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HomeMy WebLinkAbout03-117 Resolution No. 03-117 RESOLUTION AUTHORIZING EXECUTION OF A PURCHASE OF SERVICE AGREEMENT WITH NEIGHBORHOOD HOUSING SERVICES OF ELGIN, INC. FOR THE FIRST TIME HOMEBUYERS PROGRAM BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS, that David M. Dorgan, City Manager, and Dolonna Mecum, City Clerk, be and are hereby authorized and directed to execute a Purchase of Service Agreement on behalf of the City of Elgin with Neighborhood Housing Services of Elgin, Inc . for the First Time Homebuyers Program, a copy of which is attached hereto and made a part hereof by reference . s/ Ed Schock Ed Schock, Mayor Presented: April 23 , 2003 Adopted: April 23 , 2003 Omnibus Vote: Yeas : 6 Nays : 0 Attest : s/ Dolonna Mecum Dolonna Mecum, City Clerk PURCHASE OF SERVICE AGREEMENT BETWEEN NEIGHBORHOOD HOUSING SERVICES OF ELGIN, INC . AND THE CITY OF ELGIN REGARDING FIRST TIME HOMEBUYERS PROGRAM THIS AGREEMENT is made and entered into this ?Z day of , 2003 , by and between the City of Elgin, Illinois, a municip l corporation, (hereinafter referred to as "City" ) and Neighborhood Housing Services of Elgin, Inc . , an Illinois not-for- profit corporation (hereinafter referred to as "NHS" ) . WHEREAS, the City has previously established a First Time Homebuyers Down Payment Assistant Program which provides City of Elgin residents with a greater opportunity to become homeowners by providing eligible homeowners with forgivable loans to be used for a housing down payment and closing costs (hereinafter referred to as the "First Time Homebuyers Assistance Program" ) ; and WHEREAS, the City has determined that it is in the best interests of the City to enter into an agreement with NHS whereby NHS shall provide certain services in connection with the administration and implementation of the First Time Home Buyers Assistance Program. NOW, THEREFORE, for and in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows : 1 . The City shall pay to NHS the amount not to exceed $75, 000 for the administration and implementation of the First Time Homebuyers Assistance Program. A summary description of the First Time Homebuyers Assistance Program is attached hereto as Exhibit A. In the event of any conflict between the terms of this Agreement and the terms of Exhibit A the terms of this Agreement shall control . 2 . NHS shall utilize the aforementioned $75, 000 solely and only for the administration and implementation of the First Time Homebuyers Assistance Program to provide assistance to low and moderate income persons, whose income falls at or below 80% of the Median Family Income limits established by the United States Department of Housing and Urban Development (hereinafter referred to as "HUD" ) purchasing their first home, condominium, and/or townhome, located within the corporate boundaries of the City of Elgin, Illinois, pursuant to the terms and conditions provided herein and by the HUD Income Guidelines promulgated February 2003 , a copy of said guidelines is attached here to as Exhibit B. 3 . NHS shall receive up to or an amount not to exceed 10% ($7, 500) of the program budget to cover NHS administrative expenses in connection with the First Time Homebuyers Assistance Program including staff time for processing applications of qualified homebuyers, establishing and recording second mortgage lien documents, conducting homebuyer education classes, developing marketing strategies and for office overhead, supplies and program advertising. Reimbursement for administrative expenses shall be paid as described in paragraph 4 hereof . 4 . NHS shall perform the services in connection with the First Time Homebuyers Assistance Program as described in Exhibit A attached hereto and as further described as follows : a. Provide five year forgivable mortgages for one-half of the qualified applicant' s combined down-payment and closing costs, not to exceed 2% of the purchase price of the home, in no event however shall this forgivable mortgage exceed $4, 000 . b. Establish a Revolving Loan Fund account for the deposit of all applicant fees; c . Set-up and maintain all account records on an internal "Notesmith" loan accounting system; d. Market the program to Elgin residents through: (1) Press releases to all local media including the Courier News, Daily Herald, and the Neighborhood Voice; and (2) Written program material for local lenders and real estate offices; e . Process homebuyer assistance applications using established underwriting standards . f . Obtain a mortgage application from program applicants . g. Obtain a copy of all applicable lead-based paint disclosures if applicant is pursuing FHA financing; h. Conduct homebuyer education classes for applicants prior to fund distribution; i . Provide two written reports detailing the disbursement of all City funds utilized hereunder. These reports shall describe the -2- number of applicants processed, and education classes conducted. Reports shall include client household size, income information, and grant allocation levels . Expenditure reports shall also be submitted to detail the costs incurred by NHS . These reports shall be provided to the City Council by May 31 , 2003 , and December 31, 2003 , and shall include all program activity. These reports shall be submitted to the City Manager' s Office, City Hall, 150 Dexter Court, Elgin, IL, 60120 ; j . Notify the City of any early re-payments . Deposit all re-payments in the Revolving Loan Fund account for distribution to additional qualified applicants . 5 . Payments from the City to NHS for the First Time Homebuyers Assistance Program will be processed in the following manner: a. NHS shall submit a Request for Payment form monthly for NHS to be reimbursed for administering the First Time Homebuyers Assistance Program with such requests for payment for reimbursement to include : 1 . A time study for staff salaries to include the percentage of work on specific activities, hours worked, and gross amount earned during a set time period. 2 . Copies of receipts if reimbursing that month for supplies. b. Request for Funds for Forgivable Loans described in Section 4 (a) hereof for each program applicant will be processed in the following manner; 1 . NHS will submit a request for each individual program applicant . 2 . The request will not exceed 2% of the purchase price of the home up to a maximum of $4 , 000 . 3 . The request will include the Income Certification form which indicates purchase price, grant amount, total household size and -3- income . All income documentation will provided such as current tax returns and pay stubs . 4 . All requests will have to be received three weeks prior to the closing date for review and processing. 5 . The request will be processed for the approved amount and the check will be written to the title company performing the closing. 6 . NHS shall establish a separate fund for the funds provided for herein. The fund is to be accounted for separately in the annual NHS audit . NHS shall not borrow from such fund for operations or otherwise obligate the fund for purposes other than for the First Time Homebuyers Assistance Program. 7 . This Agreement shall be effective April 23 , 2003 and shall terminate December 31, 2003 . Unless otherwise terminated as provided herein, this Agreement shall terminate December 31, 2003 . 8 . This Agreement may be terminated by City upon fifteen (15) days written notice to NHS for any or no reason at the City' s sole discretion. 9 . NHS shall provide the City with financial statements relative to the organization' s total operations . These statements shall be provided on or before July 31, 2003 and December 31, 2003 . 10 . The terms and provisions of this Agreement shall be severable . In the event that any portion of this Agreement is deemed to be void or otherwise unenforceable for any reason, the remainder of this Agreement shall remain in full force and effect . 11 . This Agreement shall be subject to and governed by the laws of the State of Illinois . Venue for the resolution of any disputes or the enforcement of any rights pursuant to this agreement shall be in the Circuit Court of Kane County, Illinois . 12 . This Agreement shall not be deemed or construed to create an employment, joint venture, partnership or other agency relationship between the parties hereto. 13 . In the event the program for which the City funds provided herein are to be applied is discontinued or NHS ceases its operations prior to December 31, 2003 , NHS shall refund to the City on a pro rata basis the funds paid hereunder for the portion of the year remaining after any such termination or for the portion of the year such programs or NHS operations were not conducted. -4- 14 . The City shall be recognized as sponsor of NHS and shall receive the benefits of sponsorship consistent with the level of support provided. At a minimum, the city support shall be acknowledged in the Annual Report of NHS and any "Web" page information. Samples of this acknowledgement shall be provided to the City. 15 . To the fullest extent permitted by law, NHS agrees to indemnify, defend and hold harmless the City, its officers, employees, boards and commissions from and against any and all claims, suits, judgments, costs, attorney' s fees, damages or other relief arising out of or resulting from or through or alleged to arise out of any reckless or negligent acts or omissions of NHS ' s officers, employees or agents in the performance of this agreement . In the event of any action against the City, its officers, employees, agents, boards or commissions covered by the foregoing duty to indemnify, defend and hold harmless, such action shall be defended by legal counsel of the City' s choosing. The provisions of this paragraph shall survive any termination and/or expiration of this Agreement . 16 . This Agreement and each and every portion thereof shall be binding upon the successors and the assigns of the parties hereto, provided, however, that no assignment shall be made by NHS without the prior written consent of the CITY. 17 . This Agreement, the documents it incorporates and its attachments, if any, constitutes the entire Agreement of the parties on the subject matter hereof and may not be changed, modified, discharged or extended except by written amendment duly executed by the parties . Each party agrees that no representations or warranties shall be binding upon the other party unless expressed in writing herein or in a duly executed amendment hereof . CITY OF ELGIN NEIGHBORHOOD HOUSING SERVICES OF ELGIN, INC. YtiJY� City Manager Nitctotrv1 Scott //)1'e Board Presidenp Attest : / kN/OL.4,'� / City Clerk -5- PROPOSAL FIRST TIME HOMEBUYERS DOWNPAYMENT ASSISTANCE PROGRAM GUIDELINES Neighborhood Housing Services of Elgin will act as administrator for the City of Elgin First Time Homebuyers Assistance Program. Eligibility Requirements: - Applicants must be current residents of Elgin (for the twelve month period prior to application) and must meet federal first time homebuyer and low to moderate income guidelines. - Applicants must have an accepted sales contract to purchase a home within the City of Elgin, and must have a first mortgage commitment. - Applicants should demonstrate a financial need for assistance (no more than the equivalent of four month's mortgage payments available in savings). - Applicants must complete a homebuyer education program administered by NHS prior to funding. Application Processing: Applicants will complete a 1003 mortgage application with NHS, or provide a copy to NHS from their first mortgage financer. If the applicant is obtaining FHA financing, NHS will be provided with a copy of all applicable lead based paint disclosures. If the applicant is obtaining conventional financing, NHS staff will be responsible for performing applicable lead based paint Inspection services. All applications will be approved by the NHS Loan Committee using existing NHS underwriting standards. Once approved, applicants will schedule a homebuyer education class with NHS staff. It is anticipated that participants will be required to attend a class from two to four hours in length using materials from Neighborhood Reinvestment Corporation and Fannie Mae. Upon successful completion of the homebuyer education class, applicants will receive a certificate • to be included in their first mortgage and NHS loan files. _ Three days prior-to closing,applicants-will execute documents with_NIBS. The loan proceeds check will be made payable to the title company whenever possible,•or to the pplicants;directly to exchange for a bank check to be presented at closing. Program Guidelines: . • - - Program will be administered by NHS of Elgin to.comply with ail federal • guidelines noted under the City of Elgin's CDSG program application. EXHIBIT A Applicants will be eligible to receive a grant of up to a maximum of$4,000 to make up a total of 2% of down payment funds needed to close. Applicants must provide proof of providing a minimum of 3% of their own funds, meeting FHA standard underwriting criteria. Loan will be forgiven if the applicants stay in the property for a period of five years. If the property is sold prior to the end of the five year period, the loan would be repaid at a rate of 20% for each year remaining up to the fifth year. NHS will record a second mortgage on each property with the applicable county recorder's office. NHS will maintain all account records on the internal Notesmith loan accounting system. A separate bank account will be established for program funds. All fees will be deposited to the NHS Revolving Loan Fund account. NHS will provide monthly reports to the City until all funds are exhausted. The City will be notified of any early repayments. Funds may then be used by NHS for any other first time homebuyer applicants. Marketing: NHS will market program availability through the following sources: press releases to all local media, including the Courier News, Elgin Herald, Chicago Tribune and The Neighborhood Voice. Written program material will be sent to local lenders and real estate offices by NHS. Administrative Costs: NHS will receive 10% ($7,500) of the program budget to cover administrative expenses. Included in these administrative expenses are the following: application processing costs including recording of second mortgage lien documents and credit report costs, homebuyer education course and materials, bank account establishment, staff costs, office expenses and overhead and marketing expenses. Attachments: NHS Loan Documents Sample of Homebuyer Education Materials HUD approval letter for NHS to administer homebuyer programs HUD Income Guidelines Effective February 20, 2003 Household Extremely Very Low Other Low Median Size Low Income Income Income Family (0-30% MFI) (31-50% MFI) (51-80% MFI) Income 1 $15,850 $26,400 $39,550 $52,800 2 $18,100 $30,150 $45,200 $60,300 3 $20,350 $33,950 $50,850 $67,900 4 $22,600 $37,700 $56,500 $68,700 5 $24,450 $40,700 $61,000 $81,400 6 $26,250 $43,750 $65,550 $87,500 7 $28,050 $46,750 $70,050 $93,500 8 or more $29,850 $49,750 $74,600 $99,500 MFI = Median Family Income MFI for all household sizes for 2003 is $68,700 EXHIBIT B r OF Et Ci Agenda Item No. City of Elgin °R,T0,10' ' L G April 4 , 2003 N alin4 l • QUALITY HOUSING TO: Mayor and Members of the City Council FROM: David M. Dorgan, City Manager Amy Coyne, CDBG Coordinator V SUBJECT : 2003 Purchase of Service Agreement with Neighborhood Housing Services of Elgin First Time Homebuyer Program PURPOSE The purpose of this memorandum is to provide the Mayor and members of the City Council with information to consider a Purchase of Service Agreement with Neighborhood Housing Services few of Elgin, Inc . , (NHS) for a First Time Homebuyer Program. BACKGROUND NHS is chartered through a national, congressionally-chartered organization; Neighborhood Reinvestment Corporation. The NHS partnership is a structure fostering involvement and cooperation from the community, bringing together citizens, financial institutions and city government . The cooperation is evident in the NHS budget, which supplements City support by leveraging contributions from local banks, grants and other fund raising. During the 2002 program year, NHS has accomplished the following; • Eleven First Time Homebuyers have been approved with an additional one ready to close in March 2003 . • Expended $40, 692 . 39 with $34 , 307 . 61 remaining which will be brought over into the 2003 program year. This is due to the suspension of all services during the middle of the 2002 program year. NHS' s First Time Homebuyer Program was �I. reinstated in October of 2002 . At this time, NHS does not have any clients on a waiting list . NHS did have calls for people to be put on a waiting list but the Interim 2003 Purchase of Service Agreement with NHS April 4 , 2003 Page 2 Executive Director decided it was in the agency' s best interest to complete the agency' s reorganization before initiating a waiting list . Staff does not anticipate having any difficulty in expending the remaining 2002 funding and the proposed 2003 funding by December of 2003 . • All recipients completed the First Time Homebuyer education classes . The certified classes were provided through FHA or through conventional lenders/banking institutions . • All other requirements of the 2002 PSA have been fulfilled. For 2003 , the budget includes $75, 000 for NHS to administer the second year of the City' s First Time Homebuyer Program. This program will provide closing costs and down payment assistance for income eligible First Time Homebuyers . All potential homebuyers will have to be at or below 80% of the median family income as established by HUD. NHS shall receive 10% ($7, 500) of (00P. the program budget to cover administrative expenses . Due to administrative changes, NHS and the Planning and Neighborhood Services staff have established new procedural requirements . The following have already been initiated; (1) monitoring of each client file for eligibility, (2) Certification of Income forms indicating family size, closing date, purchase price, grant amount, and income documentation, and (3) Request for Payment forms will be a new procedure implemented in program year 2003 . Instead of a lump sum payment to NHS of $75, 000, the city will retain these funds and establish a drawn down system. NHS will be required to submit a request for payment prior to the clients closing date in order to process the check in a timely manner. Separate from the client draw down request , NHS will be submitting monthly requests for reimbursement associated with administrative expenses . COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED None. 2003 Purchase of Service Agreement with NHS April 4 , 2003 Page 3 FINANCIAL IMPACT The First Time Homebuyer Program is funded with $75, 000 from the 2003 budget in the Riverboat Fund, account number 275-0000- 791 . 78-99, project number 079840 . Sufficient funds are available to enter into this agreement . I\JOWGAL IMPACT None . ALTERNATIVES 1 . Approve the Purchase of Service Agreement . 2 . Do not proceed with the Purchase of Service Agreement at this time . rk RECOMMENDATION It is recommended that the City Council approve the Purchase of Service Agreement with NHS for the First Time Homebuyer Program. Respectfully submitted for Council consideration. AC/sr Attachment