HomeMy WebLinkAbout2002-10-22 - AGENDA REPORTS - FIRST TIME HOME BUYER (2)CITY OF SANTA CLARITA
AGENDA REPORT
CONSENT CALENDAR City Manager Approv
Item to be presented by: Barbara Bos ell
DATE October 22, 2002
SUBJECT: MODIFICATION OF FIRST-TIME HOME BUYER PROGRAM
DEPARTMENT: Administrative Services
RECOMMENDED ACTION
Approve the following First -Time Home Buyer Program modifications:
1. Increase maximum loan amount to $60,000.
2. Eliminate rehabilitation minimum.
3. Appropriate $400,000 into account number 2711-8001 and $20,000 into account
number 2711-7011.
4. Increase estimated revenues by $420,000 into revenue account number 102-5223.
BACKGROUND
In 2000, the City was awarded $420,000 from the State of California to implement a
First -Time Home Buyer Land Acquisition Rehabilitation program. This second
mortgage program is intended to help first-time buyers purchase homes in need of
significant repair and selling below market rates. Loan policy is crafted to
implement this program and provides limited down -payment assistance.
At the time the program was implemented, home sales in Santa Clarita began to
rise. In two years, the median sales price in Santa Clarita increased 25 percent,
from $215,000 in August of 2000 to $285,000 in August of 2002. The "starter home"
has also risen by 10% in the same time period. For example, in 2000, a 1,100
square -foot starter house in Canyon Country sold for $180,000. In 2002, a similar
home sold for $200,000. During this same time, mortgage interest rates dropped,
creating a seller's market. Homes in need of significant repair were and are selling
at or near market rates.
Staffs efforts to draw the interest of lenders and realtors to the program included
mass mailings, attending realtor networking meetings, ads, brochures, and special
meetings on the program. From the marketing, the City received 25 applications,
and none qualified. The conditions described above had a negative impact on the
program. Applicants found themselves limited by their required low -to -moderate
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FIRST-TIME HOME BUYER PROGRAM
October 22 ,2002 — Page 2
incomes and the price of homes being just out of reach with limited assistance under
the current program (illustrated in Attachment I A).
City staff discussed this problem with Housing and Community Development
Department (HCD) staff They acknowledge the City has flexibility to amend
program guidelines to meet current market conditions. City staff recommends the
first-time home buyer land acquisition rehabilitation program be modified.
Attachment II is a matrix, which compares current program policy to recommended
policy. If adopted, it is anticipated the recommended program modifications will
help bridge the gap between income -qualifying families and the cost of starter homes
in Santa Clarita (illustrated in Attachment I B) by providing more down -payment
assistance. To this end, staff is recommending the amount of the loan required for
rehabilitation be lowered to zero, so loan -by -loan analysis can be done to determine
the need for help in rehabilitation versus down -payment assistance. Staff is also
investigating changes to the first mortgage criteria. Feedback from realtors and
lenders suggest allowing conventional, VA, and capped adjustable loans would
increase borrowing power.
ALTERNATIVE ACTIONS
1. Not change the current policy.
2. Make policy changes as determined by the Council.
FISCAL IMPACT
The $400,000 for loans and $20,000 for administration comes to the City as
reimbursement to approved loans. There is no impact to the City's General Fund.
ATTACHMENTS
Attachment I - A & B Comparison of HOME Program Modification
Attachment II — Proposed Changes
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