HomeMy WebLinkAboutAgenda Statement 1982/04/20 Item 9COUNCIL AGENDA STATEMENT
Item 9
Meeting Date 4/20/82
TITLE: Resolution ~~ ~~~ Terminating an Agreement with Crocker
National Bank, and Amending an Agreement with Bank of America
TIED BY: Community Development Director ~[ ~ Date: Yes No X )
Th Community Housing Improvement Program (CHIP) currently operates with two
ba ks: Crocker National Bank in the Feaster area and with the mobile home
pr gram, and Bank of America in the Mueller and Vista Square areas. In order
t maximize financial leverage and reduce accounting and paperwork, it is my
MENDATION: That the Council adopt the resolution which terminates the
ment with Crocker National Bank and amends the agreement with Bank of
ca to provide all CHIP lender services.
B RDS/COMMISSIONS RECOMMENDATION: The Housing Rehabilitation Loan
C mmittee recommended on February 25, 1982 that the program be consolidated
with the Bank of America.
T e Trailer Rehabilitation Loan Committee recommended on March 8, 1982, that
t e program be consolidated with the Bank of America.
D SCUSSION:
T e City has had an agreement with Crocker National Bank since 1978 for
1 nder services for the CHIP program for rehabilitation of houses and
m bilehomes/trailers. We have utilized Crocker National Bank in the Feaster
S hool area for housing rehabilitation and in both the Feaster and Mueller
a eas for mobilehomes and trailers.
T e City's existing agreement with Bank of America provides lender services
f r single-family and multi-family housing rehabilitation in the Mueller and
V sta Square Neighborhood Strategy Areas, as well as for the City's
C mmercial Rehabilitation Program.
A though we have enjoyed a beneficial relationship with Crocker National Bank
o er the years, my analysis of the programs of the two banks, coupled with
t e recent extension of the Bank of America's program to include mobilehome
r habilitation loans, leads me to recommend consolidating our efforts with
B nk of America.
T e Bank of America offers greater opportunity for the CHIP housing
habilitation program to maximize financial leverage from program funds
rough the opportunity to choose two different forms of City participation.
hey are interest subsidy and partial loan collateralization. On short-term
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Meeting Date ~J2D78~
loa s, the City can pay an up-front, non-refundable interest subsidy to lower
the client's interest rate. The subsidy required is determined by the length
of he amortization period. On longer-term loans, where the interest subsidy
wou d be high, the program can choose to deposit a percentage of the loan
amo nt in a partially-collateralizing account, with those funds returning to
the program as the loan is repaid. Thus, unlike Crocker Bank's agreement,
whi h just provides for interest subsidy on amortized loans, the Bank of
Ame ica agreement allows us to fine-tune our leveraging strategies.
An additional motivation for consolidating is to reduce administrative time
by dealing with only one bank rather than two. A result of dealing with two
bans is a proliferation of accounts needed to manage the program. The
pro ram at Crocker National Bank currently has ten accounts, while the Bank
of America program requires nine. If only one bank were used, the total
nu er could be halved, thus saving much paperwork and auditing time.
Fi ally, the Bank of America agreement entails a slightly lower interest
yi ld rate than Crocker Bank's agreement. As the program pays the difference
be ween the bank's yield rate and the effective interest rate to the borrower
on interest subsidy loans, the Bank of America agreement offers that further
fi ancial advantage of requiring a smaller interest subsidy.
At ached is a proposed amendment to the existing agreement with Bank of
Am rica which would provide for mobilehome/trailer loans. This loan
am ndment delivers the same interest rates to the owner as the Crocker Bank
ag Bement. The amendment has been executed by the Bank of America.
Ad itionally, no amendment to the existing agreement is required to allow the
Ba k of America to proceed with single-family and multi-family rehabilitation
to ns in the Feaster neighborhood.
FI ANCIAL IMPACT: The changing of the current contract from Crocker
Na Tonal Bank to the Bank of America will result in an increased number of
re abilitation loans that can be made with the available funds, especially in
fu ure years as repayments from collateralized loans are received.
Ad inistrative time and costs will also be reduced.
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