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HomeMy WebLinkAbout05-274 Resolution No. 05-274 RESOLUTION AUTHORIZING EXECUTION OF A PURCHASE OF SERVICE AGREEMENT WITH NEIGHBORHOOD HOUSING SERVICES OF ELGIN, INC. FOR FIRST TIME HOMEBUYER ASSISTANCE PROGRAM BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN,ILLINOIS,that Olufemi Folarin,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 Homebuyer Assistance Program,a copy of which is attached hereto and made a part hereof by reference. s/Ed Schock Ed Schock, Mayor Presented: September 14, 2005 Adopted: September 14, 2005 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 HOMEBUYER ASSISTANCE PROGRAM THIS AGREEMENT is made and entered into this ty day of S'EPTCM Q {2 2005,by and between the City of Elgin, Illinois, a municipal 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 Homebuyers Down Payment Assistance 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"Homebuyer 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 Home Buyer Assistance Program; NOW, THEREFORE, for and in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the sufficiency of which is hereby mutually acknowledged, the parties hereto hereby agree as follows: 1. The City shall pay to NHS an amount not to exceed $63,000 for the administration and implementation of the Homebuyer Assistance Program during the term of this agreement. A summary description of the Homebuyer Assistance Program is attached hereto and made a part hereof 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$63,000 solely and only for the administration and implementation of the Homebuyer Assistance Program to provide assistance to low and moderate income persons,whose income falls at or below 85%of the Median Family Income limits established by the United States Department of Housing and Urban Development (hereinafter referred to as "HUD") for the purposes of purchasing a 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 2005. A copy of said guidelines is attached hereto and made a part hereof as Exhibit B. 3. NHS shall be entitled to utilize an amount not to exceed 10%of the amount paid by City pursuant to this agreement to be applied to administrative expenses in connection with the Homebuyer Assistance Program which administrative expenses shall include 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. These administrative expenses will be added to each approved application reviewed and released by the city. 4. NHS shall perform the services in connection with the Homebuyer 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 3%of the purchase price of the home;in no event,however,shall this forgivable mortgage exceed$5,000. Provide an additional$5,000 in grant funding to eligible properties in areas specifically identified by the City of Elgin. This grant funding is to be used to correct outstanding code violations present at the time of the property closing. b. Review prospective applicants to ensure eligibility with the federal income guidelines provided for herein and attached hereto as Exhibit B. c. Set up and maintain all account records on an internal loan accounting system. d. Market the program to Elgin residents through(1)press releases to all local media, including but not limited to, the Courier News, Daily Herald,Chicago Tribune,Reflejos and the ECN Community Builder; and(2)written program materials to be provided to local lenders and real estate offices. e. Process homebuyer assistance applications using established underwriting standards. f. Obtain mortgage applications 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 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 October 31,2005,and March 31,2006,and shall -2- 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 repayments. Early re-payments should be sent directly to the City of Elgin. 5. Payments from the City to NHS for the Homebuyers Assistance Program will be processed in the following manner: a. NHS shall submit a Request for Payment form to be reimbursed for administering the First Time Homebuyers Assistance Program with each application. b. Requests for funds for forgivable loans as provided for herein for each program applicant shall be processed in the following manner: 1. NHS shall submit a request for each individual program applicant. 2. The request shall not exceed 3%of the purchase price of the home up to a maximum of$5,000. 3. The request shall include the Income Certification form which indicates purchase price, grant amount, total household size and income. 4. All requests for payment shall be submitted not less than twenty-one (21) days prior to the closing date. 5. The request shall be processed for the approved amount and the check shall be written to the title company performing the closing. 6. 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 Homebuyer Assistance Program as provided for herein. 7. 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 without penalty or any liability. This agreement shall otherwise terminate December 31, 2006. 8. NHS shall provide the City with financial statements relative to the organization's total operations. These statements shall be provided on or before October 31,2005 and March 31, 2006. -3- 9. 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. 10. 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. 11. This Agreement shall not be deemed or construed to create an employment,joint venture,partnership or other agency relationship between the parties hereto. 12. 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. The City will issue a press release when the agreement is signed and post information about this program on its web page. 13. 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. 14. 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. 15. 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. -4- CITY OF ELGIN NEIGHBORHOOD HOUSING SERVICES OF ELGIN, INC. By W ke,a-rAL—. City M. ,fir J a 'oberson Board President Attest: “rui4 /1 Caws City Clerk -5- Exhibit A HOMEBUYER ASSISTANCE PROGRAM GUIDELINES Neighborhood Housing Services of Elgin will act as administrator for the City of Elgin Homebuyer Assistance Program. Eligibility Requirements: • Applicants 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.) • Applicant must complete a homebuyer education program administered by NHS prior to funding. • Applicants must have maintained a residence within the corporate limits of the City of Elgin for 12 months prior to the date of application. • Applicant can not have owned a home within the previous three years of the application date. • The applicant's requirement for a matching three percent (3%) cannot be in the form of an additional loan. Application Processing: Applicants will complete a mortgage application with NHS,or provide a copy to NHS from their first mortgage financer. If the applicant is obtaining FHA financing,NHS will ensure that all lead paint inspection requirements have been satisfied. All applications will be approved by NHS staff using existing underwriting standards. Applications will then be reviewed and approved by City staff. 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. Prior to closing, applicants will execute documents with NHS. The loan proceeds check will be made payable to the title company whenever possible, or to the applicants directly to exchange for a bank check to be presented at closing. -6- Program Guidelines: The program will be administered by NHS of Elgin to comply with all federal guidelines noted under the City of Elgin's CDBG program application. Applicants will be eligible to receive a grant of up to a maximum of$5,000 to make up a total of 3% of down payment funds needed to close. Applicants must provide proof of 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 NSTEP loan accounting system. A separate account will be established for program administrative funds. The City will be notified of any early repayments. Funds may then be used by NHS for any other homebuyer assistance applicants. Marketing: NHS will market program availability through the following sources: press releases to all local media, including the Courier News, Daily Herald, Chicago Tribune, and Reflejos. Written material will be sent to local lenders and real estate offices by NHS. Administrative Costs: NHS will receive 10% ($6,300) of the program budget to cover administrative expenses. Included in their administrative expenses are the following: application processing costs including recording of second mortgage lien documents, homebuyer education courses and materials,bank account establishment, staff costs, office expenses and overhead and marketing expenses. The appropriate amount of administrative expenses will be disbursed with each application. -7- Exhibit B HUD Income Guidelines Effective February 11, 2005 Extremely Very Low Other Low Median Family Household Low Income Income Income Income Size 0-30% MFI 31-50% MFI 51-85% MFI 1 $15,850 $26,400 $42,630 $52,800 2 $18,100 $30,150 $48,720 $60,300 3 $20,350 $33,950 $54,810 $67,900 4 $22,600 $37,700 $60,900 $68,700 5 $24,450 $40,700 $65,751 $81,400 6 $26,250 $43,750 $70,665 $87,500 7 $28,050 $46,750 $76,495 $93,500 8 $29,850 $49,750 $80,377 $99,500 F:\Planning Neighborhood Srvs\Mike\HUD Income Guidelines-revised.doc c,of FSC •`` \" City of Elgin Agenda Item No. E7111111111 August 19,2005 N s ` TO: Mayor and Members of the City Council QUALITY HOUSING FROM: Olufemi Folarin, City Manager G'/"A&c Michael Millikan, Program Manager SUBJECT: 2005-2006 Purchase of Service Agreement with Neighborhood Housing Services of Elgin—First Time Homebuyer Assistance 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 of Elgin, Inc., (NHS) for a First Time Homebuyer Assistance Program. RECOMMENDATION It is recommended that the City Council approve the Purchase of Service Agreement with NHS for the First Time Homebuyer Assistance Program with the proposed revisions, in the amount of $94,920. BACKGROUND NHS of Elgin is a local agency dedicated to providing a strong foundation in the fundamentals of homeownership. Their mission is to seek to strengthen and enhance our community by developing and administering program and educational resources that foster homebuyer and homeowner education and community development. _ The First Time Homebuyer Assistance Program was initiated in 2001. During the first two years of the program, twenty nine (29) first time homebuyer grants were approved. In 2003, seven grants were approved and in 2004, one grant was approved. The decrease in activity for the program the past two years was partially due to some internal issues within NHS. These issues have been resolved and NHS is ready to move the program forward this year. In 2003, several changes were made to the program procedures. These changes included, City monitoring of each client file for eligibility; certification of income forms indicating family size, closing date, purchase price, grant amount and income documentation; and request for payment forms to be submitted to the city for each applicant. Instead of a lump sum payment to NHS for 2005 NHS Purchase Service Agreement August 19, 2005 Page 2 the entire program amount, the City retained the funds and distributed them through a draw down system. NHS was required to submit a request for payment to the City for each applicant. For 2005, the budget includes $94,920 for NHS to administer this program. The First Time Homebuyer Assistance Program provides closing costs and down payment assistance for income eligible first time homebuyers. All potential homebuyers have to be at or below 80% of the median family income as established by HUD. NHS receives 10% of the program budget to cover administrative expenses. Staff has met with NHS and developed a number of revisions that will stimulate interest in the program. The proposed revisions include; 1. Remove the requirement for applicants to be a resident of Elgin for 12 months prior to applying to the program. The current agreement requires applicants to be Elgin residents for at least one year before applying to the program. By opening up the program to non- Elgin residents who are looking to buy a home in Elgin, the potential applicant pool would be greatly expanded. 2. The available funds will be distributed with a preference to current Elgin residents. Sixty percent(60%) of the funds allocated to the program will be reserved for Elgin Residents. 3. Increase the five-year forgivable down payment assistance from 2% to 3% of the purchase price with a cap that is increased from $4,000 to $5,000. With the cost of housing increasing every year, the money required for down payments also increases. This change will keep the program competitive with other down-payment assistance programs. 4. Modify the program name to Homebuyer Assistance Program to make the program available to residents who may not be buying their first home but still need financial assistance, (i.e. minimum wage workers, teachers, healthcare workers, etc.). There have been several inquiries about the program from people who were previous home owners but are in need of financial down payment assistance. Applicants can not have owned a home within the three years immediately preceding the date of the application. There have also been inquiries from potential applicants who are looking to move into Elgin to be closer to their work. This revision will make the program available to prospective home buyers who truly need financial assistance even though they are not buying their first home. It will also expand the potential pool of applicants. 5. Specify that the applicant must also provide 3% of the purchase price or loan amount as part of the down payment requirement. This demonstrates that the applicant has a vested commitment in this property. The City would not limit where the applicant can get the required 3%, however, the applicant's funds cannot come from another loan commitment. 6. Provide an additional grant of up to $5,000 to potential applicants who purchase a home in specific targeted areas (as defined by the City) and who have agreed to correct outstanding code violations as a condition of the purchase of the home. • 2005 NHS Purchase Service Agreement August 19, 2005 Page 3 • 7. Adjust the 80% AMI (Area Median Income) limits to meet the HUD 2005 income guidelines. Each year, HUD issues updated income guidelines and this change would keep the program in line with the current numbers. 8. Include an executed Certificate of homebuyer Program as proof of completion. NHS offers this in house program to prospective applicants. 9. The program specifies that NHS will be allowed ten percent (10%) of the allocated funds as administrative fees. The current PSA requires NHS to submit each application to the City for review and approval. The funds are then released by the City to the title company handling the application. The ten percent (10%) administrative fee will be added to each application so NHS will only receive payment for the applications actually processed. COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED Neighborhood Housing Services FINANCIAL IMPACT There are sufficient funds budgeted ($94,920) and available ($94,920) in Riverboat Fund, rak Rehabilitation Grants, account number 275-0000-791.78-99,project number 079840. EGAL IMPACT None ALTERNATIVES 1. Approve the Purchase of Service Agreement. 2. Do not proceed with the Purchase of Service Agreement at this time. Respectfully submitted for Council consideration. MJM Attachments