Loading...
HomeMy WebLinkAboutReso 1981-10627 RESOLUTION NO. 10627 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING A CONTRACT WITH THE BANK OF AMERICA FOR FINANCIAL SERVICES RELATIVE TO THE BLOCK GRANT HOUSING REHABILITATION AND COMMERCIAL REHABILITATION PROGRA}lS The City Council of the City of Chula Vista does hereby resolve as follows: WHEREAS, the City has undertaken a Co~~unity Housing Improvement Program and a Commercial Rehabilitation Program financed with Community Development Block Grant funds; and, WHEREAS, the City wishes to use such funds in such a way as to generate investment of lending industry funds in the City's property rehabilitation efforts; and, WHEREAS, the Bank of America wishes to provide lending services to the Community Housing Improvement Program and the Commercial Rehabilitation Program by contractual agreement; and, WHEREAS, the provision of said services will involve ,commitment of Bank of America funds to the City's property rehabili- 'tation efforts; and, WHEREAS, an agreement entitled Property Rehabilitation Loan Agreement Comprehensive Form is attached hereto as though fully set forth. Rehabilitation authorized and of the City of NOW, THEREFORE, BE IT RESOLVED that the Property Loan Agreement is hereby approved and the Mayor is directed to execute the agreement for and on behalf Chula vista. Presented by Approved as to form by .A~ 4- /' " ~ty George D. Lindberg, City Attorney ADOPTED AND APPROVED BY THE CITY It~ ~ :L:'':: :., dol 01 AY S: Councilmen Scott, Hyde, Gi 11 ow , Cox COUNCIL OF THE CITY OF SpntpmhpY' Councilmen CoIIlcilmen None Nil fS: AIN: None Councilmen Mrrnndl i c;c; (,VdQ ~(~ Mayor of the City of ChuIa Vista AT S1 TE OF CALFORNIA ) C ~TY OF SAN DEGO ) SS. CI OF CHULA VISTA ) I, JENNE M. FULASZ, CMt, CITY CLERK of the City of Chula Vista, California, DO rfiEREBY CERTIFY that the above and foregoing is a full, true and correct copy of RESOLUTION NO. 10627 ,and that the eame has not been omended or repealed. to ! City Clerk ( seol) i cqi660 PROPERTY REHABILITATION LOAN AGREEMENT COMPREHENSIVE FORM THIS AGREEMENT is made by the CITY OF CHULA VISTA, a municipal corporation in the State of California (herein called "Au- thority"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association (herein called "Bank"). RECITALS A. Authority has authorized a Housing Preservation Program and a Commercial Property Rehabilitation Program as part of an adopted Community Development Block Grant Program (as may be amended and modified from time to time) hereinafter collectively called "Program." B. As part of Authority's implementation of Program, Author- ity has requested Bank to make below-market interest rate property re- habilitation loans ("Loans" or "Program Loans") to certain owners/tenants of single and multi-unit residential and commercial real property within Authority and approved by Authority as recipients of Loans ("Applicants"). The purpose of the Loans would be the rehabilitation of said real property in accordance with Program. In addition, Authority has requested a choice of several types of Loans to Applicants. C. To support these objectives, and based on an initial de- posit of Community Development Block Grant funds, Bank is willing to provide Authority and Applicants with Collateralized Loans (Part Three), Interest Subsidy Loans (Part Four), Deferred Payment Loans (Part .Five), and other services at rates and terms not available to the general public or to Authority independent of this Agreement. .p r('" ~ 1'- - I. ....... / NOW, THEREFORE, for and in consideration of the foregoing and the mutual agreements made herein, and for other good and valuable con- sideration, Authority and Bank agree as follows: PART ONE DEPOSIT OF COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS 1. Authority shall deposit up to $146,000 of Community Development Block Grant rehabilitation funds available to Authority under the Housing and Community Development Acts of 1974 and 1977, as amended, as part of this Agreement. 2. Authority's deposits of Community Development Block Grant funds may be made in any of the following forms: (a) A deposit to the Warehouse Account, the funds in which are unallocated to Loans. (b) A deposit to Collateralized Loan Account(s) which are noninterest-bearing savings accounts which subsidize Loans and are pledged as Loan collateral. (c) A deposit to the Loan Subsidy Account(s). This is an interest-bearing savings account pledged to subsidize Loan interest rates. (d) The purchase from Bank of time certificate(s) of de- posit from which all proceeds are allocated to future Program Loans. Bank will pay, at Authority's election, the highest interest rate permitted by law and this Agreement on all accounts described above. If legal in- terest rate limitations are removed, Bank will pay its highest rate offered to the public. 3. Authority relinquishes the use of and control over accounts 1(-/06/7 - 2 - described in paragraphs 2(b) and 2(c). These accounts will be used only for the Loan purposes described in this Agreement. 4. Authority retains full accessibility to all deposits which are unallocated to existing Program Loans. 5. Authority agrees all interest earnings will be paid to the Warehouse Account and will become immediately available for the subsidy of Loans. PART TWO APPLICATION PROCEDURES 6. (a) At the request of Authority, Bank, through its Chula Vista Main Office, shall consider making Loans to qualified Applicants di- rected to Bank by Authority. Bank shall notify the respective Applicant(s) in writing of any such request it receives from Authority. The notification shall contain the following statement: "The City of Chula Vista has re- quested the Chula Vista Main Office of Bank of America National Trust and Savings Association, 295 E Street, Chula Vista, California 92010, to con- sider making a specific extension of credit to you." (b) A qualified Applicant shall be identified by Authority or its agents, using Authority's established standards, which must consider, without limitation: (i) Applicant is "the owner of record" of the property subject to rehabilitation. (ii) Applicant has verifiable income(s) which can be used to repay the proposed Loan. 1f-/ew7-7 - 3 - (iii) Authority has determined that the proposed Loant given Program options available, will best serve the re- habilitation needs of Applicant and the Program objectives. (c) In addition, each commercial improvement/rehabili- tation Loan Applicant, if a lessee, has a lease which, with options, extends at least six (6) months beyond the maturity of the proposed Loan. 7. Authority shall furnish to Bank, with respect to each Loan application: (a) an introductory letter stating that Authority de- sires Bank to consider making a Loan to Applicant; (b) a breakdown of the costs involved in the rehabili- tation work to be performed on Applicnat's real property; (c) a description of the work; (d) an estimate of the value of the real property offered as security for the Loan; (e) a copy of any contractor bid proposed to or accepted by Applicant; (f) a statement including the name of the contractor who will perform the rehabilitation work, and that Authority has satisfied itself with respect to the competence and reliability of the particular contractor; and (g) for each commercial improvement/rehabilitation Loan, Bank shall require from Applicant: If - /tJ6:Z7 - 4 - (1) 2-year business income statements supported by IRS income tax filings; (2) a copy of the existing lease, if Applicant is a property tenant; (3) Applicant's personal financial statement; (4) A policy of Creditor Life Insurance, in a form acceptable to Bank. The policy must be maintained while the Loan remains outstanding, in an amount at least equal to the amount outstanding under the Loan to Applicant, with Bank named as bene- ficiary. Upon Authority's request, said insurance shall be prepaid from Loan proceeds and said amount added to the principal amount of the Loan. At Bank's request, each Applicant shall also be required to maintain a standard policy of hazard insurance covering the real property upon which the rehabilitation work is to be performed in effect while any part of the Loan remains outstanding, with Bank named as beneficiary. In the case of defaulted Loans, Authority agrees to guarantee unpaid premiums in accordance with the provisions of para- graph 15 below. 8. Bank shall perform its customary credit evaluation with respect to the Applicant, render its judgment with respect to the credit- worthiness of the Applicant, and recommend appropriate Loan terms. 9. Upon completion of its credit evaluation, Bank shall fur- nish to Authority a recommendation whether to proceed with the Loan or not, including: (a) a recommendation as to use of either an Interest Ii ~ /0 t;J-7 - 5 - Subsidy, Collateralized, or Deferred Payment Loan, or some com- bination thereof; and (b) an indication of which of the following Loans (for which Bank assumes all or part of the credit risk, as indicated parenthetically below) Bank is willing to make to Applicant: (1) For residential property improvement Loans: (i) an Interest Subsidy Loan (total credit risk for principal and partial credit risk for interest); (ii) a 5.00% Collateralized Loan (15% credit risk); or (iii) a 10.00% Collateralized Loan (50% credit risk) (2) For commercial property improvement Loans: (i) an Interest Subsidy Loan (total credit risk for principal and partial credit risk for interest); or (ii) a 9.00% Collateralized Loan (35% credit risk); (iii) a 12.00% Collateralized Loan (60% credit risk). 10. After having determined the exact nature and scope of the rehabilitation work to be performed on Applicant's real property, Authority may request Bank to grant Applicant a Loan, which either must be from among those designated by Bank pursuant to paragraph 9(b) above or must be a Loan pursuant to paragraph ll(a) (100% collateralized) or paragraph 25 (Deferred Payment Loan). PART THREE COLLATERALIZED LOANS 11. Each Collateralized Loan shall be supported by a noninterest- f{ -/()6~7 - 6 - i~ bearing deposit made by Authority to a Collateralized Loan Account, an account that shall at all times be at least equal to: (a) 100% of unpaid principal for each 3.00% Loan for which Bank has not designated the Applicant (pursuant to paragraph 9(b)) as a party to whom Bank is willing to make a (partially) Col- lateralized Loan; (b) 85% of Rehabilitation Loan; (c) 50% of Rehabilitation Loan; (d) 65% of Rehabilitation Loan; (e) 40% of unpaid principal for each 5.00% Residential unpaid principal for each 10.00% Residential unpaid principal for each 9.00% Commercial unpaid principal for each 12.00% Commercial Rehabilitation Loan; plus, in each case, 100% of accrued unpaid interest. Authority hereby as- signs the Collateralized Loan Account to secure the Collateralized Loans. 12. (a) Unless Authority requests one note only, each Col- lateralized Loan shall be evidenced by two notes, effective in suc- cession, as provided herein. (b) The note first effective shall be a short-term com- mercial note, the term of which shall coincide approximately with the rehabilitation period (although all references herein to the short-term commercial note are singular, a Loan could include more than one short-term commercial note). The term of anyone short- term commercial note may not exceed ninety (90) days, although the note may be extended, renewed, or refinanced. The Loan proceeds Ii -/o~J7 - 7 - thereof shall be disbursed by Bank in a number of draws, each to follow completion of an applicable state of construction, as cer- tified to Bank by Authority. Interest shall accrue only on the disbursed portion of the Loan. (c) Promptly after Bank's disbursement of the final draw under the short-term commercial note, that note shall be re- financed by an installment note, as provided for at subparagraph (d) below or, alternatively, as provided in Part Five (Deferred Payment Loans). At the time the short-term commercial note is refinanced by the installment note, Applicant may either pay Bank the accrued interest on the short-term commercial note or may have it added to the principal of the installment note. (d) The term of the installment note may be determined by the Applicant for the Loan in question but; (i) may not exceed 15 years (ii) may not exceed 10 years for commercial rehabilitation unless the proposed Loan is over $75,000 and is to the property owner. The installment note shall be amortized in equal monthly installments over its term. (e) Bank reserves the right to require a contractor funding control service or construction progress inspections by the Bank's Appraisal Department on all multi-family properties. In either case, construction inspection expense shall be paid by the Applicant. ~-~~~7 - 8 - 13. With respect to Collateralized Loans: (a) On both the short-term commercial note and the in- stallment note, interest and other finance charges shall be such as to bear interest at an annual rate of 5.00%, or 9.00%, or 10.00%, or 12.00% calculated on a simple interest basis. (b) The Loan shall be documented using Bank's standard forms . (c) Both the short-term commercial note and the install- ment note shall, at Bank's or Authority's option, be secured by a deed of trust covering the real property that is the subject of the re- habilitation for which the proceeds of the Loan are to be used. 14. Authority shall make a relevant deposit to the Collateral- ized Loan Account in the percentage of Loan amount provided for at para- graph 11, when the commercial note and deed of trust are signed by Appli- cant and when interest on a short-term commercial note becomes added to the principal of a subsequent installment note. At the end of each calen- dar month ending 180 days after Authority's first deposit hereunder, Bank shall remit to Authority the amount by which the Collateralized Loan Ac- count exceeds the paragraph 11 percentages of the unpaid balances of Col- lateralized Loans. Funds that Bank thus remits to Authority shall be deemed funds that Authority deposited at least 180 days before. 15. If a Collateralized Loan remains in default for a continu- ous period of ninety (90) days on account of nonpayment of any sum of money due pursuant to the terms thereof or of any instrument or document related thereto, Bank may withdraw from the Collateralized Loan Account, 1?-'/-~7 11-lufF- - 9 - and pay to itself, an amount equal to the then outstanding principal bal- ance of the Loan multiplied by the same percentage as the percentage of the Loan amount that was deposited to the Collateralized Loan Account pursuant to paragraph 11, plus 100% of accrued unpaid interest on the Loan and insurance premiums, if any, through the 90th day of default. Bank shall have no recourse against Authority or the Collateralized Loan Ac- count for any amounts in excess of those permitted under this paragraph. During any ninety (90) day default period, Bank shall perform its cus- tomary collection procedures with respect to the Loan. 16. After a withdrawal from the Collateralized Loan Account under paragraph 15 above, in the case of a Loan for which the deposit to the Collateralized Loan Account under paragraph 11 was less than 100% of the Loan amount: (a) Bank need not assign the deed of trust to Authority upon completion of the withdrawal but may, for its own account, exercise rights under the deed of trust to recover the remaining outstanding and unpaid principal of the Loan plus accrued unpaid interest thereon after the 90th day of default. (b) At its election, Bank may assign to Authority such rights as may be necessary for Authority to attempt to recoup any funds withdrawn from the Collateralized Loan Account in connection with any Loan default. Authority agrees to recoup funds, as much as possible, for the benefit of Bank as well as itself. Funds re- covered shall be credited as follows: (1) to withdrawals from the Collateralized Loan Account; ~-#~~7 - 10 - (2) to the costs of recovery; (3) to Bank's Loan charge-off. (c) If Bank subsequently recovers funds with respect to a defaulted Loan (as, for example, but without limitation, if a voluntary sale of the property takes place), Bank shall, after deducting the previously unreimbursed percentage of Loan loss to which Bank is entitled, plus Bank's cost of recovery, return and pay over to Authority all amounts in excess thereof. 17. After a withdrawal from the Collateralized Loan Account under paragraph 15 above, in the case of a Loan for which the deposit to the Collateralized Loan Account under paragraph 11 was 100% of the Loan amount, Bank shall assign the Loan to Authority, the assignment to be accomplished by: (a) the due endorsement by Bank to Authority of the promissory note evidencing the Loan, without recourse or warranty; and (b) the delivery of the promissory note and the assign- ment and delivery of the deed of trust. 18. Collateralized Loans, as described in paragraphs 11 through 17, must have an average original Loan amount of $10,000.00. Au- thority's Collateralized Loans will be analyzed every 180 days from con- tract approval. If average $10,000 Loan amounts are not maintained, Bank may: (a) increase borrower interest rates for new Loans; (b) increase collateral requirements for new Loans; or (c) assess an origination fee for new Loans. 1f'-/()6c27 - 11 - PART FOUR INTEREST SUBSIDY LOANS 19. The interest rate for any Interest Subsidy Loan shall be 5.00%, or 9.00%, or 12.00% as designated by Authority. Interest Subsidy Loan maturity shall be as described in paragraph l2(d). The Loan terms other than interest rate shall be the same as those appli- cable to Bank's conventional home improvement loans, and they shall be documented using Bank's standard forms. All Interest Subsidy Loans shall be assets of Bank. 20. To subsidize Bank's making Interest Subsidy Loans, Au- thority shall make deposits to Bank in the Loan Subsidy Account(s) as provided in paragraph 21. The Loan Subsidy Account is a savings account, the minimum balance of which must at all times at least equal the total, for all Interest Subsidy Loans, of the difference between: (a) the total interest due at Bank's target yield rate (17.75% as of the date of execution of this Agreement) for the term of the Loan as of the date of origination of the Loan, and (b) total Loan interest for the term of the Loan. Bank will pay, at Authority's election, the highest interest rate permitted by law on the accounts described above. 21. (a) The minimum balance of the Loan Subsidy Account is hereby irrevocably committed to payment of interest subsidies to Bank with respect to the Interest Subsidy Loans. Bank will debit the Account, and pay itself monthly, for the aggregate of the dif- ference between Bank's target yield rate and the 5.00%, 9.00% and 12.00% interest rates at which the Interest Subsidy Loans are actu- ally made. n-/Ob~7 - 12 - (b) Authority may transfer funds among the various ac- counts referred to at paragraph 21 above, except that it may not effect withdrawals from the Loan Subsidy Account. If Authority requests an Interest Subsidy Loan, and the balance of the Loan Sub- sidy Account is insufficient to subsidize the proposed Loan, Bank may transfer to the Loan Subsidy Account any funds needed that may exist in the Warehouse Account. (c) Bank may refuse to make new Interest Subsidy Loans if the Warehouse Account is insufficient to provide the appropriate subsidy funds. 22. (a) The interest subsidy that Authority is required to make hereunder and the minimum required balances for the Loan Sub- sidy Account shall be adjusted for prepayments. If an Interest Subsidy Loan is prepaid, Authority shall not be chargeable for any interest subsidy for the resulting unused term of the Loan. The minimum required balance of the Loan Subsidy Account shall be ratably decreased to take account of the prepayment. (b) Authority shall subsidize, on the same ratable basis as for Interest Subsidy Loan regular payments, additional interest, up to a maximum of ninety (90) days' interest for each Loan, that accrues as a result of the borrower's delinquency in making payment. Bank may use its standard operating procedures with respect to such delinquent payments; a common practice is for the borrower to pay no additional delinquent interest at the time the delinquent installment payment itself is made, and for Bank to col- lect the total of all delinquent interest payments concurrently with t-~;~7 - 13 - the final Loan payment. 23. The target yield rate quoted in paragraph 2l(a)(1) will be subject to change at Bank's election every 180 days. PART FIVE DEFERRED PAYMENT LOANS 24. In the event Authority requests Bank to make a Loan, the terms of which are other than as provided in Parts Three and Four above, Bank shall comply with Authority's request. In that case, after Bank has obtained Applicant's note on terms Authority has requested for the Loan, Bank shall, promptly after completion of the respective rehabilitation work, assign the Loan to Authority according to the same procedures, and for the same price, as would be applicable under paragraphs 15 and 17 (Part Three) in the case of the assignment following default of a Col- lateralized Loan for which the deposit to the Collateralized Loan Account under paragraph 11 was 100%. Promptly after the assignment, unless pre- viously paid by Authority, Applicant shall pay to Bank a fee to cover its internal administrative and out-of-pocket expenses, as specified by Bank, but in no event less than THIRTY SEVEN ~~ 50/100 DOLLARS ($37.50) nor more than SEVENTY-FIVE DOLLARS ($75.00) for each Loan so made. Such fee shall be at Applicant's sole expense if not recovered from Authority. 25. Prior to the making of the first Deferred Payment Loan, Authority shall furnish Bank an opinion of its legal counsel: (a) stating that Authority has established rates and terms for its Deferred Payment Loan Program note; Ii _lOb?? 14 - (b) designating whether any Deferred Payment Loan fee is a "charge to be financed" or a "prepaid finance charge" under Regulation Z; and (c) that Authority has delivered this information and note to Bank's Chula Vista Main Office. PART SIX GENERAL PROVISIONS 26. On Authority's request, Bank shall, for its customary fees therefor, accept for collection purposes, pursuant to Bank's then current installment collection procedures, a Program Loan that has been transferred to Authority. 27. On Authority's request, Bank shall, for its customary fees therefor, provide foreclosure services with respect to a defaulted Program Loan that has been transferred to Authority, in which case Bank shall be substituted for Continental Auxiliary Company/Authority as trustee under the applicable deed of trust. 28. (a) The term of this Agreement shall mature on August 1, 1982. This Agreement may be terminated or amended by either of the parties hereto at six (6) month intervals from August 1, 1981 pro- vided written notice of intent is given to the other party at least fifteen (15) days prior to the termination date. (b) Any termination of this Agreement shall not affect Program Loans outstanding at the time of termination. (c) At termination, Bank shall retain the Collateralized Loan Account and shall remit monthly to Authority the amount by which ;f) - )(J b;2 7 - 15 - the Collateralized Loan Account exceeds the paragraph 11 percentages of the unpaid balances of Collateralized Loans. (d) At termination, the minimum balance for the Loan Subsidy Account shall be calculated for all existing Loans in the manner provided in paragraph ll(a). Bank shall continue to pay itself interest subsidies from the Loan Subsidy Account as long as there is an existing Loan outstanding. As existing Loans are retired or otherwise satisfied, Bank shall repay Authority from the Loan Subsidy Account the amount of unearned subsidies. 29. Bank covenants and agrees that nothing in this Agreement or any agreement made pursuant hereto shall be deemed or construed by Bank to make Authority a surety or guarantor of any Loan, and that Bank's rights with respect to a Collateralized Loan shall be limited to those set forth at paragraphs 15 through 17 hereof. 30. Authority and Bank shall comply with all applicable stat- utes and regulations, including without limitation, where applicable, the Federal Truth in Lending Act and Regulation Z thereto, the Consumer Credit Reporting Act, and the Equal Credit Opportunity Act and Regulation B thereto. 31. Except as specifically required by this Agreement, Author- ity waives any right it may have to require Bank to: (a) proceed against any Applicant or other person; (b) proceed against or exhaust any collateral for the relevant Loan; or (c) pursue any other remedy in Bank's power; and waives any defense arising by reason of any disability or other defense lI-jop,;7 - 16 - of Applicant or any other person, or by reason of the cessation from any cause whatsoever, other than full payment, of the liability of an Applicant or any other person. 32. Bank and Authority acknowledge the "Special Purpose" nature of the Program and Program Loans. To serve this "Special Purpose," a Loan shall be considered in default after the date of a transfer of the deed of trust property which, according to the provisions of the note, make the entire principal and interest of the note due and payable, re- gardless of Bank's ability or inability to enforce those provisions of the note. 33. Any communications between the parties hereto may be given by mailing the same, postage prepaid, to Bank at its Chula Vista Main Office, 295 E Street, Chula Vista, CA 92010, and to Authority at its Office of Community Development, City of Chula Vista, City Hall, 276 Fourth Avenue, Chula Vista, CA 92010, or to such other addresses as either party may in writing hereafter indicate. 34. Authority shall indemnify and hold harmless Bank against all claims and damages, alleged or otherwise, of whatsoever nature arising out of or in any way connected with the acts or omissions of any contractor performing rehabilitation work in connection with this Agreement; provided, however, that Authority's obligations under this paragraph shall not extend to negligent or wilful acts or omissions by Bank. All contractors shall operate as independent contractors and nothing herein is intended to affect such independent contractor status. 35. Bank may, at its option, decline to make additional Loans jf'-/O(:;;Z7 - 17 - from and after the date when the principal balance of all Loans outstand- ing has exceeded ONE MILLION DOLLARS ($1,000,000.00). 36. This Agreement may be executed in as many counterparts as may be deemed convenient, each of which, when executed, shall be deemed an original. 37. The operating aspects of this Agreement, including but not limited to target area boundaries, may be altered from time to time through a letter of understanding, accepted mutually by Authority's Director of Community Development and Bank's City Improvement and Restoration Program (CIRP) Department, Oakland, California. 38. Bank and Autho~ity recognize the structural heterogeneity of the Authority's residential target areas. On a case basis, the Bank will consider making loans on multi-unit residential properties (5 units or more) at interest rates and with collateral deposits described in this Agreement. All other terms are subject to negotiation. IN WITNESS WHEREOF, this Agreement is executed by Authority act- ing by and through its City Council pursuant to Resolution No. 10627 authorizing such execution, and by Bank. Dated this 15th day of September , 1981. CITY OF CHULA VISTA BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By U~~~ By ; Title Mayor Title Assistant ic President-Loans City Impr e ent and Restor- "tion Pr%ram APPROVED AS TO FORM: y/ ~~? /.-'C/~ot,;< "_ ;/_: __: f/,? Agency Cou el - - 18 -