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SINGLE FAMILY HOUSING REHABILITATION LOAN FOR 2154 SOUTH UNION STREET
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RECOMMENDATION
It is recommended that the City Council approve a motion:
1. Authorizing a $125,000 Community Development Block Grant (CDBG) Loan to Lucino and Virginia Navarrete for repairs on their home located at 2154 South Union Street; and
2. Authorizing the City Manager, or his designee, to take necessary and appropriate actions to carry out the purpose and intent of the motion.
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Summary
Lucino and Virginia Navarrete own a home located at 2154 South Union Street Stockton, CA 95206 (Attachment A - Vicinity Map, Attachment B - Photos) that is in need of repairs to correct deferred maintenance issues, water damage, and building code violations and which will benefit from installation of energy and water saving components to reduce ongoing costs. The loan will also be used to provide handicap accessibility to the bathroom and a wheelchair ramp to the front entrance. The repairs will be funded with a $125,000 CDBG funded loan, provided as a 30-year, one percent (1%) interest loan, with payments deferred until the end of the loan term.
DISCUSSION
Background
The City of Stockton offers several housing assistance programs for low and moderate-income persons to either purchase a house or to repair one they already own. One of the programs is the Single-Family Housing Repair Loan Program which offers comprehensive repairs to single-family homes with the goal of preserving and modernizing the existing housing stock. Funding for this program comes from a variety of federal grant funds such as the Community Development Block Grant (CDBG), Home Investment Partnerships (HOME), and the state CALHOME program.
The Single-Family Housing Repair Program is structured to carry out the intent of the State and Federal grant programs, which is to provide decent, safe, and sanitary housing for lower-income persons that could not otherwise afford to undertake repairs on their own. The program is voluntary, and applications are processed on a first-come, first-served basis, subject to funding availability. Homeowners become aware of this program through a variety of means including the City’s website, advertisements, housing fairs, and referrals from Code Enforcement.
If a homeowner would like to participate in the program, they complete an application and then meet with City staff who explain the program requirements and the process. To qualify for a rehabilitation loan, the homeowners must be low-income, as defined by HUD, and meet the requirements of the City Housing Program Guidelines (Attachment C - Housing Program Guidelines), which were last approved by the City Council in 2008. The Guidelines require that the total value of all loans secured by the property not exceed 105 percent of the appraised value of the home and that the owner’s total debt (housing and non-housing debt) not exceed 55 percent of their income.
If the homeowner is qualified and wishes to proceed, staff will then inspect the home to determine the scope of the rehabilitation. The rehabilitation projects are intended to bring the homes up to current codes, while also incorporating other requirements, such as energy efficiency and water conservation. The costs of the rehabilitation projects can vary widely, with some prior rehabilitation projects costing over $150,000.
Present Situation
The subject residence, located at 2154 South Union Street, was built in 1964 and is 1,289 square feet in size with four bedrooms and one bathroom with an illegally attached single carport. A City staff inspection of the house revealed very few, if any, legal improvements have been completed since it was built. A number of deficiencies that are eligible for repairs under the CDBG Program include but are not limited to:
• Replace the roof and leaking rain gutters
• Complete all violations cited by Code Enforcement notices, including removing illegal additions
• Repair dry rot and water damaged siding and trim
• Correct numerous electrical and plumbing code violations
• Abate lead-based paint and obtaining a clear termite report
• Replace the water damaged bathroom floor and tub/shower surrounds
• Remove and replace the water damaged walls and ceilings
• Replace all windows with double pane glass windows
• Replace all exterior doors
• Repair exterior areas and re-stucco the northside exterior walls
• Replacing worn and damaged floor coverings
• Install new kitchen and bathroom cabinets with counter tops
• Install new Energy Star kitchen appliances
• Install a new water heater with earthquake straps
• Install a new central heating and air conditioning system
• Install smoke and carbon monoxide detectors
• Install attic insulation
• Replace missing and damaged fencing
• Providing a wheelchair ramp and a handicap accessible stall shower
Staff aids the homeowners in obtaining contractor bids. Bid request notices were given to three contractors selected by Mr. and Mrs. Navarrete and one bid was awarded to Alan Spragg and Associates; a Stockton based company.
Construction Costs $107,630
Construction Contingency $ 15,170
Relocation Allowance $ N/A
Impound Set-Up Estimate $ 1,500
Title & Recording Fee $ 700
Total Loan Amount $125,000
Staff analyzed the homeowner’s loan-to-value and debt-to-income ratios and determined that they are within the limits established by the City’s Housing Program Guidelines. As previously noted, the Guidelines require that the total value of all loans secured by the property not to exceed 105 percent of the appraised value of the home and that the owner’s total debt (housing and non-housing debt) not exceed 55 percent of their income.
As determined by Cary and Associates, a licensed appraiser, the after-rehabilitation value of this home will be $185,000. The homeowner has an existing first mortgage with a balance of $54,000; the City’s loan will take second position on the Deed of Trust. The proposed loan of $125,000 and the balance of the first loan will be 97 percent of the appraised value. Including the proposed loan, the household’s debt- to- income ratio will be 41 percent.
As required by the Housing Program Guidelines, the loan will be provided as a 30-year, one percent (1%) interest loan with payments deferred until the end of the loan term.
This loan will be evidenced by a CDBG Loan Agreement (Attachment D - CDBG Loan Agreement), Promissory Note, and secured against the property by a Deed of Trust. In the event of a transfer of the property, the loan is due and payable in full at the time of the transfer. Subordination Request are only allowed to reduce the homeowner’s current interest rate on their existing mortgage. This program does not permit cash out refinances.
FINANCIAL SUMMARY
No General Fund dollars will be used for this project. This rehabilitation loan will be funded with $125,000 of CDBG funds which are restricted to affordable housing uses.
Sufficient funds are available in account 062-8523-640.20-51 (CDBG Program Revolving Loan Fund) to provide the $125,000 loan from the CDBG Program.
Attachment A - Vicinity Map
Attachment B - Photos
Attachment C - Housing Program Guidelines
Attachment D - CDBG Loan Agreement