HomeMy WebLinkAboutFIRST INTERSTATE BANKDMF/fm
6/17/81
AGREEMENT FOR RESIDENTIAL REHABILITATION
SUBSIDIZED INTEREST LOAN PROGRAM
This agreement, made and entered into this (,VVN
day of Tol,r 1981, by and between the City of
Santa Ana, a municipal corporation of the State of California
("CITY"), and First Interstate Bank of California, a California
corporation ("BANK"),
W I T N E S S E T H
1. CITY has adopted a Community Development Block
Grant ("CDBG") Housing Rehabilitation Loan Program in
accordance with the Housing and Community Development Act of
1974, as amended ("HCDA"), to assist in the rehabilitation
of dwellings located in certain qualified BCDA target areas
within the jurisdiction of CITY'S authority, hereinafter
referred to as the "Program."
2. CITY desires BANK to make loans for property
improvement ("Rehab Loans") to qualified borrowers ("Borrowers")
owning properties in areas covered by the Program at below
market interest rates.
3. CITY is willing to pay to BANK an interest reduction
payment on behalf of Borrowers which will enable BANK to
make Rehab Loans at subsidized rates desired by CITY.
4. The parties hereto desire to set forth the procedures
which will apply to the processing of Rehab Loans and the
terms and conditions which will apply to any Rehab Loan
which may be approved by BANK subsequent to the date hereof.
5. CITY estimates the aggregate amount of all Rehab
Loans requested under this agreement will not exceed
Eight Hundred Thousand Dollars
($_800_,0Q0. 00 during the period commencing with the
date of July 1, 1981, and ending
July 1, 1982. CITY will furnish BANK with any modifi-
cations to this estimate.
WHEREFORE, in consideration of the respective and
mutual covenants and promises hereinafter contained and
made, and subject to all the terms and conditions hereof,
the parties hereto agree as follows:
I. CITY'S OBLIGATIONS
A. CITY agrees to refer to BANK, by correspondence,
applicants for Rehab Loans. CITY will furnish the following
documents for each such applicant:
1. Certificate of eligibility from CITY indicating
the Borrrower`s subsidised interest rate desired by CITY.
2. Loan application on a form provided by BANK
and other supporting documents required by BANK including
authorization from Borrower to permit BANK and CITY to
exchange information regarding Borrower's application.
3. Statement of the rehabilitation work to be
done, together with an itemized breakdown of the cost of
materials, supplies, services and labor necessary to complete
the work.
B. With respect to Rehab Loans which are approved as
provided below, CITY shall pay to BANK an interest reduction
payment concurrent with the making of Rehab Loans by BANK to
the Borrower. The interest reduction payment shall be in an
amount computed in accordance with the example set forth in
"Exhibit A" using rates currently quoted for individual
Rehab Loans.
C. With respect to Rehab -Loans which are approved as
provided below, CITY will advise BANK when it may advance
loan proceeds.
D. CITY may make deferred loans as set forth in
Paragraph III hereinbelow in those circumstances when CITY
determines such loans are desirable to carry out the Program.
II. BANK'S OBLIGATIONS
BANK agrees to make loans to approved applicants,
subject to the following terms and conditions:
A. Loan Prcc"ossing
BANK shall process the applications referred to
BANK by CITY pursuant to Paragraph IA above. BANK shall
make a credit evaluation of each applicant in accordance
-2-
with BANN's procedures. BANK shall obtain an appraisal of
applicant's property in those cases when BANK deems an
appraisal to be necessary. BANK shall advise the applicant
and CITY if the loan application is approved or disapproved.
If the loan is not approved in the requested amount, BANK
shall endeavor to approve the loan for a lesser amount when
possible and shall inform CITY of the approved loan amount
provided prior authorization has been given by the applicant.
If the funds needed by Borrower to complete the rehabilitation
work exceed the funds available from a Rehab Loan, CITY may
provide funds to Borrower to cover the amount by which the
cost of rehabilitation exceeds funds available from the
Rehab Loan. If the loan application is approved, BANK shall
indicate the amount of the loan and any conditions of the
loan. The conditions of the loan shall include, but not be
limited to, an agreement by CITY to make interest reduction
payments in accordance with Paragraph I hereinabove.
B. Terms of Rehab Loans.
1. All Rehab Loans made by BANK pursuant to
approved applications shall be for a term not.to exceed
fifteen (15) years.
2. Rehab Loans shall bear interest, payable by
Borrower, at the per annum rate specified by CITY based on a
365-day year. Principal and interest shall be payable in
equal monthly installments during the term of the loan;
provided, however, that the total minimum monthly payment
will be Twenty -Five Dollars ($25.00).
3. Rehab Loans for single family residences
shall not exceed Fifteen Thousand Dollars ($15,000.00),
except when BANK determines that special circumstances
warrant a larger loan. Under no circumstances shall the
loan for a single family residence exceed Twenty -Five
Thousand Dollars ($25,000.00).
4. Rehab Loans for multiple family residences
shall not exceed.Ten Thousand Dollars ($10,000.00) per unit
nor exceed Fifty Thousand Dollars ($50,000.00) per structure
or property.
5. A deed of trust shall be executed as security
for all Rehab Loans in excess of Two Thousand Dollars
-3-
($2,000.00). A deed of trust may be executed as security
for all Rehab Loans of Two Thousand Dollars ($2,000.00) or
less when deemed desirable by BANK. Any such deed of trust
shall cover the property which is to be rehabilitated.
5. BANK may disapprove a loan if the amount of
the loan, together with existing prior encumbrances, exceeds
eighty percent (80%) of the appraised value of the property.
BANK may disapprove a loan if the property which is security
for the loan is subject to encumbrances or has title defects
which are objectionable to BANK.
C. Loan Documents
BANK shall use a form of Note and Deed of Trust
which it customarily uses for property improvement loans and
shall use such other loan documents which it deems necessary
or desirable.
D. ' Loan 'Disbursement
On the date a Rehab Loan is made, BANK shall
prepare one or more cashier's checks in the total amount of
the Rehab Loan. The checks shall be in amounts which are
designated by CITY. The designation of check amounts and
payees shall be made by CITY using a form such as is set out
in "Exhibit B," attached hereto.and by this reference incor-
porated herein. Upon notification from CITY, any portion of
the loan proceeds which is not intended for the rehabilitation
work shall be credited to loan principal. Checks shall be
disbursed to CITY, providing Borrower has given prior
authorization. CITY shall disburse checks upon satisfaction
that the work has been completed and notify BANK in writing
of date of said disbursement in a form substantially similar
to that set out in "Exhibit C," attached hereto and by this
reference incorporated herein.
E. Defaults
In the event any payment due under the terms of a
Rehab Loan is more than thirty (30) days delinquent, BANK
shall notify CITY and CITY may elect to pay such delinquent
payment on behalf of the Borrower. BANK may proceed with
-4-
foreclosure under the power of sale contained in the Deed of
Trust with respect to any Rehab Loan where payments are more
than sixty (60) days delinquent.
F. Refund of Portion of Interest Reduction Payment
In the event a Rehab Loan is fully prepaid before
maturity, or in the event a Rehab Loan is foreclosed, BANK
shall repay to CITY a portion of the interest reduction
payment in accordance with the repayment schedule set forth
in "Exhibit A," attached hereto and by this reference incor-
porated herein.
III DEFERRED LOANS
CITY may elect to make a deferred loan to an
applicant. A deferred loan shall be a loan under which
principal and interest are not due and payable until transfer
by the Borrower of the property securing the loan. Said
deferred loan shall bear interest at an interest rate pre-
scribed by CITY. The form of Note and Deed of Trust.shall
be prescribed by CITY. At the request of CITY, BANK shall
prepare necessary documentation, and shall be reimbursed by
CITY for out-of-pocket expenses, including, but not limited
to, the cost of a lot book report. BANK shall arrange for
the closing of the loan on behalf of CITY for a fee of One
Hundred Dollars ($100.00) payable upon the loan closing.
Disbursement of loan proceeds shall be made by CITY.
IV. REPRESENTATIONS AND WARRANTIES
CITY represents and warrants as follows:
A. That CITY has the requisite power and authority to
enter into this agreement.
B. That CITY has taken the required action for
execution, delivery and performance hereof.
C. That this agreement is valid and binding upon
CITY.
D. That the funds to be used by CITY for interest
reduction payments pursuant to the terms hereof may be used
for this purpose.
-5-
E. That CITY will have complete responsibility for
determining whether or not each loan applicant and the
proposed rehabilitation work are eligible under the Program.
F. That CITY will have complete responsiblity for
enforcement of any agreement concerning rents between CITY
and Borrower.
V. OTHER TERMS AND CONDITIONS
A. Opinion of Counsel. CITY agrees to furnish a
statement of counsel acceptable to BANK indicating that the
matters set forth in the representations listed in Para-
graphs W.A. through F. above are true and correct.
B. Standard of Care. BANK shall exercise the same
degree of care in the exercise of its duties hereunder as
BANK would normally exercise in the normal course of its
business. BANK shall have no responsibility or liaibility
for determining whether or not rehabilitation work is per-
formed in a satisfactory manner.
C. Term. This agreement shall be subject to a yearly
review and continue in effect until terminated by either
party. Either party may terminate this agreement by giving
to the other party written notice of termination at least
thirty (30) days prior to the intended termination date.
D. Amendments. This agreement contains the entire
agreement between the parties and may not be modified or
amended without the written consent of BANK and CITY.
E. Notices. All -notices, requests and demands to or
upon either party hereto shall be in writing, shall be
addressed to such party at the address set forth below or at
such other address as may be hereafter designated in writing
by such party and shall be deemed to have been given or made
when mailed:
To CITY:
Clerk of the Council
20 Civic Center Plaza
Santa Ana, California 92701
Q.
To BANK:
FIRST INTERSTATE BANK OF CALIFORNIA
Box 3666
Terminal Annex
Los Angeles, California 90051
Attention: Eda Levine-Rossman
F. Compliance with Laws. BANK and CITY agree to
fully comply with all state and federal laws and regulations
applicable to the actions taken under the terms of this
agreement.
G. Non -Liability. Neither BANK nor CITY shall be
liable hereunder for errors in judgment and shall otherwise
not be liable for any action taken in good faith, provided
such party is not guilty of bad faith, willful neglect or
gross negligence.
H. Applicable Law. This agreement shall be governed
by and construed under the laws of the State of California.
DATED: JU 1\/ (0 tq% t
ATTEST.,
J ICE C, GUY,
le ERK OF THE COUNCIL
APPROVED AS TO FORM:
EDWARD J * CO
CITY ATTORNET7R"�-)
CITY OF SANTA ANA, a municipal
corporation of the State of
Cq,1 i f o rn -1-a
MAYOR
"CITY"
FIRST INTERSTATE BANK OF
CALIFORNIA, a California
corpor/,tion
By:
"BANK"
-7-
EXHIBIT "A"
EXAMPLE COMPUTATIONS OF INTEREST REDUCTION PAYMENT
AND REFUND OF PORTION OF INTEREST REDUCTION PAYMEN'
Example
A property owner wishes to borrow $12,800 for a period of fifteen years. As part of
the Agency's residential rehabilitation program., the borrower will receive a sub-
si'dized interest rate of 6%, as compared to the Bank's market rate (adjusted for this
program) of 16.5%. Using the attached table, the procedure for computing the Agency's
Interest Reduction Payment (IRP) and refund, in the event of prepayment or foreclosure
is as follows:
I. EXAMPLE COMPUTATION OF INITIAL !RP
Step 1: Find the Agency's initial IRP per $1,000 = $438.8163
Step 2: Divide the principal loan amount by $1,000 to find the loan multiple
Loan multiple = 12,800� = 12.8 times
Step 3: Multiply the Agency's initial IRP per $1,000 by the loan multiple
to find total initial IRP
Agency's initial IRP = $438.8163 X 12.8 = $5616.85
II. EWIPLE COMPUTATION OF REFUND OF PORTION OF IRP IN THE EVENT THE LOAN
PREPAYS AFTER 5 MONTHS
Refund equals the remaining balance of the Agency's IRP per $1,000
(shovin in Table, row 5, column B) times the loan multiple.
Refund = $425.163 X 12.8 = $5,442.08
III. EXAMPLE COMPUTATION OF REFUND OF PORTION OF IRP IN THE EVENT THE LOAN
IS FORECLOSED AFTER 5 MONTHS
To the extent the proceeds realized from foreclosure are sufficient to pay the
unpaid loan balance plus bank foreclosure costs, the refund would be equal to
the amount computed in Example II., If the proceeds are not sufficient to pay
the unpaid balance plus bank foreclosure costs, the refund would be made as
follows: -
Unpaid balance of borrower's loan $12,577.74
Foreclosure costs (hypothetical) 1,000.00
Total Owed to Bank $13,577.74
Less: Net proceeds realized from foreclosure(hypothetical) 10,000.00
Balance Owed to Bank $ 3,577.74
Amount of IRP remaining (shown in II) $5,442.08
Less: Balance Owed to Bank 3,577.74
Refund due to Agency $1,864.34
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EXHIBIT B
INCREMENTAL PAYMENT FORM
Case No.
Name
Address
PAYMENTS
PAYABLE TO
AMOUNT
PERCENT
First
Second
Third
Fourth
General
Contract Total
100%
Termite
Contract
1001%.
Refinance
Total
Contingency
10%
Total
Loan fees
Case No.
Authorized by
Signature
Date
Title
Authorized by
Signature
Date
tle
TO: FIRST INTERSTATE BANK
ATTN:
EXHIBIT "C^
CITY LETTERHEAD
DATE:
N{}TlFICATIDN DF I Sf,E CTlDN A ND
P A Y M EY�T A DYA N C E
Payment
Date
Payment� Amount� Advanced
Name First
Address Second
Third
----' ----
Loan No. Fourth
Loan Amt. $ Other *
This is to certify that an inspection has been completed at the above -listed address.
The required work has been performed and payments have been authorized and advanced
for the amounts indicated above.
DATE_______ AGENCY BORROWER
(signature) ��—�