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Home My WebLink About2010-05-10 10-182 ORDERCOUNCIL ACTION 1 it Item No. () 1 R Date: May 10, 2010 Item/Subject: ORDER, Adopting Revised Policy for Investor Owned Loans, Community Development esidential Rehabilitation Loan Responsible Department: ommunity & Economic Development Commentary: The Busines and Economic Development Committee has discussed revising and restating the City's policy for I ans to investor owners of multi-family residential properties through the City's federally funded Co munity Development Residential Property Rehabilitation Loan Program. The City annually receives C mmunity Development Block Grant funds and allocates a portion to make loans available to financ the rehabilitation of residential buildings owned by or occupied by low and moderate income persons The Committee recommends modifications to the policy under which Community Development fund d loans may be made to finance the rehabilitation of investor owned residential properties, thoser sidential properties with five or more apartments or are not owner occupied. This Order continu s the policy that all loans will comply with the requirements of the Community Development Prog am, loans of $100,000 or less may be approved by the Business and Economic Development Com ittee and over $100,000 by the City Council, investor owners are eligible to participate if they ent or agree to rent a minimum of 51% of the apartments in the property to be improved to to - and moderate- income persons at rents not to exceed the maximum fair market rents for Bangor p blished by HUD, the property meet City building maintenance codes after rehabilitation, and rent increases be restricted for four years after the loan is made to protect existing tenants. Changes proposed are that the loan interest rate no longer be fixed but be adjusted every five years, the term of the loan not exceed the expected life of the improvements being financed not to exceed 20 years, and the loans meet minimum lending standards. This revised policy has been reviewed and recommended for approval by the Business and Economic Development Committee. Department Head Manager's Comments: Interim City Manager Associated Information: O der, including Policy Budget Approval: Finance Director Legal Approval: ty Solicitor Introduced for x Passage First Reading Page _ of _ Referral 10 186 Assigned to Councilor — Gratwick May 10, 2010 CI'T'Y OF BANGOR (TITLE.) ORDER, Adopting Revised Policy for Investor Owned Loans, Community Development Residential Rehabilitation Loan WHEREAS, the City of Bangor is an entitlement community under the U.S. Department of Housing and Urban Development (HUD) Community Development Block Grant Program and annually receives Community Development Block Grant funds; and WHEREAS, an eligible use of Community Development Block Grant funds is the rehabilitation and preservation of privately owned buildings and improvements for residential purposes, principally to benefit low and moderate income persons as defined by the U.S. Department of Housing and Urban Development; and WHEREAS, the City has traditionally allocated a portion of its annual Community Development Block Grant to provide loans to low and moderate income residential property owners, and to investor owners that rent or agree to rent a minimum of 51% of the residential units in the property to be rehabilitated to low and moderate income persons; and WHEREAS, the City Council of the City of Bangor wishes to refine and restate the policy under which City of Bangor Community Development funded loans may be made to finance the rehabilitation of residential properties that are investor owned, defined as residential properties that have five or more residential units and any residential properties that is not owner occupied: BE IT ORDERED BY THE CITY COUNCIL OF THE CITY OF BANGOR THAT the following policy applies to Community Development funded loans to owners of residential property containing more than four residential units and residential properties that are not occupied by the owner: 1. All loans will comply with the requirements of the Community Development Block Grant Program. 2. Loans of $100,000 or less may be approved by the Business and Economic Development Committee of the Bangor City Council. 3. Loans of more than $100,000 require the approval of the City Council of the City of Bangor. 4. Investor owners of multi -family properties are eligible to participate if they rent or agree to rent a minimum of 51% of the apartments in the property to be improved to low- and 1 c �, L moderate- income persons as defined by the U.S. Department of Housing and Urban Development (at or below 80% of median family income by family size). 5. Borrowers agree to rent a minimum of 51% of the units in a property financed to low - and moderate- income persons at rents not to exceed the maximum fair market rents for Bangor published by the U.S. Department of Housing and Urban Development. 6. Loans can be made only if all City of Bangor - International Property Maintenance Code violations will be corrected and the property after the rehabilitation financed will comply with U.S. Department of Housing and Urban Development housing quality standards. 7. Owners be required to enter a Rent Agreement effective for the first 4 years of the loan that restricts rent increases for pre-existing low- to moderate- income tenants (tenants at time of the loan closing) to no more than the rental amount before rehabilitation, plus a prorated amount necessary to cover the additional debt service required to amortized the Community Development loan, in order to prevent rent increases following rehabilitation that could potentially cause existing tenants to move due to rent increases resulting from the property improvements financed. 8. The interest rate for loans for the rehabilitation of investor owned properties will be fixed at the Federal Home Loan Bank of Boston rate at the time of the loan plus 300 basis points (3 PP) for the first five years of the loan, then adjusted to the Federal Home Loan Bank of Boston rate plus 300 basis points (3 PP), and every five years thereafter, unless otherwise approved by the Business and Economic Development Committee, if needed to make a project financially feasible. 9. Loan repayments be amortized for a period not to exceed the expected life of the improvements being finance, not to exceed 20 years, unless otherwise approved by the Business and Economic Development Committee, if needed to make a project financially feasible. 10. Loans not exceed an 80% loan to value ratio unless otherwise approved by the Business and Economic Development Committee, if needed to make a project financially feasible. 11. The owner will provide not less than 20% of the project cost, in cash or equity, unless otherwise approved by the Business and Economic Development Committee. 12. The debt coverage ratio (revenue available to cover debt service) not be less than 1.2 unless otherwise approved by the Business and Economic Development Committee, if needed to make a project financially feasible. IN CITY COUNCIL May 10, 2010 Motion Made and Seconded for Passage Passe a"�v� CLERK # 10-182 (UTLEJ-Adupling Revised Policy for =—actor (paned Loans, Community Development Residential Rehabilitation Loan. Assigned to Councilor G44t4