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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/01/2001 - RESOLUTION 2001-66 ADOPTING PROCEDURES FOR THE DIS AGENDA ITEM SUMMARY ITEM NUMBER: 21 FORT COLLINS CITY COUNCIL DATE: May 1, 2001STAFF: Ken Waido SUBJECT: Resolution 2001-66 Adopting Procedures for the Disbursement of Funds in the City'sHome Buyer Assistance Program. RECOMMENDATION: f Staff recommends adoption of the Resolution. The CDBG Commission voted in favor of the I recommended changes at its meeting on April 12, 2001. The Affordable Housing Board voted in favor of the recommended changes at its meeting on March 22, 2001. EXECUTIVE SUMMARY: In May of 1994, the City of Fort Collins received designation as a Participating Jurisdiction in the Housing and Urban Development's (HUD) HOME Program. The intent of the HOME Program is to expand the supply of decent, safe, sanitary, affordable housing in the community, to strengthen the ability of local government to provide housing and to expand the capacity of nonprofit community-based housing development organizations to provide affordable housing. On July 18, 1995, City Council approved Resolution 95-96 which adopted processes/procedures to implement the HOME program. These included the requirement that assistance for down payment and closing costs (known as the City of Fort Collins Home Buyer Assistance Program) not exceed $5,000 per household. It is the recommendation of both the Affordable Housing Board and the CDBG Commission that the Resolution be amended to allow loan amounts to be increased to a maximum of 4.5%of the local FHA limit per household for those households which have incomes below 80% of the Area Median Income(AMI) and a maximum of 9% of the local FHA limit per household for those at or below 50% AMI with the amount adjusted as the local FHA limit is adjusted. For example, at the current FHA limit of $175,750, these amounts would be raised to $8,000 and $16,000 respectively. The HOME Program was authorized by the National Affordable Housing Act of 1990 to provide funds for a variety of housing-related activities which would increase the supply of decent, safe, sanitary and affordable housing. Council approved the City's participation in the HOME Program in March of 1994 and on May 26, 1994, HUD notified the City of the official awarding of a HOME Investment Partnership Program grant. Designation as a Participating Jurisdiction in the HOME Program is similar to being an entitlement community in the CDBG Program; that is, the City will continue to receive an allocation of HOME funds in future years provided Congress re-authorizes and funds the program. DATE: May 1, 2001 2 ITEM NUMBER: 21 The City has provided the Home Buyer Assistance program to low-to moderate-income households to help them purchase their first homes since 1995. Over 470 households have received loans of up to$5,000 to cover down payment and closing costs. In most cases,these households would not have been able to purchase their first home without this help. However, as housing costs have risen in Fort Collins, the amount of down payment and closing costs required to close on a home has also risen.Currently,households participating in the Home Buyer Assistance Program pay an average of $2,900 out of pocket in addition to the $5,000 loan from the City. The Colorado Department of Local Affairs,Housing Division,recently surveyed down payment and closing costs state-wide and determined that state-sponsored down payment and closing cost assistance would be raised to a figure that reflects 4.5% of the local FHA limit. As the federal FHA limit is raised or lowered, the amount of assistance is adjusted. It is the State Board of Housing's opinion that this amount of assistance accurately reflects the appropriate amount of funding needed to help households purchase affordable housing. The Latimer Home Ownership Program (LHOP), the State-sponsored down payment program which covers Larimer County outside of Fort Collins, has already raised its maximum loan amount to this level. Local mortgage lenders in Fort Collins were asked to comment on the change and the comments received were all favorable citing increasing housing costs making it more difficult for households to qualify. Using the current FHA limit of $175,750 for Fort Collins, and rounding the loan amount to the nearest $1,000, the City's maximum loan amount would be increased to$8,000 for families earning between 51-80%of AMI. This amount would be adjusted according to any future adjustment in the local FHA amount. In addition,with wages not keeping pace with rising housing costs,it has become apparent that home ownership for low-income households in Fort Collins requires additional help. It is proposed that the maximum loan amount for households at the 50% AMI level and below (low income households)be increased to 9%of the FHA limit. Using the current FHA limit of$175,750 for Fort Collins, and rounding the loan amount to the nearest $1,000, the City's loan amount would be increased to $16,000 for families earning 50% of AMI or below. This amount would be adjusted according to any future adjustment in the local FHA amount. The majority of these larger loans would most likely be available to Habitat families who typically earn between 30% and 50% AMI or to households purchasing other subsidized housing targeted to low-income households such as the manufactured units in Via Lopez or the townhomes at Parkway. Increasing the maximum loan amount may reduce the number of households able to receive help assuming that the yearly funding allocated to Home Buyer Assistance remains the same. However, the program has seen a definite slowing during the last year in the number of households able to qualify for a loan due to rising home prices and an increase in the amount of out-of-pocket dollars needed to close on a home. Since income limits for this program are set by the Department of Housing and Urban Development and have not kept pace with the increase in housing costs locally, raising the maximum loan amount will help additional households have access to a larger down payment to make a home more affordable to them and will reduce the out of pocket expense for lower income households. By increasing the maximum loan limit, the program is thereby able to broaden the base of lower income families who can use the program to purchase affordable housing. Home Buyer Assistance loans are offered at zero-percent interest with no payments until the home (1) is sold or transferred, (2)becomes a rental and no longer the primary residence of the owner, or (3) equity is removed from the home (i.e. a home equity loan). The owner then repays the loan to the Home Buyer Assistance program and the program income is recycled to help more qualified low- and moderate-income households. RESOLUTION 2001-66 OF THE COUNCIL OF THE CITY OF FORT COLLINS ADOPTING PROCEDURES FOR THE DISBURSEMENT OF FUNDS IN THE CITY'S HOME BUYER ASSISTANCE PROGRAM WHEREAS,on March 21, 1995,the Council of the City of Fort Collins adopted Resolution 95-40 establishing a procedure for the disbursement of funds in the City's Homebuyer Assistance Program which procedure was amended in its entirety by the Council pursuant to Resolution 95-96; and WHEREAS, upon the recommendation of the Affordable Housing Board and Community Development Block Grant Commission, the Council has determined that the procedures as established in Resolution 95-96 should be amended in order to change the maximum amount available to applicants for down payment and closing cost assistance from$5,000 per household to a maximum of 4.5% of the local FHA limit per household for those households with incomes at or below 80% of area median income ("AMI") and to a maximum of 9% of the local FHA limit per household for those households which have incomes at or below 50% of AMI; and WHEREAS,the purpose of this resolution is to amend the procedures previously established by Resolution 95-96 accordingly. NOW,THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS that Resolution 95-96 be, and hereby is repealed and that the following procedures be adopted for the purpose of processing applications and making disbursements of funds pursuant to the Homebuyer Assistance Program (the "Program"): 1. Applications for the disbursement of Program funds will be accepted by the City which meet the following criteria: a. The applicant and the subject property are verified by the City to be eligible for Program funding. b. The project conforms with the housing priorities contained in the City's Consolidated Plan or the City's Comprehensive Housing Affordability Strategy (CHAS), whichever is in effect. C. The applicant demonstrates that it has the ability to abide by the conditions of and perform the obligations of the Program contract. d. The project is determined by the City to be feasible. e. The City Council has set aside sufficient funds for operation of the program. 2. The process to award funding of projects will be as follows: a. Applications for funding shall be submitted to the City's CDBG/HOME Administrator. b. City staff shall screen all applications for basic eligibility and program priority conformance. City staff shall separately review applications for down payment and closing costs assistance not exceeding the limits provided in subparagraph(1) or(2) below and those applications will be certified for eligibility based upon the applicant's gross household income. Eligible down payment and closing cost applicants shall receive from the City staff a Letter of Conditional Commitment which will entitle such applicants to the appropriate funding at the home closing. No further review shall be required of such down payment and closing cost applications. Any assistance under this paragraph (b) shall be subject to the following limits: (1) A maximum of 4.5% of the local FHA limit per household for those households which have incomes at or below 80% of AMI, or (2) A maximum of 9%of the local FHA limit per household for those households which have incomes at or below 50% of AMI. Passed and adopted at a regular meeting of the Council of the City of Fort Collins held this 1st day of May, A.D. 2001. Mayor ATTEST: City Clerk