Agenda Item Wording:
title
Conduct a second Public Hearing to approve and adopt the proposed U.S. Department of Housing and Urban Development (HUD) Neighborhood Stabilization Program (NSP1) Substantial Amendment to provide an estimated $120,000 for the funding of First Time Homebuyer loans for five single-family homes constructed at NW 5th Avenue and N Court Street.
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Deadline for Action: 4/17/2023
Submitting Department: Finance and Technology Services
Contact Name and Phone Number: Margie Perez, margie.perez@visalia.city <mailto:margie.perez@visalia.city>, (559) 713-4460; Melody Murch, Assistant Finance Director, melody.murch@visalia.city <mailto:melody.murch@visalia.city>, (559) 713-4379; Renee Nagel, Finance Director, renee.nagel@visalia.city <mailto:renee.nagel@visalia.city>, (559) 713-4375
Department Recommendation:
1. Conduct a second Public Hearing, allowing a final opportunity for citizens to provide input and comment on the proposed NSP1 Substantial Amendment;
2. Adopt and appropriate the NSP1 Substantial Amendment;
3. Authorize City Manager or their designee to enter into all contracts listed in the NSP1 Substantial Amendment; and
4. Authorize City Manager or their designee to submit the NSP1 Substantial Amendment to HUD.
Background Discussion:
The Neighborhood Stabilization Program was enacted in 2008 under the Housing Economic Recovery Act (HERA) and is referred to as NSP1. NSP1 was established for the purpose of providing emergency assistance to stabilize communities with high rates of abandoned and foreclosed homes, and to assist households whose annual incomes are up to 120 percent of the area median income (AMI), because of the great recession of 2008. The City of Visalia received NSP1 funds in Fiscal Year 2008-2009 and has not since received any additional grant funds. Current available NSP1 funds are a result of program income generated from previous NSP1 first time homebuyer loans. The City of Visalia is nearing closeout of its Neighborhood Stabilization Program and is proposing to reallocate the remaining balance of approximately $120,000 in NSP1 funds. This balance is from recaptured program income and available funds obligated for acquisition, rehabilitation and resell of foreclosed homes through Habitat for Humanity.
An amendment has been prepared, in an effort to close out the 2008 Neighborhood Stabilization Program (NSP1) grant, which proposes the use of approximately $120,000 in remaining NSP1 program income funding to a First Time Homebuyer (FTHB) program or secondary financing for five single-family homes which have been constructed by Self-Help Enterprises (SHE) on NW 5th Avenue and N Court Street with the use of HOME Investment Partnerships Program (HOME) funds.
Eligible Activities:
Only three possible property types can receive NSP assistance:
1. Foreclosed Properties,
2. Abandoned Properties, or
3. Development on Vacant Land.
NSP1 eligible activities include the following:
A. Establish financing mechanisms for purchase and redevelopment of foreclosed homes and residential properties;
B. Acquisition and rehabilitation to sell, rent or develop abandoned or foreclosed homes and residential properties;
C. Establishment of land banks for foreclosed homes;
D. Demolition of blighted structures; and
E. Redevelopment of demolished, or vacant properties.
Ineligible Activities:
These include, but not limited to:
• Foreclosure prevention
o Including refinancing mortgages, paying back taxes or mortgage payments, and underwriting counseling-related expenses.
• Demolition of non-blight structures
• Any NSP1 activity that is not located within the approved neighborhood/target area.
Proposed Neighborhood Stabilization Program (NSP1) Substantial Amendment:
The proposed NSP1 Substantial Amendment consists of an additional approximate amount of $120,000 in NSP1 program income generated from paid NSP1 funded loans, towards a First Time Homebuyer (FTHB) program or secondary financing for 5 single-family homes constructed on NW 5th Avenue and N Court Street with the use of HOME Investment Partnerships Program (HOME) funds. The 5 single-family homes are restricted to purchase by households at 80% of the area median income (AMI) or lower who have not owned a home within the past 3-years per HOME program standards.
The NSP1 Homebuyer Assistance will meet the Low-Moderate and Middle-Income (LMMH) national objective. The project will be within an NSP Targeted area, for households at or below 120% of the area median income. The Homebuyer Assistance will be provided to NSP1 eligible beneficiaries.
NSP1 homebuyer assistance follows HOME program standards found in 24 CFR 92.254. NSP1 funds may be used to make housing affordable by providing direct homeownership assistance, reducing the price of the home being sold, or offering downpayment assistance. NSP1 assisted homes will need to remain owner occupied for the life of the loan.
Federal and State Regulations:
Per § 92.254(a)(3), HOME assisted housing must be acquired by a homebuyer whose family qualifies as a low-income family, and the housing must be the principal residence of the family throughout the period described in paragraph (a)(4) of this section. If there is no ratified sales contract with an eligible homebuyer for the housing within 9 months of the date of completion of construction or rehabilitation, the housing must be rented to an eligible tenant in accordance with § 92.252. In addition, three of the homes were constructed on land purchased with Successor Agency Housing (SAH) funds. As a result, if converted to rental housing those homes would require a 55-year rental affordability covenant in accordance with § 33334.3(f)(1)(B). Therefore, the City would be responsible to perform a 55-year annual monitoring of those homes.
NSP1 was established for the purpose of providing emergency assistance to stabilize communities with high rates of abandoned and foreclosed homes, and to assist households whose annual incomes are up to 120 percent of the area median income (AMI). The City of Visalia received NSP1 funds in Fiscal Year 2008-2009 and has not since received any additional grant funds. Current available NSP1 funds are a result of program income generated from previous NSP1 first time homebuyer loans. The City of Visalia is nearing closeout of its Neighborhood Stabilization Program and is proposing to reallocate the remaining balance of approximately $120,000 in NSP1 funds. This balance is from recaptured program income and available funds obligated for acquisition, rehabilitation and resell of foreclosed homes through Habitat for Humanity.
Eligible Activities:
Only three possible property types can receive NSP assistance:
1. Foreclosed Properties,
2. Abandoned Properties, or
3. Development on Vacant Land.
NSP1 eligible activities include the following:
A. Establish financing mechanisms for purchase and redevelopment of foreclosed homes and residential properties;
B. Acquisition and rehabilitation to sell, rent or develop abandoned or foreclosed homes and residential properties;
C. Establishment of land banks for foreclosed homes;
D. Demolition of blighted structures; and
E. Redevelopment of demolished, or vacant properties.
A. Financing Mechanisms:
Financing Mechanisms for purchase and redevelopment of foreclosed upon homes and residential properties may include soft-second mortgages, loan loss reserves, and shared equity loans. This use must involve some form of loan or credit enhancement and might include a pool of low interest loans for individuals who purchase and rehabilitate homes for use as their primary residence. Loan forgiveness is allowed, based on performance by the borrower according to terms set by the grantee. Such Financing Mechanisms are distinct from the type of subsidies used below in B or E.
B. Acquisition and Rehabilitation:
In purchasing and rehabilitating homes and residential properties that have been foreclosed upon or abandoned, grantees can finance rehabilitation with loans or grants to make housing affordable, provide direct homeownership assistance, reduce the price of the home being sold, or offer downpayment assistance.
C. Land Banking:
Land banking - Properties that have been landbanked may use any of the strategies mentioned above under A or B when they are put back onto the market, then renovated and/or sold.
D. Demolition of Blighted Structures:
Demolition of blighted properties to mitigate the likelihood of property value declines in surrounding properties. A structure is blighted when it exhibits objectively determinable signs of deterioration sufficient to constitute a threat to human health, safety, and public welfare.
E. Redevelopment of Demolished, or Vacant Properties:
Redevelopment of demolished or vacant properties could include many of the activities noted above in A and B, as well as new construction of housing for LMMI. These would include loans and grants for homeowners and rental housing providers, homeownership assistance, and other similar forms of assistance.
Ineligible Activities:
These include, but not limited to:
• Foreclosure prevention
o Including refinancing mortgages, paying back taxes or mortgage payments, and underwriting counseling-related expenses.
• Demolition of non-blight structures
• Any NSP1 activity that is not located within the approved neighborhood/target area.
Proposed Neighborhood Stabilization Program (NSP1) Substantial Amendment: The proposed NSP1 Substantial Amendment consists of an additional approximate amount of $120,000 in NSP1 program income generated from paid NSP1 funded loans, towards a First Time Homebuyer (FTHB) program or secondary financing for 5 single-family homes constructed on NW 5th Avenue and N Court Street with the use of HOME Investment Partnerships Program (HOME) funds. The 5 single-family homes are restricted to households at 80% of the area median income (AMI) or lower who have not owned a home within the past 3-years per HOME program standards.
The NSP1 Homebuyer Assistance will meet the Low-Moderate and Middle-Income (LMMH) national objective. The project will be within an NSP Targeted area, for households at or below 120% of the area median income. The Homebuyer Assistance will be provided to NSP1 eligible beneficiaries.
NSP1 homebuyer assistance follows HOME program standards found in 24 CFR 92.254. NSP1 funds may be used to make housing affordable by providing direct homeownership assistance, reduce the price of the home being sold, or offer downpayment assistance. NSP1 assisted homes will need to remain owner occupied for the life of the loan.
Federal and State Regulations: Per § 92.254(a)(3), HOME assisted housing must be acquired by a homebuyer whose family qualifies as a low-income family, and the housing must be the principal residence of the family throughout the period described in paragraph (a)(4) of this section. If there is no ratified sales contract with an eligible homebuyer for the housing within 9 months of the date of completion of construction or rehabilitation, the housing must be rented to an eligible tenant in accordance with § 92.252. In addition, three of the homes land were purchased with Low- and Moderate-Income Housing Asset Funds (LMIHAF) or Successor Agency Housing (SAH) funds. As a result, if converted to rental housing those homes would require a 55-year rental affordability covenant in accordance with § 33334.3(f)(1)(B). Therefore, the City would be responsible to perform a 55-year annual monitoring of those homes.
Loan Terms: The NSP1 FTHB loan shall be in the form of a second trust deed secured by a Note and Deed of Trust.
• Payments on the loan may be deferred at 0% interest, at the election of the Eligible Homebuyer, for thirty (30) years, beginning at the time of execution of the Note.
• The City Loan(s) shall be due and payable in full on the thirtieth (30) year at the conclusion of the deferral period in accordance with the terms of the Note required by the Owner’s Participation Agreement. This will allow the borrower to delay amortization of this portion of the debt until the first mortgage is fully repaid. Borrowers may make payments on this deferred debt at any time during the 30-year deferral period.
• The deferred principal amount shall become immediately due and payable at such time as either:
o The Eligible Homebuyer or immediate family member ceases to maintain continuous residence on the property; or
o Title to the property is transferred; or
o The property is refinanced.
Affordability Covenant: A 30-year affordability covenant shall be recorded to maintain affordability. The affordability covenant shall use the “Recapture Provision”, as referenced under 24, CFR 92.254(a)(5)(ii)(A)(1) and shall begin the date the Deed of Trust is recorded. “Recapture Provision”, as referenced under 24, CFR 92.254(a)(5)(ii)(A)(1) and shall begin the date the Deed of Trust is recorded. The City may recapture the entire amount of the direct grant subsidy from the homeowner and the difference between the fair market value and the purchase price, if the purchase price is below the fair market value and any additional assistance as referenced above. The amount to be recaptured will not exceed the amount of net proceeds available at the time the home is sold. HOME rule limits recapture to available net proceeds, therefore, if net proceeds are insufficient for the city to recapture the full amount of the Direct assistance/investment, the City will recapture only what is available from net proceeds.
Public Comment Period: The 30-day public comment period for the review of the draft NSP1 Substantial Amendment began on March 17th through April 17th, 2023. During the 30-day public comment period the draft NSP1 Amendment was available for public review on the City’s website at www.visalia.city. Public notices were published on City’s social media outlets, and in the Visalia Times Delta on March 15th, March 17th, and March 31st, 2023. Public notices were also included in Kings/Tulare Homeless Alliance and the Visalia Chamber of Commerce email listservs. A public hearing was conducted on April 3, 2023, to allow public comment and input. The proposed NSP1 Amendment was also presented at the Citizens Advisory Committee (CAC) on April 5, 2023, to receive additional public input. Tonight’s public hearing is the final step in the public comment period.
Fiscal Impact:
Approval of this item will appropriate the available balance (approximately $120,000) of NSP1 program income to a First Time Homebuyer Program for single family homes newly constructed at 101, 105, 111, and 113 NW 5th Avenue, and 1113 N Court Street, and no General Fund money is to be included. All proposed budget amounts will become amendments to the current City budget.
Prior Council Action: Click or tap here to enter text.
• March 19, 2018 - Conference with Real Property Negotiators for vacant lots at 101, 105, 111, and 113 NW 5th Ave., and 1113 N Court St.
• April 16, 2018 - Authorize sale of properties located at 101, 105, 111, and 113 NW 5th Ave., and 1113 N Court St. to Self-Help Enterprises for affordable housing development and future sale as owner-occupied single-family detached homes to income qualifying households.
• June 18, 2018 - First Reading of Ordinance 2018-10 and held a public hearing to received comment on the sale and development of the properties located at 101, 105, 111, and 113 NW 5th Ave., and 1113 N Court St.
• July 16, 2018 - Second Reading of Ordinance No. 2018-10 and held a public hearing to received comment on the sale and development of the properties located at 101, 105, 111, and 113 NW 5th Ave., and 1113 N Court St.
• April 3, 2023 - Review of draft FY 2022-23 NSP1 Amendment.
Other: None.
Alternatives: None
Recommended Motion (and Alternative Motions if expected):
recommendation
Staff recommends that Council:
1. Conduct a second Public Hearing, allowing a final opportunity for citizens to provide input and comment on the proposed NSP1 Substantial Amendment;
2. Adopt and appropriate the NSP1 Substantial Amendment;
3. Authorize City Manager or their designee enter into all contracts listed in the NSP1 Substantial Amendment; and
4. Authorize City Manager or their designee to submit the NSP1 Substantial Amendment to HUD.
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Environmental Assessment Status: N/A
CEQA Review: N/A
Attachments: Click or tap here to enter text.
• Attachment A: NSP1 Substantial Amendment
• Attachment B: COV Homebuyer Guidelines
• Attachment C: NSP Amendment PPT