HomeMy WebLinkAbout2021-04-13 - AGENDA REPORTS - AMEND CONTRS FROM FIRSTHOME PGM (2)Agenda Item: 5
CITY OF SANTA CLARITA
." AGENDA REPORT
CONSENT CALENDAR
CITY MANAGER APPROVAL: �?1 A�J'3
DATE: April 13, 2021
SUBJECT: AUTHORITY TO AMEND PREVIOUSLY EXECUTED CONTRACTS
FROM FIRSTHOME PROGRAM
DEPARTMENT: Community Development
PRESENTER: Michael Villegas
RECOMMENDED ACTION
City Council authorize the City Manager, or designee, to amend previously executed contracts
associated with Earthquake Rehabilitation and FirstHOME loans, including the forgiveness of
debt, subject to City Attorney approval.
BACKGROUND
In 2002, the City of Santa Clarita (City) applied for and received a state grant in the amount of
$600,000 from the FirstHOME Program, which offered deferred -payment, low -interest second
mortgage loans to low-income first-time homebuyers. With this grant funding, in addition to
$200,000 in program income from another HOME Investment Partnership Program (HOME)
funded program, the City administered an $800,000 homebuyer program that year.
The City continued to offer mortgage loans to low-income residents between 2002 and 2013
using HOME funds, which varied annually based on approved budgets, program income, and
available grants. In total, the City provided 16 FirstHOME loans during this time period. These
loans were available to income -eligible residents at a fixed interest rate of 3 percent up until
2013, when the City approved one loan at a rate of 0 percent. The City has not issued any
additional loans using HOME funds since 2013. To date, the City has 13 HOME funded loans
that remain outstanding, totaling approximately $1.74 million, with interest accrued of
$638,502.39. Eleven of these outstanding loans are from the FirstHOME program.
In recent months, a recipient of a FirstHOME loan requested the City Council and staff consider
waiving all, or a portion of, accrued interest. The borrower indicated this is causing financial
hardship for the household and preventing a refinance of the first mortgage loan, based on
income qualifications. Since presented with the information, City staff has been working with the
borrower to identify a feasible solution, while also evaluating all outstanding loans funded
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through the FirstHOME program. City Council approval is required to make any amendments
deemed necessary to existing contracts.
Approval of the recommended action could result in the forgiveness of interest owed in an
amount up to approximately $330,000, assuming interest accrued from 2013 to the present on all
outstanding loans is forgiven. However, City staff will work with inquiring borrowers on a case -
to -case basis and amend contracts, as deemed necessary, in order to prevent financial hardship or
housing instability. Therefore, the amount of potential interest lost could be significantly less. It
is important to note that interest payments received from these loans are restricted for use on
HOME fund eligible activities.
ALTERNATIVE ACTION
Other action as determined by the City Council.
FISCAL IMPACT
There is no impact to the General Fund. Approval of the recommended action could potentially
result in a loss of up to approximately $330,000 in loan interest in HOME funds.
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