HomeMy WebLinkAboutAgenda Statement 1976/11/09 Item 07CITY OF CHULA VISTA
COUNCIL AGENDA STATEMENT
ITEM N0.
11-9-76
FOR MEETING OF:~~
ITEM TITLE: Resolution No. 8403 - Approving Agreement with Bank of America for
Services relative to the City's Community Housing
Improvement/ Program (CHIP)
SUBMITTED BY Community De.velapment Director~~/Y
ITEM EXPLANATION
The agreement for services between Bank of America and the City has been legally
reviewed by both the City Attorney and the Bank's Counsel. The agreement will bring
to the CHIP Program 3-3/4% per annum financing which is 2-1/2% lower than what Balboa
Bank is currently offering. The new agreement would augment rather than supercede
the older agreement with Balboa Bank. The lenders have differing capabilities and
restrictions. Used in concert, the two agreements will give the program and the
homeowner greater flexibility in financing home repairs. Attached is a description
of the Bank's proposal.
n ~~ ern
t1Cr'1it31 I J H I I Hl,l'1CU
Agreement X Resolution X Ordinance Plat Other X
Environmental Document) Attached Submitted on
STAFF RECOMMENDATION:
Approve Resolution.
A P P R O V E D
BOARD/COMMISSION RECOMMENDATION
COUNCIL ACTION
by the
City Council
of
.:hula Vista, California
ated............/...~.-......q-.....~... ~ .............._.
Form A-113 (Rev 5-75)
~i
i 'til-
.~ is BANKnFAMERICA
CITY IMPROVEMENT AND
RESTORATION PROGRAM
(CIRP)
SAN FRANCISCO HLAUOUA R7ERS
PROPOSAL FOR COMMUNITY DEVELOPMENT FUNDS
PURPOSE
August, 1976
The purpose of the plan is to utilize funds received by the City
from the federal government under the Community Development Act of
1974 in such a way as to provide below-market rate home improvement
loans, principally to eligible owner-occupants and some owner non-
occupants in designated areas of the City•
GENERAL CONCEPT
The City will refer and direct potential borrowers to a desig-
nated community office of the Bank of America. The Bank shall perform
its customary credit evaluation with respect to each applicant, make
its judgment with respect to the credit-worthiness of each applicant,
and inform a designated representative of the City of such judgment.
If the City desires that the loan should be made, the Bank shall make
the loan to the applicant, taking into account the pledged deposit
(described below) to support the loan.
Each loan made by the Sank will be supported by a non-interest
bearing deposit account pledged to the Bank by the City. The deposit
will be made on a loan-by-loan basis when such loan is granted.
Because the account will be non-interest bearing, the Bank will lower
its prevailing interest rate for the rehabilitation Loan made under
this program. The non-interest bearing deposit relieves the Bank of
all but 3% of its cost of funds for the amount of the loan granted.
RANK OF AMERICA NATIONAL TRUST ANO SAVINGS ASSOCIATION • ROX 37000 • SAN FRANCISCO, CALIFORNIA 94137
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The 3% cost o'f funds represents the Federal Reserve requirement
relative to public agency deposits. The necessary deposit must be
made by the City on or before the date the loan proceeds are advanced
by the Bank. The Bank will be authorized in advance to debit the
account for the then earned and unpaid interest and principal on all
loans which remain in default Eor a period of 90 days.
The Sank will follow its normal collection procedure in servicing
the loans, but shall not service after assigning Loans to the City.
If requested, the Bank shall accept such loans for collection purposes
only, pursuant to the Bank's then current installment collection
(IC Account) procedures. Concurrently, the Bank will assign without
recourse or warranty the note and any security therefore to the City.
TERMS:
Loan Interest Rates:
The effective rate to the borrower can be as
low as 3.75% when supported by a 100% deposit
from the City.
This interest rate is the annual percentage
rate per annum, payable monthly.
Loan Origination Fees:
The Bank waives the following loan origination
fees which are normally the applicant's expense:
Lot Book Report
Notarization
Appraisal
Recording of Deed of Truat
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Maturities:
Fully amortized in equal monthly payments not to
exceed 15 years. As the principal amount of the
debt is reduced, the Bank will return the surplus
portion of the supporting deposit on a monthly basis.
Security:
A Deed of Trust on the real property being improved.
DISBURSEMENT OF FUNDS
If City desires, the bank also offer to control the disbursement
of funds while the home is being remodeled.
Agreement "A"
Bank disburses Loan funds to borrower the day the Loan is made.
Agreement "B"
Bank retains and disburses loan funds (in maximum 4 draws) during
the construction period. The construction loan is then converted
to an installment basis.
IMPI.EMENTATI ON
The Bank and the City will enter into a written agreement setting
forth this proposal, together with such details as may be agreed upon
between the parties and their counsel, and shall include as conditions
precedent the receipt by the Bank of opinions of counsel for the City
that the agreement does not conflict with any laws or regulations applic-
able to community development funds.
This proposal is not intended to be the exclusive method by which
the City utilizes its community development funds.
This agreement would be reviewed by both parties after one year,
and could be altered or terminated at that time.