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CC Resolution No. 1501 2810 RESOLUTION NO. 1501 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS, AMENDING THE GUIDELINES FOR THE CDBG-FUNDED HOMEBUYERS' ASSISTANCE PROGRAM; PROVIDING A REPEALING CLAUSE; CONTAINING A SAVINGS CLAUSE; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF. WHEREAS,on January 23, 1997,the City Council approved a Homebuyers'Assistance Program (the "Program") for the City of Baytown, which program is designed to assist families in procuring affordable housing by providing funds to assist with closing costs; and WHEREAS,the Program, which was last amended on May 23, 2000, promotes the stabilization of neighborhoods by increasing the percentage of owner-occupied homes within the City; and WHEREAS,the City of Baytown desires to revise the Program in order to increase the sales price of eligible homes from $60,000 to $70,000; and WHEREAS, since the inception of this Program, the stable economy has increased the price of housing,decreased interest rates,created more lenient lending criteria,and spurred new housing development; and WHEREAS,these factors have resulted in making the finding of an eligible home within the City a fairly arduous task; and WHEREAS,in order to afford income-eligible homebuyers a greater number of homes from which to choose, the increase in sales price is believed to be necessary and will have little affect on the amount of closing cost assistance provided per home; and WHEREAS,the Community Development Advisory Committee has reviewed the amended guidelines and recommends the same to the City Council; and WHEREAS,the CDBG Homebuyers'Assistance Program,as amended,furthers the recommendations of the City of Baytown's Comprehensive Plan and Enterprise Zone Revitalization Plan;NOW THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS: Section 1: That the City Council of the City of Baytown,Texas,hereby adopts the Homebuyers' Assistance Program Guidelines (CDBG-funds), which are attached hereto as Exhibit"A" and incorporated herein for all intents and purposes. Section 2: That the City Council of the City of Baytown, Texas, hereby declares that the amended guidelines referenced in Section 1 hereof shall not be effective until October I, 2001, but shall thereafter remain in effect until hereinafter amended or repealed. Section 3: All resolutions or parts of resolutions inconsistent with the terms ofthis resolution are hereby repealed;provided,however,that such repeal shall be only to the extent of such inconsistency and in all other respects this resolution shall be cumulative of other resolutions regulating and governing the subject matter covered by this resolution. Section 4: If any provision,section,exception,subsection,paragraph,sentence,clause or phrase of this resolution or the application of same to any person or the set of circumstances,shall for any reason be held unconstitutional,void or invalid,such invalidity shall notaffectthe validity of the remaining provisions of this resolution or their application to other persons or sets of circumstances and to this end all provisions ofthis resolution are declared to be severable. 2811 Section 5: This resolution shall take effect immediately from and after its passage by the City Council of the City of Baytown. INTRODUCED, READ and PASSED, by the affirmative vote of the City Council of the City of Baytown this the 12"'day of July, 2001. PETE C. ALFARO, M yor ATTEST: 4GAW. MITH, City Clerk APPROVED AS TO FORM: Jkh�CIO RAMIREZ, SR., OilyXfforney cklh271\citycouncil\resolu[ions\HomebuyersGuidelines071201 2 EXHIBIT"A" CITY OF BAYTOWN HOMEBUYERS' ASSISTANCE PROGRAM GUIDELINES I. PURPOSE The Homebuyers' Assistance Program is sponsored by the City of Baytown and administered through its Planning and Community Development Department. The goal of the program is to stabilize neighborhoods by assisting households to purchase affordable housing within the city limits. IL PROGRAM DESCRIPTION All homebuyers are required to provide proof of eligibility and be able to obtain a mortgage loan. The homebuyer should consult a real estate agent to find an eligible home and pay the required deposits for mortgage loan application processing and earnest money agreement. Upon mortgage loan approval, the Community Development Division will render closing cost assistance as a forgivable loan. Homebuyers will receive aid on a first come, first serve basis. III. ELIGIBILITY REQUIREMENTS All potential homebuyers must provide the appropriate documents to verify the following: 1. homebuyer is able to obtain mortgage financing; 2. homebuyer is 18 years of age or older; 3. homebuyer has been a resident of the City of Baytown for at least three (3) years immediately preceding the application; 4. homebuyer has completed the Homebuyers' Counseling Workshop sponsored by the City; 5. homebuyer's employment and credit stability is consistent with lender's qualifications; 6. no person in the household has previously received assistance through the Homebuyers' Assistance or Housing Rehabilitation Programs of the City of Baytown; 7. neither the applicant nor any person in the applicant household has owned a home within the past three (3) years; and 8. applicant household's annual gross income must not exceed the maximum income limits,which will be recalculated each year based on HUD's guidelines and the median income of residents of the Houston Primary Metropolitan Statistical Area. For purposes of determining whether the eligibility requirement enumerated in item 7 of this article has been satisfied, a person will be deemed to have owned a home within the last three (3)years if during such time, the person had an ownership interest in a manufactured home or mobile home and held more than merely a leasehold interest in the property on which the same is situated. IV. DEFINITIONS Annual Gross Income: wages listed on annual W-2 tax form in addition to the following applicable income sources including, but not limited to, all unreported wages, salaries, tips, commissions, overtime, self-employment wages, farm self-employment wages, part-time income,unemployment benefits,stock/bond interest and dividends,net rental income,estate or trust funds, Social Security awards, disability benefits, retirement pensions, Supplemental 1 EXHIBIT A Security Income (SSI), Aid to Families with Dependent Children(AFDC), survivor pensions, veteran benefits, child support, and alimony. Applicant Household: the household that is applying for the Assistance Loan and a home mortgage loan from a lender. Assistance Loan: the amount that the City of Baytown grants to the homebuyer that supplements downpayment and closing costs incurred during the mortgage loan financing process. City: the City of Baytown, Texas, its officers, agents, representatives and employees. City of Baytown's Lien: the legal claim against a property in the amount of the Homebuyers' Assistance Loan that must be paid to the City of Baytown in the pro-rated amount if the homebuyer is no longer in compliance with the terns of the Owner-Lien Agreement. This lien is subordinate to the lender's mortgage lien. Closing Costs: only those expenses that are necessary and incurred by buyers in transferring property ownership that are above the price of the property and are not included in the financing. Closing costs include, but are not limited to, loan origination fee, appraisal fee, credit report, underwriting fee,escrow fee,courier/messenger fee,attorney's fee,mortgagee's title policy,title charges, recording fee, assumption fee, survey, pest inspection, one discount point, lender's inspection, structural inspection, flood certificate, hazard insurance (deposit & premium), mortgage insurance(deposit&premium),tax proration,and termite inspection. Categories not included in closing costs will be earnest money,lender application fee,downpayment,and real estate broker/agent commissions. Earnest Money: the deposit made to the title company by the potential homebuyer to show his\her serious intention of purchasing the property. This money is applied to the closing costs. Homebuyer: the person applying for City of Baytown's Homebuyers'Assistance Program and the same person applying for a home mortgage loan from the lender. Household: all persons who occupy a housing unit. The occupants may consist of a single person; a group of persons related by birth,marriage,adoption or law; or, a group of unrelated persons who share living arrangements. Lender: a lending institution maintaining a place of business to which the public is invited in the City of Baytown that signs a Participating Lender Agreement with the City of Baytown. Maximum Income: the maximum gross income allowed for program eligibility. The scale is calculated according to Housing and Urban Development's(HUD)guidelines using the Houston Primary Metropolitan Statistical Area's median income. Mortgage: a legal document that pledges a property to the lender as security for payment of a conventional,Federal Housing Administration(FHA),Veteran's Administration(VA),or other home loan product processed by a lender. 2 Real Estate Agent: an agent licensed to show and sell homes in the State of Texas. Staff: any member of the Planning and Community Development office charged with administrating the Homebuyers' Assistance Program. Title Company: a corporation or other business entity,maintaining a place of business to which the public is invited in the City of Baytown, which is authorized and licensed to transact the business of insuring titles to interests in real property in this state. V. APPLICATION PROCESS 1. Interested homebuyers will obtain an application and the guidelines from the Planning and Community Development office. Staff will explain the program requirements and answer any questions. 2. Staff will schedule the homebuyer for the Homebuyers' Counseling Workshop. This workshop is free of charge and open to anyone interested. 3. The homebuyer is required to submit to Staff the residency verification forms and sign the information release forms allowing Staff access to loan files when returning the completed application. 4. Staff will review the application and notify homebuyer of eligibility status, which is contingent on fulfilling all requirements of the application process and mortgage loan approval. 5. Homebuyers who meet the initial requirements should contact a potential lender to begin a pre-approval loan process. The homebuyer must inform Staff of his/her chosen lending institution and Staff will ask the lending institution to sign a Lender Participation Agreement. If the lending institution does not wish to participate, the homebuyer must seek financing from another institution. 6. After receiving notification from the lender of the maximum mortgage loan amount available, the homebuyer should meet with a real estate agent to look for an eligible home. 7. The homebuyer will update all information previously submitted to the City if the information is over three (3) months old. The homebuyer must also have completed the City-sponsored Homebuyers' Counseling Workshop to proceed with the program. 8. The homebuyer will take the Homebuyers' Counseling Workshop certificate to the lender, pay for the application deposit and begin the loan process. Loan procedures depend on the lending institution. The lender,using its own guidelines,will determine the homebuyer's creditworthiness with regard to loan approval. 9. The lender will advise Staff of the incurred closing costs. Staff will process the Assistance Loan, which will be the amount of closing costs less the earnest money deposit and mortgage loan application fee previously paid by the homebuyer. The Assistance Loan will not exceed$4500. The homebuyer is responsible for any fees over and above $4500 needed to close the mortgage loan. 10. The homebuyer must secure an eligible home with an Earnest Money Agreement and an earnest money payment to the Title Company of at least$500 before completing the loan process. This deposit will be used as part of the closing costs. 3 11. When the lender notifies Staff of loan approval, the homebuyer must sign an Owner- Lien Agreement with the City of Baytown stipulating the requirements of the five (5) year forgivable loan. 12. The forgivable loan will be made by the City to the homebuyer at the time of closing. 13. Any homebuyer who falsifies information will be disqualified from the program. VI. HOMEBUYER'S RESPONSIBILITIES 1. Secure a mortgage loan from a lender. 2. Consider contacting a local real estate agent to find an eligible home. 3. Tender the earnest money and Earnest Money Agreement to a Title Company. 4. Tender the funds for mortgage loan application fees charged by lender. 5. Furnish Staff with a copy of the mortgage loan application and the receipt of application fee. 6. Attend the Homebuyers' Counseling Workshop sponsored by the City. 7. Sign the information release form to allow access to lender's loan file. 8. Furnish Staff with a copy of the property inspection, termite inspection, survey, appraisal and any other property evaluation report required by the lender. 9. Inform Staff of changes in information previously provided on the application any time during the loan process. 10. Complete a yearly update provided by the City and return to Staff. 11. Remain a resident in the chosen home for at least five (5)years. 12. Adhere to all requirements outlined in the guidelines and Owner-Lien Agreement. VII. HOMEBUYERS' ASSISTANCE LOAN 1. Loans will be used for payment of closing costs. 2. The assistance is granted as a forgivable loan at the time of closing. 3. The amount of loan granted depends upon the total amount necessary to complete the loan process less the downpayment and application deposit collected by the lender and the earnest money deposit collected by the Title Company. 4. The maximum Assistance Loan amount will not exceed $4500 for each home. VIII. SECURITY 1. The Homebuyers'Assistance Loan will be secured by a five(5)year lien on the property subordinate to the mortgage lien. 2. Forgiveness of the Assistance Loan will be pro-rated for five(5)years. Twenty percent (20%)of the total Assistance Loan will be forgiven at the end of each year of ownership and completely forgiven at the end of the fifth year. 3. The conditions of the Assistance Loan are separate from the mortgage requirements of the lender. 4. During the five (5) year loan period, upon sale, transfer of title, or cessation of owner- occupied status, as defined in the Owner-Lien Agreement, the unforgiven balance of the Assistance Loan shall be immediately due and payable. 5. In no case will the Assistance Loan be assumable by the next purchaser. 6. In the event the homebuyer refinances the original mortgage loan and the new lender does not accept the City's lien, the pro-rated share of the Assistance Loan must be repaid before the lien is removed. 4 IX. ELIGIBLE PROPERTIES Eligible properties must meet all of the following criteria: 1. detached single family housing structures,excluding manufactured and mobile homes; 2. priced$6070,000 or below; 3. located within the City limits of Baytown; and 4. the property owner and/or seller cannot be related to the homebuyer within the third degree by consanguinity and/or second degree by affinity (marriage, blood or law) as defined in Chapter 573 of the Texas Government Code, nor can the property be owned by a member of the homebuyers' household. X. HOMEBUYERS' COUNSELING WORKSHOP 1. Workshops will be sponsored by the City of Baytown. 2. A workshop must be completed no more than four (4) months before obtaining the Homebuyers' Assistance Loan and the mortgage loan from the lending institution. 3. Workshop topics will include, but are not limited to,how to buy a home, how to apply for a loan, ownership benefits and responsibilities, home maintenance, household budgeting and the loan closing process. 4. Homebuyers will be given a workbook and a Certificate of Completion upon successfully completing an entire Homebuyers' Counseling Workshop. cklh 115\CommunityDevelopment\HomebuyersOuideliness.Clean 5