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HomeMy WebLinkAboutR04-128 Fund Revolving Loan Policies • •
Commissioner ) C NC rI 3 moved adoption
of the following Resolution:
BOARD OF COUNTY COMMISSIONERS
COUNTY OF EAGLE, STATE OF COLORADO
RESOLUTION NO. 2004- /;:
RESOLUTION CONCERNING APPROVAL OF
THE EAGLE COUNTY FUND REVOLVING LOAN POLICIES
AND
THE COLORADO DIVISION OF HOUSING
REVOLVING LOAN POLICIES
WHEREAS, Eagle County, Colorado ( "County ") is a political subdivision of the State
of Colorado ( "State "), duly organized and existing pursuant to the laws and the Constitution of
the State; and
WHEREAS, the purpose of the Eagle County Fund Revolving Loan Policies (see
Exhibit "A" attached hereto and incorporated by reference) is to provide a framework for
managing the Eagle County Down Payment Assistance program, a revolving loan fund; and
WHEREAS, the purpose of the Colorado Division of Housing ( "CDOH ") Revolving
Loan Policies (see Exhibit `B" attached hereto and incorporated by reference) is to provide a
framework for managing a revolving loan fund created with a grant through the Colorado
Division of Housing to Eagle County; and
WHEREAS, the Eagle County Fund Revolving Loan Policies and the CDOH Revolving
Loan Policies have been drafted and approved by the Home Buyer Assistance Committee; and
WHEREAS, the Revolving Loan Policies are intended to serve as directives to Eagle
County's management, staff and loan servicing agent; and
WHEREAS, the County recognizes that the Revolving Loan Policies may be altered or
amended to reflect the changing needs of the organization; and
WHEREAS, the County desires to approve the Eagle County Fund Revolving Loan
Policies and the CDOH Revolving Loan Policies.
NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF COUNTY
COMMISSIONERS OF THE COUNTY OF EAGLE, STATE OF COLORADO:
THAT, the County hereby approves the Eagle County Fund Revolving Loan Policies
(Exhibit "A ") and the CDOH Revolving Loan Policies (Exhibit "B ").
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, • •
THAT, the County recognizes that the Revolving Loan Policies may be altered or
amended to reflect the changing needs of the organization.
THAT, the Board hereby finds, determines and declares that this Resolution is necessary
for the public health, safety and welfare of the residents of the County of Eagle, State of
Colorado.
MOVED, READ AND ADOPTED by the Board of County Commissioners of the
County of Eagle, State of Colorado, this ! day of December, 2004.
COUNTY OF EAGLE, STATE OF
COLORADO, By and Through Its
ATTEST: BOARD OF COUNTY COMMISSIONERS
• 01 1 111 mair.4.:4, ' le,ok
0 Pi
0*
Clerk to the Board of F poLE e, Tom . to e
County Commissioners f o`` \ . �� Chairman
r' t5 ,,,, ,et \ V' t li r 1/ g coLost. I iyAlle
illallj)
Michael L. Gallagher /
C► issioner
-gar::7I - .
'1a+,',5,+- Boni
Commissioner
Commissioner G - 4 L 1,6 I seconded adoption of the foregoing resolution. The roll
having been called, the vote was as follows:
Commissioner Tom C. Stone R I
Commissioner Michael L. Gallagher Ay e
Commissioner Arn M. Menconi ..1
This Resolution passed by % — 0 vote of the Board of County Commissioners of
the County of Eagle, State of Colorado.
2
•
FAS F COUNTY
Eagle County Fund
Revolving Loan Policies
PREFACE
The purpose of this document is to provide a framework for managing the Eagle County Down Payment
Assistance program, a revolving loan fund. The EAGLE COUNTY loan program provides equal opportunity
for all qualified participants, where factors of race, color, religion, gender, handicap, family status or national
origin are expressly prohibited from consideration in the analysis of loan applications.
As written herein, "policies and procedures" should be interpreted as a framework for decision - making,
creating a standard for lending functions of the organization. Policy statements are an expression of the Board
of County Commissioners, serving as clear directive to EAGLE County's management, Staff and loan
servicing agent who are, in turn, charged with developing operating guidelines and procedures consistent with
those stated directions.
It is the intent and expectation of the Board of County Commissioners that the following policies and
procedures may be altered, added to, or deleted to reflect the changing needs of the organization. EAGLE
COUNTY Staff acknowledges that these policies are not designed to be inflexible rules to which all cases are
expected to conform. Rather, they represent standards to which most cases are expected to conform, but from
which deviation is permitted if good reasons exist for such deviation. If a borrower should disagree with a
decision made by EAGLE COUNTY or its representative, borrower may appeal the decision following the
process outlined in Section V.
Eagle County's interest in developing standards of efficiency dictate the use of lending policies, but EAGLE
COUNTY recognizes the inherent limitations. With the exception of specific policy parameters which state
that deviation is not allowed (i.e. "must "), the policies contained herein should not be applied rigidly. In all
cases, policies and procedures shall not be used as a substitute for sound credit judgment.
Finally, this document shall be reviewed periodically to reflect changes in EAGLE County's lending activities,
portfolio growth, and other factors that may affect the nature and assessment of risk.
EXHIBIT
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I. ROLE OF STAFF AND LOAN SERVICING AGENT
1. Management and Staff —The Director of Housing and all other employed Staff of Eagle County
shall be collectively referred to as "Staff'_ A third party Loan Servicing Agent (LSA) will be engaged
to implement and service lending activities on behalf of EAGLE COUNTY. As stipulated in the
governing documents of the organization, EAGLE COUNTY Board of County Commissioners shall
retain ultimate authority and oversight of all lending activities;
a. Within Eagle County and its surrounds, reputable mortgage and other real estate professionals will
be engaged to originate loan applications on behalf of EAGLE COUNTY and homebuyers who
meet established income thresholds and other pertinent criteria under program guidelines.
b. Oversee implementation of adopted Policies and Procedures and conduct periodic reviews of LSA
activities and performance according to established goals. Make appropriate recommendations to
LSA for further action, if necessary.
c. After receipt of loan application and supporting documentation listed in Section II., LSA shall
review documentation provided, verify Borrower's eligibility under program guidelines and forward
to Eagle County Staff a loan summary sheet demonstrating that the borrower has met all program
guidelines and / or detailing policy exceptions. Eagle County Staff will approve or deny the loan
based on LSA's analysis of the borrower's eligibility under program guidelines. After review by
Staff, LSA shall then issue a loan commitment letter, decline the application, request further
information, or forward a recommendation to Staff as identified in Section II.
d. Receive LSA recommendations and supporting analysis of any loan request outside policy
parameters, as set forth in Section II. EAGLE COUNTY Staff and/or the Home Buyer's Assistance
Committee will provide an underwriting decision and set terms accordingly.
e. Monthly review of Loan Activity Report, or more frequently in situations where delinquency, loss,
or loan activity warrant Staff input.
f. Establish priorities related to lending activity and consistency of such activity to the mission of
Eagle County.
2. Loan Servicing Agent (LSA) - The LSA will function as an agent of EAGLE COUNTY and
implement lending programs according to established policies and procedures. Under no circumstances
shall LSA operate outside its stated authority, nor obligate EAGLE COUNTY to any transactions that
compromise the integrity of the organization or its loan programs without the duly authorized written
consent of EAGLE COUNTY. LSA shall not engage in any practice that unduly favors itself or other
outside parties to the detriment of EAGLE COUNTY or its loan portfolio without duly authorized written
consent of EAGLE COUNTY. LSA shall implement all lending activity, including:
a. Review and recommend modifications of the EAGLE COUNTY Loan Policies and Procedures to
Staff for consideration and approval as deemed appropriate. Staff will provide valuable input in
this process.
b. Referral sources will collect and review applicant data for qualification under the program, assist
borrower in completing all underwriting and funding requirements, facilitate the purchase
transaction, and provide any post - closing assistance necessary to maintain portfolio integrity.
Completed loan applications shall be sent directly to Loan Servicing Agent for underwriting.
c. After receipt of loan application and supporting documentation listed in Section II., LSA shall
review documentation provided and verify Borrower's eligibility under program guidelines. LSA
shall determine the appropriate loan program to be used based on borrower eligibility and program
availability. Programs designated for low income households (i.e. CDOH and/or H2O) must be
utilized first for qualifying households.
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d. LSA shall forward to Eagle County Staff a loan summary sheet demonstrating that the borrower
has met all program guidelines and / or detailing policy exceptions. Eagle County Staff will
approve or deny the loan based on LSA's analysis of the borrower's eligibility under program
guidelines. After review by Staff, LSA shall then issue a loan commitment letter, decline the
application, request further information, or forward a recommendation to Staff as identified in
Section II.
e. Within a reasonable time period following an underwriting decision, LSA will advise the
borrower, through the referral source, of the action. If approved, the notification will include all
terms, conditions and supporting documentation necessary to fulfill the loan commitment. The
commitment shall be extended for a period equal to the time commitment of the primary loan. If
the loan is declined, applicant will be advised of the reasons for the decision and any
recommendations for further consideration, if appropriate. Applicant will also be advised of
dispute and appeal procedures as stated in Section V.
e. Based upon a favorable underwriting decision, a loan file must contain satisfactory documentation
detailed in Section II prior to funding the loan. LSA will coordinate with all parties to the
transaction to facilitate timely execution of the transaction.
f. LSA will prepare and review all loan documents, including settlement statement, for accuracy, as
well as setup wire transfer or obtain certified funds in the exact amount of the approved loan. All
loan closing fees shall be a charge to borrower at the time of settlement.
g. A mortgage banker or lender of the referral source, or their representative, shall attend closing and
present final loan documents. LSA may elect to provide alternative arrangements for loan
presentation at its discretion. The closing agent to the transaction will be engaged to notarize and
record the Deed of Trust with the appropriate agency, and collect any documentation required from
borrower or referral source to complete the loan file, according to the Closing Instruction form
provided with the loan package. The agency shall be instructed to return the recorded instrument to
LSA. Closing agent shall be instructed to return the executed loan package to LSA within 48 hours
of final settlement.
h. LSA shall maintain all executed documents in a secure manner, where the Promissory Note is
stored in Safe Deposit with a financial institution deemed most appropriate by LSA. LSA will
follow -up with the agency if the original recorded document is not received within a reasonable
period of time. All executed loan documents will be stored electronically or similar method, to
achieve redundancy.
i. Within 15 business days of closing, LSA will conduct a post - closing audit of loan files to verify
accuracy and presence of all necessary documentation. Immediate action will be taken to correct
any findings.
j. LSA will monitor compliance with all loan provisions and advise Borrower in writing and/or by
telephone of any non - compliance issues. If, in the opinion of LSA, non - compliance is of a material
nature, Staff will be advised of the situation in a manner deemed most appropriate. LSA will
provide sufficient detail and recommend a course of action for consideration by Staff.
k. LSA will assess and advise Staff of any outstanding loans that are at risk of non - performance, with
all appropriate action pursued.
1. When a request for loan payoff is received, LSA will complete and deliver a Payoff Statement
within a reasonable time period. Particular care will be given to the completeness and accuracy of
all figures.
m. LSA shall invoice for and accept all monthly loan payments, and all loan payoffs, from borrowers
according to the terms and conditions of the Note. Within 15 days of the close of each calendar
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month, LSA shall forward proceeds of such payments to EAGLE COUNTY or a financial
institution authorized by EAGLE COUNTY to receive such payments. Such payments shall
include a detailed accounting of principal, interest and other charges received by LSA and
corresponding application to borrower accounts.
n. Acceptable forms of payment from the borrower will include certified funds, money order or
personal check. Any other form must have prior agreement from Staff. Borrowers' account will be
credited as of the date of receipt of payment. In cases of returned items, LSA shall process a
reverse entry of the affected borrower payment, assess the appropriate late payment charge and
returned item charge equal to the charge imposed by LSA's financial institution and re- invoice the
borrower with appropriate advisement of the loan status and itemized detail of charges included.
o. Within a reasonable period of time, not to exceed 90 days, of receipt of acceptable final payment
of the loan obligation, LSA will prepare, execute and deliver a Release of Deed of Trust to the
appropriate agency. The original recorded Release shall be returned to LSA and retained in a
secure manner. Copies of all documents shall be retained in the Borrowers' permanent file, with
original note marked as "Paid ", initialed and dated by a LSA representative and forwarded to the
Borrower, or Public Trustee as appropriate.
p. LSA will follow -up with the appropriate agency(s) if the recorded Release document is not
received within a reasonable period of time.
3. ROLE OF HOMEBUYER'S ASSISTANCE COMMITTEE\
The Homebuyer's Assistance Committee (HBAC) was formed by the EAGLE COUNTY Board of
County Commissioners to provide recommendations to the Board on mortgage assistance policies and
procedures.
The HBAC will schedule meetings at least every other month, or more frequently as dictated by loan
activity and membership availability. To accommodate urgent responses, items may be considered by the
committee via fax, telephone, and/or email. Such alternate polling is subject to the provisions identified
below.
HBAC will be comprised of a minimum of ten members appointed by the Board of County
Commissioners for specific terms. The HBAC will include members from all parts of Eagle County. The
members will represent diversified interests and expertise within Eagle County. Membership will include,
but not be limited to, members representing the banking and mortgage group, the real estate group, citizen
advocacy groups, as well as low /moderate income citizens group. A simple majority of the membership
shall be present at meetings to constitute a quorum for formal action. Such action shall include
recommendations on loan decisions, remands or other recommendations to the Board of County
Commissioners for further consideration.
The Director of Housing and Staff will oversee LSA lending activity through the advisement of the
HBAC including:
a. Review and recommend modifications of loan policies and procedures to the Board of
County Commissioners for approval as deemed appropriate. Staff will participate in this
process.
b. Approval of solutions for problem loans.
c. Approval of Staff decisions regarding exceptions to established policies.
d. In the case of appeal or dispute resolution, a sub - committee of HBAC members will serve
as Hearing Officers.
At a minimum, the HBAC will review annually the Staff decisions made regarding applicant selection,
loan terms, problem loans and foreclosures.
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II. DOCUMENTATION AND UNDERWRITING CRITERIA
1. Documentation Requirements – Loan applicants shall be required to provide sufficient
documentation that verifies their eligibility under EAGLE COUNTY program guidelines, capacity to
assume the mortgage liability and a formal introduction to the responsibilities of home ownership through
home buyer education.
Delivery of loan documents and loan funding shall be the responsibility of LSA, subject to timely
submission of required application documentation and capacity of LSA resources. LSA shall review
documentation submitted by the referral source and either approve the application, request further
information, forward a recommendation to Staff, or decline the application. LSA shall issue a final
determination in writing to the borrower within a reasonable period of time, specifying the approved loan
amount and any documentation requirements prior to loan funding. For expediency, the letter may be
faxed to the referral source and shared with the borrower. A complete loan file must include:
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a. Application— Borrower shall complete, sign and date the LSA loan application and submit other required
documents with the understanding that LSA retains the right to verify the accuracy of all information
provided.
b. Income Verification – Borrower shall provide payroll statements for the most recent thirty (30) day period
and signed federal tax returns for the most recent tax year. If borrower shows income from a business not
listed on Schedule C of the return, the complete and signed copy of the business return will be required
for the corresponding period. Borrowers who are self - employed, or an employee receiving commission
income, tax returns for the most recent two -year period and a year -to -date profit & loss statement (P &L),
signed and dated by borrower, shall be required. A P &L form may be produced with assistance of the
referral source, based upon information provided by borrower. (Note: if borrower filed an extension of
the most recent years' return, a year -end profit and loss statement, copy of the extension and the two
previous years' returns shall be required.)
If payroll statements are unavailable, referral source shall provide a written statement from the
borrower's supervisor or human resource manager that specifies borrower's wage scale, number of
regularly scheduled hours, additional income (overtime, holiday pay, etc.) and the likelihood of its
continuance, as well as any relevant changes to the borrower's employment status.
EAGLE COUNTY reserves the right to require a minimum number of hours worked by all, or at
least one, borrower within EAGLE COUNTY loan service areas. Additionally, EAGLE
COUNTY may establish a minimum threshold for length of employment within said service areas
and/or number of hours worked over a set time period in order to qualify under this loan program.
c. Qualification Letter – Borrower shall be required to obtain loan approval for the 1 mortgage from a
reputable lender and authorize the lender to issue an approval letter that specifies the terms and conditions
of the mortgage, though there shall be no requirement to use any particular lender.
Staff shall be cognizant of lender terms and conditions that may indicate unfair business practices
or terms, which may create unreasonable financial burden to the borrower. A listing of all
qualified and reputable lenders /mortgage brokers shall be compiled by LSA and made available to
Staff.
d. Home Ownership Training – Borrower shall be required to attend and complete a qualified training
program, approved by Eagle County, which introduces the fundamental responsibilities of home
ownership, personal finance, and other concepts frequently encountered by homebuyers. Satisfactory
service providers shall include those agencies approved by EAGLE COUNTY.
e. Purchase Contract – Borrower, or their agent, shall provide a copy of the executed purchase contract and
all amendments to verify purchase price, property description, and all applicable performance dates.
Referral source and/or borrower shall be notified immediately if LSA is unable to meet any specified
performance dates.
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f. Felony Investigation — EAGLE COUNTY reserves the right to require felony, identity verification or
other background screening qualifications as a precondition of funding. LSA shall obtain required
authorizations and order such reports prior to loan approval.
g. Title Commitment — LSA shall request a copy of the Title Commitment issued by the closing agent
engaged by the property seller. Such commitment shall identify all liens, encumbrances, easements and
exceptions to the title coverage. LSA shall verify the EAGLE COUNTY security interest will not be
compromised by such limitations, or that adequate endorsements will be issued to protect the interest.
LSA shall also verify the correct legal description of the subject property when preparing the loan
documents. Leasehold purchases shall be considered according to specific terms of the individual
application, whereby LSA shall forward a recommendation to Staff for final determination.
h. Good Faith Estimate — LSA shall obtain a copy of the lenders' Good Faith Estimate of Settlement Costs
to verify borrower funds needed to close and provide greater comfort for the type and terms of the 1
mortgage. The estimate shall reflect the correct purchase price for the subject property. LSA shall advise
the referral source if the mortgage type is incompatible with the EAGLE COUNTY program or if the
terms indicate predatory lending practices or terms that create unreasonable fmancial burden to the
borrower.
2. Underwriting Analysis — Qualification for the program shall be evaluated against minimum debt capacity
standards and target market thresholds, and incorporating credit and property risk factors. Exceptions to these
standards may only be allowed as noted below, according to LSA or Staff assessment of verified hardship
conditions of the borrower and subject to all other program limitations. Hardships may include, but are not
limited to, medical conditions or related expenses, financial support of minors or other related individuals,
availability of suitable housing, and extraordinary work - related expenses.
EAGLE COUNTY is an equal opportunity lender and shall not permit factors of race, color, religion, gender,
handicap, family status or national origin as criteria for underwriting purposes. Underwriting and funding the
program will entail.
a. Income Qualification — Borrower's gross annual income must be at, or below, 100% of AMI as
established by HUD annually for the number of household members. Income shall be calculated
according to the method described below. Income from other sources may be used if it is court- ordered,
or documented by an award letter from the source (i.e. Social Security, pension, insurance, etc.) and likely
to continue for a period not less than 24 months from the date of closing.
• For W2 employees, income shall be calculated from the most recent pay stub, dividing the year -to-
date regular income amount by the number of pay periods reflected. The resulting figure shall be
multiplied by the number of pay periods per month to determine monthly income. Overtime, bonuses,
holiday pay, etc. shall not be used unless borrower has received such pay for at least 2 years from the .
current employer, can be supported by tax return income amounts and has been verified in writing
from the employer of its strong likelihood to continue.
• Non - taxable income sources (Social Security, etc.) shall be adjusted to reflect an approximate gross
Wage equivalent, or "grossed up" by 1.3% to demonstrate effective income of such source.
• For self - employed borrowers and employees receiving commission income, income verification
using two years' tax returns shall be calculated using Net Profit from Schedule C, then adding back
any claims for depreciation, depletion or business use of home. This adjusted profit figure shall be
added to the Net Profit figure shown on the year -to -date P &L and divided by the number of months
included in the calculation to determine monthly income. (i.e. two years' return, plus six months'
P &L, equal thirty months total.)
• If the borrower owns a business not shown on Schedule C, income shall be determined using tax
returns for the business and year -to -date P &L. Income shall be calculated using any distributions to
owners (pro rata if not otherwise specified), plus retained earnings (pro rata) and divided by the
number of months reflected (as above).
b. Debt Ratio — As a result of the proposed mortgage, borrower's total contractual or court- ordered
debts, initial principal, interest, property taxes, hazard insurance, mortgage insurance and homeowner
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association dues shall not exceed 50% of gross monthly income. If a borrower's debt ratio exceeds
50% and the borrower or borrower's representative seeks an exception to this policy, LSA may
request the credit score used by the first mortgage lender. If the borrower's credit score exceeds 680,
then Staff may grant an exception. Payroll deductions for taxes, local employment assessments,
social security, Medicare, insurance, retirement, or other benefit - related deductions shall not be
counted against borrower's income.
Contractual obligations shall include credit card minimum monthly payment (3% of account
balance if not verified by current statement or credit report), bank loans or lines of credit, consumer
finance loans, deferred payment accounts (same -as -cash contract payment estimated at 3% of account
balance unless otherwise documented), personal property rental contracts, student loans, loans
against employer retirement account, payments for income taxes owed, or other installment
obligations. Court- ordered payments shall include garnishment of wages, child support, separate
maintenance, alimony, bankruptcy or civil judgment.
Monthly obligations may not be considered if it is an installment loan or court- ordered obligation
with less than ten (10) regularly scheduled payments remaining for settlement in full. Revolving or
open credit with an outstanding balance shall always be counted. Other discretionary obligations
(auto insurance, utilities, rent, etc.) shall not be considered contractual obligations.
c. Collateral — Program loans are to be secured by a Deed of Trust on the property to be purchased,
not to exceed 105% of the appraised market value or purchase price, whichever is less.
Subordinations after loan closing shall not be permitted.
d. Purchase Price — Maximum purchase price limitations shall be based upon the most recently
published FHA maximum loan amount for EAGLE COUNTY.
e. Loan Amount — Maximum loan amount shall be equal to 5% of the contractual purchase price of
the home, or $10,000, whichever is less, or as otherwise limited by conditions of the primary
mortgage loan, or as amended.
f. Borrower — All parties taking ownership interest in the subject property must be obligated on the
EAGLE COUNTY Promissory Note and Deed of Trust and constitute natural individuals. Legal
entities are not eligible under this program. All borrowers must be of legal age and provide a valid
Social Security Number.
g. Minimum Investment — Borrower shall be required to invest a minimum of $3,000 of their own
funds in the purchase of the new home. Earnest Money deposit and pre -paid expenses to the
lender to obtain financing shall be counted toward this requirement. Closing cost credits obtained
through premium pricing of the 1s mortgage, or seller concessions shall not satisfy this
requirement.
h.. Although asset verification is not required, borrower must demonstrate within the loan application
detail that the current value of all assets held does not exceed 150% of household income.
Retirements accounts totaling less than $100,000 will not be considered as a household asset.
Under no circumstance shall the borrower receive cash back at closing regardless of other prepaid
expenses or deposits made to other parties.
i. Consistency — All documentation used to underwrite a loan file shall be accurate and consistent with
all other documentation within the file.
3. Loan Approval — LSA shall have authorization to approve applications that meet EAGLE COUNTY
program objectives and target market definitions, limited by loan amounts noted below and not otherwise
limited by geographic constraints of EAGLE COUNTY service areas. LSA shall request a formal
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underwriting decision from Staff if an application does not meet all such criteria. Loan applications that are
declined or withdrawn shall be retained on file for period of two (2) years from the application date.
a. Loan amount not to exceed $ 10,000 or as amended.
b. Assistance not to exceed 5% of purchase price or as amended.
4. Loan Funding — At such point that all underwriting conditions have been satisfied and in accordance with
timing requirements of performance contracts, LSA will provide to borrower, through the referral source, a
written detail of any conditions or documents necessary prior to executing the promissory note. To the extent
possible, referral source shall be provided copies of all documents to be executed at loan closing in advance
for their review with borrower. The agent presenting the final loan documents shall assume responsibility for
satisfying such requirements prior to issuing loan funds to any party. All multi -page documents shall bear the
initial(s) of all borrowers at the bottom of each page of the document, except where signature(s) are required.
All persons taking title to the property, as listed on the Warranty Deed, must also be obligated on the
Promissory Note and pledge their interest in the security through the Deed of Trust. The loan package
must include the following:
a. HUD1 Settlement Statement - Prepared by the closing agent engaged by the parties, LSA shall
request a copy in advance of closing to review for completeness and accuracy of all entries.
EAGLE COUNTY /LSA shall be listed as subordinate lender for the correct loan amount, with all
applicable loan fees listed by category. The file copy shall have signatures of all parties to the
transaction.
b. Promissory Note — LSA shall prepare and review for accuracy a Promissory Note to be executed
by borrower at loan closing. The terms of the approved loan shall be accurately reflected on the
appropriate Note form.
c. Deed of Trust — LSA shall prepare and review for accuracy a Deed of Trust that shows terms as an
exact match of the Promissory Note. The closing agent engaged by parties to the transaction shall
be employed to notarize and record the executed document with the appropriate agency. If
applicable, all necessary riders to the Deed of Trust will be prepared and executed in a similar
manner.
d Federal Truth In Lending Notice — LSA shall prepare applicable disclosures of EAGLE COUNTY
loan terms and sample calculations, submitted as part of the final loan package.
e. Loan Proceeds — Prior to the scheduled loan closing, LSA shall set up a wire transfer to the bank
account of the closing agent engaged by parties to the transaction equal to the loan amount.
EAGLE COUNTY shall retain the right to verify all such transfers prior to execution of the order.
f. When loans are made from the Eagle County Fund, EAGLE COUNTY may require LSA to request
payment from the Eagle County Housing Department. This request may be made at the time of
commitment accompanied by a copy of the commitment letter or LSA may choose to request
payment after closing by submitting a copy of the Deed of Trust.
5. Post Closing Procedures — Within a reasonable time period of loan closing, LSA must conduct a
complete review of the loan file to insure all documents are correct, complete, and secured in the
permanent loan file. The live note shall be placed in safe deposit with a financial institution, while the
recorded Deed of Trust shall be securely maintained in the file. LSA shall forward to EAGLE COUNTY a
copy of the Deed of Trust. Additionally, LSA will assume responsibility for monitoring:
a. Receipt of recorded documents — Within 90 days of loan closing, LSA should be in receipt of all
recorded documents. If not received, LSA will contact the appropriate public office to determine if
the instrument has been received, recorded, or subject to processing delays. If recording has been
delayed, an appropriate follow up period will be established. If recorded more than 15 business
days prior, LSA shall request the agency perform a document search and report their findings
within 10 days of such request. If not received within such time, LSA shall request a certified
copy of the document and forwarded by registered delivery from recording agency. If the
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document has not been received by the public agency within 60 days, LSA shall contact the
closing agent to request a document search. Closing agent shall be instructed to provide gap
coverage under the title insurance policy, obtain new signatures on replacement documents, if
necessary, and record the document at the earliest possibility.
b. Loan Registration — Upon execution of the loan, LSA shall enter the new loan into the tracking
system and establish follow -up dates for annual review, hazard insurance renewal and maturity
notification.
c. Loan Servicing — LSA shall maintain accurate and complete records of all payments and charges
associated with each loan file and correctly invoice for all outstanding loans on a monthly basis.
As borrower payments are received, payment shall be applied to accrued interest first, any late fees
or returned item charges, then principal reduction of the loan. To the extent possible all borrower
invoices shall include detail of the most recently applied payment and subsequent affect to the
principal balance. LSA reserves the right to retain all late fees, returned item charges and
collection fees recovered from borrower to offset resulting service costs.
III. PROGRAM PARAMETERS & UNDERWRITING MATRIX
1. Program Parameters — Exceptions to program descriptions may be allowed according to
Underwriting Matrix
Description Target Market
Borrower Households earning 100 %, or less, of the AMI as
established by HUD annually and adjusted for
family size.
Loan Amount Up to $10,000 or 5% of purchase price, whichever
is less, or as amended.
Use of Funds Down payment, closing costs and prepaid items
directly attributed to the primary mortgage.
Service Areas Eagle County plus three miles
Term Option A: 30 years; fully- amortizing payments to
include principal and interest. The loan will
become immediately due upon sale, transfer,
refinance, when the house is no longer the primary
residence or upon the death of the buyer.
Option B: 30 years. The loan will become
immediately due upon sale, transfer, refinance,
when the house is no longer the primary residence
or upon the death of the buyer
Loan Fees As negotiated with LSA
Collateral Real Property; junior lien
Cost Recovery Third party service fees to be paid by borrower .
Fees
Rates Option A: Fixed at 2.5% or as amended.
Option B: Variable:1S two years fixed at 3 %,
adjusts according to appreciation thereafter. (see
Section IV, paragraph 3).
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IV. PORTFOLIO MANAGEMENT
1. Reporting, Risk and Compliance Review — LSA shall conduct ongoing review of outstanding loans
to establish compliance with loan provisions. LSA shall prepare and present to Staff the following
monthly reports
a. Comprehensive Report — A complete accounting of all outstanding loans which details borrower
name, family size, AMI percentage, loan amount, parental status, date of the loan, ethnicity,
property address, and occupation. Total loans funded and available capital, if appropriate, shall
also appear.
b. Summary Report — A composite accounting of total program capital, funds invested, principal and
interest recapture, loan loss, and aggregate loan characteristics
2. Risk Rating and Loan Loss Reserves — According to the assigned risk rating, EAGLE COUNTY
may elect to maintain a loss reserve (expressed as a percentage of the loan amount) against available loan
capital that reflects a reasonable assumption of loss. Reserve provisions may be re- evaluated from time to
time to reflect the overall portfolio quality, historical losses and delinquency rates..
2. Loan Repayment — When loan application is made, borrowers will have a choice of loan repayment
plans.
Option A — Monthly Payments: Borrowers shall make monthly payments of principal and interest to
fully amortize the outstanding loan within the established loan term. LSA shall be allowed to assess late
charges against any payment that is received more than 15 days after the due date, not to exceed $10 per
incident. If it is determined that borrower is not in compliance with any of terms or conditions of the
Note or Deed of Trust, borrower shall be instructed in writing to submit payment in full of outstanding
principal and interest within thirty (30) days of the notice. There is no prepayment penalty
Option B- Property Appreciation Model: Borrowers shall not be required to make interim payments of
principal or interest, deferring all such payments to loan maturity or early payment in full. There is no
prepayment penalty.
The first two years of the loan, interest shall be fixed at 3% simple interest. Thereafter, the applied simple
interest rate will be based on the appreciation of the home. Appreciation will be computed using the
number of days the loan is outstanding. The applied simple interest rate is calculated as follows:
New Value of Home — Original Purchase Price (OP) = Accrued Appreciation (AA)
AA / OP = Gross Appreciation (GA)
GA / Days Loan Outstanding = Daily Appreciation (DA)
DA X 365 = Average Annual Appreciation (AAA)
AAA = Applied Simple Interest Rate, subject to rate caps.
The amount owed is best explained by example:
Example: A family purchases a $100,000 home. They borrow $5,000 from this program to cover the
down payment. Assume they want to sell the home in 4 years, and at that time it appraises for
$120,000. By signing the contract for this loan, the borrower will be obligated to repay according to
the calculations below.
1. Principal or Loan Amount: $5,000
. 2. Percent Appreciation: 20%
3. Avg. Annual Appreciation or Adjustable Interest Rate: 5% (20% appreciation on 4 yr. or 1,460
day loan)
4. Interest Due:
a. Fixed Interest in Years 1 & 2: $ 300 $5,000 X 3% X 2 years
(2 years =730 days / 365 days)
b. Adjustable Interest in Years 3 & 4: $ 500 $5,000 X 5% X 2 years
(2 years =730 days / 365 days)
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5. Repayment:
a. Principal $5,000
b. Fixed Interest in Years 1 & 2 300
c. Adjustable Interest in Years 3 & 4 + 500
$5,800 Total Repayment
Maximum and Minimum Loan Rate for Option B: The interest rate will never be less than a simple
interest rate of 3% or more than 11.5 %.
In the event that a triggering event occurs (i.e., sale, refinance, transfer, or the house is no longer used as
the primary residence) and there is no appreciation in the property or the property depreciates, the
minimum loan rate will apply.
•
4. Delinquency — In all cases, payment of principal and interest are due no later than the close of
business on the date specified within the loan documents, or by the date shown on the demand for
payment noted in Part 3 above. Borrower shall be given a grace period of 15 days to make payment
without penalty for regularly scheduled monthly payments. After such time, the loan shall be considered
in default, with appropriate action taken to remedy the loan. Until the point when payment is sixty (60)
days past due, LSA shall retain the ability to make all satisfactory arrangements for payment, including
waiver of any penalties where appropriate.
The following procedures shall be taken in cases of default:
a. 30 days past due — A late payment notice is mailed to the borrower, reflecting the amount due, date
of default and request for immediate payment.
b. 45 days past due — A second notice shall be mailed to borrower advising of past due status and
possible corrective actions available to lender.
c. 60 days past due — Delinquent Notice is mailed, followed by phone contact with the borrower to
make payment arrangements and address any outstanding concerns.
d. 75 days past due — LSA shall complete a full report that details the nature of all contact with
borrower, any outstanding concerns of the borrower, and results of all discussions with borrower,
its representatives and/or counsel. The report shall be submitted to Staff.
e. 90 days past due — LSA shall consult Staff and its legal representation of collection options, which
may include, but not limited to, issuance of Notice of Right to Cure. Staff shall make
recommendations prior to further action.
f. 120 days past due — Staff shall recommend further action strategy to LSA, which may include
form and tone of further communication with borrower and/or its legal counsel, loan restructure,
sale of the loan or foreclosure on security interest.
5. Foreclosure — As the recourse of last resort, Staff shall direct all further collection activity. Prior to
any formal action, a Notice of Right to Cure, an attorney demand letter for payment and personal meeting
with borrower and their legal counsel, if applicable, shall be complete and documented in the borrower's
file. Occasionally, a deed -in -lieu of foreclosure may be accepted. In some instances, foreclosure may be a
better option.
a. Where foreclosure, or deed -in -lieu of, becomes a formal action, every effort shall be pursued to
factor the mortgage and security interest to a third party. It is not within the scope of either LSA or
EAGLE COUNTY nor in the best interest of public relations to take a property to sale or assume
ownership of loan collateral.
b. If LSA is in receipt of a Notice to Foreclose through the action of the prior lien holder, or Notice
of Tax Sale initiated by the County Treasurer's office, Staff shall conduct a full review of the loan
file for completeness and accuracy, noting any deficiencies that may affect ability to recover
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losses. To the extent possible, remedies shall be implemented and documented in the file.
Recognizing that, in many cases, EAGLE COUNTY loans have limited security and provide little
financial incentive to redeem listed deficiencies to preserve the EAGLE COUNTY security
interest. LSA shall monitor such situations and report status to Staff as dictated by such
developments.
c. LSA shall retain authority to take appropriate action and request input from Staff to possibly allow
redemption while preserving deed restrictions.
6. Bankruptcy — Upon receipt of a notice of bankruptcy petition, all direct collection efforts with the
borrower will cease, with EAGLE COUNTY legal counsel engaged to direct further procedure. LSA
shall collect and review all relevant documentation and advise Staff of possible action to preserve the
security interest of EAGLE COUNTY.
•
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V. Dispute Resolution Process
Informal Hearing
The loan applicant will have the right to an informal hearing at the loan applicant's request to resolve
any disputes or appeals concerning the program.
The procedure for dispute resolution will be provided to each loan applicant as outlined in Section I,
Part 2 (d). The loan applicant may request a hearing for dispute resolution by contacting the Eagle
County Housing Department.
The Director of Housing will select three members of the HBAC to function as Hearing Officers and
hear any disputes or appeals. The Hearing Officers will have a good understanding of the basics of
the Down Payment Assistance Program and will have no bias, personal or professional interest
concerning the dispute. Staff will be present at the hearing.
Hearing Officers
The Hearing Officers will be responsible for conducting the hearing in accordance with the
following guidelines:
• The loan applicant or the loan applicant's representative will first be given an opportunity to
present his/her issues regarding the dispute. The loan applicant may present evidence or
question witnesses at this time.
• The housing organization's representative will then have an opportunity to explain their
decision or point of view regarding the issue at hand. The representative may present
evidence and question witnesses. The loan applicant will have the opportunity to question
any agency witnesses at this time also .
• The Hearing Officers will issue a written decision within 10 business days of the Informal
Hearing. Factual decisions related to the individual circumstances of the loan application
will be based on the evidence presented at the hearing. A copy of the hearing decision will
be sent certified mail to the loan applicant. The written decision will contain a summary of
the decision and the reasons for the decision.
Loan Applicant Has the Right To:
• Examine and copy (at the homeowner's expense) relevant documents before the Informal
Hearing
• Present any or all information pertinent to the issue of the Informal Hearing
Housing Organization Has the Right To:
• Present evidence and all or any information pertinent to the issue of the Informal Hearing;
• Examine relevant homeowner documents before the Informal Hearing
• Be notified if the homeowner intends to be represented by legal counsel or another party
• Have its attorney present; and
• Have the staff person familiar with the case present.
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Eagle County
CDOH
Revolving Loan Policies
PREFACE
The purpose of this document is to provide a framework for managing a revolving loan fund created with a
grant through the Colorado Division of Housing to EAGLE COUNTY. The EAGLE COUNTY loan program
provides equal opportunity for all qualified participants, where factors of race, color, religion, gender,
handicap, family status or national origin are expressly prohibited from consideration in the analysis of loan
applications.
As written herein, "policies and procedures" should be interpreted as a framework for decision - making,
creating a standard for lending functions of the organization. Policy statements are an expression of the Board
of County Commissioners, serving as clear directive to EAGLE COUNTY's management, Staff and loan
servicing agent who are, in turn, charged with developing operating guidelines and procedures consistent with
those stated directions.
It is the intent and expectation of the Board of County Commissioners that the following policies and
procedures may be altered, added to, or deleted to reflect the changing needs of the organization. EAGLE
COUNTY Staff acknowledges that these policies are not designed to be inflexible rules to which all cases are
expected to conform. Rather, they represent standards to which most cases are expected to conform, but from
which deviation is permitted if good reasons exist for such deviation. If a borrower should disagree with a
decision made by EAGLE COUNTY or its representative, borrower may appeal the decision following the
process outlined in Section V.
Eagle County's interest in developing standards of efficiency dictate the use of lending policies, but EAGLE
COUNTY recognizes the inherent limitations. With the exception of specific policy parameters which state
that deviation is not allowed (i.e. "must "), the policies contained herein should not be applied rigidly. In all
cases, policies and procedures shall not be used as a substitute for sound credit judgment.
Finally, this document shall be reviewed periodically to reflect changes in EAGLE COUNTY's lending
activities, portfolio growth, and other factors that may affect the nature and assessment of risk.
EXHIBIT
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ROLE OF STAFF AND LOAN SERVICING AGENT
1. Management and Staff —The Director of Housing and all other employed Staff of Eagle County
shall be collectively referred to as "Staff'. A third party Loan Servicing Agent (LSA) will be engaged
to implement and service lending activities on behalf of EAGLE COUNTY. As stipulated in the
governing documents of the organization, EAGLE COUNTY Board of County Commissioners shall
retain ultimate authority and oversight of all lending activities:
a. Within Eagle County and its surrounds, reputable mortgage and other real estate professionals will
be engaged to originate loan applications on behalf of EAGLE COUNTY and homebuyers who
meet established income thresholds and other pertinent criteria under program guidelines.
b. Oversee implementation of adopted Policies and Procedures and conduct periodic reviews of LSA
activities and performance according to established goals. Make appropriate recommendations to
LSA for further action, if necessary.
c. After receipt of loan application and supporting documentation listed in Section II., LSA shall
review documentation provided, verify Borrower's eligibility under program guidelines and forward
to Eagle County Staff a loan summary sheet demonstrating that the borrower has met all program
guidelines and / or detailing policy exceptions. Eagle County Staff will approve or deny the loan
based on LSA's analysis of the borrower's eligibility under program guidelines. After review by
Staff, LSA shall then issue a loan commitment letter, decline the application, request further
information, or forward a recommendation to Staff as identified in Section II.
d. Receive LSA recommendations and supporting analysis of any loan request outside policy
parameters, as set forth in Section II. EAGLE COUNTY Staff and/or the Home Buyer's Assistance
Committee will provide an underwriting decision and set terms accordingly.
e. Monthly review of Loan Activity Report, or more frequently in situations where delinquency, loss,
or loan activity warrant Staff input.
f. Establish priorities related to lending activity and consistency of such activity to the mission of
Eagle County.
2. Loan Servicing Agent (LSA) - The LSA will function as an agent of EAGLE COUNTY and
implement lending programs according to established policies and procedures. Under no circumstances
shall LSA operate outside its stated authority, nor obligate EAGLE COUNTY to any transactions that
compromise the integrity of the organization or its loan programs without the duly authorized written
consent of EAGLE COUNTY. LSA shall not engage in any practice that unduly favors itself or other
outside parties to the detriment of EAGLE COUNTY or its loan portfolio without duly authorized written
consent of EAGLE COUNTY. LSA shall implement all lending activity, including:
a. Review and recommend modifications of the EAGLE COUNTY Loan Policies and Procedures to
Staff for consideration and approval as deemed appropriate. Staff will provide valuable input in
this process.
b. Referral sources will collect and review applicant data for qualification under the program, assist
borrower in completing all underwriting and funding requirements, facilitate the purchase
transaction, and provide any post - closing assistance necessary to maintain portfolio integrity.
Completed loan applications shall be sent directly to Loan Servicing Agent for underwriting.
c. After receipt of loan application and supporting documentation listed in Section II., LSA shall
review documentation provided, verify Borrower's eligibility under program guidelines and
forward to Eagle County Staff a loan summary sheet demonstrating that the borrower has met all
program guidelines and / or detailing policy exceptions. Eagle County Staff will approve or deny
the loan based on LSA's analysis of the borrower's eligibility under program guidelines. After
review by Staff, LSA shall then issue a loan commitment letter, decline the application, request
further information, or forward a recommendation to Staff as identified in Section II.
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d. Within a reasonable time period following an underwriting decision, LSA will advise the
borrower, through the referral source, of the action. If approved, the notification will include all
terms, conditions and supporting documentation necessary to fulfill the loan commitment. The
commitment shall be extended for a period equal to the time commitment of the primary loan. If
the loan is declined, applicant will be advised of the reasons for the decision and any
recommendations for further consideration, if appropriate. Applicant will also be advised of
dispute and appeal procedures as stated in Section V.
e. Based upon a favorable underwriting decision, a loan file must contain satisfactory documentation
detailed in Section II prior to funding the loan. LSA will coordinate with all parties to the
transaction to facilitate timely execution of the transaction.
f. LSA will prepare and review all loan documents, including settlement statement, for accuracy, as
well as setup wire transfer or obtain certified funds in the exact amount of the approved loan. All
loan closing fees shall be a charge to borrower at the time of settlement.
g. A mortgage banker or lender of the referral source, or their representative, shall attend closing and
present final loan documents. LSA may elect to provide alternative arrangements for loan
presentation at its discretion. The closing agent to the transaction will be engaged to notarize and
record the Deed of Trust with the appropriate agency, and collect any documentation required from
borrower or referral source to complete the loan file, according to the Closing Instruction form
provided with the loan package. The agency shall be instructed to return the recorded instrument to
LSA. Closing agent shall be instructed to return the executed loan package to LSA within 48 hours
of final settlement.
h. LSA shall maintain all executed documents in a secure manner, where the Promissory Note is
stored in Safe Deposit with a financial institution deemed most appropriate by LSA. LSA will
follow -up with the agency if the original recorded document is not received within a reasonable
period of time. All executed loan documents will be stored electronically or similar method, to
achieve redundancy.
i. Within 15 business days of closing, LSA will conduct a post - closing audit of loan files to verify
accuracy and presence of all necessary documentation. Immediate action will be taken to correct
any findings.
j. LSA will monitor compliance with all loan provisions and advise Borrower in writing and/or by
telephone of any non - compliance issues. If, in the opinion of LSA, non - compliance is of a material
nature, Staff will be advised of the situation in a manner deemed most appropriate. LSA will
provide sufficient detail and recommend a course of action for consideration by Staff.
k. LSA will assess and advise Staff of any outstanding loans that are at risk of non - performance, with
all appropriate action pursued.
1. When a request for loan payoff is received, LSA will complete and deliver a Payoff Statement
within a reasonable time period. Particular care will be given to the completeness and accuracy of
all figures.
m. LSA shall invoice for and accept all monthly loan payments from borrowers according to the terms
and conditions of the Note. Within 15 days of the close of each calendar month, LSA shall forward
proceeds of such payments as well as proceeds from loan payoffs, to EAGLE COUNTY or a
financial institution authorized by EAGLE COUNTY to receive such payments. Such payments
shall include a detailed accounting of principal, interest and other charges received by LSA and
corresponding application to borrower accounts.
n. Acceptable forms of payment from the borrower will include certified funds, money order or
personal check. Any other form must have prior agreement from Staff. Borrowers' account will be
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credited as of the date of receipt of payment. In cases of returned items, LSA shall process a
reverse entry of the affected borrower payment, assess the appropriate late payment charge and
returned item charge equal to the charge imposed by LSA's financial institution and re- invoice the
borrower with appropriate advisement of the loan status and itemized detail of charges included.
o. Within a reasonable period of time, not to exceed 90 days, of receipt of acceptable final payment
of the loan obligation, LSA will prepare, execute and deliver a Release of Deed of Trust to the
appropriate jurisdiction agency. The original recorded Release shall be returned to LSA and
retained in a secure manner. Copies of all documents shall be retained in the Borrowers'
permanent file, with original note marked as "Paid ", initialed and dated by a LSA representative
and forwarded to the Borrower, or Public Trustee as appropriate.
p. LSA will follow -up with the appropriate agency(s) if the recorded Release document is not
received within a reasonable period of time.
2. ROLE OF HOMEBUYER'S ASSISTANCE COMMITTEE\
The Homebuyer's Assistance Committee (HBAC) was formed by the EAGLE COUNTY Board of
County Commissioners to provide recommendations to the Board on mortgage assistance policies and
procedures.
The HBAC will schedule meetings at least every other month, or more frequently as dictated by loan
activity and membership availability. To accommodate urgent responses, items may be considered by the
committee via fax, telephone, and/or email. Such alternate polling is subject to the provisions identified
below.
HBAC will be comprised of a minimum of ten members appointed by the Board of County
Commissioners for specific terms. The HBAC will include members from all parts of Eagle County. The
members will represent diversified interests and expertise within Eagle County. Membership will include,
but not be limited to, members representing the banking and mortgage group, the real estate group, citizen
advocacy groups, as well as low /moderate income citizens group. A simple majority of the membership
shall be present at meetings to constitute a quorum for formal action. Such action shall include
recommendations on loan decisions, remands or other recommendations to the Board of County
Commissioners for further consideration.
The Director of Housing and Staff will oversee LSA lending activity through the advisement of the
HBAC including:
a. Review and recommend modifications of loan policies and procedures to the Board of
County Commissioners for approval as deemed appropriate. Staff will participate in this
process.
b. Review and approval of all loan applications.
c. Determination of loan terms for each proposed loan.
d. Approval of solutions for problem loans.
e. Decisions regarding exceptions to established policies.
f. In the case of appeal or dispute resolution, a sub - committee of HBAC members will serve
as Hearing Officers.
At a minimum, the HBAC will review annually the Staff decisions made regarding
applicant selection, loan terms, problem loans and foreclosures.
II. DOCUMENTATION AND UNDERWRITING CRITERIA
1. Documentation Requirements — Loan applicants shall be required to provide sufficient
documentation that verifies their eligibility under EAGLE COUNTY program guidelines, capacity to
assume the mortgage liability and a formal introduction to the responsibilities of home ownership through
home buyer education.
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Delivery of loan documents and loan funding shall be the responsibility of LSA, subject to timely
submission of required application documentation and capacity of LSA resources. LSA shall review
documentation submitted by the referral source and either approve the application, request further
information, forward a recommendation to Staff, or decline the application. LSA shall issue a fmal
determination in writing to the borrower within a reasonable period of time, specifying the approved loan
amount and any documentation requirements prior to loan funding. For expediency, the letter may be
faxed to the referral source and shared with the borrower. A complete loan file must include:
a. Application — Borrower shall complete, sign and date the LSA loan application and submit other
required documents with the understanding that LSA retains the right to verify the accuracy of all
information provided.
b. Income Verification — Borrower shall provide payroll statements for the most recent thirty (30) day period
and signed federal tax returns for the most recent tax year. If borrower shows income from a business not
listed on Schedule C of the return, the complete and signed copy of the business return will be required
for the corresponding period. Borrowers who are self - employed, or an employee receiving commission
income, tax returns for the most recent two -year period and a year -to -date profit & loss statement (P &L),
signed and dated by borrower, shall be required. A P &L form may be produced with assistance of the
referral source, based upon information provided by borrower. (Note: if borrower filed an extension of
the most recent years' return, a year -end profit and loss statement, copy of the extension and the two
previous years' returns shall be required.)
If payroll statements are unavailable, referral source shall provide a written statement from the
borrower's supervisor or human resource manager that specifies borrower's wage scale, number of
regularly scheduled hours, additional income (overtime, holiday pay, etc.) and the likelihood of its
continuance, as well as any relevant changes to the borrower's employment status.
EAGLE COUNTY reserves the right to require a minimum number of hours worked by all, or at
least one, borrower within EAGLE COUNTY loan service areas. Additionally, EAGLE
COUNTY may establish a minimum threshold for length of employment within said service areas
and/or number of hours worked over a set time period in order to qualify under this loan program.
c. Qualification Letter — Borrower shall be required to obtain loan approval for the 1s mortgage from a
reputable lender and authorize the lender to issue an approval letter that specifies the terms and conditions
of the mortgage, though there shall be no requirement to use any particular lender.
Staff shall be cognizant of lender terms and conditions that may indicate unfair business practices
or terms, which may create unreasonable financial burden to the borrower. A listing of all
qualified and reputable lenders /mortgage brokers shall be compiled by LSA and made available to
Staff.
d. Home Ownership Training — Borrower shall be required to attend and complete a qualified training
program that introduces the fundamental responsibilities of home ownership, personal finance, and other
concepts frequently encountered by homebuyers. Satisfactory service providers shall include those
agencies approved by EAGLE COUNTY.
e. Purchase Contract — Borrower, or their agent, shall provide a copy of the executed purchase contract and
all amendments to verify purchase price, property description, and all applicable performance dates.
Referral source and/or borrower shall be notified immediately if LSA is unable to meet any specified
performance dates.
f. Felony Investigation — EAGLE COUNTY reserves the right to require felony, identity verification or
other background screening qualifications as a precondition of funding. LSA shall obtain required
authorizations and order such reports prior to loan approval.
g. Title Commitment — LSA shall request a copy of the Title Commitment issued by the closing agent
engaged by the property seller. Such commitment shall identify all liens, encumbrances, easements and
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exceptions to the title coverage. LSA shall verify the EAGLE COUNTY security interest will not be
compromised by such limitations, or that adequate endorsements will be issued to protect the interest.
LSA shall also verify the correct legal description of the subject property when preparing the loan
documents. Leasehold purchases shall be considered according to specific terms of the individual
application, whereby LSA shall forward a recommendation to Staff for final determination.
h. Good Faith Estimate — LSA shall obtain a copy of the lenders' Good Faith Estimate of Settlement Costs
to verify borrower funds needed to close and provide greater comfort for the type and terms of the 1s
mortgage. The estimate shall reflect the correct purchase price for the subject property. LSA shall advise
the referral source if the mortgage type is incompatible with the EAGLE COUNTY program or if the
terms indicate predatory lending practices or terms that create unreasonable financial burden to the
borrower.
2. Underwriting Analysis — Qualification for the program shall be evaluated against minimum debt capacity
standards and target market thresholds, and incorporating credit and property risk factors. Exceptions to these
standards may only be allowed as noted below, according to LSA or Staff assessment of verified hardship
conditions of the borrower and subject to all other geographic program limitations. Hardships may include,
but are not limited to, medical conditions or related expenses, fmancial support of minors or other related
individuals, availability of suitable housing, and extraordinary work - related expenses.
EAGLE COUNTY is an equal opportunity lender and shall not permit factors of race, color, religion, gender,
handicap, family status or national origin as criteria for underwriting purposes. Underwriting and funding the
program will entail.
a. Income Qualification — Borrower's gross annual income must be at, or below, 80% of AMI as
established by HUD annually for the number of household members or as specified in the CDOH
contract. Income shall be calculated according to the method described below. Income from other sources
may be used if it is court- ordered, or documented by an award letter from the source (i.e. Social Security,
pension, insurance, etc.) and likely to continue for a period not less than 24 months from the date of
closing.
• For W2 employees, income shall be calculated from the most recent pay stub, dividing the year -to-
date regular income amount by the number of pay periods reflected. The resulting figure shall be
multiplied by the number of pay periods per month to determine monthly income. Overtime, bonuses,
holiday pay, etc. shall not be used unless borrower has received such pay for at least 2 years from the
current employer, can be supported by tax return income amounts and has been verified in writing
from the employer of its strong likelihood to continue.
• Non - taxable income sources (Social Security, etc.) shall be adjusted to reflect an approximate gross
wage equivalent, or "grossed up" by 1.3% to demonstrate effective income of such source.
• For self - employed borrowers and employees receiving commission income, income verification
using two years' tax returns shall be calculated using Net Profit from Schedule C, then adding back
any claims for depreciation, depletion or business use of home. This adjusted profit figure shall be
added to the Net Profit figure shown on the year -to -date P &L and divided by the number of months
included in the calculation to determine monthly income. (i.e. two years' return, plus six months'
P &L, equal thirty months total.)
• If the borrower owns a business not shown on Schedule C, income shall be determined using tax
returns for the business and year -to -date P &L. Income shall be calculated using any distributions to
owners (pro rata if not otherwise specified), plus retained earnings (pro rata) and divided by the
number of months reflected (as above).
b. Debt Ratio — If the borrower's credit score is below 680, and as a result of the proposed mortgage,
borrower's total contractual or court- ordered debts, initial principal, interest, property taxes,
hazard insurance, mortgage insurance and homeowner association dues shall not exceed 50% of
gross monthly income. If a borrower's credit score exceeds 680, then no debt ratio will apply.
Payroll deductions for taxes, local employment assessments, social security, Medicare, insurance,
retirement, or other benefit- related deductions shall not be counted against borrower's income.
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Contractual obligations shall include credit card minimum monthly payment (3% of account
balance if not verified by current statement or credit report), bank loans or lines of credit, consumer
finance loans, deferred payment accounts (same -as -cash contract payment estimated at 3% of account
balance unless otherwise documented), personal property rental contracts, student loans, loans
against employer retirement account, payments for income taxes owed, or other installment
obligations. Court- ordered payments shall include garnishment of wages, child support, separate
maintenance, alimony, bankruptcy or civil judgment.
Monthly obligations may not be considered if it is an installment loan or court- ordered obligation
with less than ten (10) regularly scheduled payments remaining for settlement in full. Revolving or
open credit with an outstanding balance shall always be counted. Other discretionary obligations
(auto insurance, utilities, rent, etc.) shall not be considered contractual obligations.
c. Collateral — Program loans are to be secured by a Deed of Trust on the property to be purchased,
not to exceed 105% of the appraised market value or purchase price, whichever is less.
Subordinations after loan closing shall not be permitted.
d. Purchase Price — Maximum purchase price limitations shall be based upon the most recently
published FHA maximum loan amount for EAGLE COUNTY.
e. Loan Amount — Maximum loan amount shall be equal to 4.5% of the contractual purchase price of
the home, or $11,700, whichever is less, or as otherwise limited by conditions of the primary
mortgage loan or as amended.
f. Borrower — All parties taking ownership interest in the subject property must be obligated on the
EAGLE COUNTY Promissory Note and Deed of Trust and constitute natural individuals. Legal
entities are not eligible under this program. All borrowers must be of legal age and provide a valid
Social Security Number.
g. Minimum Investment — Borrower shall be required to invest a minimum of $1,000 of their own
funds in the purchase of the new home. Earnest Money deposit and pre -paid expenses to the
lender to obtain financing shall be counted toward this requirement. Closing cost credits obtained
through premium pricing of the 1 st mortgage, or seller concessions shall not satisfy this
requirement.
h.. Although asset verification is not required, borrower must demonstrate within the loan application
detail that the current value of all assets held does not exceed 150% of household income.
Retirements accounts totaling less than $100,000 will not be considered as a household asset.
Under no circumstance shall the borrower receive cash back at closing regardless of other prepaid
expenses or deposits made to other parties.
i. The borrower or any member of the household will not have owned a residence within the
previous three years.
j. Consistency — All documentation used to underwrite a loan file shall be accurate and consistent with
all other documentation within the file.
3. Loan Approval — LSA shall have authorization to approve applications that meet EAGLE COUNTY
program objectives and target market definitions, limited by loan amounts noted below and not otherwise
limited by geographic constraints of EAGLE COUNTY service areas. LSA shall request a formal
underwriting decision from Staff if an application does not meet all such criteria. Loan applications that are
declined or withdrawn shall be retained on file for period of two (2) years from the application date.
a. Loan amount not to exceed $ 11,700 or as amended.
b. Assistance not to exceed 4.5% of purchase price or as amended.
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4. Loan Funding — At such point that all underwriting conditions have been satisfied and in accordance with
timing requirements of performance contracts, LSA will provide to borrower, through the referral source, a
written detail of any conditions or documents necessary prior to executing the promissory note. To the extent
possible, referral source shall be provided copies of all documents to be executed at loan closing in advance
for their review with borrower. The agent presenting the final loan documents shall assume responsibility for
satisfying such requirements prior to issuing loan funds to any party. All multi -page documents shall bear the
initial(s) of all borrowers at the bottom of each page of the document, except where signature(s) are required.
All persons taking title to the property, as listed on the Warranty Deed, must also be obligated on the
Promissory Note and pledge their interest in the security through the Deed of Trust. The loan package
must include the following:
a. HUD1 Settlement Statement - Prepared by the closing agent engaged by the parties, LSA shall
request a copy in advance of closing to review for completeness and accuracy of all entries.
EAGLE COUNTY /LSA shall be listed as subordinate lender for the correct loan amount, with all
applicable loan fees listed by category. The file copy shall have signatures of all parties to the
transaction.
b. Promissory Note — LSA shall prepare and review for accuracy a Promissory Note to be executed
by borrower at loan closing. The terms of the approved loan shall be accurately reflected on the
appropriate Note form.
c. Deed of Trust — LSA shall prepare and review for accuracy a Deed of Trust that shows terms as an
exact match of the Promissory Note. The closing agent engaged by parties to the transaction shall
be employed to notarize and record the executed document with the appropriate agency. If
applicable, all necessary riders to the Deed of Trust will be prepared and executed in a similar
manner.
d. Federal Truth In Lending Notice — LSA shall prepare applicable disclosures of EAGLE COUNTY
loan terms and sample calculations, submitted as part of the final loan package.
e. Loan Proceeds — Prior to the scheduled loan closing, LSA shall set up a wire transfer to the bank
account of the closing agent engaged by parties to the transaction equal to the loan amount.
EAGLE COUNTY shall retain the right to verify all such transfers prior to execution of the order
5. Post Closing Procedures — Within a reasonable time period of loan closing, LSA must conduct a
complete review of the loan file to insure all documents are correct, complete, and secured in the
permanent loan file. The live note shall be placed in safe deposit with a financial institution, while the
recorded Deed of Trust shall be securely maintained in the file. LSA shall forward to EAGLE COUNTY a
copy of the Deed of Trust. Additionally, LSA will assume responsibility for monitoring:
a. Receipt of recorded documents — Within 90 days of loan closing, LSA should be in receipt of all
recorded documents. If not received, LSA will contact the appropriate public office to determine if
the instrument has been received, recorded, or subject to processing delays. If recording has been
delayed, an appropriate follow up period will be established. If recorded more than 15 business
days prior, LSA shall request the agency perform a document search and report their findings
within 10 days of such request. If not received within such time, LSA shall request a certified
copy of the document and forwarded by registered delivery from recording agency. If the
document has not been received by the public agency within 60 days, LSA shall contact the
closing agent to request a document search. Closing agent shall be instructed to provide gap
coverage under the title insurance policy, obtain new signatures on replacement documents, if
necessary, and record the document at the earliest possibility.
b. Loan Registration — Upon execution of the loan, LSA shall enter the new loan into the tracking
system and establish follow -up dates for annual review, hazard insurance renewal and maturity
notification.
c. Loan Servicing — LSA shall maintain accurate and complete records of all payments and charges
associated with each loan file and correctly invoice for all outstanding loans on a monthly basis.
As borrower payments are received, payment shall be applied to accrued interest first, any late fees
or returned item charges, then principal reduction of the loan. To the extent possible all borrower
invoices shall include detail of the most recently applied payment and subsequent affect to the
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principal balance. LSA reserves the right to retain all late fees, returned item charges and
collection fees recovered from borrower to offset resulting service costs.
III. PROGRAM PARAMETERS & UNDERWRITING MATRIX
1. Program Parameters — Exceptions to program descriptions may be allowed according to
Underwriting Matrix
Description Target Market
Borrower Households earning 80 %, or less, of the AMI as
established by HUD annually and adjusted for
family size or as stated in the CDOH contract.
Loan Amount Up to $11,700 or 4.5% of purchase price,
whichever is less, or as amended.
Use of Funds Down payment, closing costs and prepaid items
directly attributed to the primary mortgage.
Service Areas Eagle County plus three miles
Term 30 years; fully - amortizing payments to include
principal and interest. The loan will become
immediately due upon sale, transfer, refinance,
when the house is no longer the primary residence
or upon the death of the buyer.
Loan Fees As negotiated with LSA
Collateral Real Property; junior lien
Cost Recovery Third party service fees to be paid by borrower
Fees
Rates Fixed at 2.5% or as amended
IV. PORTFOLIO MANAGEMENT
1. Reporting, Risk and Compliance Review — LSA shall conduct ongoing review of outstanding loans
to establish compliance with loan provisions. LSA shall prepare and present to Staff the following
monthly reports
a. Comprehensive Report — A complete accounting of all outstanding loans which details borrower
name, family size, AMI percentage, loan amount, parental status, date of the loan, ethnicity,
property address, and occupation. Total loans funded and available capital, if appropriate, shall
also appear.
b. Summary Report — A composite accounting of total program capital, funds invested, principal and
interest recapture, loan loss, and aggregate loan characteristics
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2. Risk Rating and Loan Loss Reserves — According to the assigned risk rating, EAGLE COUNTY
may elect to maintain a loss reserve (expressed as a percentage of the loan amount) against available loan
capital that reflects a reasonable assumption of loss. Reserve provisions may be re- evaluated from time to
time to reflect the overall portfolio quality, historical losses and delinquency rates..
3. Loan Repayment — Under the design of this program, borrowers shall make monthly payments of
principal and interest to fully amortize the outstanding loan within the established loan term. LSA shall be
allowed to assess late charges against any payment that is received more than 15 days after the due date,
not to exceed $10 per incident. If it is determined that borrower is not in compliance with any of terms or
conditions of the Note or Deed of Trust, borrower shall be instructed in writing to submit payment in full
of outstanding principal and interest within thirty (30) days of the notice. There is no pre - payment
penalty.
4. Delinquency — In all cases, payment of principal and interest are due no later than the close of
business on the date specified within the loan documents, or by the date shown on the demand for
payment noted in Part 3 above. Borrower shall be given a grace period of 15 days to make payment
without penalty for regularly scheduled monthly payments. After such time, the loan shall be considered
in default, with appropriate action taken to remedy the loan. Until the point when payment is sixty (60)
days past due, LSA shall retain the ability to make all satisfactory arrangements for payment, including
waiver of any penalties where appropriate.
The following procedures shall be taken in cases of default:
a. 30 days past due — A late payment notice is mailed to the borrower, reflecting the amount due, date
of default and request for immediate payment.
b. 45 days past due — A second notice shall be mailed to borrower advising of past due status and
possible corrective actions available to lender.
c. 60 days past due — Delinquent Notice is mailed, followed by phone contact with the borrower to
make payment arrangements and address any outstanding concerns.
d. 75 days past due — LSA shall complete a full report that details the nature of all contact with
borrower, any outstanding concerns of the borrower, and results of all discussions with borrower,
its representatives and/or counsel. The report shall be submitted to Staff.
e. 90 days past due — LSA shall consult Staff and its legal representation of collection options, which
may include, but not limited to, issuance of Notice of Right to Cure. Staff shall make
recommendations prior to further action.
f. 120 days past due — Staff shall recommend further action strategy to LSA, which may include
form and tone of further communication with borrower and/or its legal counsel, loan restructure,
sale of the loan or foreclosure on security interest.
5. Foreclosure — As the recourse of last resort, Staff shall direct all further collection activity. Prior to
any formal action, a Notice of Right to Cure, an attorney demand letter for payment and personal meeting
with borrower and their legal counsel, if applicable, shall be complete and documented in the borrower's
file. Occasionally, a deed -in -lieu of foreclosure may be accepted. In some instances, foreclosure may be a
better option.
a. Where foreclosure, or deed -in -lieu of, becomes a formal action, every effort shall be pursued to
factor the mortgage and security interest to a third party. It is not within the scope of either LSA or
EAGLE COUNTY nor in the best interest of public relations to take a property to sale or assume
ownership of loan collateral.
b. If LSA is in receipt of a Notice to Foreclose through the action of the prior lien holder, or Notice
of Tax Sale initiated by the County Treasurer's office, Staff shall conduct a full review of the loan
file for completeness and accuracy, noting any deficiencies that may affect ability to recover
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losses. To the extent possible, remedies shall be implemented and documented in the file.
Recognizing that, in many cases, EAGLE COUNTY loans have limited security and provide little
financial incentive to redeem listed deficiencies to preserve the EAGLE COUNTY security
interest. LSA shall monitor such situations and report status to Staff as dictated by such
developments.
c. LSA shall retain authority to take appropriate action and request input from Staff to possibly allow
redemption while preserving deed restrictions.
6. Bankruptcy — Upon receipt of a notice of bankruptcy petition, all direct collection efforts with the
borrower will cease, with EAGLE COUNTY legal counsel engaged to direct further procedure. LSA
shall collect and review all relevant documentation and advise Staff of possible action to preserve the
security interest of EAGLE COUNTY.
V. Dispute Resolution Process
Informal Hearing
The loan applicant will have the right to an informal hearing at the loan applicant's request to resolve
any disputes or appeals concerning the program.
The procedure for dispute resolution will be provided to each loan applicant as outlined in Section I,
Part 2 (d). The loan applicant may request a hearing for dispute resolution by contacting the Eagle
County Housing Department.
The Director of Housing will select three members of the HBAC to function as Hearing Officers and
hear any disputes or appeals. The Hearing Officers will have a good understanding of the basics of
the Down Payment Assistance Program and will have no bias, personal or professional interest
concerning the dispute. Staff will be present at the hearing.
Hearing Officers
The Hearing Officers will be responsible for conducting the hearing in accordance with the
following guidelines:
• The loan applicant or the loan applicant's representative will first be given an opportunity to
present his/her issues regarding the dispute. The homeowner may present evidence or
question witnesses at this time.
• The housing organization's representative will then have an opportunity to explain their
decision or point of view regarding the issue at hand. The representative may present
evidence and question witnesses. The loan applicant will have the opportunity to question
any agency witnesses at this time also .
• The Hearing Officers will issue a written decision within 10 business days of the Informal
Hearing. Factual decisions related to the individual circumstances of the loan application
will be based on the evidence presented at the hearing. A copy of the hearing decision will
be sent certified mail to the loan applicant. The written decision will contain a summary of
the decision and the reasons for the decision.
Loan Applicant Has the Right To:
• Examine and copy (at the homeowner's expense) relevant documents before the Informal
Hearing
• Present any or all information pertinent to the issue of the Informal Hearing
Housing Organization Has the Right To:
• Present evidence and all or any information pertinent to the issue of the Informal Hearing;
• Examine relevant homeowner documents before the Informal Hearing
• Be notified if the homeowner intends to be represented by legal counsel or another party
• Have its attorney present; and
• Have the staff person familiar with the case present.
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