HomeMy WebLinkAboutReso 9-1987 RESOLUTION q-~7
CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE 3F CALIFORNIA
A RESOLUTION AUTHORIZING AN AGREEMENT F)R
BANKING LOAN SERVICES FOR THE HOUSING A~D
RENTAL REHABILITATION PROGRAMS
WHEREAS, on December 10, 1986 the City Council ap3roved rehabilitation
program guidelines for projects to be undertaken in connection with the City's
Community Development Block Grant (CDBG) Housing Rehabilitation Program and
the HUD Rental Rehabilitation Program; and
WHEREAS, it is necessary to enter into an operating agreement with a
financial institution for financial averaging and loan processing services
in order to implement the rehabilitation program; and
WHEREAS, the proposal received from Security Pacific National Bank has
been determined to provide the best available services for the program needs;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South
San Francisco that the Agreement attached as Exhibit "A" is hereby approved
and the City Manager is authorized to execute the Agreement.
I hereby certify that the foregoing Resolution was regularly introduced
and adopted by the City Council of the City of South San Francisco at a
regular meeting held on the 28th day of January , 1987 , by
the following vote:
AYES: Councilmembers John "Jack" Draqo, Richard A. Haffey, Gus Nicolopulos,
and Roberta Cerri Teglia
NOES: None
ABSENT: Councilmember Mark N. Addieqo
EXHIBIT A TO RESOLUTION NO. 9-87
OPERATING AGREEMENT
COMPENSATING BALANCE PROGRAM
This Agreement is made between the City of South San Francisco
California, hereinafter called "City", and the Security Pacific National
Bank, hereinafter called "Bank".
WHEREAS, the City is carrying out a Rehabilitation Loan Program as a
part of its Community Development Block Grant Program under the United
States Housing and Community Development Act of 1974 and re-authorized
by the 1977 Act;
WHEREAS, the City and the Bank mutually desire to agree upon the methods
and procedures under which they will make loans for rehabilitation and
improvement purposes.
NOW, THEREFORE, THE PARTIES MUTUALLY AGREE AS FOLLOWS:
1. LOAN APPLICATION PACKAGE
City shall refer all persons desiring credit under this Agreement
to the Bank by forwarding to the Bank a Loan Application Package
consisting of at least the following documents and materials:
A. Letter of Introduction from City; stating Interest Rate to be
charged to borrower and term requested.
B. Loan Application; Application Supplement and Bank's form of
Fair Lending Notice;
Construction Contract or Bids or Description of work with cost
estimate;
D. Applicant Authorization of Confidential Disclosure.
2. REVIEW OF LOAN APPLICATIONS
Following receipt of the Loan Application Package, Bank shall
review the Loan Application Package and forward to the City, in addition
to the applicant, a written notice indicating esther the Bank's approval
or disapproval of the loan application. The information contained in
the Loan Package and in the Bank's written notice shall be held by the
City as a privileged and confidential document and'not as a public
record.
City warrants that Bank shall be held harmless from any acts of
City's employees in the course of the loan processing, that may be in
violation of State and/or Federal credit granting statutes and
regulations. City employees shall not express credit worthiness
opinions to applicants.
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E j
LOAN PROVISIONS
Bank agrees to make loans for the Housing Rehabilitation Loan
Program in all cases where loan applications are approved by
the Bank and the City, according to all applicable laws,
regulations and Bank policies and procedures·
The Interest Rate paYable by the borrowers shall be 3 percent,
as determined by the borrowers eligibility under the City's
'program· In order to achieve the desired interest rate to be
charged to the borrower, the City shall deposit at the time of
individual loan fundings into a 'non interest bearing account
that percentage of the loan amount as set forth in Exhibit A of
this agreement. These ~eposits shall hereinafter be called
"Compensating Balances" and will be the mechanism used to
enable Bank to reduce the interest rate to the borrower.
The Bank shall determine the interest rate required, prior to
any Compensating Balance. That interest rate shall be .the
equivalent of the interest rate charged to borrowers under the
Banks regular Property Improvement Plat Loans which at the date
of execution of this agreement is 13·06 percent. This rate is
subject to change and may affect the required percentage of
Compensating Balance on loan fundings. Any changes in interest
rate and required Compensating Balance shall only be made by
written amendment, agreed to by both City and Bank. Bank shall
not be obligated to make loans under this agreement after
advising the City of a change in the interest rate until such
time as Bank and City have agreed. The Bank will not charge
the customary 3% Loan Fee or Documentation Preparation Fee,
thereby reducing the Bank's yield to less than yields on non-
City sponsored Loans of the same terms and amounts.
The Bank shall be reimbursed for expenses incurred on approved
1vans. Costs for Lot Book Reports, Appraisals, Credit Reports
and Recording Fees on approved loans will be charged whether
the loan is funded or not. Such costs can be prepaid by the
City or the borrower, or deducted from loan proceeds if
requested at the time of Loan documentation preparation.
Within 10 working days after the last business day of the
months of March and September, the Bank shall recalculate the
amounts deposited as Compensating Balances on the then
outstanding loans as of the last business day. Compensating
Balances in excess of the required percentages of the balances
owed on the outstanding loans as described in Exhibit A shall
be'refunded to the City. Such refunds will be made by Cashiers
Check or other method requested by City.
LOAN DOCUMENTATION & DISBURSEMENT
City obtains a dated and signed rehabi'itation contract. The
contract must specify the type of improvements and the itemized
cost of those improvements. If the property owner performs the
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work himself or herself, the City must approve the
rehabilitation specifications and the ~temized cost of each
improvement.
City forwards the executed contract or City certified
specifications to Bank with a request for loan documents·
Bank prepares and forwards loan documentation at the interest
rate previously determined and advises City of the Compensating
Balance required· Payments bn the loa~ shall be equal monthly
installments. The first payment is due 30 days from Note Date·
City obtains borrower's signature on loan documentation,
arranges for notarial acknowledgements and returns all
documents to Bank·
Bank deposits into an Escrow account designated by the City or
forwards to the City loan p~oceeds in nhe form of one or more
Cashier's Checks payable to the borrower, borrower and City or
other persons designated by the City and agreed to by the
borrower· If more than one check is necessary, the City will
inform the Bank of the number of checks to be issued.
5. COMPLETION CERTIFICATE
A. City makes a final inspection·
City executes the completion certification.
(i) The certificate must be properZy filled in and signed
by both the borrower and the contractors. It must be
dated the day it is signed by =he borrowers, and
borrowers must sign it only AFTER work has been
completed. The completion certificate shall be
accompanied by the necessary llen releases.
(ii) City forwards the completed and signed completion
certificate to Bank.
6. PAYMENT OF COMPENSATING BALANCES
The City shall initially deposit $95,000 in Bank, to be placed in a
savings account paying Market Rate interest; in:erest earnings on City
rehabilitation funds shall be redeposited with nhe BANK to contribute to
additional Compensating Balances; City must maintain sufficient funds
throughout the term of this agreement to meet Compensating Balance
obligations as and when program loans are funded; BANK is authorized to
debit the account designated by City for the Compensating Balances due
on approved loans upon loan funding.
The terms and conditions of this agreement are subject to the
provisions governing lump sum. drawdowns for property rehabilitation of
the HUD Community Development Block Grant regulations (Section 570.513
CFR 24)·
Page 3 of 5
7. COLLECTION OF FUNDS
The Bank shall collect all monthly payments due on loans originated
under this loan program. There shall be no additional charge to the
borrower or the City for servicing of loans 'except charges to the
borrower resulting from late payments, defaults and/or foreclosures, or
to discharge the borrower's obligations under the loan documents should
borrower fail to do so.
8. DELINQUENCY AND FORECLOSURE
The Bank shall advise the City of loans in default that may result
in Foreclosure or proposed foreclosure proceedings· The City shall have
the option to cure any default of the borrower. A report by the Bank to
the City of loan delinquencies s~all be made at least once a month
unless the City elects to waive such reporting.
9. CITY LOAN LIABILITY
City shall, not be liable or responsible in any manner for payment
of borrower's loan, in the event of borrower's Cefault on the promissory
note with Bank.
10. DEFERRED LOAN PROGRAM
(i)
In addition to the preceding Compensating Balance Program
the City desires that the Bank prepares loan documents for
the City's Deferred Loan Program.
(ii)
Deferred Loans are loans funded by the City with no
immediate repayment schedule.
11. DOCUMENT PREPARATION - DEFERRED LOANS
Each loan shall be funded in whole by City, evidenced by a
promissory note and secured by a Deed of Trust, which deed will
be recorded by Bank: Bank at the direction of the City shall
prepare all necessary loan documents with City designated as
oblige, and return all documents to City.
Each such loan shall be non-interest bearing,'payable in full
upon sale or transfer of the property which the loan proceeds
were used to improve.
For the Bank's service for each Deferred Loan, City shall pay
to Bank a loan origination fee not to exceed $25.00 plus out-
of-pocket expenses.
12. TERMINATION
The term of this agreement shall be for a period of two years from
date of execution by the City and Bank. This agreement may be amended,
but not extended, so long as such amendment is in writing and agreed
upon by both City and Bank. Termination of this agreement may be made
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by either City or Bank so long ag written noti of intent to terminate
is given 60 days prior to the termination date. Any termination of this
agreement shall not affect the operation thereof as it relates to loans
and Compensating Balance obligations outstandil~g at the time of said
termination.
13. NOTICES
Any notice required or permitted under this Agreement, shall be in
writing and may be personally served or sent bl certified U.S. mail to
the parties at the addresses indicatgd below:
City of South San Francisco
P.O. Box 711
South San Francisco, CA 9408.3
Attn: Lyle W. Norton
Director of Recreation &
ity Services
Security Pacific NatioNal Bank
P.O. Box 4430
Downey, CA 90241
Attn: Phil Long, Vice President
14. APPLICABLE LAW
This agreement shall be governed by the la~s of the State of
California.
15. RETURN OF UNUSED FUNDS
At the termination of the period of the a eement, all unobligated
funds (funds of the rehabilitation fund that e not been encumbered or
disbursed) then on deposit shall be returned to the Locality. The
Locality reserves the right to withdraw from rehabilitation fund any
unobligated amounts required by H.U.D. in the ercise of corrective or
remedial actions under this section of the re ations.
, 19 By:
Title:
, 19__ ATTEST:
City
SECURITY PACIFIC NATIONAL BANK
· 19
'APPROVED AS
City Attornt
By:
Page 5 of 5
City Manager
Clerk
TO FORM:
~y
EXHIBIT A '
Required Compensating Balances when Banks Inter
Rate to Borrower Compe
3% 95% o
4% 86% o
5% . 80% o
6~ 70% o:
7% 65% o:
8% 55%
9% 50%
10~ 40%
11~
12~
est Rate is 13.00 Percent
nsating Balance Required
amount financed
amount financed
amount financed
amount financed
amount financed
amount financed
amount financed
amount financed
of amount financed
of amount financed