mortgage buy-downs (approved on a case-by-case basis and according to client need). Calculating Affordability Eligibility refers to the income and asset calculations used to determine if the applicant household meets the requirements of the U.S. Department of Housing and Urban Development for participation in Section 501.153 of the Local Government Code (Type B Economic Development Corporation) Grant- funded assistance program. This is a different calculation from an affordability calculation. It should also be noted that affordability, as calculated by the City of Port Arthur and in accordance with HUD guidelines, often varies from the affordability calculations made by lenders for pre-approval. In order to purchase a home through the PAEDC Down Payment Assistance program, the applicant must meet both program eligibility requirements and affordability thresholds. The City Housing Division Staff or designee will calculate and provide the applicant with the affordable amount of monthly payment, including principal and interest of a mortgage loan, property taxes, home owner's insurance, and mortgage insurance. Eligible Properties and Inspections Eligible properties include PAEDC-sponsored newly constructed homes. Properties deemed ineligible include mobile homes, manufactured homes, condominiums, duplexes, multiplexes, and pre-sold newly constructed homes. Properties located in the 100-year floodplain or floodway are not eligible for assistance. An eligible property must meet the City of Port Arthur's minimum standards for "decent, safe, and sanitary" condition, as certified by an inspection conducted by the City Staff prior to closing. Any property being considered for purchase is required to have a private (TREC), third party inspection conducted by a State-licensed home inspection company, funded by the potential home buyer. Costs borne by the applicant for this purpose can be used toward the applicant's minimum required investment. Notifications will be given at the appropriate times to the home buyer about the prohibition of the use of lead-based paint, and all legal documents will contain language prohibiting the use of lead-based Port Arthur Economic Development Corp. Down Payment Assistance Program Policies and Procedures paint. All exposed surfaces (walls, ceilings, floors, etc.) in all homes to be potentially purchased will be inspected for the presence of previously applied lead-based paint. If evidence of lead-based paint is found, coverage, removal, or other corrective action shall be taken in accordance with 24 CFR, Part 35, and will be conducted in a manner that avoids further diffusion of lead particles throughout the residence. Required inspection or testing will be conducted for all potentially-assisted properties built prior to 1978. Lead based paint removal and/or coverage will be the responsibility of the seller. Home Buyer Education An applicant must schedule his or her Home buyer classes normally provided at no cost; however, the applicant must make the agency aware that the applicant is a participant in the DPA program in order to qualify for a fee waiver. Any member of the household who will be on the mortgage, i.e. the applicant and the co-applicant, must attend the class, and the class must be attended by all parties prior to program approval. If an applicant is more than 15 minutes late to a class, the applicant must attend another class to make up for the late/missed class. Attendance of this class, along with the program orientation, is a key component of the number of hours of education and training required to be completed as part of a PAEDC-funded home purchase assistance program. Title Companies Title companies work with the lender, client, and PAEDC to provide the closing documents. The title company must provide a final, approved HUD-1 and a copy of the title commitment (including the legal description of the property) to the PAEDC Staff five business days prior to a scheduled closing to ensure funding. The title company will file the subordination agreement on behalf of the PAEDC and will provide the final deed, note, and amortization schedule to the PAEDC within five days of closing. Representatives of the title company are expected to behave in an ethical and professional manner at all times. The title company must meet the membership and certification eligibility standards of the Texas Department of Insurance and the Real Estate Settlement Act. Responsibilities of City/PAEDC and Staff The City / PAEDC Staff is responsible for administering the DPA program in a professional manner that ensures maximum effectiveness, efficiency, compliance with City and program guidelines, and customer satisfaction.The PAEDC Staff will: • Communicate with the applicant, title company, realtor, and lender regarding all administrative procedures that affect completion of the purchase on behalf of the applicant • Make reasonable accommodation with all parties regarding scheduling of inspections • Document applicant files in compliance with all applicable regulations • Review or oversee the review of applicant credit and income information to determine program eligibility • Provide resources to applicants and potential applicants who are in need of credit counseling • Provide guidance to the applicant regarding mortgage requirements • Clarify with the applicant the advisability and eligibility of certain fees and/or charges 5 Port Arthur Economic Development Corp. Down Payment Assistance Program Policies and Procedures Loan Refinancing The PAEDC Staff will consider and/or approve a request of the home owner for loan refinancing of a DPA-assisted home through a third party lender if the home owner has resided in the home for at least three years; and • The interest rate is lowered a minimum of 1.5%; or • The term of the loan is reduced PAEDC Staff will only approve refinancing if there is no cash out to the home owner in the transaction and the home remains affordable under the new loan terms. The loan form is not assumable. The loan must be paid in full upon the sale or transfer of the property. Complaints It is the goal of the PAEDC to address all grievances and complaints as fairly and efficiently as possible. Any applicant who expresses a concern with the DPA program or personnel should request an appointment with the City Director of Housing and PAEDC CEO to present and discuss the complaint. It is the City Director of Housing and the CEO of PAEDC's intent to respond to and resolve the complaint as quickly as possible and practical, and as such, the City Director of Housing and PAEDC CEO will schedule a meeting, whether in person or via telephone, within five days of the receipt of a complaint, notwithstanding vacations, travel, or other instances in which the PAEDC CEO is out of the office for longer than five days. Grievance Procedure Should any applicant for or recipient of services under the DPA program not be able to reach satisfaction through the actions of the PAEDC CEO, the applicant has the right to file a formal complaint, or grievance. The following procedure shall be followed to address the grievance or complaint when staff has been unable to achieve solution in the field. • Should the response by the PAEDC CEO not be satisfactory to the complainant, the complainant may request a meeting with the PAEDC Board President. The complaint should describe the nature of the problem and provide all pertinent information necessary to complete a thorough review of the situation. The PAEDC Board President will provide a response to the complainant within 10 working days from date of the meeting/discussion. In some instances, the response time may be extended. Should that occur, the PAEDC CEO will notify the complainant the reason for the delay and advise the client of the new response date. • If the response by the PAEDC Board President is not satisfactory to the complainant, a written request of an appeal may be directly sent to the PAEDC Directors. The appeal provided should include the complainant's name, address, and daytime telephone number. A copy of the appeal will be given to an ombudsman assigned by the PAEDC Board President. The ombudsman will act as the advocate for the complainant and will accompany the complainant at all subsequent levels of appeal and review. If a complainant refuses ombudsman services, he or she must waive these services in writing. A written response to the complainant should be made by the Director within 20 working days of the meeting. 6 Port Arthur Economic Development Corp. Down Payment Assistance Program Policies and Procedures • If the complainant has availed himself or herself of the avenues listed above and has not been provided with a satisfactory outcome,the complainant has the right to request a formal hearing with the City Council. Hearing requests must be received by the City Secretary and/or through the ombudsman at least 10 days prior to a monthly meeting of the City Council. A request received after the 10-day prior deadline will be considered at a subsequent monthly meeting of the Board. The complainant will be accompanied by his or her designated ombudsman, unless the complainant expressly, in writing, waives ombudsman services. The determination of the City Council is final and binding on all parties. The determination of the City Council will be provided in writing to the complainant within 15 days of the hearing. If the City Council requires further review time,the complainant will receive written notification of the delay.