HomeMy WebLinkAboutAgenda Statement 1980/01/02 Item 12LI~I Ur I,hULH VI~IH
' COUNC I L AGENDA STATEMENT Item No. • 12
For meeting of 1/2/80
ITEM TITLE Resolution 99// Adopting Amendments to Agreements With
Crocker National Bank Regarding Credit
SUBMITTED BY Community Development Director -'
ITEM EXPLANATION
(4/5TH'S VOTE REQUIRED YES. NO X )
In August, 1978, the City entered into agreements with Crocker Bank for lending
services relative to the Community Housing Improvement Program (CHIP) and the
Mobile Home Loan Rehabilitation Program. Through these agreements, the City is
able to leverage Community Development Block Grant funds to property owners for
housing rehabilitation loans with the bank. A similar agreement exists with Bank
of America for the housing program only.
Under our current agreement with Crocker Bank, a base interest rate of 10% is in
effect for residential properties and a base rate of 11% is in effect for mobile-
homes. Both of these rates are reduced to a lending rate of 7% and 3% respectively.
Block Grant funds are utilized to pay the difference between the base rate and the
lending rate.
With the increasing cost of funds being experienced by lending institutions,
Crocker Bank is requesting an increase in the base rate from 10% and 11% to 12%
respectively for both residential loans (CHIP) and mobilehomes. This increase
will result in a 54% increase in the Block Grant cost on a 7% loan and a 19% in-
crease in the Block Grant.. cost on a 3% loan. This increase is permitted under
the terms of our agreement provided both parties agree. If Council decides not
to adopt the amendments, our contract with Crocker would expire in 60 days.
The increase being requested is in line with our housing lending agreements with
Bank of America. Bank of America's rate is currently 11% and has been in effect
for six months.
JTS: as
Amended EXHIBITS ~,
Agreement X Resolution X Ordinance Plat Notification List
Other ENVIRONMENTAL DOCUMENT: Attached Submitted on
FINANCIAL IMPACT
Currently, a $10,000 loan for 15 years at 7% would cost $1,635.70 in Block Grant funds.
With the requested increase in effect, the same loan would cost $2,510.80 in Block
Grant funds or an $875.10 increase. A loan at 3% would result in a $772.40 increase.
STAFF RECOMMENDATION
Based on my analysis, Crocker's rate is consistent with other lending institutions
and money market conditions. Our experience with Crocker Bank has been excellent and
the CHIP program continues to progress. In addition, Crocker Bank is the only bank
participating in the mobilehome loan rehabilitation program. Therefore, I would
recommend adoption of the resolution. If interest rates begin to fall, we will peti-
tion the bank to revise their rate accordingly.
BOARD/COMMISSION RECOMMENDATION
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COUNCIL ACTION
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Form A-113 (Rev. 5/77)