HomeMy WebLinkAboutState of California - Begin Program Reuse Account and Loan Servicing Monitoring Ageement
BEGIN PROGRAM
REUSE ACCOUNT and LOAN SERVICING MONITORING AGREEMENT
Standard Agreement Number 07-BEGIN-100
THIS MONITORING AGREEMENT (hereinafter the "Agreement"), dated May 27,2009
for reference purposes only, is made and entered into by and between the Department of
Housing and Community Development, a public agency of the State of California (the
"Department"), and the City of Gilroy, a Local Public Agency (the "Recipient").
RECITALS
A. The Department and Recipient have entered into Standard Agreement No. 07-
BEGIN-100, dated July 3,2008, (the "Agreement"), whereby the Department has
made a conditional commitment of $510,000 (the "Commitment") from the
Department's BEGIN Program (the "Program") to assist Recipient in the operation of
a mortgage assistance program. The Program is subject to the requirements of
Health and Safety Code Section 50860 et seq. (the "BEGIN Program Statutes") and
except as provided in the BEGIN Program Statutes, the CalHome requirements of
Health and Safety Code Section 50650 et seq. (the "CalHome Statutes") and the
CalHome Regulations at California Code of Regulations, Title 25, Section 7715 et
seq. (the "CalHome Regulations") and is further governed by regulations issued by
the Department as further described in the Standard Agreement (the "Agreement").
B. In executing the Standard Agreement, Recipient has agreed to abide by the
provisions of the BEGIN Program Guidelines and the CalHome Statutes and
Regulations. The Guidelines provide that all revenue generated from use of BEGIN
Program funds, including loan repayments, if any, are to be deposited into a local
reuse account and used as provided for in the Guidelines and as described in a local
reuse account plan approved by the Department. The Standard Agreement contains
additional requirements pertaining to the reuse account and plan, and specifically
requires the Recipient to enter into this Agreement. The Department has reviewed
and approved the Reuse Account Plan and Loan Servicing Plan submitted to the
Department and copies are attached. Any changes to either of these plans must be
submitted to the Department for review and approval prior to implementation.
C. In executing the Standard Agreement, Recipient also has agreed to service loans
made with BEGIN Program funds in accordance with a Loan-Servicing Plan
approved by the Department.
D. The purpose of this Agreement is to set forth Recipient's obligations with respect to
long-term loan servicing and the administration of the local reuse account. A
separate agreement is necessary because Recipient's obligations for loan
servicing and administration of its local reuse account extend beyond the term of
the Standard Agreement.
NOW THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Recipient's execution of this Agreement is given in further consideration for
receipt of the Commitment.
Monitoring Agreement (May 2009))
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2. The term of this Agreement shall commence on the Date of the Standard
Agreement, July 3, 2008, and remain in full force and effect for a period of
twenty (20) years unless terminated earlier by the Department.
3. Recipient shall administer its local reuse account in conformance with the reuse
account plan approved by the Department. The reuse account plan approved
by the Department shall not be modified or amended except by the express
written consent of the Recipient and Department.
4. Recipient shall monitor and service loans made with BEGIN Program funds or
funds from the local reuse account (hereinafter collectively referred to as
"BEGIN Program loans") in conformance with the Loan Servicing Plan approved
by the Department. The Loan Servicing Plan approved by the Department shall
not be modified or amended except by the express written consent of the
Recipient and Department.
5. Recipient shall permit the Department, its employees, agents, or designees,
upon reasonable notice and at reasonable times, to enter Recipient's premises
and inspect any and all records pertaining to the local reuse account and the
Recipient's servicing of BEGIN Program loans. The Department may request
any other information that it deems necessary to monitor compliance with
requirements set forth in this Agreement. Recipient shall promptly provide such
information.
6. Recipient shall file an annual report with the Department for the period July 1
through June 30. This report shall be submitted no later than July 31 of each
year. The report shall provide information on the dollar amount of deposits to
and withdrawals from the local reuse account, and a description of the uses of
funds withdrawn, including but not limited to number and dollar amounts of
loans made, expenses of providing homebuyer education, and dollar amount of
fees for loan servicing, loan processing or loan activity. The annual report shall
also provide information on Recipient's loan servicing activities during the year
including, but not limited to costs of loan servicing, loans in default, remedial
actions undertaken, foreclosures, and bankruptcies.
7. In the event of a breach or violation of the provisions of this Agreement, the
Department may give written notice to the Recipient thereof by certified mail or
any express delivery service with a delivery receipt addressed to the Recipient
at the address stated in this Agreement. If the breach or violation is not cured
to the satisfaction of the Department within the time period specified in the
notice, which shall not be less than 30 days, the Department may declare a
default and may seek legal remedies including specific performance of this
Agreement, declaratory, and/or injunctive relief, or other remedies as may be
available by law or equity.
8. Recipient agrees and acknowledges that failure to cure a violation to the
satisfaction of the Department within the time allotted shall constitute grounds
for denial of eligibility for future BEGIN Program funding due to lack of
organizational capacity, and shall constitute grounds under any other program
administered by the Department for making a determination that the Recipient
lacks the capacity to administer the program funds being applied for.
Monitoring Agreement (May 2009))
9. In the event that the breach or violation involves charges to individual
homebuyers in excess of those permitted under the Standard Agreement or
Regulations, the Department may demand, and seek as an additional remedy,
the return of such excess charges to the affected households.
10. The remedies of the Department hereunder are cumulative, and the exercise of
one or more of such remedies shall not be deemed an election of remedies and
shall not preclude the exercise by the Department of anyone or more of its
other remedies.
In witness hereto, the parties hereby execute and enter into this BEGIN Program Reuse
Account and Loan Servicing Monitoring Agreement as of the date set forth above and agree
to be bound hereby:
THE DEPARTMENT
RECIPIENT
Department of Housing and
Community Development,
a public agency of the
State of California
By:~~.~D
Sharon I. Sarno
Program Manager
BEGIN Program
City of Gilroy,
a local public agency
By:
Thomas J. glund,
City Administrator
P.O. Box 952054
Sacramento, CA 94252-2054
7351 Rosanna Street
Gilroy, CA 95020
Attachments
Monitoring Agreement (May 2009))
CITY OF GILROY
BEGIN GUIDELINES
LOAN SERVICING PLAN FOR MORTGAGE ASSISTANCE LOANS
I. Management of Loans from Underwriting to Loan Servicing
The City of Gilroy will service loans made with BEGIN funds for downpayment
assistance using the HCD staff. All files will include a standardized checklist to verify
the files include all required documentation. Copies of all executed and recorded loan
documents, including deeds of trust and promissory notes, will be contained in the legal
custody files. These original loan documents are kept in the City's Finance department's
fireproof safe in an organized file for the life of the loan. All other documentation as
required in the BEGIN Operations Handbooks will be maintained in the individual
homeowner's file.
II. Impound Accounts
The City of Gilroy will not collect impound account payments for the BEG IN funded
loans, the lender or their servicing firm will be required to set up impound accounts for
property taxes and hazard insurance payments. If the loan is not sold to CalHF A (when
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will instruct the developer to have their mortgage lender or servicing firm require that tax
and insurance payments be impounded with the mortgage payment.
III. Property Taxes, Hazard fire insurance and Assessments
When the first mortgage loans are to be purchased by CalHF A, one of their requirements
is that the servicer collects and manages impounds for property taxes and hazard
insurance. At properties that have homeowner's associations, often the fire insurance for
the building is part of the HOA fees and initially can be verified by the budget approved
by the DRE. Currently in the City of Gilroy, there are no Assessments triggered by
master planned communities that the homebuyer is expected to pay.
IV. Hazard Insurance
Alllo,lns will have the City of Gilroy listed as "Additional Loss Payee" on hazard
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\-vill be satisfied for the term of each loan, the BEGIN loans will be tracked manually by
the HCD department in conjunction with staff who are employed by the developer, South
County Housing (SCH), who will hold and audit the resale restriction program for the
homes at The Cannery project in the City of Gilroy. Annual certification of the owner's
occupancy status will be verified by the loan packaging staff at SCH requiring evidence
of home occupancy and copies of household hazard insurance. At the developments that
have hazard and flood insurance maintained by the HOA an annual letter from the HOA's
insurance company will be requested and kept on file providing evidence of the policy
that covers the buildings. For homebuyers who do not purchase homes through South
County Housing and/or do not purchase homes with a homeowners association that pays
for the insurance policy, the City's HCD department staff will send out annual notices
and request a copy of the renewal of the hazard insurance policy with their certification
letter.
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V. Annual certification
Annual certification of the owner's occupancy status will be verified by the City's HCD
staff or the loan packaging staff at South County Housing (for the developments that
SCH is administering the resale restriction agreement) requiring evidence of home
occupancy and copies of househtYld hazard insurance. A majority of the homebuyers will
have signed a thirty (30) year resale restriction agreement with the City of Gilroy or
South County Housing and these agreements call for annual monitoring by the City of
Gilroy or South County Housing utilizing a standard form that is mailed out and returned
within thirty days (30) with documentation indicating the homebuyer still resides in the
home(as an example: a current utility bill). At the planned unit developments that have
hazard and flood insurance maintained by the HOA, an annual letter from the HOA's
insurance company will be requested and kept on file providing evidence of the policy
that covers the homes.
VI. Collection and Receipt of Payments
As part of the City of Gilroy's Loan Collection process in the HCD department, the City
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with the Finance Department. The department will set up separate BEGIN reuse account
that will enable the City to track and report on repayments received from home owners.
New loans made from this account will continue to be spent on eligible activities as
required in the BEGIN Program Guidelines.
VII. Payoff Demands
Demand information is supplied within ten days of receipt of the request for loan payoff
from the title company and escrow officer. All incoming checks from the title company
will be addressed to the attention of the Housing Community Development's Housing
Planner. Upon receipt, a copy of the check is placed in the homeowner's file with the
copy ofa HUD-l, where applicable. The check is then forwarded to the City's Finance
Department and is posted and deposited to the BEGIN reuse accounts.
As part oftne City of Gilroy's Loan Collections Guidelines the City has adopted written
rt-,li'_ICS ~ll1Li p:uL'".:durc:-, 1\ (J~'l1i 11H..L) and j)ayofl~ lh;-tl l'll'~ur\.' pl'l~n)rl acto; !rj l!l"i t
following:
a) process for accessing original loan files
b) Computation of accrued interest, utilizing industry standard methods;
c) Ability to receive funds
d) Ability to issue demand information within ten day time period required by law;
and
e) The ability to process reconveyances and lien releases, including access to a
notary public
VIII. Collection of the BEGIN Note when a default or foreclosure occurs
The City shall record a Request for Notice of Default for each lien senior to the City's
BEGIN mortgage and deed of trust. Upon receipt of a Notice of Default to the City of
Gilroy, a letter will be sent to the homeowner and an inspection of the home will be made
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by HCD staff to initiate immediate contact with the homeowner. If the Owner is not able
to make their payments and are in default of their first mortgage, the City will utilize the
resale restriction program to purchase the home to sell to another qualified home
purchase (or South County Housing will initiate the process if they hold and administer
the resale restriction) prior to the home being taken back by the first mortgage lender or
bank. The City's BEGIN mortgage note will be in effect and all principal and interest
will become immediately due and payable. The funds from the BEGIN note will be
entered into the City's Reuse Account for BEGIN funds so that it can be loaned to
another qualified home buyer in the future.
If the home is not bound by a resale restriction agreement, the City will invoke the terms
of Section 5 of the BEGIN deed of trust to cure the default or will subordinate to the
Senior Lender's rights as explained in Section 4 of the BEGIN deed of trust after the
Senior Lender's foreclosure or acceptance of a deed of assignment in lieu of foreclosure.
IX. Permitted Transfers/Loan Assumptions
The BEGIN loans are assumable by another income-qualifying homebuyer after five
years from the recordation of the deed of trust securing the BEGIN loan. The following
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a) The transfer of the property to a surviving j oint tenant by devise, descent or
operation of law, on the death of a joint tenant.
b) A transfer of the property in which the transferee is a person who occupies or will
occupy the property, which is:
1. A transfer where the spouse becomes an owner of the property
2. A transfer of the property 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 to an inter vivos trust in which the Borrower is and remains the
beneficiary and occupant of the home.
The City's HCD staff department is responsible for approving loan assumption requests.
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CITY OF GILROY
BEGIN GUIDELINES
Reuse Account Plan governing Program Income From BEGIN Program Assistcd Ac~ivitics for
the Purpose and Account set up
I. The Purpose of the City's Reuse Account is to establish policy and procedures for the
administration and utilization of program income received as a result of activities funded under
the State of California BEGIN Program. It is intended to satisfy the requirements specified in the
Health and Safety Code Section 50806 ~ and the BEGIN Program Guidelines.
The City will establish an account with Finance Department which is separate from any othcr
funding sources, such as the Housing Trust Fund, and will provide:
-A tracking system to ensure reuse of the funds used for the activities as described below in
Section III.
- A tracking system to ensure reuse of funds are in compliance with the program and reporting
requirements as defined in Section IV.
- Timely processing and appropriate reporting of reuse funds
-Any accrued interest earned on BEGIN funds will accrue to the City's BEGIN Reuse Account
II. Program Income Dcfined
Program Income is defined as the gross income received by the City that has been directly
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payments of principal and interest on downpayment assistance loans made using BEGIN funds.
interest earned on program income pending its disposition, and interest earned on funds that ha\'e
been placed in a revolving loan fund account.
III Reuses of Program Income
Health and Safety Code Section 50806 (c) indicates that "Any loan repayments shall be retained
by the qualifying city, and reused for first time homebuyer downpayment assistance, home
rehabilitation, home buyer counseling, home acquisition and rehabilitation, or self-help mortgage
assistance for families and persons of low-or moderate-income, as defined in Section 50093.
The City's program income will be used only for eligible activities as defined in Section 50860
(c) and the BEGIN Program Guidelines. \
1, Loans to assist low or moderate-income homcowners or homebuycrs 3S follows:
. : ,(\~j It., ill'Sl-ll; L..' ~'i(1!I'll' L"r:-,
(ii',';,'.'l': :"'\Yil';"iJll.\ 1,": il'll
. Loans to owner-occupants for rehabilitation.
- Loans to first time home buyers for acquisition and rehabilitation
- Loans for self-help mortgage assistance
2. The cost of the homebuyer education provided to first-time homebuyers recei\'ing
mortgage assistance from the reuse account. Education classes pro\'ided by Project Sentenial
as contracted yearly with City of Gilroy is an example of an eligible activity.
3. Payment for the delivery of BEGIN eligible activities funded from the reuse account. Up
to five percent (5%) of the funds deposited into the Reuse Account may be used towards
the costs of loan servicing by the City or the cost of using a third party loan servicing
company if contracted by the City. The maximum allowable amounts for each activity and
the method of calculation are indicated in the BEGIN Program Guidelines.
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IV. Compliance with Program and Reporting Requirements
The City of Gilroy shall comply with all State BEGIN program and reporting requirements
governing the BEGIN Reuse Account. The City will submit all BEGIN quarterly and annual
reports, as specified in the BEGIN Program Guidelines and the BEGIN Operations
Handbook. The City shall also ensure that the use of program income under the Reuse
Account Plan complies with all BEGIN program requirements. The HCD department will
update existing homebuyer loan policies and procedures to ensure that the following subjects
are addressed:
-Maintenance of individual loan tiles including proper documentation in accordance with
BEGIN requirements in effect at the time of funding the loans;
. Documentation that the amount of disbursements for delivery of BEGIN eligible activities
funded from the reuse account do not exceed the amounts allowed by the BEGIN Guidelines
in effect at time of such disbursements.
. Accounting records indicating that a separate account is being maintained of deposit and
disbursement of repaid BEGIN loans.
. Checks and balances to ensure that funds in the BEGIN Reuse Account for the approved
activities listed in Section III.
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