HomeMy WebLinkAboutR06-116 Approval of Colorado Division of Housing Revolving Loan Policies
Commissioner
~
moved adoption
Of the following Resolution:
BOARD OF COUNTY COMMISSIONERS
COUNTY OF EAGLE, STATE OF COLORADO
RESOLUTION NO. 2006- / ( (0
RESOLUTION CONCERNING APPROVAL OF 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 ofthe Colorado Division of Housing ("CDOH")
Revolving Loan Policies(see exhibit A attached hereto and incorporated by reference) is
to provide a frame work for managing a revolving loan fund created with a grant through
the Colorado Division of housing to Eagle County; and
WHEREAS, The CDOH Revolving Loan Policies have been amended! 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 of amended to reflect the changing needs of the organization; and
WHEREAS, the County desires to approve the amendments to the CDOH
Revolving Loan Policies.
NOW, THEREFORE, BE IT REVOLVED BY THE BOARD OF COUNTY
COMMISSIONER OF THE COUNTY OF EAGLE, STATE OF COLORADO:
THAT, the County hereby approves the CDOH Fund Revolving Loan
Policies(Exhibit "A").
THAT, the County recognized that the Revolving Loan Policies may be altered or
amended to reflect the changing needs of the organization.
THA T, 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 5- day of November, 2006.
COUNTY OF EAGLE, STATE OF
COLORADO, By and Through Its
BOARD OF COUNTY COMMISSIONERS
A TTEST:.,f-::do:"
l~~>;~~~:\
~) ~...'J' "'."'::'''}-<
, ... t} \ \\;'~~>~~7 '<
. "" 'Tiff
CI k t th B d f \. C '--...--0
er 0 e oar 0 e<OIC;I,i>S;'"
County Commissioners
Peter Runyon
Chairman
(M~
Tom Stone
c~r
rc'
Commissioner
Commissioner ~ seconded adoption of the foregoing resolution. The roll
Having been called, the vote was as follows:
Commissioner Peter Runyon
Commissioner Tom Stone
Commissioner Am Menconi
~
This Resolution passed by '?! 0 vote of the Board of County Commissioner of the
County of Eagle, State of Colorado
Eagle County
COOH
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 loan program provides equal opportunity for all qualified applicants,
and the EAGLE COUNTY housing organization will not discriminate against anyone
through its lending practices or in any other decision making processed due to
race, color, religion, gender, disability, sexual preference, family status and/or
national origin.
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.
The outcomes for the Down Payment Assistance Program are:
. Provide opportunities for low and moderate income Eagle County residents
to purchase their own homes.
. Increase the number of homeowners in Eagle County.
. Create and maintain a regional revolving loan fund to assist future families
with Down Payment Assistance.
. Enhance neighborhoods and communities.
. Provide stability for families and achieve lower foreclosure rates by requiring
pre- homeownership counseling.
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.
C:\Documents and Settings\rvigil\Local Settings\Temperary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
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, engage reputable mortgage and
other real estate professionals to originate loan applications on behalf of
EAGLE COUNTY to 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. LSA shall then
issue a loan commitment letter to all requests that meet established
guidelines. LSA shall 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 applicantdata 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. The Eagle County Housing Department will require the LSA, or its
designee, to conduct a property inspection report which conforms to
section VI. 3. of this document. The LSA shall retain a copy of the property
inspection report in the individual loan file.
d. 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. LSA shall issue a loan
commitment letter to all requests that meet established guidelines. The
LSA shall 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
C:\Documents and Settings\rvigil\Local Settings\Temperary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
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.
I. 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
C:\Documents and Settings\rvigil\Local Settings\Temperary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
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 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.
I. 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, acting in its role as an advisory Board of Directors 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
C:\Documents and Settings\rvigil\Local Settings\TeR$erary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
decisions, remands or other recommendations to the Board of County
Commissioners for further consideration.
The role of the HBAC will be to:
. Formulate, review and recommend program approval to the Eagle County
Board of Commissioners
. Periodical review the program implementation.
. Monitor grant compliance and reporting.
. Development and Implement guidelines for program loans (approval
criteria, rates, terms).
. Establish and oversee the loan committee.
. Develop and implement policies on types of loans made from the revolving
loan fund.
. Review grievances and complaints. In the case of appeal or dispute
resolution, a sub-committee of HBAC members will serve as Hearing
Officers.
The Director of Housing and Staff will oversee lending activity upon the
advisement of the HBAC including:
. 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.
. Review and approval of all loan applications.
. Confirm the recommendation of the LSA in the loan summary sheet, or
confer with the primary lender and the LSA when other loan terms within
the CDOH program may be considered beneficial to the applicant.
. Approval of solutions for problem loans.
. Decisions regarding exceptions to established policies.
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.
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,
C:\Documents and Settings\rvigil\Local Settings\Ternperary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
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 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
Verification of Income in the form of 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(s) 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.
. All income documentation must display a valid tax identification
number, as referenced in Section 11.2.f (below) that is consistent
throughout the file.
c. Qualification Letter - Borrower shall be required to obtain loan approval for
the 1 st 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.
C:\Documents and Settings\rvigil\Local Settings\Temperary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
· 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
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 st 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
C:\Documents and Settings\rvigil\Local Settings\Temperary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
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, 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:
b. Eligibility Requirements - The borrower must intend to use the unit as his/her
primary residence and maintain it as his/her primary residence in the future.
Eligibility under the Program shall be limited to Borrowers able to demonstrate
Earned Income constituted from employment of 30 hours per week (aggregate
average over a 12 month period) or at least 75% of all documented income.
This provision shall not apply to valid Social Security, disability, retirement /
pension, child support or other court-ordered sources of income.
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.)
C:\Documents and Settings\rvigil\Local Settings\Temperary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
· 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 proposed mortgage, borrower's total contractual or court-
ordered debts, initial principal, interest, property taxes, hazard insurance,
mortgage insurance and homeowner association dues exceed 50% of gross
monthly income the LSA shall refer the loan application to staff. 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, car loans/leases,
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.
c. 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.
C:\Documents and Settings\rvigil\Local Settings\TeRiperary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
All borrowers must be of legal age and provide a valid Social Security Number
or an Immigration Tax Identification Number (ITIN.) Each file shall contain either
a valid SSN or ITIN, but may not contain both.
f. 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 ender 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.
g. Asset verification - 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.
h. First Time Home Buyer - The borrower or any member of the household will
not have owned a residence within the previous three years.
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 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 $ 18,140 or as amended.
b. Assistance not to exceed 8.5% 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
C:\Documents and Settings\rvigil\Local Settings\Temporary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
pledge their interest in the security through the Deed of Trust. The loan package
must include the following:
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.
a. 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.
b. 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 ensure 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
C:\Documents and Settings\rvigil\Local Settings\Temporary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
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 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 $18,140 or 8.5% 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 OR deferred up to 5 years. The total of
all deferred loans cannot exceed 25% of this portfolio.
Loan Fees Invoiced separately to Eagle County
C:\Documents and Settings\rvigil\Local Settings\Temjlorary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
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 Total loans funded and
available capital, if appropriate, shall also appear.
b. Summary Worksheet - A composite accounting of total program capital,
funds invested, principal and interest recapture, loan loss, and aggregate
loan characteristics, physical address, and occupation of borrower.
2. 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.
3. 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.
C:\Documents and Settings\rvigil\Local Settings\Temporary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
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.
4. 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 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:\Documents and Settings\rvigil\Local Settings\TeniJiorary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
c. LSA shall retain authority to take appropriate action and request input from
Staff to possibly allow redemption while preserving deed restrictions.
5. 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
1. 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 Informal Hearing is not intended to duplicate procedures under
judicial review so the rules of admissibility under such proceedings will
not be applied in the course of the hearing.
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.
2. 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
C:\Documents and Settings\rvigil\Local Settings\Temporary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
be sent certified mail to the loan applicant. The written decision will
contain a summary of the decision and the reasons for the decision
including:
a. A summary of the decision and the reasons for the decision;
b. If the decision is based on money owed, the amount owed shall
be stated;
c. The date the decision goes into effect.
The housing organization or homeowner is not bound to the Informal
Hearing decisions. The purpose for having an Informal Hearing is to try to
remedy a situation prior to an action being taken in civil court. Contrary to
HUD regulations or requirements, or Federal, State and local law, evidence
presented at the Informal Hearing may be considered without regard to
admissibility under the rules of evidence applicable to judicial proceedings.
3. 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
· Request that the housing organization program staff be available or
present at the Informal Hearing to answer questions pertinent to the
case
· Be represented by legal counselor other designated representative at
his or her own expense (with five days notice to the regional housing
organization of the designated person.)
4. 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
counselor another party
· Have its attorney present; and
· Have the staff person familiar with the case present.
VI. Property Eligibility and Inspection Requirements
1. Eligible Property
The following is a list of housing stock that is eligible through the Eagle County
Down Payment Assistance Program:
· The property must be the household's principle residence.
· Site built single-family homes.
· Manufactured homes on permanent foundations (or properly tied-down) on
land owned by the homeowner.
. Duplexes.
C:\Documents and Settings\rvigil\Local Settings\Temporary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
. Town homes or condominiums.
. Land Trust property
2. Ineligible Property:
· Manufactured homes on land not owned by the prospective homeowner (lot
is rented).
. Rental Housing.
3. Inspection Requirements
· Property must meet applicable State and local housing quality standards and
code requirements at the time of purchase. If no such standards or codes
exist, the property being purchased must meet Section 8 Housing Quality
Standards (HQS).
· Whenever possible, a single property inspection will be required, providing
that the property inspection verifies that the property meets applicable state
and local codes or HQS (if necessary).
· The LSA, on behalf of the Eagle County Housing Department will retain a
copy of the property inspection report in the individual loan file.
· When a separate HQS inspection is necessary, Eagle County housing staff
will complete the HQS inspection.
VII. Additional Program Requirements of The Colorado Division of Housing
1. Environmental Review
Before any funds will be drawn down from the State, an appropriate
environmental review will be completed and submitted.
2. Program Income
All revenues (with the exception of loan servicing fees) received by a housing
organization that result directly from a Down Payment Assistance Program
subsidized activity are considered program income. Program income includes,
but is not limited to:
· Principal and interest payments from homeowner loan payments.
· Proceeds from the sale of acquired assets.
Eagle County will not retain more than $5,000 in program income before
requesting additional grant funds. The LSA will ensure that fund use is
maximized and that balances do not lie dormant.
The Eagle County understands that Colorado Division of Housing retains the
right to recapture program income that has been used to fund projects/
programs outside the scope of the original use of the funds, unless such use
has been approved in advance by the DOH.
3. Miscellaneous Income
Miscellaneous income originally derived from a specific program may be used to
C:\Documents and Settings\rvigil\Local Settings\Temporary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
address other community housing needs if there is no longer demand for the
originally funded program. Eagle County will submit a request to the Colorado
Division of Housing to use the miscellaneous income funds for a different use
than the originally funded program for approval.
4. Conflict of Interest
No member of the Board of Commissioner, the Homebuyers Assistance
Committee, the Loan Committee, the staff of the housing organization or the
LSA will participate in any decisions that may result in direct personal or
financial benefit or interest either for themselves or for those with whom they
have family or business ties.
5. Code of Ethics
The CDOH Loan fund will be governed by the following Sate of Colorado Code
of Ethics which requires - All elected officers, appointees, state contractors and
employees of the Executive Department:
· Shall serve the public with respect, concern, courtesy and
responsiveness;
· Shall demonstrate the highest standards of personal integrity,
truthfulness and honesty and shall through personal conduct inspire
public confidence and trust in government;
· Shall not use public office to bestow any preferential benefit to anyone
related to the officer, appointee or employee by family, business or
social relationship;
· Shall not disclose or use or allow others to use confidential
information acquired by virtue of state employment for private gain;
· Shall not accept any compensation, gift, payment of expenses or any
other thing of value which would influence him or her to depart from
the faithful and impartial discharge of his or her duties;
· Shall not accept any compensation, gift, payment of expenses or any
other thing of value as a reward for official action taken;
· Shall not engage in outside employment unless: (1) the outside
employment is disclosed to the Governor or, in the case of an
employee, the employee's immediate supervisor; and (2) the outside
employment does not interfere with the performance of state duties;
· Shall not use state time, property, equipment or supplies for private
gain;
· Shall not knowingly engage in any activity or business which creates
a conflict of interest or has an adverse effect on the confidence of the
public in the integrity of government;
· Shall carry out all duties as a public servant by exposing corruption or
impropriety in government whenever discovered;
· Shall support equal access and employment opportunities in state
government for all citizens of the State of Colorado;
· Shall comply at all times with the standards of conduct set forth in title
24, article 18 of the Colorado Revised Statutes.
C:\Documents and Settings\rvigil\Local Settings\Tem~orary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc
6. Advertising and Marketing
Eagle County Housing Department, under the direction of the HBAC, will
develop or maintain affirmative marketing and advertising programs that assist
in meeting the minimum program production goals and further fair housing
opportunities, as well as advancing the use of the program by all qualified
households in Eagle County.
The advertising and marketing plan will include:
· Housing organization staff responsibilities concerning advertising and
marketing.
· Training procedures for all staff and Board members responsible for
advertising and marketing.
· Marketing strategies that include:
o Brochures
o Speakers bureau
o Radio and newspaper advertisements
o Realtors, Banks and Mortgage Lenders
o Contacts at senior centers, child care facilities, and social
services
· Procedures designed to the measure the success of the marketing
program.
7. Lead Based Paint Requirements
This revolving loan fund program will comply with the lead-based paint
requirements as required through the HUD regulations found in 24 CFR Part 35.
The Lead Based Paint Disclosure notice will be included in the final loan
package.
C:\Documents and Settings\rvigil\Local Settings\T~mfJOfary Internet Files\OLKDF\CDOH Revolving Loan
Policies 2006 (3).doc