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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