COUNTY OF SAN MATEO

COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Housing

DATE:

April 14, 2011

BOARD MEETING DATE:

April 26, 2011

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Duane Bay, Department of Housing Director

SUBJECT:

Foreclosed Homes for First-time Homebuyers Acquisition/ Rehabilitation/Resale Loan Pilot Program

RECOMMENDATION:

Adopt a Resolution authorizing the:

1)

Department of Housing to conduct a pilot program to loan funds to qualified non-profit organizations to acquire and rehabilitate vacant, bank-owned, foreclosed single-family homes to resell to qualified low-income buyers; and

2)

Director of the Department of Housing or the Director’s designee to execute up to four loan agreements for a maximum of $300,000 each, and related security instruments, for transactions conforming to existing loan program guidelines with certain modifications.

BACKGROUND:

For more than twenty years the County has operated a suite of programs that provide low-interest loans to low-income households to buy or rehabilitate homes, and to local non-profits to rehabilitate apartments affordable to very-low income households. The suite currently includes the following programs or sub-programs: Section 8 Homeownership Program, START and START Plus down-payment assistance loan programs, Mortgage Credit Certificate program, and Single-Family and Multi-Family Housing Rehabilitation loan programs.

The loan programs are now funded primarily from two revolving trust funds, federal and non-federal, that recapture loan repayments. Currently the maximum loan amount for a down-payment assistance loan is $70,000; and for a major home rehabilitation loan, $75,000. All loans are secured by deeds of trust on the subject property. Loans conforming to program parameters are approved at the department level under delegated authority.

Over time the Department has adapted the programs to respond to changing market conditions, funding conditions and community needs. Programs, including program adaptations as they evolve, are described in the Annual Action Plan the Department brings to the Board each April or May for review and approval before submittal to the Federal Department of Housing and Urban Development (HUD). Consistent with this long-standing practice of program adaptation, the Department now wishes to conduct a limited pilot program to provide non-profit partners a viable approach to rehabilitating vacant foreclosed properties.

DISCUSSION:

A large number of vacant bank-owned properties exist in certain neighborhoods in San Mateo County, many in need of substantial repair. These properties present a unique opportunity for acquisition of affordable housing. Nationally, many communities have been able to use federal Neighborhood Stabilization Program (NSP) funds to launch acquisition/rehabilitation/resale (A/R/R) programs through which vacant dilapidated single-family homes are returned to habitable condition and sold to qualifying low-income buyers. San Mateo County was not able to compete effectively for these federal funds because the foreclosure crisis was much more severe in other areas. However, there have been over 1,000 homes in some stage of the foreclosure process in San Mateo County every month for more than two years, and the need and opportunity for a moderate-scale, countywide A/R/R program clearly exists in San Mateo County as well.

The Department of Housing wishes to conduct a pilot program using existing federal and non-federal departmental reserves designated for community projects, supplemented by a $100,000 grant from Wells Fargo Foundation. This pilot is one of the activities described in the recent informational memo to the Board, dated April 5, 2011 and entitled “Continuing Responses to Home Foreclosure Situation”. The Department would conduct a four-home pilot program, then evaluate program efficacy and report back outcomes. The program would use the existing administrative systems and procedures of the current Single Family Home Rehabilitation Loan program, which has been in place for more than thirty-five years, with the following modifications:

1.

The pilot program, to be called Foreclosed Homes for First-time Homebuyers, is capped at four homes.

2.

Acquisition/rehabilitation/resale (A/R/R) loans would be made on vacant, bank-owned single-family properties only. This is more restrictive than current program.

3.

The maximum individual loan amount would be raised from $75,000 to $300,000 to provide enough bridge capital to acquire each home, but the outstanding balance would have to be reduced to $75,000 or lower within one year. In other words, this essentially combines a one-year bridge loan of up to $225,000 with the standard home rehab loan of up to $75,000.

4.

The household to whom the home is eventually sold must meet current standard income and credit requirements of the County’s START program, and must be enrolled in a homebuyer preparation and/or self-sufficiency program administered by Department of Housing or its non-profit grantees (e.g., Housing Authority’s Family Self-Sufficiency Program, Housing Authority’s Homeownership Program, HIP Housing’s Self-Sufficiency Program).

The Resolution has been reviewed and approved by County Counsel.

Approval of this Resolution contributes to the Shared Vision 2025 outcome of a Livable Community by addressing health and safety hazards including, but not limited to, improving handicap accessibility, addressing housing code deficiencies and rehabilitating existing housing stock in San Mateo County.

Performance Measure(s):

Measure

FY 2009-10
Actual

FY 2010-11
Projected

No. of County-funded housing units developed and occupied

119

200

FISCAL IMPACT:

There is no Net County Cost. The source of funds for the bridge loan portion of the pilot program will be non-federal departmental reserves for community projects (Trust Fund 04531). A maximum of $900,000 will be expended for a maximum of four bridge loans, all of which will be repaid within one year of lending. The source of funds for the rehabilitation loan portion of the pilot program will the CDBG Rehab Revolving Loan Fund. Additionally, a maximum of $300,000 will be expended, all of which will be scheduled for repayment on terms consistent with the existing Home Rehabilitation Loan program.


			COUNTY OF SAN MATEO Inter-Departmental Correspondence Department of Housing

DATE:						April 14, 2011
BOARD MEETING DATE:						April 26, 2011
SPECIAL NOTICE/HEARING:						None
VOTE REQUIRED:						Majority

TO:				Honorable Board of Supervisors
FROM:				Duane Bay, Department of Housing Director
SUBJECT:				Foreclosed Homes for First-time Homebuyers Acquisition/ Rehabilitation/Resale Loan Pilot Program

RECOMMENDATION:
Adopt a Resolution authorizing the:

1)	Department of Housing to conduct a pilot program to loan funds to qualified non-profit organizations to acquire and rehabilitate vacant, bank-owned, foreclosed single-family homes to resell to qualified low-income buyers; and

2)	Director of the Department of Housing or the Director’s designee to execute up to four loan agreements for a maximum of $300,000 each, and related security instruments, for transactions conforming to existing loan program guidelines with certain modifications.

BACKGROUND:
For more than twenty years the County has operated a suite of programs that provide low-interest loans to low-income households to buy or rehabilitate homes, and to local non-profits to rehabilitate apartments affordable to very-low income households. The suite currently includes the following programs or sub-programs: Section 8 Homeownership Program, START and START Plus down-payment assistance loan programs, Mortgage Credit Certificate program, and Single-Family and Multi-Family Housing Rehabilitation loan programs.

The loan programs are now funded primarily from two revolving trust funds, federal and non-federal, that recapture loan repayments. Currently the maximum loan amount for a down-payment assistance loan is $70,000; and for a major home rehabilitation loan, $75,000. All loans are secured by deeds of trust on the subject property. Loans conforming to program parameters are approved at the department level under delegated authority.


Over time the Department has adapted the programs to respond to changing market conditions, funding conditions and community needs. Programs, including program adaptations as they evolve, are described in the Annual Action Plan the Department brings to the Board each April or May for review and approval before submittal to the Federal Department of Housing and Urban Development (HUD). Consistent with this long-standing practice of program adaptation, the Department now wishes to conduct a limited pilot program to provide non-profit partners a viable approach to rehabilitating vacant foreclosed properties.

DISCUSSION:
A large number of vacant bank-owned properties exist in certain neighborhoods in San Mateo County, many in need of substantial repair. These properties present a unique opportunity for acquisition of affordable housing. Nationally, many communities have been able to use federal Neighborhood Stabilization Program (NSP) funds to launch acquisition/rehabilitation/resale (A/R/R) programs through which vacant dilapidated single-family homes are returned to habitable condition and sold to qualifying low-income buyers. San Mateo County was not able to compete effectively for these federal funds because the foreclosure crisis was much more severe in other areas. However, there have been over 1,000 homes in some stage of the foreclosure process in San Mateo County every month for more than two years, and the need and opportunity for a moderate-scale, countywide A/R/R program clearly exists in San Mateo County as well.
The Department of Housing wishes to conduct a pilot program using existing federal and non-federal departmental reserves designated for community projects, supplemented by a $100,000 grant from Wells Fargo Foundation. This pilot is one of the activities described in the recent informational memo to the Board, dated April 5, 2011 and entitled “Continuing Responses to Home Foreclosure Situation”. The Department would conduct a four-home pilot program, then evaluate program efficacy and report back outcomes. The program would use the existing administrative systems and procedures of the current Single Family Home Rehabilitation Loan program, which has been in place for more than thirty-five years, with the following modifications:

1.		The pilot program, to be called Foreclosed Homes for First-time Homebuyers, is capped at four homes.

2.		Acquisition/rehabilitation/resale (A/R/R) loans would be made on vacant, bank-owned single-family properties only. This is more restrictive than current program.

3.		The maximum individual loan amount would be raised from $75,000 to $300,000 to provide enough bridge capital to acquire each home, but the outstanding balance would have to be reduced to $75,000 or lower within one year. In other words, this essentially combines a one-year bridge loan of up to $225,000 with the standard home rehab loan of up to $75,000.

4.		The household to whom the home is eventually sold must meet current standard income and credit requirements of the County’s START program, and must be enrolled in a homebuyer preparation and/or self-sufficiency program administered by Department of Housing or its non-profit grantees (e.g., Housing Authority’s Family Self-Sufficiency Program, Housing Authority’s Homeownership Program, HIP Housing’s Self-Sufficiency Program).

The Resolution has been reviewed and approved by County Counsel.

Approval of this Resolution contributes to the Shared Vision 2025 outcome of a Livable Community by addressing health and safety hazards including, but not limited to, improving handicap accessibility, addressing housing code deficiencies and rehabilitating existing housing stock in San Mateo County.

Performance Measure(s):
Measure					FY 2009-10 Actual		FY 2010-11 Projected
No. of County-funded housing units developed and occupied					119		200

FISCAL IMPACT:
There is no Net County Cost. The source of funds for the bridge loan portion of the pilot program will be non-federal departmental reserves for community projects (Trust Fund 04531). A maximum of $900,000 will be expended for a maximum of four bridge loans, all of which will be repaid within one year of lending. The source of funds for the rehabilitation loan portion of the pilot program will the CDBG Rehab Revolving Loan Fund. Additionally, a maximum of $300,000 will be expended, all of which will be scheduled for repayment on terms consistent with the existing Home Rehabilitation Loan program.

Inter-Departmental Correspondence

DATE:

BOARD MEETING DATE:

SPECIAL NOTICE/HEARING:

VOTE REQUIRED:

TO:

FROM:

SUBJECT:

RECOMMENDATION:

BACKGROUND:

DISCUSSION:

Performance Measure(s):

Measure

FY 2009-10 Actual

FY 2010-11 Projected

FISCAL IMPACT:

FY 2009-10
Actual

FY 2010-11
Projected