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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 "). 1 , • • 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 F:\NIy Documents\DPA \Eagle County Fund RLP.doc rl - 1 - • 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. F:\My Documents\DPA\Eagle County Fund RLP.doc 2 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 F:\My Documents\DPA\Eagle County Fund RLP.doc 3 1 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. F:\My Documents\DPA\Eagle County Fund RLP.doc 4 • • 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: • 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. F:\My Documents\DPA\Eagle County Fund RLP.doc 5 • 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 F:\My Documents\DPA\Eagle County Fund RLP.doc 6 • • 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 F:\My Documents\DPA\Eagle County Fund RLP.doc 7 • • • 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 F:\My Documents\DPA\Eagle County Fund RLP.doc 8 • 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). F:\My Documents\DPA\Eagle County Fund RLP.doc 9 • 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) F:\My Documents\DPA\Eagle County Fund RLP.doc 10 • . 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 F:\My Documents\DPA\Eagle County Fund RLP.doc 11 • 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. • F:\My Documents\DPA\Eagle County Fund RLP.doc 12 • 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. F:\My Documents\DPA\Eagle County Fund RLP.doc 13 • • 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 F:\My Documents\DOH \CDOH Revolving Loan Policies.doc _ -1- 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. F:\My Documents\DOH \CDOH Revolving Loan Policies.doc 2 i • 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 F:\My Documents\DOH \CDOH Revolving Loan Policies.doc 3 • • 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. F:\My Documents\DOH \CDOH Revolving Loan Policies.doc 4 • 411 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 F:\My Documents\DOH \CDOH Revolving Loan Policies.doc 5 • • 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. F:\My Documents\DOH \CDOH Revolving Loan Policies.doc 6 • • 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. F:\My Documents\DOH \CDOH Revolving Loan Policies.doc 7 • • 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 F:\My Documents\DOH \CDOH Revolving Loan Policies.doc 8 • • 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 F:\My Documents\DOH \CDOH Revolving Loan Policies.doc 9 • • • 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 F:\My Documents\DOH \CDOH Revolving Loan Policies.doc 10 110 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. F:\My Documents\DOH \CDOH Revolving Loan Policies.doc 11