HomeMy WebLinkAbout1999-04-13 - AGENDA REPORTS - FRESH RATE HOME MORTGAGE PGM (2)CITY OF SANTA CLARITA
AGENDA REPORT
City Manager Approv
Item to be presented by: Dennis Lu ens
UNFINISHED BUSINESS
DATE: April 13, 1999
SUBJECT: INDEPENDENT CITIES LEASE FINANCE AUTHORITY FRESH
RATE HOME MORTGAGE PROGRAM
Resolution No. 99-21
DEPARTMENT: Administrative Services
RECOMMENDED ACTION
Adopt Resolution No. 99-21, and direct the City Manager to enter into an agreement with
the Independent Cities Lease Finance Authority (ICLFA), a JPA, to become an associate
member and participate in the Home Mortgage Finance Program as described in the
attached agreement.
BACKGROUND
At their February 23, 1999 regular City Council meeting, the Council directed staff to bring
this item back after the April 6, 1999 Study Session on Affordable Housing.
Adopting Resolution No. 99-21 makes the City an associate (non-voting) member of the
ICLFA and an eligible jurisdiction wherein eligible home buyers could receive 101% home
mortgage financing. For example, a person who earns no more than $63,120 and qualifies
under FHA underwriting standards could purchase a home not exceeding $208,800 for an
out-of-pocket cost of approximately one month's mortgage payment. Recent real estate data
shows nearly 500 listings for single-family units selling at $200,000 or below in the Santa
Clarita Valley. Currently, 40 cities participate, and of these jurisdictions, 38 FreshRate
loans have been made in 14 jurisdictions. The City of Los Angeles leads with 14 loans.
Below you will find a list of pros and cons for the program.
Pros
• 101% financing for moderate income home buyers.
• Augment City's affordable home ownership goals established in our General Plan
Housing Element, Five -Year Consolidated Plan for HUD, and the City's Standard
Management Procedures on Affordable Housing.
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RESOLUTION NO. 99-21
April 13, 1999 — Page 2
• Alternative to the City's mortgage credit certificate (MCC) program as the demand for
this high and quickly exceed supply.
• Essentially for one month's mortgage payment a home buyer can get into a home.
• Uses 97% FHA financing and underwriting standards, layered with a 4% soft second,
which is forgivable over time.
Cons
• Home owners have zero equity and makes it easier to "walk away from their mortgage."
• Participants pay a higher interest rate, approximately 1h percent higher than the going
rates.
ALTERNATIVE ACTION
1. Not adopt No. Resolution 99-21, and defer action until after the May 1999 City Council
Study Session on Housing.
2. The City Council could choose to not adopt Resolution No. 99-21 and decide not to
participate in the program.
FISCAL IMPACT
No direct cost. Minimal indirect costs associated with staff time for initial coordination,
and introduce the program to the community.
SUMMARY
With no financial risk to the City by adopting staffs recommendation, the City Council
would make these loans accessible to moderate -income home buyers in Santa Clarks.
ATTACHMENTS
Resolution No. 99-21
Associate Member Agreement
Program Summary
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