M&C Review


COUNCIL ACTION:  Approved on 11/6/2018 

DATE: 11/6/2018 REFERENCE NO.: G-19413 LOG NAME: 1919-HAP POLICY CHANGE
CODE: G TYPE: NON-CONSENT PUBLIC HEARING: NO
SUBJECT:   Authorize Changes to the City's Homebuyer Assistance Program to Allow Maximum Assistance up to $20,000.00 for Eligible Homebuyers, Change Certain Underwriting Requirements and the Recapture Provisions, and Change the Limit for Closing Costs Assistance (ALL COUNCIL DISTRICTS)

RECOMMENDATION:

It is recommended that the City Council authorize changes to the City's Homebuyer Assistance Program to allow maximum assistance up to $20,000.00 for eligible homebuyers, change certain underwriting requirements the limit for closing costs assistance and the recapture provisions, as well as other changes detailed below.

 
DISCUSSION:

Since 1997, the City's Homebuyer Assistance Program (HAP) has assisted low and moderate income households with affordable homeownership by providing deferred forgivable loans to reduce down payment and closing costs associated with the purchase of a house.  Households whose income is at or below 80 percent of Area Median Income (AMI), set annually by the United States Department of Housing and Urban Development (HUD), are currently able to receive a HAP loan of up to $14,999.00. The loan is a zero-payment, zero-interest subordinate loan. If the homebuyer occupies the home as their principal residence for five years, the loan is forgiven. If the home is sold or rented before the end of the five year period, the loan must be repaid in full.

Due to historically low interest rates, improved lending climate and population growth, the City served about 100 to 150 households with down payment and closing cost assistance prior to 2014.  From 2014 to 2017 the City served an average of 62 households.  Staff met with lenders and real estate agents and based on the discussions and recommendations, decided to make several changes to the current policy and guidelines to help more citizens to own homes. Staff also determined that the City's current HAP guidelines are more stringent than those of other cities and counties.  

Staff briefed the City Council's Housing and Neighborhood Services Committee about this proposal on October 30, and the committee voted on that date to recommend it for approval by the full Council.

Staff recommends the following changes to the City's HAP policies and guidelines:

1.        Eliminate the current tiered maximum assistance based on family size and raise the maximum
         assistance to $20,000.00.
2.        Lower the minimum housing ratio from 20% to 10%.
3.        Change the housing ratio (front end ratio) from 30% to 32% and debt ratio (back end ratio) from
         41% to 43%.
4.        Add a housing ratio of 35% and debt ratio of 45% for homebuyers with credit scores at or above 620.
5.        Eliminate the current cap of $3,000.00 for closing cost assistance and change it to three percent of
         the loan amount.
6.       The loan term will be 10 years if the assistance amount is over $14,999.00. The first $14,999.00 of
        the loan will be forgiven after five years. Twenty percent of the remaining loan amount over
        $14,999.00
will be forgiven each year on the anniversary date of years six through ten of the loan
        term.  

The Homebuyer Assistance Program is available in ALL COUNCIL DISTRICTS.

This M&C does not request approval of a contract with a business entity.

 
FISCAL INFORMATION/CERTIFICATION:

The Director of Finance certifies that this action will have no material effect on City funds.

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Submitted for City Manager's Office by:
Fernando Costa (6122)
Originating Department Head:
Aubrey Thagard (8187)
Additional Information Contact:
Rhonda Hinz (2573)

 
 
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