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HomeMy WebLinkAbout20A - AA - LOAN AGMT 601 E 20TH STREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: OCTOBER 18, 2010 TITLE: APPROPRIATION ADJUSTMENT - LOAN AGREEMENT WITH IRENE M. MAYORGA FOR REHABILITATION OF 601 E. 20TH STREET CITY MANAGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ? As Recommended ? As Amended ? Ordinance on 1st Reading ? Ordinance on 2nd Reading ? Implementing Resolution ? Set Public Hearing For_ CONTINUED TO FILE NUMBER Approve an appropriation adjustment recognizing a $900,000 CalHome Program Grant from the California Department of Housing and Community Development and appropriating the same to fund eligible single family rehabilitation loans. 2. Authorize the City Manager and Clerk of the Council to execute the attached rehabilitation loan agreement with Irene M. Mayorga for the rehabilitation of her home at 601 E. 20th Street in the amount not to exceed $135,000, subject to non-substantive changes approved by the City Manager and City Attorney. DISCUSSION We applied for and were awarded $900,000 through the California Department of Housing and Community Development's CalHome Program. Funds are to be used for single family rehabilitation loans with a term of 30 years, zero percent interest and no payments. The maximum allowable loan is $60,000. The funds must be recognized and budgeted before they can be used. The City of Santa Ana offers other single family rehabilitation loan programs that enable low- income Santa Ana homeowners to make necessary repairs to their homes. These loans are funded through a variety of sources, including the federal Community Development Block Grant (CDBG) and HOME grant programs, for which the maximum loan amount is $75,000. Homeowners are required to make all code-related repairs and to utilize the services of a licensed and insured general contractor. Non-essential, luxurious repairs are not funded, and homeowners are required to keep the home as their principle residence through the term of their loan. Depending on circumstances and the funding source, loans are amortized over twenty to thirty years; and payments are deferred for homeowners who are unable to make them. Interest rates are well below market rates. Homeowners who are low-income currently receive a 1.5 percent interest rate for HOME or CDBG funded loans. 20A-1 Irene M. Mayorga Loan Agreement October 18, 2010 Page 2 Irene Mayorga, the homeowner at 601 E. 20th Street (Exhibit 1) has applied for a rehabilitation loan. Once staff inspected the property, it became apparent that the loan would exceed our program maximum. The homeowner had previously begun construction on the home, but the contractor abandoned the job leaving a partially demolished home with faulty and incomplete repairs. The owner obtained bids from five licensed contractors. Based on the bids received, a loan amount of $135,000 is believed to be sufficient to pay for all repairs and provide for sufficient contingency to cover unanticipated repairs. The proposed loan will be funded with $60,000 in CalHome and $75,000 in CDBG funds with 1.5% interest. The homeowner has a very high credit score; however, due to their income level, loan payments will be deferred for a period of five years. At that time, staff will review the household income to determine if payments can be made. The after rehabilitation loan-to-value ratio is 87 percent which meets program guidelines. Since the loan amount exceeds program guidelines, City Council approval of the loan agreement (Exhibit 2) is required. ENVIRONMENTAL IMPACT Under the provisions of the National Environmental Policy Act (NEPA) and the California Environmental Quality Act (CEQA), the proposed project is exempt from further review. Categorical Exemption No. ER 2010-126 will be filed for this project. FISCAL IMPACT Community Development Block Grant funds are available in the CDBG Single Family Rehabilitation Loans account (no. 135-18782-69152). Upon approval of the appropriation adjustment, CalHome funds will be available in the CalHome Program account (no. 14318763- 69152). Cynthia J. Nelson Deputy City Manager for Development Services Community Development Agency CJN/SLB/TG/mlr Exhibits: 1. Map 2. Agreement APPROVED AS TO FUNDS AND ACCOUNTS: Francisco Gutierrez Executive Director Finance & Management Services Agency 20A-2 +SANTA ANA FREEWAY 601 E. 20t" Street EXHIBIT 1 Ie? - h r py ".5p o " ao ? ' ? K r . rt h ? m a OW *9 m& id N . v 20A-3 ITT" ST "own 17TH 8T [7 T 20A-4 FREE RECORDING REQUESTED PURSUANT TO GOVERNMENT CODE SECTION 27383 When Recorded Mail to: City of Santa Ana 20 Civic Center Plaza, M-26 P.O. Box 1988 Santa Ana, California 92702-1988 Attention: Housing Programs Coordinator REHABILITATION LOAN PROGRAM LOAN AGREEMENT OF CDBG FUNDS AND CAL HOME FUNDS CONTAINING AFFORDABLE HOUSING RESTRICTION (Owner Occupied Property - 601 E. 20TH ST., Santa Ana, CAI THIS AGREEMENT is made and entered into this 18th day of October, 2010 by and between the City of Santa Ana, a charter city and municipal corporation of the State of California ("City") and IRENE M. AND UBALDO MAYORGA ("Borrower"). RECITALS A. City is a recipient of Community Development Block Grant ("CDBG") funds from the United States Department of Housing and Urban Development ("HUD") pursuant to Tile I of the Housing and Community Development Act of 1974, as amended ("Act") and 24 C.F.R. 570. B. Borrower owns a single-family home located at 601 E. 20TH ST.. Santa Ana, California, as more particularly described in Exhibit "A" attached hereto and incorporated herein (the "Property"). Borrower desires to rehabilitate or make improvements to the existing single family home on the Property to habitable condition and to inhabit such single-family home as Borrower's principal residence. C. City desires to loan CDBG funds to Borrower and Borrower desires to borrow such funds from City in order to fund all or part of the costs of rehabilitating the Property for use as affordable housing. D. Borrower has provided the City with Borrower's plans for rehabilitation of the Property, and an analysis of the cost of rehabilitating the Property indicates that Borrower needs to borrow CDBG funds in the amount of $75,000.00 as well as $60,000.00 in CalHome funds. E. The $60,000 CalHome Loan is subject to the terms, conditions, and restrictions of the State of California CalHome Program as set forth in Health and Safety Code section 50650 et seq. and implementing guidelines or regulations adopted by the California Department of Housing and Community Development ("HCD' ), all of which are hereby incorporated by reference. Page 1 of 15 EXHIBIT 2 20A-5 E. Title X of the 1992 Housing and Community Development Act ("Title X") established requirements relating to lead based paint ("LBP") in housing receiving federal assistance, in particular requirements relating to (i) notification (including pamphlet distribution, disclosure to purchasers and lessees, notice of lead hazard presumption or results of evaluation, and/or lead hazard reduction), (ii) lead hazard evaluation (including visual assessment, paint testing, and/or risk assessment), (iii) lead hazard reduction (including paint stabilization, interim controls, standard treatments, or abatement depending on the requirements for housing activity type), (iv) ongoing maintenance, if required, and (v) response to children with environmental intervention blood lead levels, as required. F. On September 15, 1999, HUD adopted implementing regulations to Title X that became effective September 15, 2000 as set forth in 24 CFR Part 35, et seq. ("LBP Regulations"), which establish specific rules regarding notification to owners and occupants about the existence of LBP hazards, identification of LBP hazards, and control of LBP hazards; and G. Residential structures built after January 1, 1978 are exempt from lead-based paint requirements as the use of lead-based paint was banned for use in residences after this date by Congress (24 CFR Part 35.115). Therefore, the Title X requirements set forth herein shall not be applicable if the structures involved were built after January 1, 1978. H. In connection with the loan of funds under this Agreement, City requires that Owner comply and evidence compliance with all applicable requirements of Title X and the LBP Regulations, and Owner will accept assignment from the City of all responsibilities set forth in the relevant sections of the LBP Regulations, as and when applicable. 1. To protect the public interest and ensure the integrity of Federal programs, City may only conduct business with responsible persons and may not make any award or permit any award to any party which is debarred or suspended or is otherwise excluded from or ineligible for participation in Federal assistance programs under Executive Order 12549, "Debarment and Suspension". Borrower must review and sign Exhibit J "Debarment", which is attached hereto and incorporated herein by this reference. NOW, THEREFORE, for good and valuable consideration, the parties agree as follows: 1. DEFINITIONS: Unless otherwise defined, the following capitalized terms shall be defined in this Agreement as follows: "CalHome Loan" means the loan of CalHome funds to be made by City to Borrower in the principal amount of $60,000.00 in accordance with this Agreement. "CDBG Loan" means the loan of CDBG funds to be made by City to Borrower in the principal amount of $75,000.00 in accordance with this Agreement. Page 2 of 15 20A-6 "Deed(s) of Trust" means the two different deeds of trust securing the CDBG Loan and the CalHome Loan, in the form attached to this Agreement as Exhibit "F" and incorporated herein by reference. "Deputy City Manager of Development Services" means the City's representative for this Agreement and his/her designee. "Eligible Person or Family" means a person or family (1) with a household income that does not exceed 80% of the median income for the area, adjusted for family size, as determined by HUD, and (2) who is using the Property for occupancy as his, her, or their principal residence. "First Mortgage Loan" means the loan to Borrower from NATIONSTAR MORTGAGE in the amount of $273,000.00, or any loan obtained by Borrower to refinance the First Mortgage Loan. "HCD" means the California Department of Housing and Community Development "HUD" means the United States Department of Housing and Urban Development. "LBP" means lead based paint. "Loans" means the each of the two loans collectively. "Project" means the rehabilitation of the Property pursuant to this Agreement. "Promissory Note(s)" means the promissory notes in favor of City; one, evidencing the CDBG Loan, in the form attached to this Agreement as Exhibit "D", and one evidencing the CalHome Loan, in the form attached to this Agreement as Exhibit "E", and incorporated herein by reference. "Property" means the real property described in the legal description attached to this Agreement as Exhibit "A" and incorporated herein by reference. "Sale" means any sale, transfer, assignment or conveyance of the Property, any portion thereof or interest therein, including, without limitation, any lease, exchange, or other disposition of any interest in the Property, whether voluntary or involuntary, except that any transfer by gift, devise or inheritance to an existing spouse, surviving joint tenant or co-owner, or a spouse as part of a dissolution proceeding or in connection with marriage, or by devise or inheritance to children shall not be considered a Sale for the purposes of this Agreement. 2. Loans. A. CDBG Loan. City agrees to lend to Borrower, and Borrower agrees to borrow from City, $75,000.00 (the "CDBG Loan"), with interest as provided in the Promissory Note, subject to the conditions and restrictions set forth in this Agreement, in the Promissory Note and in the Deed of Trust. Borrower shall execute, acknowledge and deliver to the Escrow Agent the Promissory Note, and the Deed of Trust, as a condition of the City's origination of the CDBG Loan. Page 3 of 15 20A-7 B. CalHome Loan. City agrees to lend to Borrower, and Borrower agrees to borrow from City, $60,000.00 (the "CalHome Loan"), with interest as provided in the Promissory Note, subject to the conditions and restrictions set forth in this Agreement, in the Promissory Note and in the Deed of Trust. Borrower shall execute, acknowledge and deliver to the Escrow Agent the Promissory Note, and the Deed of Trust, as a condition of the City's origination of the CalHome Loan. 3. Development of the PropgrtX. (a) Borrower agrees to complete the Project in accordance with Exhibit "B" and with plans approved by City consistent with said Exhibit "B". (b) Borrower has submitted for City approval preliminary construction drawings, elevations, and an estimate of construction costs for the Project. City hereby approves the concept of the Project as disclosed thereby, subject to approval of final construction plans consistent therewith by City's Planning and Building Safety Agency. (c) The budget for the rehabilitation of the Property is attached hereto as Exhibit "C". The cost of rehabilitating the Property shall be the sole responsibility of Borrower. City shall not be obligated to make loans or otherwise fund the cost of rehabilitation of the Property except as set forth in this Agreement. (d) Borrower shall begin and complete the Project within one hundred and eighty (180) days from the date of this Agreement subject to revision from time to time as mutually agreed upon in writing between Borrower and the Deputy City Manager. The Deputy City Manager will not withhold a reasonable extension of time for completion of the Project if the Borrower has shown continuous and substantial progress toward completion. (e) Before commencement of any work upon the Property, Borrower shall, at his own expense, obtain any and all permits which may be required by the City or other governmental agency affected by such work. (f) Representatives of the City shall have a reasonable right of access to the Property without charges or fees, at normal construction hours during the period of construction for the purposes of this Agreement, including but not limited to the inspection of the work being performed. (g) After completion of all rehabilitation specified in Exhibit "B" of this Agreement, and upon written request of Borrower, City shall inspect the Property. If all work specified in Exhibit "B" has been performed to the City's satisfaction, the City will issue, in recordable form, a Certificate of Completion. Such Certificate of Completion shall be, and shall so state conclusive determination of satisfactory completion of the Project. If the City refuses or fails to furnish a Certificate of Completion for the Project after written request from the Borrower, the City shall, within 30 days of written request, provide the Borrower with a written statement of the reasons the City refused or failed to furnish a Certificate of Completion. The statement shall also contain the City's opinion of the action the Borrower must take to obtain a Certificate of Completion. If the Page 4 of 15 20A-8 City shall have failed to provide such written statement within the said 30 day period, the Borrower shall be deemed entitled to the Certificate of Completion. (h) City enters this Agreement in furtherance of the goal of neighborhood revitalization and in reliance on the Borrower's representation that he/she shares this goal and does not intend merely to speculate in land values. (i) Borrower shall not sell, transfer, convey, assign, or lease the Property, or any part thereof, without prior written approval of the City. 0) As a condition to City's obligation to fund the Loans, there shall be no liens upon the Property having priority over any deed of trust securing the Promissory Note(s) or any other note executed by Borrower in favor of the City, other than those specified in Exhibit "H", attached hereto and incorporated herein, unless otherwise consented to in writing by the Deputy City Manager. (k) The Loans shall be made by depositing the loan proceeds into a construction escrow account established hereinbelow. Such deposits shall be made as the City receives funding from the letter of credit. Any other monies to be used to fund the rehabilitation of the Property shall also be deposited in the construction escrow account. In addition to other conditions set forth hereinabove, the funding of the Loans is conditional upon the Borrower having obtained all necessary permits for the Project. (1) If the Loans are insufficient to cover the entire estimated costs of the Project, Borrower shall deposit into the construction escrow account the amount required to make up the deficit. (m) Loan proceeds used for actual construction/rehabilitation costs shall be placed in an escrow account with AmeriNational Community Services or at such other institution as City requires. (n) The proceeds of the Loans shall be used for materials, supplies, labor and services that are an integral part of the Project. Funds shall be disbursed only for the purposes and in the amounts approved by City. In the event that, upon the issuance of a Certificate of Completion, if any portion of the proceeds of the Loans remains unexpended in the escrow account established herein, such unexpended balance shall be returned to the City and credited against the loan principal. (o) Upon written request of Borrower, the City will request disbursement of funds from the construction escrow account for fully completed work items. Such requests by the Borrower for payments for individual work items shall be made after inspection and acceptance/approval of the work by the City. Of Borrower's requisitions and invoices and satisfactory proof that the Property, Borrower and City are properly protected from liens or claims of liens for labor and materials. All funds disbursed to Borrower shall be received by Borrower in trust and Borrower agrees that the same shall be used only for the payment of those items contemplated by the particular disbursement. Page 5 of 15 20A-9 (p) City shall not be required to approve disbursement of any amount which, in City's opinion, will reduce that portion of the undisbursed funds designated for the cost of completion of the rehabilitation below that amount needed to pay for the labor and materials necessary to complete the work. (q) Borrower and City shall maintain records which accurately and fully show the date, amount, purpose, and payee of all expenditures from the Loans. Each party has the right at all reasonable times to inspect the books and records of the other party as pertinent to the purposes of this Agreement. (r) It is understood and agreed that the City shall have no liability to Borrower by reason of the failure to perform or inadequate performance of any contractor retained by Borrower for work on the Project. 4. Obligation to Refrain from Discrimination Borrower herein covenants by and for him/herself, his/her heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against, or segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, or any part thereof, nor shall Borrower himself or any person claiming under or through him, establish or permit any such practice or practice of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Property. 5. Low and Moderate Income Housing Covenant (a) Borrower covenants and agrees for him/herself, his/her heirs, executors, administrators and assigns, and every person acquiring an interest in the Property or any part thereof, that, for a period of 15 years or as long as these Loan remain outstanding, commencing upon the recordation of the Deed(s) of Trust, the Property shall be owned and occupied exclusively by persons or families with a household income that does not exceed 80% of the median income for the area, adjusted for family size, as determined by HUD. (b) Borrower represents and warrants to City that the information relating to Borrower's household income that has been provided by Borrower to City to verify Borrower's eligibility for the Loans is true, correct and complete as of the date such information was provided to City and as of the date of this Agreement. If any such information changes prior to the close of escrow for the rehabilitation of the Property, Borrower shall promptly notify City of such change. Borrower acknowledges that City is relying upon the representations made by Borrower with respect to Borrower's household income and that City would not enter into this Agreement if Borrower's household annual income were in excess of 80% of the median income for the area, adjusted for family size, as determined from time to time by HUD. Page 6 of 15 20A-10 (c) In the event of a breach or threatened breach of this Section 5, City or its successors or assigns shall be entitled to institute legal action to enforce performance of this Section and to obtain an injunction prohibiting anyone who is not an eligible person or family from occupying the Property and/or requiring Borrower to sell the Property to an eligible person or family. Notwithstanding the foregoing, it shall not be a breach of this Agreement if the income of a person or family whose household annual income was within the applicable limitation at the time such person or family first obtained the Loans subsequently increases to an amount that exceeds the applicable limitation. 6. Owner-Occupancy Requirement. (a) Borrower shall occupy the Property as his/her/their primary residence, and the Property shall be used as the principal residence of Borrower and Borrower's household. The maximum occupancy of each dwelling unit on the Property shall not exceed two persons per bedroom plus one additional person. (b) City shall have the right to monitor whether the Property is owner-occupied by requesting that Borrower provide City no more frequently than annually, with a written certification under penalty of perjury that the Property is owner-occupied, accompanied by supporting documentation reasonably satisfactory to City. (c) In the event of a breach or threatened breach of this Section 6, the City or its successors or assigns shall be entitled to institute legal action to enforce performance of this Section and to obtain an injunction prohibiting anyone who is not an eligible person or family from occupying the Property and/or requiring Borrower to sell the Property to an eligible person or family. Notwithstanding the foregoing, it shall not be a breach of this Agreement if the income of a person or family whose household annual income was within the applicable limitation at the time such person or family first obtained the Loans subsequently increases to an amount that exceeds the applicable limitation. 7. Notice of Sale: Assumption of CDBG Loan (ONLY) (a) Within 5 days following entering into any agreement for the Sale of the Property (or, in the event of an involuntary transaction constituting a Sale of the Property, within 5 days after such involuntary transaction), Borrower shall notify the City in writing of (i) the nature of the Sale or other transaction, (ii) when such Sale or other transaction occurred or is expected to occur, (iii) the name of the person or persons to whom the Property was or is intended to be transferred (the "Buyer") and the nature of any relationship between Borrower and Buyer, and (iv) whether the Buyer desires to assume the CDBG Loan. (b) The City shall request such additional information from Borrower and Buyer as the City deems necessary under the circumstances. Such additional information may include: (i) a copy of any agreement for the Sale of the Property; (ii) a written certification in a form that is reasonably acceptable to the City, and signed by Borrower and Buyer under penalty of perjury, stating that Borrower and Buyer have not paid, have no agreement to pay and will not pay, to the other party or to any other person, any money or other consideration in addition to the consideration described in Page 7 of 15 20A-11 the agreement for the Sale of the Property; (iii) any loan application submitted by Buyer for a new First Mortgage Loan; and(iv) any other information about Buyer's financial condition reasonably required by the City in order to determine whether Buyer is an Eligible Person or Family, and, if Buyer desires to assume the CDBG Loan, to determine whether Buyer is qualified to do so. In determining whether Buyer is an Eligible Person or Family and/or whether Buyer is qualified to assume the CDBG Loan, the City shall apply the income and other qualification requirements applicable at the time that determination is made. (c) If the City concludes that Buyer is an Eligible Person or Family, the City shall execute and acknowledge a Consent to Resale in a recordable form satisfactory to the City. The Consent to Resale shall be recorded in the Official Records of the Recorder of the County of Orange, State of California, immediately prior to the recordation of the grant deed or other instrument effecting such Sale. (d) If the City consents to the Sale of the Property and the Buyer does not assume the CDBG Loan, the City shall have the right to require the Buyer to execute a non-monetary deed of trust securing Buyer's compliance with the Covenants. (e) In the event of a breach or threatened breach of this Section 7, the City, or their successors or assigns shall be entitled to institute legal action to enforce performance of this Section and to obtain an injunction prohibiting the Sale of the Property and/or requiring retransfer of the Property back to Borrower and/or requiring Borrower to sell the Property to an Eligible Person or Family. (f) Not later than 20 days prior to the closing of escrow on a sale of the Property, Borrower shall permit the City to inspect the Property. Following such inspection, if the City determines that the Property is not in compliance with Section, the City shall deliver to Borrower a list of repairs that are required to be made to the Property to comply with Section. At his, her or their sole cost and expense, Borrower shall complete such repairs, or provide for such repairs to be completed, to the reasonable satisfaction of the City prior to the sale. With the consent of the City, Borrower may provide for such repairs to be paid out of the proceeds of sale payable to Borrower. (g) The CalHome Loan is NOT assumable. 8. Maintenance of Property. Borrower shall maintain the interior and exterior of the improvements and the landscaping on the Property in a manner consistent with community standards which will uphold the value of the Property, in accordance with this Agreement and federal, state and local regulations. (a) Exterior Maintenance. All exterior surfaces of any structures located on the Property shall be maintained at all times in a clean and presentable manner. (b) Graffiti Removal. All graffiti, and defacement of any type, including marks, words and pictures, must be removed from the Property and any necessary painting or repair completed within a reasonable time, but in no event more than one week after notice to Borrower from the City. Page 8of15 20A-12 (c) Landscaping. All landscaping surrounding the Property shall be maintained in a manner consistent with standards of the Santa Ana Municipal Code and any rules, regulations and standards adopted pursuant thereto. In addition, for example, the yard areas shall not contain the following: (i) lawns with grasses in excess of 9 inches in height; (ii) trees, shrubbery, lawns or other plant life which are dying from a lack of water or other necessary maintenance; (iii) trees and shrubbery grown uncontrolled without proper pruning; (iv) vegetation so overgrown as to be likely to harbor rats or vermin; (v) dead, decayed or diseased trees, weeds and other vegetation; and (vi) inoperative irrigation systems. (d) Maintenance by Borrower. Borrower shall, at his, her or their sole cost and expense, maintain and repair the Property and the improvements thereon, keeping the same in good condition and making all repairs as may be required by this Agreement and applicable State and City rules and regulations. (e) Damage and Destruction Affecting Property Duty to Rebuild. If all, or any portion of the Property and the improvements thereon is damaged or destroyed by fire or other casualty, it shall be the duty of Borrower to rebuild, repair or reconstruct the Property in a timely manner to restore it to comply with any applicable City rules or regulations. (f) Variance in Exterior Appearance and Design. If the Property is damaged or destroyed by casualty, Borrower may not, without the prior written consent of the City, reconstruct, rebuild or repair the Property in a manner which will provide the same or different exterior appearance and lot design from that which existed prior to the date of the casualty. (g) Time Limitation. In the event of damage or destruction due to casualty, Borrower shall be obligated to proceed with all due diligence to commence reconstruction within two months after the damage occurs and to complete reconstruction within a reasonable time after damage occurs, unless prevented by causes beyond the reasonable control of Borrower. 9. Defaults. Failure or delay by either party to perform any term or provision of this Agreement, the Promissory Note(s), the Deed(s) of Trust or the Covenants which are to be performed by such party constitutes a default under this Agreement. Any default by Borrower on any lien listed on Exhibit "H" to this Agreement is a default under this Agreement. The other party (the "Complaining Party") shall give written notice of default to the party in default, specifying in reasonable detail the matter constituting the default. The party in default shall have 30 days following receipt of notice to cure the default. Except as required to protect against further damages, the Complaining Party shall not institute proceedings against the party in default unless the matter is not cured within such 30 day period, or, if the default is of a nature requiring more than 30 days to cure, the party in default commences to cure the matter within such 30 day period and diligently pursues such cure to completion within a reasonable time, but in no event more than 90 days after notice of default. Failure or delay in giving such notice shall not constitute a waiver of any default, nor shall it change the time of default. Failure to cure the default within the applicable cure period shall entitle the Complaining Party to terminate this Agreement and/or exercise any remedies available to such party, including, without limitation, foreclosure on the Deed(s) of Trust. Page 9 of 15 20A-13 10. Acceleration. The outstanding principal balance of the Loans and all accrued and unpaid interest shall become immediately due and payable upon the occurrence of any one of the following events while any portion of the principal of the Loans remain unpaid: (a) Any sale of the Property, unless such sale has been approved by the City pursuant to Section 6 of this Agreement; (b) Borrower no longer occupies the Property as his, her or their principal residence; (c) The City discovers that Borrower knowingly made a misstatement or misrepresentation pertaining to Borrower's household income or intention to occupy the Property as his, her or their principal residence; (d) An uncured default in performance or breach by Borrower of any provision of this Agreement, the Promissory Note(s), or the Deed(s) of Trust. (e) An uncured default by Borrower on the promissory note evidencing or deed of trust securing the First Mortgage Loan or any other lien listed on Exhibit "H" to this Agreement. City may, in its sole and absolute discretion, waive the requirements of this Section and/or defer repayment and/or extend the term of the Loans. Any such waiver, deferment or extension shall be in writing and signed by City. In the event of acceleration due to an uncured default by Borrower on any lien listed on Exhibit "H" of this Agreement, the City shall have the right to purchase the Property subject to prior liens. In the event that the City exercises such right, Borrower shall indemnify the City from and against any and all liability for the payment of any real estate brokerage commissions due and payable in connection with the City's purchase of the Property. 11. Inspection of Books and Records City has the right at all reasonable times to inspect the books and records of Borrower pertaining to the Property as pertinent to the purposes of this Agreement. 12. Limitation of Funds. The United States of America, through HUD, may in the future place programmatic or fiscal limitations on the use of CDBG funds which limitations are not presently anticipated; likewise, the State of California, through HCD may in the future place programmatic or fiscal limitations on the use of CalHome funds which limitations are not presently anticipated. Accordingly, City reserves the right to revise this Agreement in order to take account of actions affecting HUD and/or HCD program funding. In the event of funding reduction, City may, in its sole and absolute discretion, reduce the budget of the Project as a whole or as to a cost category, may limit Borrower's authority to commit and spend funds, or may restrict Borrower's use of both its uncommitted and unspent funds. Where HUD and/or HCD has directed or requested City to implement a reduction in funding, in whole or as to a cost category, with respect to funding for this Agreement, the Deputy City Manager is authorized to act for City in implementing and effecting such a reduction and in revising, modifying or amending the Agreement for such purposes. Where Page 10 of 15 20A-14 City has reasonable grounds to question Borrower's fiscal accountability, financial soundness or compliance with this Agreement, City may suspend the operation of this Agreement for up to 60 days upon 5 days' written notice to Borrower of its intention to so act, pending an audit or other resolution of such questions. In no event, however, shall any revisions made by City affect expenditures and legally binding commitments made by Borrower before it received notice of such revision, provided that such amounts have been committed in good faith and are otherwise allowable and that such commitments are consistent with cash withdrawal guidelines. 13. Loan Servicing. City may contract with a private lender to originate and service the Loans. 14. Indemnification. Borrower shall indemnify, defend and hold harmless the City and its officers, agents, employees, legal counsel, representatives and volunteers, from and against any loss, liability, claim or judgment relating in any manner to the Property or this Agreement, including, but not limited, to any mechanic's lien or materialmen's lien against the property. 15. Taxes. Borrower shall remain fully obligated for the payment of taxes, liens and assessments relating to the Property. There shall be no reduction in taxes for Borrower, nor any transfer of responsibility to City to make such payments, by virtue of the Loans. 16. Insurance. Borrower shall maintain, during the term of the Loans, an all-risk property insurance policy insuring the Property in an amount equal to the full replacement value of the structures on the Property. The policy shall name City as loss payee and shall contain a statement of obligation on behalf of the insurance carrier to notify City of any material change, cancellation or termination of coverage at least 30 days in advance of the effective date of such material change, cancellation or termination. Borrower shall deliver a copy of the certificate of insurance and loss payee endorsement to City at the close of escrow of this loan, and Borrower shall annually deliver a copy of the certificate of insurance and loss payee endorsement to City, signed by an authorized agent of the insurance carrier and setting forth the general provisions of coverage. The copy of the certificate of insurance and loss payee endorsement shall be delivered to City as follows: The City of Santa Ana 20 Civic Center Plaza, M-37 P.O. Box 1988 Santa Ana, California 92702-1988 Attention: Housing Programs Coordinator Any certificate of insurance required by this Section must be in a form, content and with an insurance company that is acceptable to City in its sole discretion. 17. Non-Waiver. Failure to exercise or delay in exercising any right City may have or be entitled to, in the event of default hereunder, shall not constitute a waiver of such right or any other right in the event of a subsequent default. 18. Documents. Borrower has reviewed and, if appropriate, agrees to execute and acknowledge the following documents in substantially the form as attached to this Agreement prior Page 11 of 15 20A-15 to receiving the Loans, and any other documents or instruments reasonably required by City or a participating entity to complete the transaction contemplated herein: (a) Legal Description (Exhibit "A"); (b) Rehabilitation Plans (Exhibit "B"); (c) Rehabilitation Budget (Exhibit "C"); (d) CDBG Promissory Note (Exhibit "D"); (e) CalHome Promissory Note (Exhibit "E"); (f) CDBG Deed of Trust (Exhibit "F"); (g) CalHome Deed of Trust (Exhibit "G"); (h) Lien List (Exhibit "H") (i) Disclosure Statement (Exhibit "I)); and, 0) Debarment Certificate (Appendix B to Part 24) (Exhibit "J") Borrower agrees and acknowledges that the Deeds of Trust and this Agreement shall be recorded against the Property with the County Recorder of the County of Orange and shall appear of record with respect to and as an encumbrance against the Property. 19. Further Assurances. Borrower shall execute any further documents consistent with the terms of this Agreement, including documents in recordable form, as City may from time to time find necessary or appropriate to effectuate its purposes in entering into this Agreement and making these Loans. 20. Governing Laws. This Agreement shall be governed by the Federal laws as well as the laws of the State of California, with venue in Orange County, California. 21. Severability. In the event that any provision or clause of this Agreement conflicts with applicable law, such conflict will not affect other provisions of this Agreement which can be given effect without; the conflicting provision, and to this end the provisions of the Agreement are declared to be severable. 22. Amendment of A eement. No modification, rescission, waiver, release or amendment of any provision of this Agreement shall be made except by a written agreement executed by Borrower and the Deputy City Manager. 23. Assignment by City Permitted. City may, in its sole and absolute discretion, assign its rights under this Agreement and/or its right to receive repayment of the Loans without obtaining the consent of Borrower. 24. Assignment by Borrower Prohibited. In no event shall Borrower assign or transfer any portion of this Agreement or any rights herein without the prior express written consent of City, which consent City may give or withhold in its sole and absolute discretion. This provision shall not affect or diminish City's right to assign all or any portion of its rights under this Agreement or to the proceeds of the Loans hereunder. Page 12 of 15 20A-16 25. Relationship of Borrower and City. The relationship of Borrower and City pursuant to this Agreement is that of debtor and creditor and shall not be, or be construed to be, a joint venture, equity venture, partnership or other relationship. Borrower acknowledges that City has no relationship, contractual or otherwise, with any general contractor, subcontractor, tradesman, laborer, or any other person, who shall perform any work on the Property or supply any materials used in connection with any rehabilitation or repair of the Property. 26. Notices. Except as otherwise expressly provided in this Agreement, in every case when, under the provisions of this Agreement, it shall be necessary or desirable for one party to serve any notice, request, demand, report or other communication on another party, the same shall be in writing and shall not be effective for any purpose unless served (i) personally, (ii) by independent, reputable, overnight commercial courier, or (iii) by deposit in the United States mail, postage and fees fully prepaid, registered or certified mail, with return receipt requested, addressed as follows: To Borrower: IRENE M. MAYORGA UBALDO MAYORGA 601 E. 20TH ST. SANTA ANA, CA 92706 To City: The City of Santa Ana 20 Civic Center Plaza, M-26 P.O. Box 1988 Santa Ana, California 92702-1988 Attention: Housing Programs Coordinator 27. Attorneys' Fees and Costs. In the event that any action is instituted to enforce payment or performance under this Agreement, or otherwise in connection with this Agreement, the parties agree that the prevailing party shall be reimbursed by the other party for all costs and all attorneys' fees incurred by the prevailing party in such action. 28. Entire Agreement. This Agreement, together with all attachments hereto and all documents executed pursuant hereto, constitutes the entire understanding and agreement of the parties. This Agreement integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all prior negotiations, discussions and previous agreements between City and Borrower concerning all or any part of the subject matter of this Agreement. 29. Conflict of Interest. No member, official or employee of City shall have any personal interest, direct or indirect, in the Agreement nor shall any member, official or employee participate in any decision relating to the Agreement which affects his personal interests or the interests of any corporation, partnership or association in which he is directly or indirectly interested. Borrower warrants that he/she has not paid or given and will not pay or give any third person any money or other consideration for obtaining this Agreement. 30. Captions. The captions and headings in this Agreement are for convenience only and are not to be used to interpret or define the provisions hereof. Page 13 of 15 20A-17 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first written above. CITY OF SANTA ANA Cynthia J. Nelson Deputy City Manager of Development Services APPROVED AS TO FORM: JOSEPH W.FLETCHER City Attorney By: Lisa E. Storck Assistant City Attorney Page 14 of 15 BORROWER: IRENE M. MAYORGA BORROWER: UBALDO MAYORGA 20A-18 LIST OF EXHIBITS Exhibit A - Legal Description of Property Exhibit B - Rehabilitation Plans Exhibit C - Rehabilitation Budget Exhibit D - CDBG Promissory Note Exhibit E - CalHome Promissory Note Exhibit F - CDBG Deed of Trust Exhibit G - CalHome Deed of Trust Exhibit H - Lien List Exhibit I - Disclosure Statement Exhibit J - Appendix B to Part 24 - Cert. Regarding Debarment Page 15 of 15 20A-19 20A-20