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SINGLE FAMILY HOUSING REHABILITATION LOAN FOR 2440 SOUTH MONROE STREET
recommended action
RECOMMENDATION
It is recommended that the City Council approve a motion:
1. Approving a $135,000 Community Development Block Grant (CDBG) loan to Rosalie Sanguino St. Mary for repairs on her home located at 2440 South Monroe 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
Rosalie Sanguino St. Mary owns a home located at 2440 South Monroe Street (Attachment A - Vicinity Map, Attachment B - Photos) that is in need of repairs to correct deferred maintenance issues, water damage, and building deficiencies and will also benefit from installation of energy and water saving components to reduce ongoing costs. The repairs will be funded with an $135,000 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 owner-occupied 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 explains 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 2440 South Monroe Street, was built in 1946 and is 1,172 square feet in size with three bedrooms and two bathrooms. A City staff inspection of the house revealed a number of deficiencies that are eligible for repairs under the CDBG Loan Program, including:
• Replacing the roof and leaking rain gutters
• Completing all violations cited by Code Enforcement notices, including removing weeds and debris in the yard areas
• Repairing dry rot and water damaged siding and trim
• Correcting numerous electrical and plumbing code violations
• Abating lead-based paint and obtaining a clear termite report
• Replacing water damaged bathroom floors and tub/shower surrounds
• Removing and replacing the water damaged walls and ceilings
• Replacing all windows with double pane glass windows
• Replacing all exterior doors
• Repairing exterior areas and painting the entire exterior
• Repairing, retexturing and painting all interior walls and ceilings
• Replacing worn and damaged floor coverings
• Installing new kitchen and bathroom cabinets with counter tops
• Installing new Energy Star kitchen appliances
• Installing a new water heater with earthquake straps
• Installing a new central heating and air conditioning system
• Installing smoke and carbon monoxide detectors
• Installing attic insulation
• Replacing the rot damaged front porch cover
• Abating the abandon water well as required by the San Joaquin County Health Department
Staff provides assistance to homeowners in obtaining bids from licensed contractors. Bid request notices were offered to four contractors selected by Ms. St. Mary and one bid was received. The bid price is $107,085.00; staff’s estimate is $98,455.00. The job was awarded to Alan Spragg and Associates, a Stockton-based Company.
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Construction Costs |
$107,085 |
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Construction Contingency |
$ 15,715 |
|
Relocation Allowance |
$ 10,000 |
|
Impound Set-Up Estimate |
$ 1,500 |
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Title & Recording Estimate |
$ 700 |
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Total Loan Amount |
$135,000 |
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 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 $265,000. The homeowner does not have an existing first mortgage; the City’s loan will take first position on the Deed of Trust. The proposed loan of $135,000 will be 51 percent of the appraised value. Including the proposed loan, the household’s debt- to- income ratio will be 13 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 to a new loan or an increase of an existing loan (cash-out refinancing) is not allowed.
FINANCIAL SUMMARY
No General Fund dollars will be used for this project. This rehabilitation loan will be funded with $135,000 of CDBG funds, which are restricted to affordable housing use. Sufficient funds are available in account 062-8523-640.20-51 (CDBG Program Revolving Loan Fund) to provide the $135,000 loan from the CDBG program.
Attachment A - Vicinity Map
Attachment B - Photos
Attachment C - Housing Program Guidelines
Attachment D - CDBG Loan Agreement