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Home My WebLink About55D - RESO HOMEOWNERSHIP PRESERVATIONREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: MARCH 3, 2008 TITLE: RESOLUTION IN SUPPORT OF HOMEOWNERSHIP PRESERVATION EFFORTS c CITY MANAGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ^ As Recommended ^ As Amended ^ Ordinance on 1 S` Reading ^ Ordinance on 2"d Reading ^ Implementing Resolution ^ Set Public Hearing For CONTINUED TO FILE NUMBER Adopt a resolution in support of federal, state, local government and private sector efforts to address homeownership preservation. DISCUSSION The preservation of homeownership has taken on additional significance this past year as sub-prime mortgage lending has impacted homeowners throughout the United States. Santa Ana has taken a leadership role in Orange County to assure that our residents are able to access all available information and resources to enable them to make informed decisions regarding their home and sub-prime or adjustable rate home mortgage. Most recently, an outreach and educational event drew the attendance of over 400 affected homeowners. It is expected that efforts underway to preserve homeownership in Santa Ana will also benefit from a package of initiatives introduced by the federal adminstration which include: • Modernization of the Federal Housing Administration (FHA) to allow greater numbers of households to access FHA mortgage insurance. • Reform of the Internal Revenue Code, to exclude the forgiveness of mortgage debt as taxable income and to allow cities and states to issue tax-exempt mortgage bonds to allow the refinance of existing loans. • Appropriation of $180 million to support mortgage counseling for households at risk of losing their homes due to subprime mortgage loans. • Reform of Government Sponsored Enterprises like Fannie Mae and Freddie Mac to increase conforming loan limits and allow these institutions to provide further liquidity in the mortgage markets. 55D-1 Homeowner Preservation Resolution March 3, 2008 Page 2 In addition, the private sector and lending industry have identified a package of homeownership preservation initiatives promoted by U.S. Treasury Secretary Paulson and the American Securitization Forum. These voluntary efforts provide additional options for borrowers with subprime mortage loans. These options are not mandated by federal law and in brief include: • Rate freeze for 5 years for qualified borrowers. • Qualified borrowers must have homes that are owner occupied, borrower must be no more than 30 days late on payments, have a FICO credit score of 660 or less and a loan originated in January 2005 to July 2007 with an initial reset date of January 2008 to July 2010. Eligible borrowers must also have less than 3o equity in their home. While this voluntary package does not allow continuation of interest only payments provided by initial "teaser" rates, significant relief is achievable for homeowners that contact their lenders in advance of any default on their loan obligations. In California, through the leadership of Governor Schwarzenegger, lenders are encouraged to: 1) reach out proactively to borrowers well before their loans reset; 2) streamline the processes by which they determine whether borrowers may reasonably be expected to be able to make the reset payment; and 3) for people who are in their homes and making timely payments now at the starter rate, but who cannot make the reset payment, keep them at the starter rate for a sustainable period of time. The proposed resolution recognizes the impact of subprime mortgage lending in our community and addresses Santa Ana's support of federal, state, local government and private sector efforts to aide homeowners affected by subprime mortgage loans. FISCAL IMPACT There is no fiscal impact associated with this action. ,'(,Stephen Harding Deputy City Manager for Development Services Community Development Agency SGH/SK/mlr 55D-2 2/26/08LES RESOLUTION NO. 2008- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA ANA SUPPORTING EFFORTS TO ADDRESS HOMEOWNERSHIP PRESERVATION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANTA ANA AS FOLLOWS: Section 1. The City Council of the City of Santa Ana hereby finds, determines and declares as follows: A. The impact of subprime mortgage lending has impacted homeowners throughout the United States, making the preservation of homeownership highly significant. B. The City of Santa Ana has taken a leadership role in Orange County to assure that our residents are able to access all available information and resources to enable them to make informed decisions regarding their home and subprime or adjustable rate home mortgage. C. Efforts underway to preserve homeownership in Santa Ana will also benefit from a package of initiatives introduced by the federal administration which includes the following: 1. Modernization of the Federal Housing Administration (FHA) to allow greater numbers of households to access FHA mortgage insurance. 2. Reform of the Internal Revenue Code to exclude the forgiveness of mortgage debt as taxable income and to allow cities and states to issue tax-exempt mortgage bonds to allow the refinancing of existing loans. 3. Appropriation of $180,000,000 to support mortgage counseling for households at risk of losing their homes due to subprime mortgage loans. 4. Reform of government sponsored enterprises such as Fannie Mae and Freddie Mac to increase conforming loan limits and allow these institutions to provide further liquidity in the mortgage markets. D. Additionally, the private sector and lending industry have identified a package of homeownership preservation initiatives promoted by U.S. Treasury Secretary Paulson and the American Securitization Forum. These voluntary efforts provide additional options for borrowers with Resolution No. 2008-XXX 55D-3 Page 1 of 3 2/26/08LES subprime mortgage loans. These options are not mandated by federal law, and include the following: 1. Rate freeze for five (5) years for qualified borrowers. 2. Qualified borrowers must have homes that are owner occupied, the borrower must be no more than thirty (30) days late on payments, have a FICO credit score of 660 or less and a loan originated in January 2005 to July 2007 with an initial reset date of January 2008 to July 2010. Qualified borrowers must also have less than 3% equity in their home. E. In California, through the leadership of Governor Schwarzenegger, lenders are encouraged to proactively reach out proactively to borrowers well before their loans reset; streamline the processes by which they determine whether borrowers may reasonably be expected to be able to make the reset payment; and, for people who are in their homes and making timely payments now at the starter rate, but who cannot make the reset payment, keep them at the starter rate for a sustainable period of time. Section 2. The City Council of the City of Santa Ana recognizes the impact of subprime mortgage lending in our community and supports federal, state, local government and private sector efforts to aid homeowners affected by subprime loans in order to preserve homeownership. Section 3. This Resolution shall take effect immediately upon its adoption by the City Council, and the Clerk of the Council shall attest to and certify the vote adopting this Resolution. Resolution No. 2008-XXX 55D-4 Page 2 of 3 2/26/08LES ADOPTED this day of 2008. Miguel A. Pulido Mayor APPROVED AS TO FORM: Joseph W. Fletcher, City Attorney By: Lisa E. Storck Assistant City Attorney AYES: Councilmembers NOES: Councilmembers ABSTAIN: Councilmembers NOT PRESENT: Councilmembers CERTIFICATE OF ATTESTATION AND ORIGINALITY I, PATRICIA E. HEALY, Clerk of the Council, do hereby attest to and certify the attached Resolution No. 2008- to be the original resolution adopted by the City Council of the City of Santa Ana on Date: Clerk of the Council City of Santa Ana Resolution No. 2008-XXX 55D-5 Page 3 of 3 55D-6