Affordable Housing Ordinance Administrative Manual

Transcription

1 Affordable Housing Ordinance Administrative Manual Adopted by Resolution July 2018 Supersedes AHO Administrative Manual adopted February 8, 2016 by Resolution 4659 Prepared by: Matthew Madsen Affordable Housing Program Manager 7/16/2018 Administrative Manual Page 1

2 Table of Contents Purpose of this Manual and Goals of the Ordinance Applicability Definitions Number of Required Affordable Homes Pricing Timing and Delivery of Affordable Homes.8 6. Incentives.8 7. Minimum Design & Construction Standards Affordable Housing Plan Non-Compliance with a Signed Affordable Housing Plan Marketing & Sales of Affordable Homes Cash-in-Lieu Policy & Procedures Buyers Application, Qualification and Purchase Recordation and Subsidy Recapture for Lower-Priced Homes Recordation for Moderate-Priced Homes Ownership Requirements Administration, Monitoring and Enforcement City s Agent Exhibits /16/2018 Administrative Manual Page 2

3 Purpose of the AHO Administrative Manual The purpose of this Administrative Manual ( manual ) is to provide guidance and information for the effective and efficient implementation and administration of Chapter 38, division 380 of the Bozeman Municipal Code as created pursuant to Ordinance 1922 ( Affordable Housing Ordinance or AHO ). This manual is to be used as a guide for administrators of the City s affordable housing program, developers and builders of affordable homes, city agents for affordable housing services and other interested parties. In the case of a conflict or difference of interpretation between the text of this manual and the text of the AHO, the AHO controls. The Community Development Director may update this manual periodically to reflect updates in the AHO, the annual release of Area Median Income (AMI) by the Department of Housing and Urban Development (HUD), or make other administrative edits to correct errors in the manual. Goals for the Affordable Housing Program* *Goals will be set on an annual basis using the updated action plan when completed. The City Commission will annually set goals for the creation of affordable housing. For the first two years of the program, , the City Commission set the following goals for voluntary development of affordable homes, through the adoption of Ordinance 1922: Affordable Homes, single family or townhomes, to be constructed and sold prior to September 12, 2016: fourteen (14) of which a minimum of four shall meet the definition of Lower-Priced Homes. Of these four Lower-Priced Homes, three must be sold at or below the maximum price schedule established for 80% of Area Median Income (AMI). One of the Lower-Priced Homes may be sold at or below the price scheduled established for 70% AMI. Affordable Homes, single family or townhomes, to be constructed and sold prior to June 12, 2017: twenty seven (27) Affordable Homes, of which no less than seven (7) shall meet the definition of Lower-Priced Homes. Of these seven Lower-Priced Homes, five (5) must be sold at or below the maximum price schedule established for 80% of Area Median Income (AMI). Two (2) of the Lower-Priced Homes may be sold at or below the price scheduled established for 70% AMI. Affordable Homes, single family or townhomes, to be constructed and sold prior to December 12, 2017: fifty four (54) Affordable Homes, of which no less than twelve (12) shall meet the definition of Lower-Priced Homes. Of these twelve Lower-Priced Homes, three (3) must be sold at or below the maximum price schedule established for 70% AMI. These target dates were extended once by Ordinance Under the terms of the AHO, should any of the goals described above not be met by a target date, the 7/16/2018 Administrative Manual Page 3

4 requirements of would become mandatory. The requirements became mandatory on July 12, 2017, meaning development proposals submitted after that date are required to provide 10% of the total residential units in the development as Lower- Priced Homes (70% AMI), 30% of the total residential units as Moderate-Priced Home (90% AMI), or a mix of both types as defined in the AHO and this Manual. 1. Applicability City of Bozeman Ordinance 1922 applies to all of the following: a. Subdivisions and Site Plans which propose 10 or more new market rate homes b. Annexations where the net developable area could result in 10 or more dwellings c. Developments seeking to use incentives to develop affordable housing d. Condominiums and rental units are exempt from the AHO 2. Definitions Most of the definitions that are used in the manual can be found in Section Definitions of the Bozeman Unified Development Code. However, some of the terms used in this manual are not found in the AHO and are provided here: a. Buyer Certification Process by which it is established that a given household meets the requirements in the AHO and this manual to qualify to purchase a home produced through the AHO. This can be done by the City or City s Agent. b. City s Agent Refers to a qualified entity retained by the city to implement the AHO. c. AHO Maximum Price The maximum AHO-allowed price of Lower-Priced Homes and Moderate-Priced Homes as determined from a schedule of AHO Maximum Prices calculated and published annually as an update to the manual. d. Eligible Buyer A household meeting the AHO s eligibility requirements to purchase a home that is subject to the conditions of the AHO. e. Housing Counseling Agency An organization certified by the US Department of Housing and Urban Development (HUD) to provide housing counseling and education. f. Substantial Improvement Any repair, reconstruction or improvement of a structure, the cost of which equals or exceeds 50 percent of the market value of the structure either: i. Before the improvement or repair is started; or 7/16/2018 Administrative Manual Page 4

5 ii. If the structure has been damaged, and is being restored, before the damage occurred. For the purposed of this definition, substantial improvement is considered to occur when the first construction to any wall, ceiling, floor or other structural part of the building commences. The term substantial improvement does not include any project for improvement of a structure to comply with existing state or local health, sanitary or safety code specifications which are solely necessary to protect the public health, safety and general welfare of residents; or any alteration of a structure listed on the National Register of Historic Places or state inventory of historic places. 3. Number of Required Affordable Homes The number of Affordable Homes that a developer/builder is required to build is a percentage of the total number of market-rate homes proposed in the development plan, calculated in accordance with the AHO pricing. See the ordinance or fillable form below. 4. Pricing The annual pricing schedule of the AHO establishes two pricing categories for Affordable Homes to include: 1. Lower-Priced Homes - Maximum price is calculate at 70% of Area Median Income for the number of bedrooms in the home. 2. Moderate-Priced Homes Maximum price is calculated at 90% of Area Median Income for the number of bedrooms in the home. The City will publish an updated pricing schedule for Affordable Homes on an annual basis following the release of updated AMI. The pricing requirement for Lower-Priced and Moderate-Priced homes in a development is based off of the pricing schedule that is in effect at the time of the issuance of building permits. The City considers the following in determining maximum sales prices: 1. Assumptions About Cost of Home Ownership The costs of homeownership include real estate taxes, homeowners insurance, mortgage interest rates, association fees and private mortgage insurance. These costs will be updated during the annual pricing schedule update if community averages have changed. In addition, the Community Development Director may make de minimis exceptions and make changes to maximum allowed prices if prevailing mortgage interest rates have adjusted by 50 basis points or more over the current rate schedule. The city may conduct a survey of a sample of 7/16/2018 Administrative Manual Page 5

6 recent home sales and other data sources to determine if any changes have occurred in housing payment cost assumptions used to determine affordable prices - such as typical monthly costs of real estate taxes, insurance, association fees, and private mortgage insurance. If the Director of Community Development determines any such changes materially affect the schedule, the Director may amend the schedule. 2. Household Size for the Type/Size of Affordable Home The City uses the AMI for different household sizes to determine the pricing of Affordable Homes of different sizes, as follows: Home Size Studio/Zero-Bedroom One-Bedroom Two-Bedroom Three-Bedroom AMI Used One-Person Household Two-Person Household Two-Person Household Four-Person Household 3. The Percentage of AMI that Corresponds to the Category of Affordable Home The maximum price for a Lower-Priced Home is based on an AMI of 70%, adjusted to the number of bedrooms and calculated at the present value based on 12 monthly payments for a term of 360 months. The maximum price for a Moderate-Priced Home is based on an AMI of 90%, adjusted to the number of bedrooms and calculated at the present value based on 12 monthly payments for a term of 360 months. Affordable Home Type Buyer s Qualifying Income Income Used to Determine Sales Price Lower-Priced Home 65% - 80% AMI 70% AMI Moderate-Priced Home 81% - 100% AMI 90% AMI 4. Maximum Monthly Housing Payment is determined by dividing annual AMI by 12 and multiplying that number by 33%. a. Example: 70% AMI for family of four = $56,840/12 = $4,737 x 33% = maximum monthly housing payment of $1, Formula for Determining AHO Maximum Prices - The following is a summary of the formula used to determine the maximum effective sales price of a two-bedroom, Lower-Priced Home priced at the 70% of AMI level. The example below uses the AMI for Bozeman in effect as of February 1, /16/2018 Administrative Manual Page 6

7 a. Multiply the annual AMI for the household size by the applicable percentage of Area Median Income (AMI) (70 or 90%): i. AMI for a 4 person household is $81,200 x 70% = $56,840 (70% of AMI) b. Divide by 12 to determine monthly income at that AMI level: i. $56,840 divided by 12 = $4,737 c. Multiply monthly income by 33% to determine maximum affordable monthly housing payment: i. $4,737 X 33% = $1,563 d. Subtract from the total maximum monthly housing payment estimates for monthly payments for real estate taxes, homeowner's insurance, mortgage insurance and homeowners association fees, in this instance a total of $466 i. $1,563 - $466 = $1,097 e. The resulting amount is the maximum principal and interest payment capacity, from which a mortgage amount is imputed using the prevailing mortgage rate, which is currently assumed to be 4.5% per annum. f. The resulting amount equals the AHO Maximum Price for a Lower-Priced Home at the 70% AMI price level. In this proforma example, the resulting price is $216,589. g. The above formula is used to determine the AHO Maximum Prices of Lower- Priced Homes at the 70% AMI price level and for AHO Maximum Prices of Moderate-Priced homes at the 90% AMI price level. 6. Applicability of Revised Pricing Schedules - The pricing of Lower-Priced and Moderate- Priced Homes is subject to the Maximum Home Price Schedule in effect at the time of issuance of building permit. A developer may request that a newly published Maximum Home Price Schedule apply to a home subject to a previous Maximum Home Price Schedule. *See Exhibit A: AMI, Pricing, Cash-in-Lieu Rates and Fractional Fee schedule. 7/16/2018 Administrative Manual Page 7

8 5. Timing of Delivery of Affordable Homes The AHO requires that in any development in which more than one affordable home will be sold, the affordable homes must be sold concurrently and in proportion to the sale of unimproved lots or market-rate homes. The timing must be included in the Affordable Housing Plan that is submitted. A developer may always sell affordable homes earlier than is required in an Affordable Housing Plan. A developer may also partner with another builder or sell lots to a builder to build affordable homes as long as the timing coincides with the building and selling of market-rate homes. 6. Incentives A developer must submit an Affordable Housing Plan for review and approval by the city describing how the proposed plan will meet the requirements of the AHO and what incentives are being requested for the plan, if any. Developers may apply for incentives at any time during the development process in conjunction with their Affordable Housing Plan. However, applying for incentives at the time of subdivision plan submittal can result in the greatest benefit from incentives. Impact Fees: Developers/builders will be responsible for paying impact fees at the time of securing building permits. Once the home is sold and the sales price is verified with the Affordable Housing Program staff the developer/builder may apply for impact fee reimbursement. * See Exhibit B: Affordable Housing Incentives Chart. 7. Minimum Design & Construction Standards Minimum design and construction standards are intended to meet the AHO requirement to ensure livability and compatibility with nearby market-rate homes in the development. 1. Mix of Bedroom Sizes Affordable Homes must represent a mix of bedrooms per unit as similar as possible to the mix of bedrooms in the market-rate homes in the development. The developer may provide units with a different mix if it meets the needs of the next qualified household. 2. Equipment and Equipment Hookups Affordable Homes must at a minimum include a new kitchen range and refrigerator, hookups for a clothes washer, dryer, a built-in dishwasher, and a central heating system to meet the same standard as the market-rate homes in the development. 7/16/2018 Administrative Manual Page 8

9 3. Location within Neighborhood Affordable Homes must be dispersed among the market-rate homes in the development as evidenced on the recorded plat. 4. Design and Materials Affordable Homes must be designed, built and landscaped similar to market-rate homes in the development with similar quality and type of materials, lighting, plantings and irrigation systems. 5. Other Features Affordable Homes need features that are functionally equivalent to market rate homes in the development. Additional features may include garages, parking areas, carports or other green-building features. Affordable Homes must have the same amenities as the market-rate homes in the development, including the same access to and enjoyment of common open space and facilities. 8. Affordable Housing Plan* *An example of a completed affordable housing plan is available upon request from staff The applicant for any development is required to create affordable housing or for any development where the applicant is seeking incentives must submit an Affordable Housing Plan using form AH (available Bozeman.net, Planning website or at the back of this manual) describing how all the requirements of the AHO will be met. 1. Contents of the Affordable Housing Plan include: a. Number of Lower-Priced Home including number of bedrooms b. Number of Moderate-Priced Homes including number of bedrooms c. Number of Market-Rate Homes including number of bedrooms d. Location of the Affordable Homes (lots in the plat or units in a site plan) e. Timing of the delivery of the Affordable Homes in relation to Market-Rate Homes f. Marketing plan describing how the Affordable Homes will be offered to the public g. Plan for construction of Affordable Homes in phased developments. h. Any other information that is necessary to evaluate compliance with the AHO. 2. Process for submission and approval of an Affordable Housing Plan: a. Applicant submits Affordable Housing Plan with development application b. City Planner and Affordable Housing Manager review application c. Applicant meets with Planner and Affordable Housing Manager for recommendations d. Affordable Housing Plan is signed and approved e. Applicant develops marketing plan with City & City s Agent f. Applicant secures building permits and pricing for Affordable Homes is set 7/16/2018 Administrative Manual Page 9

10 g. Applicant works with City, City s Agent and qualified buyer to complete all required documentation h. Applicant sells Affordable Home to qualified buyer i. Applicant provides settlement statement showing Affordable Home sales price to City or City s Agent j. Applicant receives incentive reimbursements if applicable 3. Once approved and signed, the Affordable housing Plan will become a recorded part of subdivision plat(s) and site plans. 9. Non-Compliance With a Signed Affordable Housing Plan If the City determines a developer/builder subject to the AHO has failed to comply with any terms or conditions of the Affordable Housing Plan or AHO, the Affordable Housing Program Manager will notify the developer/builder of the noncompliance in writing and order compliance. Notification will describe: a. Date by which compliance must occur b. Exact nature of the non-compliance c. Possible sanctions for continued non-compliance If the compliance deadline has passed and the developer/builder remains non-compliant, the City may take those enforcement actions described in the AHO. 10. Marketing & Sales of Affordable Homes* *An example of a marketing plan is available upon request from staff The marketing and sales provisions of the AHO and this manual are designed to ensure that AHO requirements are met and that Lower-Priced Homes are marketed and sold as quickly and efficiently as possible. Developers and builders can partner with the City or the City s Agent to help with the marketing of the Affordable Home but agreements have to be made in advance between all parties and documented in the Affordable Housing Plan. The steps in the marketing process are: 1. Intent to Build A developer/builder must provide the City of the City s Agent with floor plans, elevation drawings, location of the unit and anticipated construction schedule. 2. Coordination Meeting Setup a face-to-face or over the phone meeting with the City & the City s Agent to review the AHO requirements. 7/16/2018 Administrative Manual Page 10

11 3. Marketing to Buyers The City and City s Agent and developer will utilize the processes that are set out for marketing. 4. Sales Contract Before a sales contract is signed, buyer must be certified eligible to purchase an affordable home by the City or the City s Agent. 5. Transmit Copy of Sales Contract Within 3 business days of after execution of the sales contract, the developer or sales agent must transit a copy of the sales contract to the City and the City s Agent. 6. Pre-Closing Tasks An appraisal must be completed by the buyer or lender and shared with the City and City s Agent. The City currently uses the Human Resource Development Council (HRDC) to assist with the marketing and sales of homes through the Affordable Housing Program. After an initial meeting with the City s Affordable Housing Program Staff, plans can be made with the City and City s Agent to begin to develop a more thorough marketing plan including set dates and requirements. The City of Bozeman s Affordable Housing website will be a resource for any of the homes that are available for purchase through upcoming developments. * See exhibit J: Flyer for a for-sale affordable home can be found 11. Cash-in-Lieu Policy & Procedures The City of Bozeman allows cash-in-lieu payments as a form of alternative compliance to meet the requirements of a developers/builders Affordable Housing Requirements. The Cash-in-Lieu rate is set based off of the number of bedrooms in each dwelling unit required by the ordinance. The price will be the difference between the last two-year average median home sales price and the lower-priced home rate based off of the total number of bedrooms. Median 7/16/2018 Administrative Manual Page 11

12 home sales prices are collected through the Gallatin Association of Realtors Big Sky Country Multiple Listings Service data. Cash-in-Lieu plans must be approved by City of Bozeman staff. Payment schedules are described in the Affordable Housing Ordinance and requests for alternative pricing can be made and will be taken on a case by case basis. *Add a section on what cash-in-lieu payments can be used for once that policy is developed. 12. Buyers Application, Qualification and Purchase The AHO establishes two price categories for Affordable Homes as explained in section 4. In order to qualify, buyers have to report an income that meets the requirements for each of the pricing categories. See the below chart for those income qualifications: Affordable Home Type Buyer s Qualifying Income Income Used for Sale Price Lower-Priced Home 65%-80% AMI 70% AMI Moderate-Priced Home 81%-100% 80% AMI All of the requirements for buyers of Affordable Homes can be found in the AHO Sec All verification for buyers will be conducted by the city or the city s agent to include: 1. Income verification Must meet income requirements for the purchase price. 2. Asset verification Liquid assets cannot exceed $25,000 as defined in the AHO. a. Community Development Director may waive requirement 3. Household eligibility Must meet the definition as explained in the AHO. 4. First-Time Home Buyer Must meet the definition as explained in the AHO. 5. Buyer Contribution Must have at least $1,000 to contribute at time of sale. If a buyer is interested in purchasing a home through the City of Bozeman s Affordable Housing Program, there are steps that they must take to purchase a home. 1. Attend a HUD Certified Home-Buyers Education Class. The Human Resource Development Council (HRDC) of Bozeman currently runs Home-Buyers Education classes. 2. Meet with city staff or city s agent to determine eligibility. The method of verification will be the HUD Part 5 definition (24 CFR Part 5) as applied to the HOME program. If eligibility is determined by the city s agent, they will provide certification to the city. a. See: Exhibit I for Certification Letter 7/16/2018 Administrative Manual Page 12

13 3. Meet with a local lender to get qualified for a traditional mortgage. b. A list of local lenders is available from the city or the city s agent. The City or City s Agent will maintain a wait list of eligible buyers for homes through the AHO. This list will be updated and used to send out notices of for-sale affordable homes as they become available. It is the responsibility of the interested home-buyer to be actively engaging in the home-buying process. 13. Recordation and Subsidy Recapture for Lower-Priced Homes The City will secure and recapture both its cash and non-cash investments in affordable housing with the goal of creating a revolving Affordable Housing Fund. All homes sold in the Lower- Priced category will have one to two liens attached to them depending on the financial assistance that is needed by the buyers. Origination of all lien documents will be completed by the City or the City s Agent. See Exhibits D,E,F & G. As a governmental entity, the City of Bozeman is not required to be FHA certified for secondary mortgages. See Exhibit H. Lower-Priced Homes will be subject to up to two city-created liens: Type of Lien Purpose Repayment Terms To recapture the City's loan of Payable at 0% interest upon cash to an eligible buyer for sale, transfer, cash-out down payment assistance for refinance or default on AHO the purchase, up to $10,000. requirements. A. Down Payment Assistance Lien (Cash Subsidy) B. Buyer Subsidy Lien (Non-Cash Subsidy) To recapture the difference between 98% of the market value and the AHO Maximum Price of a Lower-Priced Home. Payable at 0% interest upon sale, transfer, cash-out refinance or default on AHO requirements. A. Down Payment Assistance Recapture (Cash-Subsidy): Down Payment Assistance is provided to home buyers as a cash subsidy subject to availability of the funds in the City s Affordable Housing Program Fund. 1. Lien Amount: Equal to the down payment assistance that is received from the City of Bozeman. 2. Terms of Loan: Principal amount of the lien will be repaid at 0% interest by the buyer due upon subsequent sale or refinance of the Lower-Priced Home or if the buyer fails to meet ownership or other AHO requirements. The city s lien will be subordinate to any 7/16/2018 Administrative Manual Page 13

14 first mortgage and secondary financing for down payment or principal reduction through state or federal funds. 3. Lien Form: Liens will be placed in the form of a deed of trust and promissory note payable to the City of Bozeman. 4. Recordation: These documents will be recorded at the Gallatin County Clerk and Recorders office. a. Net Proceeds Insufficient to Repay Subsidy: Upon resale, if the net proceeds are not sufficient to recapture the full amount of the City cash subsidy, the City will accept the available net proceeds as full payment. B. Buyer Subsidy Recapture (Non-Cash Subsidy): Qualified buyers purchasing homes through the City of Bozeman s Affordable Housing Program will be receiving a non-cash subsidy in the form of the price difference between the lowerpriced home and an equivalent market-rate home, calculated as described below. 1. Lien Amount: Equal to the difference between 98% of the appraised value of the home and the Lower-Priced Home sales price. 2. Terms of Loan: Principal amount of the lien will be repaid at 0% interest by the buyer due upon subsequent sale or refinance of the Lower-Priced Home or if the buyer fails to meet ownership requirements. The city s lien will be subordinate to any first mortgage and secondary financing for down payment or principal reduction through state or federal funds. 3. Lien Form: Liens will be placed in the form of a deed of trust and promissory note payable to the City of Bozeman. 4. Recordation: These documents will be recorded at the Gallatin County Clerk and Recorders office. 5. Net Proceeds Insufficient to Repay Subsidy: Upon resale, if the net proceeds are not sufficient to recapture the full amount of the City cash non-cash subsidy, the City will accept the available net proceeds as full payment. See Exhibit C for examples of cash and non-cash subsidy recapture. 7/16/2018 Administrative Manual Page 14

15 14. Recordation for Moderate-Priced Homes Buyers who qualify for purchase of a Moderate-Priced Home through the City of Bozeman s Affordable Housing Program must have an income between % AMI. They will be required to occupy the home as their primary residence and sign an occupancy agreement (exhibit F) upon purchase of the new home. 15. Ownership Requirements Buyers of Affordable Homes through the City of Bozeman s Affordable Housing Program are required to meet certain ownership requirements to continue to receive the benefit of the Affordable Home. These requirements are set out in the AHO. Buyers of Affordable Homes through the City of Bozeman s Affordable Housing Program are required to occupy the home as their primary residence and are not allowed to rent the entirety of the house to another household. Ownership requirements will be checked on an annual basis by the City or the City s Agent to make sure that the homeowners are in compliance. If found not in compliance, owners may be forced to repay the cash and non-cash subsidy liens as described in terms of liens in section Administration, Monitoring and Enforcement The Affordable Housing Program Manager and/or City s Agent are authorized to implement the Affordable Housing Ordinance. These responsibilities include but are not limited to: 1. Administration The Director of Community Development may promulgate and enforce all rules and regulations and take all actions necessary to the effective operation and enforcement of the AHO and this manual including: c. Reviewing a developer s Affordable Housing Plan for compliance with the AHO d. Developing and adopting all required forms and documentation e. Monitoring developers compliance with approved Affordable Housing Plans f. Taking enforcement actions authorized by the AHO g. Calculating and publishing the annual Affordable Homes Pricing schedule which includes: AMI, Affordable Home sales pricing, cash-in-lieu rates and the fractional fee scale i. The Community Development Director may update these schedules more frequently if the prevailing mortgage interest rate increases more than.5% h. Tracking of all Affordable Homes built and sold including any cash and non-cash subsidies that were included as part of the sale 7/16/2018 Administrative Manual Page 15

16 i. Verification of owner-occupancy of Affordable Homes j. Disbursement of down payment assistance and impact fee reimbursement expenditures for developments with approved Affordable Housing Plans. 2. Verification of Purchase Transactions The Affordable Housing Program Manager will complete the final verification that the home sale met the requirements for both Lower- Priced or Moderate-Priced Homes and buyer qualification including: a. Occupancy Agreement (Exhibit E) b. Settlement Disclosure Statement After closing c. Issuance of any impact fee reimbursements 3. Non-Compliance The Affordable Housing Program Manager will work with developers throughout the development and implementation of an Affordable Housing Plan and will be responsible for addressing any issues of non-compliance that may arise throughout that process 4. Review of Program Effectiveness The Affordable Housing Program Manager will periodically review the effectiveness of the City s Affordable Housing Program. This will include but is not limited to: d. Audits of program files maintained by the City s Agents e. Affordable Housing Annual Review f. Completion and maintenance of all files related to the Affordable Housing Program g. Tracking of all affordable homes built and sold h. Interviews with home buyers about the effectiveness of the program i. Meetings with community members 17. City s Agent Through a Professional Services Agreement (PSA), the City may choose to use an agent to help fulfill some or all of the duties described in this manual for the implementation of some of all aspects of the AHO. The City s Agent must be HUD certified to be able to complete all the tasks as laid out in the PSA. In addition, the City s Agent must have the administrative capacity to accurately and securely maintain any and all documentation as required by the AHO. 7/16/2018 Administrative Manual Page 16

17 Exhibit A: Area Median Income, Price Schedule, Cash-in-Lieu Rates and Fractional Fee Scale The current price schedule will be updated within 30 days of the annual release of Area Median Income (AMI) data from the United States Department of Housing and Urban Development (HUD) Area Median Income (HUD) Number of Persons in Household: Percentage Area Median Income % $39,788 $45,472 $51,156 $56,840 $61,387 80% $45,472 $51,968 $58,464 $64,960 $70,157 90% $51,156 $58,464 $65,772 $73,080 $78, % $56,840 $64,960 $73,080 $81,200 $87, Affordable Homes Pricing Chart Allowed Sales Prices Studio (AMI for 1-person household) 1-2 Bedroom (AMI for 2-person household) Lower-Priced Home at 70% AMI Moderate-Priced Home at 90% AMI 3+ Bedroom (AMI for 4-person household) $151,346 $173,291 $216,518 $204,558 $233,936 $292, Cash-in-Lieu Rates Formula 1-2 Bedroom 3+ Bedroom (Median Market Rate Sale Price $229,374 - $173,291 $314,407 - $216,518 Lower-Priced Home Sales Price) Cash-in-Lieu $55,453 $97, Fractional Fee Scale ($) Bedroom 5,545 11,091 16,636 25,607 27,727 33,272 38,817 44,362 49, Bedroom 9,789 19,578 29,367 39,156 48,945 58,733 68,522 78,311 88,100 7/16/2018 Administrative Manual Page 17

18 Exhibit B: Affordable Housing Incentives Chart All incentives are based off of the sales price of the Affordable Homes. Incentives Impact Fee 2 Subsidy Down Payment Assistance (Buyers at 80% AMI and below) Simultaneous Construction of Housing & Infrastructure Reduced Parking Reduction of Parkland Requirement 3 1:1 Expedited Permit Review Description Full or partial waiver/reimbursement of impact fees, paid from city funds if such funds are available. The city will provide on a first-come first-served basis, down payment assistance not to exceed $10,000 per home. Concurrent construction of infrastructure and housing development at the installation of gravel-based roads. Reduced parking requirement of two spaces per three-bedroom dwelling. Allow a 1:1 square foot reduction in the amount of parkland dedication required per square foot of lot size. Affordable homes will receive expedited building permit review. For each affordable home, one market rate home will receive the same expedited review. Lower-Priced Moderate- Homes Priced Homes 70% 1 AMI 90% AMI X X X X X X X 1 The incentives in this column are available also for Affordable Homes priced at 80% AMI (subject to availability of funds), with the exception of the reduction of parkland requirement. Note that Affordable Homes priced at 80% AMI will not count toward the requirement that 10% of the homes in a development proposal be Lower-Priced Homes; however, they may be counted as a Moderate-Priced Home in satisfying the minimum number of Affordable Homes to be provided. 2 Developers/builders will be responsible for paying impact fees at the time of securing building permits. Once the home is sold and pricing verification is documented, the Developer/Builder may apply for reimbursement. 3 This incentive is available only until the city has approved affordable housing plan(s) that include the number of lower-priced homes at 70% AMI as established by commission resolution. In addition, a developer seeking to use this incentive may only do so if the affordable homes at 70% AMI constitute no more than 10% of the total units in a development or the unit is to be constructed on a single lot wherein the parkland dedication requirement has not previously been provided. 7/16/2018 Administrative Manual Page 18

19 Exhibit C: Examples of Cash & Non-Cash Subsidy Recapture upon Resale Original Sale of Home Home Sales Price per AHO: - $199,500 HRDC Down Payment (DPA): - $30,000 City Down Payment (DPA): - $10,000 Mortgage: $159,500 Calculating the Non-Cash Subsidy 98% of Appraised Price: $213,640 (based on $218,000 appraisal) Sales Price: - $199,500 Non-Cash Subsidy: $14,140 Scenario 1 (Market Drop) Scenario 2 (Market Growth) Resale of Home: $205,000 Resale of Home: $275,000 Mortgage: - $159,500 Mortgage: $159,500 Available Funds: $45,500 Available Funds: $115,500 HRDC DPA: - $30,000 HRDC DPA: - $30,000 Available Funds: $15,500 Available Funds: $85,500 City Down Payment: - $10,000 City Down Payment: - $10,000 Non-Cash Subsidy ($14,140) - $5,500 NonCash Subsidy: - $14,140 Money to Buyer: $0 Money to Buyer: $60,860 7/16/2018 Administrative Manual Page 19

20 Exhibit D: Deed of Trust (Example, Not Official Document) After recording send to: City of Bozeman P.O. Box N. Rouse Ave. Bozeman, Mt Client Name DEED OF TRUST MAXIMUM LIEN. The total principal indebtedness that may be outstanding at any given time which is secured by this Deed of Trust is $0.00. THIS DEED OF TRUST is dated DATE, among Client Name, whose address is Address, ( Grantor ); City of Bozeman, whose address is 121 N. Rouse Ave, Bozeman, MT, (referred to below sometimes as Lender and sometimes as Beneficiary ); and Gregory S. Sullivan, Bozeman City Attorney (referred to below as Trustee ). CONVEYANCE AND GRANT. For valuable consideration, Grantor conveys to Trustee for the benefit of Lender as Beneficiary all of Grantor s right, title, and interest in and to the following described real property, together with all existing or subsequently erected or affixed buildings, improvements and fixtures; all easements, rights of way, and appurtenances; all water, water rights and ditch rights (including stock in utilities with ditch or irrigation rights); and all other rights, royalties, and profits relating to the real property, including without limitation all minerals, oil. Gas, geothermal and similar matters, (the Real Property ) located in Gallatin County, State of Montana. See Attached Property Description The Real Property or its address is commonly known as Address. Grantor presently assigns to Lender (also known as the Beneficiary in this Deed of Trust) all of Grantor s right, title, and interest in and to all present and future leases of the Property and all Rents from the Property. In addition, Grantor grants to Lender a Uniform Commercial Code security interest in the Personal Property and Rents. THIS DEED OF TRUST, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT OF THE INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS UNDER THIS DEED OF TRUST. THIS DEED OF TRUST IS GIVEN AND ACCEPTED ON THE FOLLOWING TERMS: 7/16/2018 Administrative Manual Page 20

21 PAYMENT AND PERFORMANCE. Except as otherwise provided in this Deed of Trust, Grantor shall pay to Lender all amounts secured by this Deed of Trust as they become due, and shall strictly and in a timely manner perform all of Grantor s obligations under the Note, this Deed of Trust, and the Related Documents. POSSESSION AND MAINTENANCE OF THE PROPERTY. Grantor agrees that Grantor s possession and use of the Property shall be governed by the following provisions: Possession and Use. Until the occurrence of an Event of Default, Grantor may (1) remain in possession and control of the Property; (2) use, operate or manage the Property; and (3) collect the Rents from the Property. The following provisions relate to the use of the Property or to other limitations on the Property. The Real Property does not exceed forty (40) acres, and this instrument is a Trust Indenture executed in conformity with the Small Tract Financing Act of Montana. Duty to Maintain. Grantor shall maintain the Property in good condition and promptly perform all repairs, replacements, and maintenance necessary to preserve its value. Hazardous Substances. Grantor represents and warrants that the Property never has been, and never will be so long as this Deed of Trust remains a lien on the Property, used for the generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance in violation of any Environmental Laws. Grantor authorizes Lender and its agents to enter upon the Property to make such inspection and tests as Lender may deem appropriate to determine compliance of the Property with this section of the Deed of Trust. Grantor hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims and losses resulting from a breach of this paragraph of the Deed of Trust. This obligation to indemnify and defend shall survive the payment of the indebtedness and the satisfaction of this Deed of Trust. TAXES AND LIENS. The following provision relating to the taxes and liens on the Property are part of this Deed of Trust: Payment. Grantor shall pay when due (and in all events prior to delinquency) all taxes, special taxes, assessments, charges (including water and sewer), fines and impositions levied against or on accounts of the Property, and shall pay when due all claims for work done on or for services rendered or material furnished to the Property. Grantor shall maintain the Property free of all liens having priority over or equal to the interest of Lender under this Deed of Trust, except for the lien of taxes and assessments not due, except for the Existing Indebtedness referred to below, and except as otherwise provided in this Deed of Trust. PROPERTY DAMAGE INSURANCE. The following provision relating to insuring the Property are a part of this Deed of Trust. Maintenance of Insurance. Grantor shall procure and maintain policies of fire insurance with standard extended coverage endorsements on a fair value basis for the full insurable value covering all Improvements on the Real Property in an amount sufficient to avoid 7/16/2018 Administrative Manual Page 21

22 application of any coinsurance clause, and with a standard mortgagee clause in favor of Lender, together with such other hazard and liability insurance as Lender may reasonably require. Policies shall be written in form, amounts, coverages and basis reasonably acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Grantor or any other person. Should the Real Property be located in an area designated by the Director of the Federal Emergency Management Agency as a special flood hazard area, Grantor agrees to obtain and maintain Federal Flood Insurance if available, for the full unpaid principal balance of the loan and any prior liens on the property securing the loan, up to the maximum policy limits set under the National Flood Insurance Program, or as otherwise required by Lender, and to maintain such insurance for the term of the loan. LENDER S EXPENDITURES. If Grantor fails (A) to keep the Property free of all taxes, liens, security interests, encumbrances, and other claims, (B) to provide any required insurance on the Property, or (C) to make repairs to the Property then Lender may do so. If any action or proceeding is commenced that would materially affect Lender s interests in the Property, then Lender on Grantor s behalf may, but is not required to, take any action that Lender believes to be appropriate to protect Lender s interests. All expenses incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses will become a part of the Indebtedness and, at Lender s option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note s maturity. WARRANTY; DEFENSE OF TITLE. The following provisions relating to ownership of the Property are a part of this Deed of Trust: Title. Grantor warrants that: (a) Grantor holds good and marketable title of record to the Property in fee simple, free and clear of all liens and encumbrances other than those set forth in the Real Property description or in any title insurance policy, title report, or final title opinion issued in favor of, and accepted by, Lender in connection with this Deed of Trust, and (b) Grantor has the full right, power, and authority to execute and deliver this Deed of Trust to Lender. Defense of Title. Subject to the exception in the paragraph above, Grantor warrants and will forever defend the title to the Property against the lawful claims of all persons. EXISTING INDEBTEDNESS. The following provisions concerning Existing Indebtedness are a part of this Deed of Trust: Existing Liens. The lien of this Deed of Trust securing the Indebtedness is inferior to: (i) The lien securing payment of an existing obligation to BANK NAME described as: Deed of Trust dated DATE, filed for record in the records of Gallatin County, Montana. The existing obligation has a current principal 7/16/2018 Administrative Manual Page 22

23 (ii) balance of approximately $Balance and is in the original principal amount of $-. The obligation has the following payment terms: $PAYMENT per month; and The lien securing payment of an existing obligation to Human Resource Development Council of District IX described as: Deed of Trust dated DATE, filed for record in the records of Gallatin County, Montana. The existing obligation has a current principal balance of approximately $Balance and is in the original principal amount of $-. Grantor expressly covenants and agrees to pay, or see to the payment of, the Existing Indebtedness and to prevent any default on such indebtedness, any default under the instruments evidencing such indebtedness, or any defaulted under any security documents for such indebtedness. EVENTS OF DEFAULT. At Lender s option, Grantor will be in default under this Deed of Trust if any of the following happen: Payment Default. Grantor fails to make any payment when due under the Indebtedness. Break Other Promises. Grantor breaks any promise made to Lender or fails to perform promptly at the time and strictly in the manner provided in this Deed of Trust or in any agreement related to this Deed of Trust. Compliance Default. Failure to comply with any other term, obligation, covenant or condition contained in this Deed of Trust, the Note or in any of the Related Documents. Default on Other Payments. Failure of Grantor within the time required by this Deed of Trust to make any payment for taxes or insurance, or any other payment necessary to prevent filing of or to effect discharge of any lien. Death or Insolvency. The death of Grantor, the insolvency of Grantor, the appointment of a receiver for any part of Grantor s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Grantor. Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the Indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. Existing Indebtedness. The payment of any installment of principal or any interest on the Existing Indebtedness is not made within the time required by the promissory note evidencing such indebtedness, or a default occurs under the instrument securing such indebtedness and is not cured during any applicable grace period in such instrument, or any suit or other action is commenced to foreclose any existing lien on the Property. RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default under any indebtedness, or should Grantor fail to comply with any of Grantor s obligations under this 7/16/2018 Administrative Manual Page 23

24 Deed of Trust, Trustee or Lender may exercise any one or more of the following rights and remedies: Election of Remedies. All of Lender s rights and remedies will be cumulative and may be exercised lone or together. An election by Lender to choose any one remedy will not bar Lender from using any other remedy. If Lender decides to spend money or to perform any of Grantor s obligations under this Deed of Trust, after Grantor s failure to do so, that decision by Lender will not affect Lender s right to declare Grantor in default and to exercise Lender s remedies. Accelerate Indebtedness. Lender shall have the right at its option without notice to Grantor to declare the entire Indebtedness immediately due and payable, including any prepayment penalty which Grantor would be required to pay. Foreclosure. With respect to all or any part of the Real Property, the Trustee shall have the right to foreclose by notice and sale, and Lender shall have the right to foreclose by judicial foreclosure, in either case in accordance with and to the full extent provided by applicable law. Other Remedies. Trustee or Lender shall have any other right or remedy provided in this Deed of Trust or the Note or available at law or in equity. Sale of the Property. To the extent permitted by applicable law, Grantor hereby waives any and all rights to have the Property marshaled. In exercising its rights and remedies, the Trustee or Lender shall be free to sell all or any part of the Property together or separately, in one sale or by separate sales. Lender shall be entitled to bid at any public sale on all or any portion of the Property. Attorneys Fees; Expenses. If Lender institutes any suit or action to enforce any of the terms of this Deed of Trust, Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys fees at trial and upon any appeal. Whether or not any court action is involved, and to the extent not prohibited by law, all reasonable expenses Lender incurs that in Lender s opinion are necessary at any time for the protection of its interest or the enforcement of its rights shall become a part of the Indebtedness payable on demand and shall bear interest at the Note rate from the date of the expenditure until repaid. Expenses covered by this paragraph include, without limitation, however subject to any limits under applicable law, Lender s attorneys fees and Lender s legal expenses, whether or not there is a lawsuit, including attorneys fees, paralegal fees, and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services, the cost of searching records, obtaining title reports (including foreclosure reports), surveyors reports, and appraisal fees, title insurance, and fees for the Trustee, to the extent permitted by applicable law. Grantor also will pay any court costs, in addition to all other sums provided by law. TERMINATION OF RESTRICTIONS. Upon foreclosure, deed-in-lieu of foreclosure or assignment of an insured mortgage to HUD, all restrictions on conveyance are automatically and permanently terminated. 7/16/2018 Administrative Manual Page 24

25 MATURITY DATE. The amount of the loan will be calculated using the requirements contained within the Deed Restriction Agreement and Note of the total assistance provided by the Lender to the Borrower. Said sum shall be in proper form of assignment without interest, effective only upon occurrence of the following events: A. Upon the first sale or transfer of the Property to occur after the date of the Promissory Note. For purposes of the Note, a sale or transfer shall be defined as any sale, assignment, exchange or transfer, voluntary or involuntary, and including any transfer by gift, devise, or inheritance, of any interest in the Property, including but not limited to, (i) a fee simple interest whether in its entirety or a fractional interest; (ii) a joint tenancy interest; (iii) a life estate; (iv) a leasehold interest of any nature without City of Bozeman (or its designee s) express prior written consent; (v) creation of a trust with any interest in the Property acting as the corpus of the trust; (vi) or an interest evidenced by a land contract by which possession of the Property is transferred and Borrower retains legal title for security purposes, EXCEPTING (i) a transfer by gift, devise, or inheritance to a present spouse or surviving joint tenant; (ii) a transfer to a spouse as part of a dissolution proceeding or in connection with a marriage; provided that with respect to each excepted transaction described in clause (i) and (ii), prior to or simultaneously with the transfer, the transferee agree to assume the obligations of Borrower in a manner that is acceptable to City of Bozeman. B. Upon a default or breach under the Note or this Deed of Trust securing the Note, or any Declaration of Restrictions, Declaration of Unit of Ownership, Bylaws or other recorded documents of record pertaining to the property, or upon any default in any superior lien secured by the Property; C. Upon the Borrower s refinancing of a lien superior to that created by this Deed of Trust securing the Note for any amount greater than the amount owed on account of such superior lien immediately prior to such refinancing; D. Upon the Borrower s vacation of the Property or Borrower s cessation of use as Borrower s primary residence. E. Upon full repayment of the first mortgage. Upon occurrence of the Maturity Date as stated above, the Borrower shall pay to Lender the Principal sum and all other amounts owing under the Note. City of Bozeman Affordable Housing Program Funds will recapture from net proceeds. Net proceeds are the sales price (or in the case of refinance, the appraised value) minus superior loan repayment (including HOME funds but not including City of Bozeman Affordable Housing Program funds) and any closing costs. The full amount of City of Bozeman Program Funds will be recaptured if the net proceeds are sufficient. The remaining net proceeds, after the City of Bozeman Affordable Housing Program Funds are repaid, will be paid to the homeowner. If the net proceeds are insufficient to repay the full City of Bozeman investment, then the amount of the net proceeds that are available will be recaptured. In this instance, the homeowner would not receive any funds. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Deed of Trust: 7/16/2018 Administrative Manual Page 25

26 Governing Law. This Deed of Trust will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Montana without regard to its conflicts of law provisions. This Deed of Trust has been accepted by Lender in the State of Montana. Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender s request to submit to the jurisdiction of the courts of Gallatin County, State of Montana. Time is of the Essence. Time is of the essence in the performance of this Deed of Trust. Waiver of Homestead Exemption. Grantor hereby releases and waives all rights and benefits of the homestead exemption laws of the State of Montana as to all Indebtedness secured by this Deed of Trust. FHA Insured Transactions. If the Borrower s first Deed of Trust secures an FHAinsured loan, any obligation of the Borrower to pay lender s costs and expenses, including legal fees, foreclosure costs, and other enforcement costs, does not apply if the event of default results solely from Borrower s violation of the owner-occupancy restrictions contained herein. DEFINITIONS. The following words shall have the following meanings when used in this Deed of Trust: Beneficiary. The word Beneficiary means City of Bozeman, and its successors and assigns. Borrower. The word Borrower means Client Name and includes all co-signers and comakers signing the Note and all their successors and assigns. Deed of Trust. The words Deed of Trust mean this Deed of Trust among Grantor, Lender, and Trustee, and includes without limitation all assignment and security interest provisions relating to the Personal Property and Rents. This Deed of Trust is intended to be a trust indenture as provided for in the Small Tract Financing Act of Montana. Environmental Laws. The words Environmental Laws mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.( CERCLA ), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No ( SARA ), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto. Event of Default. The words Event of Default mean any of the events of default set forth in this Deed of Trust in the events of default section of this Deed of Trust. 7/16/2018 Administrative Manual Page 26

27 Existing Indebtedness. The words Existing Indebtedness mean the indebtedness described in the Existing Liens provision of this Deed of Trust. Grantor. The word Grantor means Client Name. Guaranty. The word Guaranty means the guaranty from guarantor, endorser, surety, or accommodation party to Lender, including without limitation a guaranty of all or part of the Note. Improvements. The word Improvements means all existing and future improvements, buildings, structures, mobile homes affixed on the Real Property, facilities, additions, replacements and other construction on the Real Property. Indebtedness. The word Indebtedness means all principal, interest, and other amounts, costs and expenses payable under the Note or Related Documents, together with all renewals of, extensions of, modification of, consolidations of and substitutions for the Note or Related Documents and any amounts expended or advanced by Lender to discharge Grantor s obligations or expenses incurred by Trustee or Lender to enforce Grantor s obligations under this Deed of Trust, together with interest on such amounts as provided in this Deed of Trust. Lender. The word Lender means City of Bozeman, its successors and assigns. The words successors or assigns mean any person or company that acquires any interest in the Note. Note. The word Note means the promissory note dated DATE, in the original principal amount of $AMOUNT from Grantor to Lender, together with all renewals of, extensions of, modifications of, refinancing of, consolidations of, and substitutions for the promissory note or agreement. Personal Property. The words Personal Property mean all equipment, fixtures, and other articles of personal property now or hereafter owned by Grantor, and now or hereafter attached or affixed to the Real Property; together with all accessions, parts, and additions to, all replacements of, and all substitutions for, any of such property; and together with all proceeds (including without limitation all insurance proceeds and refunds of premiums) from any sale or other disposition of the Property. Property. The word Property means collectively the Real Property and the Personal Property. Real Property. The words Real Property mean the real property, interests and rights, as further described in this Deed of Trust. Related Documents. The words related Documents mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. 7/16/2018 Administrative Manual Page 27

28 Rents. The word Rents means all present and future rents, revenues, income, issues, royalties, profits, and other benefits derived from the Property. Trustee. The word Trustee means Gregory S. Sullivan, Bozeman City Attorney whose address is 121 N. Rouse Ave., Bozeman, MT 59771, and any substitute or successor trustees. Any person duly appointed and confirmed as Legal Officer of the City of Bozeman pursuant to Section 4.03 of the Bozeman Charter shall be considered a successor trustee. GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS DEED OF TRUST, AND GRANTOR AGREES TO ITS TERMS. GRANTOR: GRANTOR: X Client Name X 7/16/2018 Administrative Manual Page 28

29 Exhibit E: Deed Restriction (Example, Not Official Document) After recording send to: City of Bozeman P.O. Box N. Rouse Ave. Bozeman, Mt DEED RESTRICTION AGREEMENT City of Bozeman Affordable Housing Program By and between City of Bozeman P.O. Box N. Rouse Ave. Bozeman, Montana Herein after referred to as City of Bozeman And - Herein after referred to as the Property Owner regarding the purchase of the following property: Said land and improvements are hereinafter collectively referred to as the Property, 1. PURPOSE This Deed Restriction Agreement is made and entered into this day of -, by and between City of Bozeman and the Property Owner. Whereas City of Bozeman has loaned to the Property Owner City of Bozeman Affordable Housing Program funds via recapture provision in the amount of - ($0.00) for the purpose of providing assistance for the purchase of the property located at the above named address and legally described as follows: And See Attached Property Description Whereas the loan includes down payment assistance in the amount of - ($0.00) and a noncash subsidy of - ($0.00). Now therefore, in consideration of the loan and other good and valuable consideration, the parties hereto do agree as follows: 2. DEFINITIONS 7/16/2018 Administrative Manual Page 29

30 a. Affordable Housing Program means the City of Bozeman Affordable Housing Program created pursuant to Ordinance 1922, codified as Chapter 38, Division 380, Bozeman Municipal Code as amended. b. Agreements means this Deed Restriction Agreement, as it may from time to time be amended. c. HOME means HOME Investment Partnerships Program. d. Principal Residence means Property Owner will maintain the Property as their principal residence and not move out and leave the Property vacant or move out and rent the Property. e. Net Proceeds means the sales price of the Property, minus any outstanding debt senior to this loan, and minus closing costs (not including real estate commissions) required to be paid by Property Owner upon sale of the Property. HOME assistance funds are a debt senior to this loan and therefore not included in the definition of Net Proceeds from which City of Bozeman assistance can be recaptured. f. Non-cash subsidy means the difference between the appraised value and the maximum allowed price of a lower-priced home pursuant to chapter 38, division 380 of the Bozeman Municipal Code as amended at the time the Property is sold to the Property Owner. g. Property Owner means the owner(s) as set forth at the beginning of this Agreement, or any successor in title to the property. h. Recapture Event shall have the same meaning as the term is defined in the Promissory Note dated this day between the Property Owner and the City of Bozeman. i. Term means the term provided for in Section 4(a). 2. USE AND OCCUPANCY OF THE PROPERTY b. It is agreed that during the Term, the Property Owner will maintain the Property as his/her principal residence. c. It is agreed that during the Term, the Property Owner will not use the Property as a short term rental. 4. RECAPTURE PROVISIONS FOR CITY OF BOZEMAN AFFORDABLE HOUSING PROGRAM a. Term. The term of the Affordable Housing Program recapture provisions will begin at the transfer of the property to the Property Owner as evidenced by the closing date of the purchase of the Property by the Property Owner and continuing until the occurrence of a Recapture Event. b. Loan Repayment. Repayment of the loan amount noted in Section 1 will be deferred for the term of the recapture provisions, provided that the Property Owner is in full compliance with this agreement. At the time of sale or transfer of the property, or other Recapture Event, the full amount of the loan will become due in full. c. Amount to be Recaptured. 7/16/2018 Administrative Manual Page 30

31 In the event that the Property Owner sells or transfers the Property or upon the occurrence of any other Recapture Event, the full amount of the City of Bozeman investment will be due and payable to the extent that net proceeds are available to repay the Property Owner s loan. If the net proceeds are not sufficient to recapture the full City of Bozeman investment, the City of Bozeman will accept the available net proceeds as full payment. The Property Owner s down payment, principal payments, and any capital improvement investment made in the property after the City of Bozeman assistance has been provided will be returned to the Property Owner at closing after City of Bozeman assistance has been recaptured from the net proceeds as described above. The Property Owner also will retain the value of the appreciation in the property after City of Bozeman assistance has been recaptured. An agreement detailing the recapture provisions will be secured through a trust indenture recorded against the property at the time of assistance. These recapture provisions may terminate upon occurrence of the following: 1) Foreclosure, transfer in lieu of foreclosure, or assignment of an FHA insured mortgage to HUD. The City of Bozeman may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure to preserve affordability. The recapture provisions will be revived according to the original terms if the owner of record before the termination event, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. d. Order of Recapture from Net Proceeds. 1) City of Bozeman down payment assistance. 2) City of Bozeman non-cash subsidy. 5. REPRESENTATIONS AND WARRANTIES OF PROPERTY OWNER a. The Property Owner represents and warrants that he/she has validly executed this Agreement and the same constitute the binding obligation of the Property Owner. The Property Owner has full power, authority, and capacity to enter into the Agreement, to carry out the Property Owner s obligations as described in this Agreement, and to assume responsibility for compliance with all applicable federal, state, and City of Bozeman rules and regulations, including the requirements of the City of Bozeman Affordable Housing Program. b. To the best of the Property Owner s knowledge, the making of this Agreement and the Property Owner s obligations hereunder: 1) Will not violate any contractual covenants or restrictions between the Property Owner or any third party affecting the Property; 2) Will not conflict with any of the instruments that create or establish the Property Owner s authority; 3) Will not conflict with any applicable public or private restriction; 4) Do not require any consent or approval or any public or private authority which has not already been obtained; and 5) Are not threatened with invalidity or unenforceability by any action, proceeding, or investigation pending or threatened, by or against the Property Owner, without regard to capacity, any person with whom the Property Owner may be jointly or severally liable, or the Property or any part thereof. c. No litigation or proceedings are pending or to the best of the Property Owner s knowledge, threatened against the Property Owner which if adversely determined could individually or in the aggregate have an adverse effect on the title to or the use and enjoyment or value of the Property, or any portion thereof, or which could in any way interfere with the consummation of this Agreement. 7/16/2018 Administrative Manual Page 31

32 e. The Property Owner agrees to indemnify and hold harmless the City of Bozeman from and against all liabilities, losses, claims, damages, judgments, costs, and expenses (including, without limitation, reasonable attorney s fees) incurred by the City of Bozeman as a result of any material inaccuracy in any of the representations and warranties contained in this Agreement. 6. MISCELLANEOUS a. Notices. All notices required or permitted to be given under this Agreement must be in writing and will be deemed to have been duly given if delivered personally or mailed, postage prepaid, by registered or certified United States mail, return receipt requested, addressed to the parties at the following address: FOR CITY: City of Bozeman P.O. Box N. Rouse Ave. Bozeman, MT FOR THE PROPERTY OWNER: b. Binding Effect: Covenants Running with the Land. During the Term, this Agreement and the covenants, reservations, and restrictions contained herein shall be deemed covenants running with the land for the benefit of City of Bozeman and its successors, and shall pass to and be binding upon the Property Owner s heirs, assigns, and successors in title to the Property, or if the property shall not include title to land, but shall include a leasehold interest in land, this Agreement and the covenants, reservations et al. shall bind the leasehold interest as well as the Property and shall pass to and be binding upon all heirs, assigns and successors to such interest; provided, however, that upon expiration of the Term in accordance with the terms hereof said covenants, reservations and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Property or any portion thereof shall conclusively be held to have been executed, delivered, and accepted subject to such covenants, reservations, and restrictions, regardless of whether such covenants, reservations, and restrictions are set forth in such contract, deed or other instruments. If a portion or portions of the Property are conveyed, all of such covenants, reservations, and restrictions shall run to each portion of the Property. City of Bozeman, at the Property Owner s cost and expense, shall cause this Agreement to be duly recorded or filed and re-recorded or re-filed in such places, and the Property Owner shall pay or cause to be paid all recording, filing, or other taxes, fees and charges, and shall comply with all such statutes and regulations as may be required by law, in the opinion of qualified counsel, in order to establish, preserve and protect the ability of City of Bozeman to enforce this Agreement. c. FHA Insured Transactions: If the Borrower s first Deed of Trust secures an FHA-insured loan, any obligation of the Borrower to pay lender s costs and expenses, including legal fees, foreclosure costs, and other enforcement costs, does not apply if the event of default results solely from Borrower s violation of the owner-occupancy restrictions contained herein. 7/16/2018 Administrative Manual Page 32

33 Exhibit F: Occupancy Agreement (Example, Not Official Document) HRDC Funds Loaned: Loan Date: Maturity Date: $ AMOUNT DATE DATE BORROWER: Client NAME ADDRESS LENDER: City of Bozeman P.O. Box N. Rouse Ave. Bozeman, MT The undersigned Borrower(s) of the above-captioned property understand that one of the conditions of the City of Bozeman loan is the Borrower(s) occupy the subject property and the Borrower(s) do hereby certify as follows: 1. Borrower intends to occupy the property as Borrower s primary residence and will not lease or rent the property. 2. If Borrower s intention changes prior to the loan closing, Borrower agrees to notify Lender immediately of that fact. 3. Borrower understands that Lender may not make the loan in connection with subject property without this Occupancy Agreement 4. Borrower acknowledges Lender has relied upon Borrower s representation of occupancy in funding said loan. THE UNDERSIGNED BORROWER(S) ACKNOWLEDGES AND AGREES THAT: 1. ANY MISREPRESENTATION OF OCCUPANCY BY BORROWER(S), and 2. BORROWER(S) FAILURE TO OCCUPY THE PROPERTY AS THE PRIMARY RESIDENCE (i.e., OWNER- OCCUPIED) SHALL CONSTITUTE A DEFAULT UNDER THE NOTE AND SECURITY INSTRUMENT EXECUTED IN CONNECTION WITH SAID LOAN AND, UPON OCCURRENCE OF SAID DEFAULT, THE WHOLE SUM OF PRINCIPLE PURSUANT TO SAID NOTE PLUS COSTS AND FEES SHALL BECOME IMMEDIATELY DUE AND PAYABLE. FHA Insured Transactions. If the Borrower s first Deed of Trust secures an FHA-insured loan, any obligation of the Borrower to pay lender s costs and expenses, including legal fees, foreclosure costs, and other enforcement costs, does not apply if the event of default results solely from Borrower s violation of the owner-occupancy restrictions contained herein. I declare that the forgoing Agreement is true and correct and agree to said terms of Agreement allowing Lender discretion to call the loan due based upon any misrepresentation of occupancy. Client NAME Date Date 7/16/2018 Administrative Manual Page 33

34 Exhibit G: Promissory Note (Example, Not Official Document) BORROWER: Client NAME ADDRESS LENDER: City of Bozeman P.O. Box N. Rouse Ave. Bozeman, MT Principal Amount: Up to $0.00 Interest Rate: 0% Date of Note: - PURPOSE OF LOAN. The purpose of the loan is to provide assistance to the Borrower, a person of low or moderate income, using the City of Bozeman Affordable Housing Program Funds who is a "first time homebuyer" (defined as an individual who has had no ownership interest in a principal residence during the three-year period ending with the date of purchase; or a single parent whose only prior home was owned with a former spouse while married; or an individual who is a displaced homemaker and has only owned with a spouse; or an individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations; or an individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of construction of a permanent structure) of the property located at the Borrower Address listed at the top of this Promissory Note. PROMISE TO PAY. I ("Borrower") promise to pay to the City of Bozeman ("Lender"), or order, in lawful money of the United States of America, the principal amount of - Dollars ($0.00) or the amount of Net Proceeds as described under MATURITY DATE below, whichever is less. PAYMENT. I will pay this loan in one principal payment of $-, or in the amount of Net Proceeds as described under MATURITY DATE below, whichever is less, on DATE. I will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. INTEREST CALCULATION METHOD. N/A PREPAYMENT. N/A MATURITY DATE. No interest will be charged on the loan. The amount of the loan will be calculated using the requirements contained within the Deed Restriction Agreement and Trust Indenture of the total assistance provided by the Lender to the Borrower. Said sum shall be in proper form of assignment without interest, effective only upon occurrence of the following events ( Recapture Events ): A. Upon the first sale or transfer of the Property to occur after the date of this Note. For purposes of this Note, a sale or transfer shall be defined as any sale, assignment, exchange or transfer, voluntary or involuntary, and including any transfer by gift, devise, or inheritance, of any interest in the Property, including but not limited to, (i) a fee simple interest whether in its entirety or a fractional interest; (ii) a joint tenancy interest; (iii) a life estate; (iv) a leasehold interest of any nature without City of Bozeman s (or its designee's) express prior written consent; (v) creation of a trust with any interest in the Property acting as the corpus of the trust; (vi) or an interest evidenced by a land contract by which possession of the Property is transferred and Borrower retains legal title for security purposes, EXCEPTING (i) a transfer by gift, devise, or inheritance to a present spouse or surviving joint tenant; (ii) a transfer to a spouse as part of a dissolution proceeding or in connection with a marriage; provided that with respect to each excepted transaction described in clause (i) and (ii), prior to or simultaneously with the transfer, the transferee agree to assume the obligations of Borrower in a manner that is acceptable to City of Bozeman. 7/16/2018 Administrative Manual Page 34

35 B. Upon a default or breach under this Note or Deed of Trust securing this Note, or any Declaration of Restrictions, Declaration of Unit of Ownership, Bylaws or other recorded documents of record pertaining to the property, or upon any default in any superior lien secured by the Property; C. Upon the Borrower's refinancing of a lien superior to that created by the Deed of Trust securing this Note for any amount greater than the amount owed on account of such superior lien immediately prior to such refinancing; D. Upon the Borrower's vacation of the Property or Borrower's cessation of use as Borrower's primary residence. E. Upon full repayment of the first mortgage. Upon occurrence of the Maturity Date as stated above, the Borrower shall pay to Lender the Principal sum and all other amounts owing under the Note. If Net Proceeds [defined as the sales price of the Property, minus any outstanding debt senior to this loan, and minus closing costs (not including real estate commissions) required to be paid by Property Owner upon sale of the Property] are not sufficient to recapture the full Principal amount, the City of Bozeman will accept the available Net Proceeds as full payment. LATE CHARGE. N/A INTEREST AFTER DEFAULT. N/A DEFAULT. I will be in default under this Note if any of the following happen: Payment Default. I fail to make any payment when due under this Note. Break Other Promises. I break any promise made to Lender or fail to perform promptly at the time and strictly in the manner provided in this Note or in any agreement related to this Note, or in any other agreement or loan I have with Lender. False Statements. Any representation or statement made or furnished to Lender by me or on my behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished. Death or Insolvency. Any Borrower dies or becomes insolvent; a receiver is appointed for any part of my property; I make an assignment for the benefit of creditors; or any proceeding is commenced either by me or against me under any bankruptcy or insolvency laws. Taking of the Property. Any creditor or governmental agency tries to take any of the property or any other of my property in which Lender has a lien. This includes taking of, garnishing of or levying on my accounts with Lender. However, if I dispute in good faith whether the claim on which the taking of the property is based is valid or reasonable, and if I give Lender written notice of the claim and furnish Lender with monies or a surety bond satisfactory to Lender to satisfy the claim, then this default provision will not apply. Defective Collateralization. This Note or any of the related documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason. Collateral Damage or Loss. Any collateral securing this Note is lost, stolen, substantially damaged or destroyed and the loss, theft, substantial damage or destruction is not covered by insurance. Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Note immediately due, and then I will pay that amount. 7/16/2018 Administrative Manual Page 35

36 LENDER CONSENT OF TRANSFER OR ASSIGN. The Borrower shall transfer or assign the property described in the Deed of Trust, only with the written consent of Lender. Such consent shall not be unreasonably withheld, provided the Lender's security interest herein is adequately protected. Lender, may, at its option, declare immediately due and payable all sums secured by the Deed of Trust I Mortgage upon the sale or transfer of all or part of the real property as described in the Deed of Trust or Mortgage without the Borrower's prior knowledge and written consent. ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if I do not pay. I will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees, paralegal fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, I also will pay any court costs, in addition to all other sums provided by law. GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Montana without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of Montana. CHOICE OF VENUE. If there is a lawsuit, I agree upon Lender's request to submit to the jurisdiction of the courts of Gallatin County, State of Montana. SUCCESSOR INTERESTS. The terms of this Note shall be binding upon me, and upon my heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns. NOTICES. Any notice required to be given under this Note shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the address shown near the beginning of this Note. Any person may change his or her address for notices under this Note by giving formal written notice to the other person or persons, specifying that the purpose of the notice is to change the person's address. For notice purposes, I agree to keep Lender informed at all times of my current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers. It will be my responsibility to tell the others of the notice from the Lender. NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. I may notify Lender if Lender reports any inaccurate information about my account(s) to a consumer reporting agency. My written notice describing the specific inaccuracy(ies) should be sent to Lender at the following address: City of Bozeman, P.O. Box 1230, 121 N. Rouse Ave., Bozeman, MT USE, OCCUPANCY AND RECAPTURE RESTRICTIONS. The undersigned shall at all times comply with the use, occupancy and recapture restrictions affecting the property as set forth in that certain Deed Restriction Agreement and Deed Of Trust securing this Note, dated this day, between the Borrower and the Lender. If the undersigned shall fail or refuse to comply with such use, occupancy and recapture restrictions, the Lender may, at its option and with notice as provided in such Deed Restriction Agreement and Deed of Trust, declare the entire unpaid balance of this Note immediately due and payable and may invoke any remedies provided in such Deed Restriction Agreement, Deed of Trust, or applicable law in the event of default. FHA Insured Transactions. Notwithstanding anything to the contrary contained in this document, if the Borrower s first mortgage is an FHA-insured mortgage, and Borrower s default results solely from Borrower s violation of the owner-occupancy restrictions contained herein, then Borrower is not contractually liable for Lender s expenses or any other amounts except for repayment of the original indebtedness. GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. I do not agree or intend to pay, and Lender does not agree or intend to contract for, charge, collect, take, reserve or receive (collectively referred to herein as "charge or collect"), any amount in the nature of interest or in the nature of a fee for this loan, which would in any way or event (including demand, prepayment, or acceleration) cause Lender to charge or collect more for this loan than the maximum Lender would be permitted to charge or collect by federal law or the law of the State of Montana (as applicable). Any such excess interest or unauthorized fee shall, instead of anything stated to the contrary, be applied first to reduce the principal balance of this loan, and when the principal has been paid in full, be refunded to me. Lender may delay or forgo enforcing any of 7/16/2018 Administrative Manual Page 36

37 its rights or remedies under this Note without losing them. I and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several. This means that the words "I", "me", and "my" mean each and all of the persons signing below. PRIOR TO SIGNING THIS NOTE, I READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE. I AGREE TO THE TERMS OF THE NOTE. I ACKNOWLEDGE RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE. BORROWER: X X - Date Date 7/16/2018 Administrative Manual Page 37

38 City of Bozeman Affordable Housing Program Exhibit H: HUD Certification Explanation Letter (Example, Not Official Document) Dear Primary Mortgage Lender The City of Bozeman will be providing secondary financing in the form of down payment assistance (cash subsidy) and a sales price reduction (non-cash subsidy) towards the purchase of lower-priced homes through the city s Affordable Housing Program. As a governmental entity, the City of Bozeman is not required to obtain FHA approval or be placed on the HUD Nonprofit Roster per the FHA Single Family Housing Policy Handbook iii. Entities Not Requiring FHA Approval to Participate in FHA Nonprofit Programs FHA approval and placement on the HUD Nonprofit Roster are not required for federal, state, or local government agencies or their instrumentalities, provided those Entities are not organized as 501(c)(3) nonprofits. (A) Governmental Entities and their Instrumentalities of Government Governmental Entity refers to any federal, state, or local government agency or instrumentality. To be considered an Instrumentality of Government, the Entity must be established by a governmental body or with governmental approval or under special law to serve a particular public purpose or designated by law (statute or court opinion). HUD deems Section 115 Entities, as identified in Section 115 of the Internal Revenue Code, to be Instrumentalities of Government for the purpose of providing secondary financing. FHA does not maintain a list of Governmental Entity program participants. For any questions concerning the City of Bozeman as a secondary financing entity, please contact the City of Bozeman s Affordable Housing Program Manager at (406) Sincerely Greg Sullivan, City of Bozeman City Attorney 7/16/2018 Administrative Manual Page 38

39 Exhibit I: Buyer Certification Letter Date: / / To: City of Bozeman Community Development, The Human Resource Development Council Inc. (HRDC) through a professional service agreement with the City of Bozeman works to counsel and qualify buyers of Affordable Housing. This letter certifies that the HRDC has qualified the ensuing named buyer eligible for down-payment assistance from the City of Bozeman s Affordable Housing Program. To be used for the purchase of a qualifying Affordable Home. Buyer Name: Affordable Home Address: Sale Price of Home: _$ Requesting City of Bozeman Down-payment Assistance: Yes No Amount of City Funds Being Requested:_$ Are funds other than City of Bozeman Down-Payment Assistance being used: Yes No What are the other Down-Payment Assistance sources: Amount of additional Down-Payment Assistance: _$ I hereby certify and attest to the following: 1. I am an authorized representative for the Human Resource Development Council Inc. 2. The buyer is eligible for down payment assistance through the City of Bozeman s Affordable Housing Program 3. The down-payment assistance from the city will be listed as a loan to be recaptured should any of the requirements of repayment be met. Signature of HRDC Staff Name of HRDC Staff Date 7/16/2018 Administrative Manual Page 39

40 Exhibit J: Affordable Homes Sales Flyer 7/16/2018 Administrative Manual Page 40