CITY OF NORTH MIAMI HOME INVESTMENT PARTNERSHIP PROGRAM FIRST TIME HOMEBUYER PROGRAM GUIDELINES. DRAFT September 14, 2005.

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1 CITY OF NORTH MIAMI HOME INVESTMENT PARTNERSHIP PROGRAM FIRST TIME HOMEBUYER PROGRAM GUIDELINES DRAFT September 14, 2005 Prepared by ASK Development Solutions, Inc.

2 =============================================================== EFFECTIVE DATE REVISED DATE ISSUE DATE =============================================================== FIRST TIME HOMEBUYER PROGRAM GUIDELINES BACKGROUND: The City of North Miami, through its annual consolidated plan, has stated the needs for affordable housing development within the city limits. The need to renovate the housing stock and create new housing units has been well established in the annual consolidated plan. The establishment of the first time buyer program will allow the City to address the needs and meet some of the established goals. DESCRIPTION: The City of North Miami First-Time Homebuyer Program is established as a gap financing program that will provide down payment assistance and closing costs to individuals earning 80% and below of the Area Median Household Income as required by the statute. Down payment assistance refers to the dollar amount that an eligible buyer can access to bridge the maximum sales price of a house and its maximum mortgage capacity. Mortgage Capacity is the maximum mortgage a financial institution will lend to a buyer based on the buyer s income, credit history, and the value of the property. The City of North Miami will administer the program aided by the partners listed below. There are two eligible activities under this program: Purchase Rehabilitation Program and New Construction. The two programs are defined in detail below. All Activities have to take place within the City limits of North Miami. FUNDING SOURCES: Funding for the First Time Homebuyer Program is being provided by HUD through the HOME Program. Additional funding can be provided through the State Housing Initiatives Partner (SHIP) Program. PURPOSE: Establish policies and procedures for implementing a First-time Homebuyer Program that enables qualified applicants to achieve homeownership status by providing financial assistance in various forms. This program shall be administered in compliance with the HOME Investment Partnership Program. This document shall provide procedures for the coordination of various activities among the public and private partnership participants of the HOME Program, which is locally entitled "First-Time Homebuyer. Specifically, these policies and procedures apply to eligible first-time homebuyers, Community Planning and Development (CPDD) staff, participating private sector lenders, Community Development Corporations (CDC's), and non-profit housing providers. IMPLEMENTATION RESPONSIBILITY The programs are to be implemented by the City of North Miami Community Planning and Development Department with overall responsibility being held by the Department s Director. In addition, the department will partner with any other appropriate City department and external agencies in implementing the program. Specific program responsibility will reside with the Housing Administrator who reports directly to the Director. COMPLIANCE WITH APPLICABLE REGULATIONS 2

3 The programs shall be administered in compliance with established policies, types of financing programs and procedures as described in the federal HOME Investment Partnership Program Regulations at 24 CFR Part 92 (as amended from time to time) and the City s approved Consolidated Plan. As a requirement of the HOME Program, the City will use funding from the State Housing Initiatives Program (SHIP) as a match and for additional funding beyond what is provided by the HOME Program. As a result, the program guidelines shall also simultaneously adhere to the SHIP regulations, where applicable. The program guidelines will also adhere to established City policies and address local housing needs and preferences that are not in contradiction with the HOME and SHIP regulations ELIGIBLE ACTIVITIES: HOME funds may be used by a City of North Miami to provide incentives to develop and support homeownership through acquisition (including assistance to homebuyers), new construction, rehabilitation of non-luxury housing with suitable amenities, including real property acquisition, site improvements, conversion, demolition, and other expenses, including financing costs, relocation expenses of any displaced persons, families, business, or organizations; to provide payment of reasonable administrative and planning costs; and to provide for payment of operating expenses of community housing development organizations. The housing must be permanent or transitional housing. The specific eligible costs for these activities are set forth in through However, in this program, the funds will be used primarily as gap financing to eligible homebuyers residing in the City of North Miami. ELIGIBLE APPLICANTS: Low and very low income households earning 80% and below of the area median household income. The City of North Miami must use 100 percent of its HOME funds to assist families and individuals with incomes at or below 80 percent of the area median income. IMPLEMENTATION PARTNERSHIPS First-Time homebuyer works best in a partnership. Many Cities and Counties in Florida use a partnership structure where banks, realtors and non-profit organizations, usually community development corporations are members of that partnership. Each party has a distinct role and the assignment of roles facilitate the smooth administration of the process. The partners are identified as follows: The City of North Miami: Generally administers, approves, disburses the funds and enforces the recapture provision described below. Under this program, the City will be the last step in the process. The potential first-time homebuyer would be pre-qualified, educated about the process of buying a home, and approved for a mortgage by the time he or she arrives at the City. The principle role of the City will be to income-qualify the client to determine its eligibility and the dollar amount that will be allocated. Funds may be reserved for up to 120 days for a client to give an opportunity to find a home. Once the 120 days have expired, the City will have to recertify the client to adhere to the financial rules of pre-qualification and mortgage approval. Financial institutions have to do the same; a commitment is only good for a specific amount of time. The City will also approve the housing units. City staff will conduct inspections for purchase rehabilitation as well as new construction to determine the eligibility of that unit and ensure quality based on its existing building code or HUD standards. Sub-standard units will not be 3

4 automatically disqualified; however, it will have to be brought to standards before the buyer takes occupancy. The City will also refer all clients to the non-profit organizations during the intake steps as described in the procedures section. Once the program is advertised, the City will certainly receive thousands of inquiry about the program and the funds PARTICIPATING REALTORS: The City may elect to work with selected realtors who will assist homebuyers in finding homes. The City will certify the realtors once they go through the approval process. The realtor main role in this program is to assist the potential homebuyer in finding a house, existing or new, depending on the needs of the buyer and its mortgage capacity. The realtor work s begins after the client is pre-qualified by the CDCs and approved by a bank. In some instances, the bank will provide a conditional approval to a client and he or she can start looking for houses as taking steps to meet the stated conditions. The participating realtors will refer clients to the participating non-profit organizations to be pre-qualified and educated about the process of buying and maintaining a house. PARCITIPATING FINANCIAL INSTITUTIONS: The City may elect to work with selected banks. The bank participation will be determined upon their affordable housing product. The main role of the banks is to provide residential mortgages to first-time homebuyers. Based on their own affordable housing guidelines and that of the City, they will either come with a new, sensitive financial product or fit the City of North Miami Program into their program. Participating banks will submit their guidelines to the City of North Miami and the City along with their consultant and the participating non-profit organizations will review the financial product and determine if they are good instruments that will advance the provision and delivery of affordable housing units. Upon review of the guidelines, the City should put together a questionnaire that banks should complete as an entry point. The City will come up with some basic criteria once they review the financial products that currently exist in the affordable housing market. The banks will work very closely with the non-profit organizations and all files will be directly submitted to the banks by the non-profit participants, which serve as the primary liaison for banks, realtors, the City and the homebuyer. PROGRAM ACTIVITIES Purchase-Rehabilitation: The purchase-rehabilitation involves of the purchase of an existing house that may need some repair but not enough to perform a complete, gut- rehabilitation. An unsophisticated buyer may purchase these units with the confidence that the minimum repairs will bring these units up to standard. The City will perform the inspections (one at signing of the contract and one after the rehabilitation completes) and provide the funds for the rehabilitation as part of the gap financing. The non-profit organization and the buyer will work very closely in this type of transactions to ensure that the rehabilitation is do-able and will not constitute a gut-rehabilitation. Furthermore, this transaction will sometimes necessitate that the City waive the appraisal requirement of financing only units whose appraised value equates the sale prices. In these transactions, the rehabilitated appraisal may come under the sales price. The suggestion is that the City routinely allow for sales price 10% higher than after rehabbed- 4

5 appraised, but above and beyond 10%, the unit has to be re-evaluated and determination will rest with Department head. New Construction: New construction refers to a housing unit that has received its Certificate of Occupancy within 12 months or less under this program. The City will still conduct a final inspection in cases where the house has been built to make sure that the workmanship is good and all works properly. In this case, the non-profit organization or a private builder may enter into a contract with the buyer to build a new house. The buyer will select a house from an architectural plan or by seeing an existing model. This is a difficult manner for any buyer to select a house and for a new buyer, it is even worse. Under the new construction component, the non-profit organization has to be very involved in assisting the buyer in making the most cost effective choice. PROGRAM CRITERIA: 1. Type of Assistance: Financing: The First-Time Homebuyer program will provide Gap Financing in the form of down payment assistance to reduce the gap between the sales price of a house and the maximum mortgage the buyer can access, and closing costs. For example, the sales price of a house may be $200,000, the closing costs are $10,000 or 5% of the sales price for a total transaction cost of $210,000. The client may be qualified for $180,000 by a bank; he or she needs $30,000 to close the gap between the total transaction costs of $210,000 and the mortgage capacity of $180,000. Of the $28,000 gap financing, $20,000 will be used as down payment assistance or 10% of the sales price, $8,000 will be used as a portion of the closing costs, and $2,000 of the buyer s own funds to pay the balance of the closing costs. Technical Assistance: The City shall provide technical assistance to the purchaser, including property inspections, Work Write-up specification review, bid solicitation, payment reviews and processing, tenant relocation assistance, and any other staff assistance incidental to the processing and implementation of the First Time Homebuyer Program. 2. Level of Assistance: Financial assistance in the form of a conditional grant will be provided only in a dollar amount required to keep housing expenses affordable and to meet lender underwriting standards, closing costs and down payment expenses. The amount of monies received per applicant will be based upon their ability to repay a private lender loan. Each applicant is required to spend 25% to 35% of their gross income for PITI (Principal, interest, taxes and insurance). The maximum assistance per applicant/household is $40,000 per unit. An affordability analysis chart is provided under a separate attachment using different income points, the $200,000 maximum sales price and a $40,000 down payment assistance. 5

6 NOTE: Special Exception: The Director of CPDD may approve subsidies above the established levels to accommodate a special needs housing applicant and other applicants, whose situation is consistent with City of North Miami s consolidated planning process or other HUD documents. Special needs categories may be as follows, but not limited to: (list by Query) The conditional grant will be secured by a note and mortgage on the property. However, this will subordinate the private loan (s). C. Terms of Assistance The term of the City of North Miami s cured mortgage varies by the amount of the direct and indirect home subsidy provided to the borrower. LEVEL OF ASSISTANCE TERM OF MORTGAGE $ 1,000 to $5,000 3 years $5,000 -$10,000 5 years $10,000-$15,000 7 years The loan is provided at 0% interest and is forgiven at the end of the mortgage term, if the applicant has continued to maintain the property as his/her principal residence. The City of North Miami shall verify the occupancy of status of all First-time Homebuyer assisted properties at least annually via mail and/or property inspection. Repayment The loan is forgiven in a prorated share over seven years based on occupancy. If sold or transferred, payback is prorated at 4% interest. Upon the death of the homebuyer, and if the property rights are not transferred, the subordinate mortgage conditions remain the same. If the property rights are transferred, the heirs have to be income certified to determine their eligibility to keep the subordinate mortgage in place. And if they are not income eligible, the remaining, pro-rated share of the subsidy is repaid to the City. When loan or grant conditions are met, the city will prepare and execute a Satisfaction of Mortgage. D. Underwriting Guidelines These guidelines are offered as a general guidance for the City to make a decision on the approval of an applicant's request for mortgage subsidy. The participating lenders will underwrite the first mortgages and the City will review and accept them prior to issuing its own commitment letter to the buyer. - Borrower Income Applicant must have sufficient income to access and repay a private loan. Obtaining and accessing a mortgage loan usually 6

7 depends on work history, income and the front and back end ratios. This is based on a housing and total debt ratio, namely front and back end. The typical housing ratios in a first time homebuyer program is 30 to 35 and the total debt ratio including housing expenses is 40 to 45. Lender determinations concerning source and stability of income will be accepted. Please note however, that sources of income for eligibility purposes must follow federal and state guidelines. Once eligibility is determined by the County, the private lender may use their own standards regarding the amount and sources of income to count in underwriting the loan. - Out of Pocket Cost The amount of cash out of pocket to the homebuyer is determined by the lending institution yet should not be less than 3% of the total costs. This amount can include inspection fees, closing costs, pre-paids for hazard insurance and property taxes paid by the applicant. The 3% can be used for down payment assistance and or closing costs as does the subsidy. All funds are used as gap financing. The 3% must be verifiable income by the bank and a portion (as determined by the lender) may be a gift. The buyer s contribution cannot be a loan. - Housing Debt to Income Ratio It is expected that the applicant pay at least 25-35% of their gross income toward housing expenses. Housing expenses can include the following. Payment on principal and interest on the mortgage Property taxes Property insurance Private mortgage insurance Home owner association fees Utilities and maintenance items are not included in calculating housing expense (front-end) ratios. - Total Debt to Income This ratio includes housing expenses listed above and payments on other revolving or installment debt, as well. The total amount paid for housing and all other debts (back-end ratios) should not exceed 45%. A lender may use a higher housing expense ratio and a lower total debt to income ratio, to make the transaction work. - Loan to Value Ratios 7

8 This is the ratio between the loan amount and the appraised value of the property. The combined loan to value ratios should not exceed 105% of the appraised value, nor be less than 80% of the appraised value. E. Eligible Private Sector Mortgages The County will provide assistance in combination with private sector mortgages which meet the following conditions: Fixed Rate only Terms of 20, 25, or 30 years No balloon payments (except those associated with sale of the property); and Adjustable Rate Mortgages are not eligible Rates that are above 200 basis points of the current market rate are not acceptable. The Market rates for 15, 20 and 30 years mortgages are quoted in the newspaper every Saturday. F. Applicant Eligibility Criteria for Assistance The prospective homebuyer must meet the following criteria: - Have a household annual income at or below eighty (80%) percent of the area median income household. Income used in this program is defined in the same manner as the Section 8 definitions and includes all incomes for all members of the household 18 years of age and older. These incomes are shown in a separate Attachment (Attachment B). - Have not owned a home in the last three (3) years, or must meet other requirements mentioned in the First-time Homebuyers Certification. There may be exceptions in case of divorce or other circumstances where this requirement may be waived. - While no minimum household income is required, the applicant must have sufficient income to repay debt and maintain the housing unit. - Must have financial ability to secure a private loan for part of the cost for the housing unit. Funds provided by the City will only be used as a subsidy to a private loan to lower monthly housing costs (PITI) to the applicant, to pay closing costs, and serve as part of the down payment amount. All applicants must agree to occupy the home as their principal residence during the time periods required by the guidelines. H. Eligible Properties and Value: Properties for the HOME Program can be privately or publicly held prior to sale to the homebuyer: 8

9 - Housing units that are newly built, or existing, which are located within eligible areas of City of North Miami (mobile homes excluded). - If existing, the property may be sold to an eligible applicant in good condition, or with repairs needed, as indicated by and pre-purchase inspection report. - Maximum sales price of $200,000 which include repairs if existing. If extenuating circumstances exist which require that the appraised value/purchase price exceeds the set limits then the City or the appropriate authority may elect to increase the limit. Property must be environmentally acceptable based on the U.S. HUD & NEPA environmental requirements. - Property value must be established by an appraisal prepared by a qualified appraiser. Properties may not be sold at a sales price above the appraised value. However, if extenuating circumstances exist, the City may elect to waive this requirement. The appraisal prepared for the property must be dated within a six- (6) month time period prior to loan approval. - Sale of property that includes rehabilitation requires an afterrehabilitation appraisal to establish value. - Property must be located within targeted areas determined and designated by the City of Miami based on the City s Consolidated Plan and CRA Plan. I. Property Standards: Properties utilizing HOME funds for new construction or rehabilitation must meet all applicable local codes, rehabilitation standards, ordinances, and zoning ordinances at the time of project completion, as follows for each activity: - New Construction must meet all applicable local codes, ordinances, and zoning ordinances at the time of project completion. - Purchase Only... Property must meet all applicable codes prior to the closing date. An official inspection documenting such will be required. The Property must also meet Section 8 Minimum Housing Quality Standards. - Purchase/ Rehabilitation... 1) An inspection of the property noting all defects that pose a danger to health and/or safety as well as major repairs such as upgrade of electrical system, plumbing system and installation of central air; 2) Notify the prospective purchaser of the work needed to cure the defects and the time by which defects will be cured and applicable property standards will be met; and, 3) Property must be free from all noted health and safety defects before occupancy and not later than (45) 9

10 days after the property transfer. The Property must also meet Section 8 Minimum Housing Quality Standards. - Repairs must also be practical and feasible. - Repairs that show deferred maintenance must be taken care by the seller. - Properties must consist of no more than two dwelling units (duplex with the owner living in one unit) and preferably single family houses, condominiums, apartments (no mobile homes). - Property must be zoned for the number of units and is not an illegal use. - Property must have clear title and property taxes paid at the time of the loan approval. - Compliance with all other applicable requirements. J. Recapture Provisions The City of North Miami will use a recapture provision to recapture all or a portion of the HOME subsidy upon sale of the property to any willing buyer. However, the City retains the option of using a resale provision if the market conditions will result in the removal of the HOME-assisted housing from the affordable housing stock The resale option ensures that the NOME-assisted unit remains affordable during the entire affordability period. Using this option, the City of North Miami may either designate an affordable unit or use a presumption of affordability. If a unit is designated affordable and it is sold during the affordability period, the new purchaser must be rent the unit to a low-income family, meeting the HOME Program definition. The presumption of affordability relies on the assumption that a specific neighborhood is affordable and that, as a result, any sale within that neighborhood will be affordable. Rather than incorporate enforceable resale restrictions on such properties, the City of North Miami must document the affordability of the neighborhood. This must be accomplished through a market analysis of the neighborhood that evaluates the location and characteristics of the houses and residents of the neighborhood in relation to the larger market area. This analysis must demonstrate that the houses are modest in size and amenities and that they are affordable to residents. The market analysis must be updated periodically, as long as the City of North Miami provides homebuyer assistance in that neighborhood and the presumption of affordability approach is used to satisfy the HOME Program s resale requirements. PROGRAM REQUIREMENTS Application Review and Information Verification During this process information provided by the applicant is verified with the applicant s permission through 3 rd party sources and additional information is requested from the applicant for purposes of clarification and decision making related to the provision of assistance. Income Verification To determine eligibility for assistance, the applicant s household income must be verified. A household is regarded as being eligible under the HOME program if its annual income based on household size is at or below 80% of the applicable median family income for the Miami Dade 10

11 Metropolitan Statistical Area. The current median income and schedule of qualifying incomes as revised and published by HUD is found in Exhibit. Income is defined in terms of active and passive income, business, income and employment income, and various forms of social assistance and retirement payments. Household income shall be determined according to the following definitions and procedures: Income Inclusions Income includes, but is not limited to (1) gross wages and salaries, overtime pay, commissions, fees, tips and bonuses, and compensation for employment before any statutory deductions such as FICA, Federal Withholding, etc.; (2)net income from operation of a business, regardless of its form such as sole proprietorship, corporation, etc. Expenditures for business expansion or amortization of capital indebtedness shall not be used as deductions in determining net income. Allowance for depreciation of assets used in a business or profession may be deducted, based on straight line depreciation, as provided in Internal Revenue Service regulations. Any withdrawal of cash or assets from the operation of a business or profession will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested in the operation by the household; (3) passive income such as interest, dividends, and other net income of any kind from real or personal property. Expenditures for amortization of capital indebtedness shall not be used as a deduction in determining net income. An allowance for depreciation is permitted only as authorized in Internal Revenue Service regulations. Any withdrawal of cash or assets from an investment will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested by the household; (4) the full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts, including a lump sum payment for the delayed start of a periodic payment; (5) payments in lieu of earnings, such as unemployment and disability compensation, worker s compensation and severance pay; (6) Other payments as follows: a. Welfare Assistance. If the Welfare Assistance payment includes an amount specifically designated for shelter and utilities that is subject to adjustment by the Welfare Assistance agency in accordance with the actual cost of shelter and utilities, the amount of Welfare Assistance income to be included as income shall consist of: the amount of the allowance or grant exclusive of the amount specifically designated for shelter or utilities, plus the maximum amount that the Welfare Assistance agency could in fact allow the household for shelter and utilities. If the household s Welfare Assistance is ratably reduced from the standard of need by applying percentage, the amount calculated under this paragraph shall be the amount resulting from an application of the percentage; b. Periodic and determinable allowances, such as alimony and child support payments, and regular contributions or gifts received from persons not residing in the dwelling; c. All regular pay, special pay and allowances of a member of the Armed Forces (whether or not living in the dwelling) who is head of the household, spouse, or other household member. d. Any earned income tax credit to the extent it exceeds income tax liability. Income Exclusions Income does not include such temporary, non-recurring or sporadic income as the following: Casual, sporadic or irregular gifts; Amounts that are specifically for or in reimbursement of the cost of Medical Expenses; Lump-sum additions to household assets, such as inheritances, insurance payments (including 11

12 1. payments under health and accident insurance and worker s compensation), capital gains and 2. settlement for personal or property losses (but see paragraph (a)(5) of this section); 3. Amounts of educational scholarships paid directly to the student or to the educational institution, and amounts paid by the Government to a veteran, for use in meeting the cost of tuition, fees, books and equipment. Any amounts of such scholarships or payments to veterans, not used for the above purposes that are available for subsistence are to be included in income; and 4. The hazardous duty pay to a household member in the Armed Forces away from home and exposed to hostile fire. 5. Income from employment of children (including foster children) under the age of 18 years; or dependent full-time students (above the age of 18 up to age 24). 6. Payments received for the care of foster children; 7. Income of a Live-in Aide, as defined in 24CFR ; and 8. Amounts specifically excluded by any other Federal stature from consideration as income for purposes of determining eligibility or benefits under a category of assistance programs that includes assistance under the 1937 Act. The following types of income are subject to such exclusion: (i) Relocation payments made under title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C ); (ii) The value of the allotment provided to an eligible household for coupons under the Food Stamp Act of 1977 (7U.S.C ); (iii) Payments to volunteers under the Domestic Volunteer Service Act of 1973 (42 U.S.C. 5044(g), 5058); (iv) Payments received under the Alaska Native Claims Settlement Act (43 U.S.C. 1626(A)); (v) Income derived from certain sub-marginal land of the United States that is held in trust for certain Indian tribes (25 U.S.C. 459e); (vi) Payments or allowances made under the Department of Health and Human Services Low-Income Home Energy Assistance Program (42 U.S.C ); (vii) Payments received from the Job Training Partnership Act (29 U.S.C. 1552(b)); (viii) Income derived from the disposition of funds of the Grand River Band of Ottawa Indians (Pub. L , 90 Stat ); and (ix) The first $2, of per capita shares received from judgment funds awarded by the Indian Claims Commission or the Court of Claims (25 U.S.C ) or from funds held in trust for Indian tribe by the Secretary of Interior (25 U.S.C. 117). d. For applicants processed under the HOME Rehabilitation Program for the Elderly where the household has net household assets in excess of $5000, annual income shall also include the greater of the actual income derived from net household assets for a percentage of the value of such assets based on the current passbook savings rate. For the purpose of computing the above, net household assets shall include equity in real estate other than the home, stocks, bonds, deposits with banks, savings and loans, credit unions or other financial institutions, cash on hand, and any other income producing assets. 12

13 Income shall be verified through use of verification forms signed by the pertinent household member authorizing verification by the source of income or by obtaining documentation produced by a third party that establishes income information. Verification forms may include forms such as: - employment verification - unemployment benefit verification - pension benefit verification - social security benefit verification - disability benefit verification - veteran s benefit verification - verification of benefits administered by HRS - interest income verification Each income earning household member must provide a signed copy of their last IRS return including attachments (last 2 returns for self-employed person). It is recognized that IRS rules do not require the filing of a return if a person s income is below a certain amount as established by the IRS and revised from time to time. In such instance where an income earning household member does not file a return, a notation shall be so indicated on the application form. In the course of establishing and verifying household income for each applicant, CPDD shall reconcile annual income information with annual household expenses reported by the applicant or determined by CPDD. While reviewing this income and expense data, CPDD shall examine such data for consistency allowing for reasonable living expenses of the household (such as food, clothing, and transportation). Where annual obligations and other household expenses appear to constitute substantial portions of household income not allowing room for reasonable living expenses such as described with the applicant in order to resolve unrecognized differences between both. If resolution of such matter can not be reached to the satisfaction of CPDD, the applicant s request for assistance may be suspended until satisfactorily resolved or else may be rejected. Verification of Accounts All accounts indicated by the applicant on the application that are deposits with banks, savings and loans, credit unions, or other financial institutions must be verified in order to establish the extent of liquid assets available to the applicant. Verification of Liabilities The applicant s liabilities include all installment loans, revolving charge accounts, real estate loans, stock pledges, alimony, child support and all other ongoing debts including property taxes and property insurance of all types. Only liabilities that extend beyond a ten-month period shall be considered for the purposes of this section. Information collected on an applicant s liabilities must include at least the monthly payment and the term, and for installment and real estate loans, the remaining unpaid balance, and payment history. This verification process also includes establishing the amount of property tax and property insurance paid by the applicant. Verification of Credit History Credit history shall be reviewed through obtaining a credit report. The credit report serves two purposes: 13

14 a. To confirm identified and unidentified credit obligations held by the applicant. In some cases, creditors information may not appear on the credit report because the credit agency fails to report. Direct verification of credit information may be required in these cases. b. To establish the applicant s credit history and detect any slow payments, suits, or judgments for non-payments. Verification of Property The value of the property shall be verified by means of an appraisal report conducted by an independent appraiser and shall contain, at a minimum, the following: a. The property address, legal description and property control number. b. The owner s name. c. The year built and a description of the building type, and number and type of rooms & lot dimensions. d. The type of utilities serving the property e. At least three comparable sales, their dates, amounts, areas, conditions, type of construction, and any other information customarily provided by the appraisal industry f. The as-is appraised value based on the comparable approach. g. A certification by the performing appraiser of the completeness and correctness of the report and an assurance that such appraiser has no interest in the property. Verification of Age Where at least one of the property owner applicants is 62 years of age or older, a verification of their age shall be documented through a copy of a document such as a birth certificate, drivers license, or Florida identification card. Environmental Review The environmental effects of each activity carried out with federal funds must be assessed in accordance with the provisions of the National Environmental Policy Act of 1969 and the related authorities listed in HUD s implementing regulations at 24 CFR part 58. Federal funds may not be utilized in a Federal Emergency Management City designated flood area unless specific precautions are undertaken in accordance with Section 202 of the Flood Protection Act of Upon request, the CDBG/Housing Compliance Officer shall conduct an environmental review of the site in accordance with Section of HOME rules. The environmental review should consist of a checklist that examines the effect of various environmental issues on the site. See Exhibit for sample environmental review checklist. After completion of the review, a clearance notice is sent to the Housing Coordinator which indicates whether the site passes or fails. Notice will also include any required mitigation measures. If the site fails review, the rehabilitation work will be funded from SHIP sources only. Lead Hazard Reduction. In accordance with the HUD Lead-Based Paint Regulation (24 CFR Part 35), Section 401(b) of the Lead Based Poisoning Prevention Act of 1971 and Section of HOME rules, rehabilitation work on housing built before 1978 that is financially assisted by the Federal government is subject to requirements that will control lead-based paint hazards. At the very least, any painted surface that is disturbed during rehabilitation work will be repaired. Deteriorated paint may be stabilized, which includes the correction of moisture leaks or other obvious causes of paint deterioration. Clearance examination procedures will be conducted following most work activities to ensure that the work has been completed; that dust, paint chips and other debris have been satisfactorily cleaned up; and that dust lead hazards are not left 14

15 behind. As necessary, the City will require a risk assessment to identify lead-based paint hazards, perform interim control measures to eliminate any hazards that are identified or, in lieu of a risk assessment, perform standard treatments throughout a unit. The type and amount of Federal assistance and rehabilitation hard costs for the unit will determine the level of lead hazard reduction to be completed. In addition, notices shall be sent to all purchasers or tenants of housing with potential lead-based hazards informing them of the potential existence of the hazards, the potential harmful effects, and the City s lead based paint policy. Displacement, Relocation, and Acquisition Minimizing displacement, consistent with the other goals and objectives, the grantee must ensure that it has taken all reasonable steps to minimize the displacement of persons (families, individuals, businesses, nonprofit organization, and farms) as a result of a project assisted with federal funds. To the extent feasible, residential tenants must be provided a reasonable opportunity to lease and occupy a suitable, decent, safe, sanitary, and affordable dwelling unit in the building/complex upon completion of the project. Acquisition, rehabilitation and/or demolition activities may be subject to tenant notice and assistance provisions contained in the Uniform Relocation Act and/or Section 104(d) of the Housing and Community Development Act. OTHER FEDERAL REQUIREMENTS Non-Discrimination and Equal Access Federal requirements set forth in Title VI of the Civil Rights Act of 1964, the Fair Housing Act, Section 504 of the Rehabilitation Act of 1973, Executive Order and 24 CFR 5.105(a) prohibit discrimination on the basis of race, color, national origin, religion or sex. Employment and Contracting Rules Federal requirements set forth at Executive Orders 11246, 11625, and and Section 3 of the Housing and Urban Development Act of 1968 prohibit discrimination in employment and encourage the CHDO receiving federal funds to provide training and employment opportunities to low-income residents. Debarred Contractors Federal requirements set forth at 24 CFR part 5 prohibit the provision of federal funds to debarred, suspended or ineligible contractors, subcontractors or subrecipents. CHDOs are required to check the HUD listings for this purpose. Conflict of Interest Grantees and subrecipents of federal funds must be comply with procurement requirements found at 24 CFR (state and local governments) and (non-profits) and with any other applicable conflict of interest provisions. Flood Insurance Under the Flood Disaster Protection Act of 1973 (42 U.S.C ), City funds may not be used with respect to the acquisition, new construction, or rehabilitation of a project located in an area identified by the Federal Emergency Management Agency (FEMA) as having special flood hazards, unless flood insurance is obtained as a condition of approval of the commitment. 15

16 MONITORING AND COMPLIANCE All monitoring and compliance activities will be conducted by the CPDD. These will include: A. Field Inspections CPDD s Inspector will monitor work progress during rehabilitation/construction. A field inspection report will be documented at each inspection of the project. All work requiring a permit shall have one. The permit issuing agency shall be contacted to perform all rough-in and final inspections required of the permit related work. A final inspection will be conducted and a Certificate of Completion of Work form will be filled out when work is completed. All parties involved (owner, contractor and CPDD representative) will sign the completion form before final payment is authorized. In addition, a Certificate of Occupancy will be issued by the City when it is determined that the units are habitable and meet health and safety standards and applicable codes. B. Equal Opportunity The use of Minority-Owned Business Enterprise (MBE)/Women-Owned Business Enterprise (WBE) contractors and subcontractors in the rehabilitation/construction work is strongly encouraged. Information about and assistance in contracting MBE/WBE contractors is handled by CPDD. All CPDD bid packages (if applicable) will include this information. CPDD will document a subcontractor list for each project. The form will be completed by the General Contractor prior to distribution of City funds and it will be the responsibility of the General Contractor to notify the CPDD with pertinent information or changes. Data on the form will be used to monitor and document the program benefit to MBE/WBE contractors and such information shall be made available to the CPDD Office. PROCEDURES: A. APPLICATION PROCESS: Step1. Intake Process The Intake Process refers to the pre-application process. The application process for the First-time Homebuyer Program commences with non-profit housing providers and CDCs using their 501(c) (3) status. In cases where individuals contact the City of North Miami or the other partners including the participating bankers, the realtors and other non-profit organizations, there should be a mechanism in place to respond to these individuals. This creates the need for the Intake process. Individuals who are interested in participating in the first time homebuyer program and who start the process with a partner other than the non-profit needs to complete an intake form. That intake form will be collected by the respective party and turn it to the nonprofit organization which will follow up with the client and commences the application process. The City of North Miami along with the selected non-profit organization should work together to create that Intake form. The non-profit 16

17 organization will know exactly what information is needed to follow up with the potential buyer. Step2. Application and Prequalification: The application process commences with the Non-profit organizations. The potential first-time homebuyer will complete an intake form and the CDC will determine whether or not a complete application needs to be filled out. In case of a referral, the individual will bring the Intake form provided by one of the partners (City of North Miami, participating banks, realtors and for profit organizations). If the CDC determines that the client is eligible to participate in the City of North Miami First-Time Homebuyer program, a full application will be completed and a nominal application fee will be collected. Upon completion of the application, the buyer must submit the following support documentation, and other documentation deemed necessary to pre-qualify the applicant. - Copy of recent credit report (3-month old); - Copies of at least three (3) most recent pay stubs; - Copy of signed tax returns (1040) and W-2 forms for the past two (2) tax years; - Photo identification; - Alien Registration Card (or proof of citizenship), if applicable; - Third party verification of all sources of income; - Checking and savings account statements for the past two (2) months; and, - If self-employed, tax returns and current year-to-date financial statements. 17

18 Step 3. Homebuyer s Education: All applicants seeking participation in the First-time Homebuyers Program must attend a 6-to 8-hour homebuyers counseling course at minimum. Each applicant should receive a certificate of participation prior to receiving the funds. In addition, the non-profit and buyer shall sign an agreement that certifies the buyer s participation. The agreement should be notarized. Step 4. Step 5. Homebuyers Counseling: All applicants seeking participation in the First-time Homebuyers Program may need additional training. A homebuyer s counseling program is strongly suggested. The homebuyer s counseling may take the form of several hours of one-on-one counseling to group counseling. At the minimum, buyer should have 4-to-6 our of homebuyer s counseling which should cover: credit repair and monitoring, money management, and tips on maintaining your home. The Nonprofit organization may seek and or design the appropriate program for their clients. Property Selection: The non-profit can assist the applicant in identifying either a vacant lot for new construction or an existing home for purchase. For purposes of implementing the HOME/First-time Homebuyer Program and facilitating a timely purchase, it shall be policy that non-profits, lenders, etc., to ensure purchase of properties that will not result in displacement of persons. a. Environmental Review and Relocation: Environmental Review: Upon request by non-profit partner, City staff shall conduct an environmental review of the site. After completion of the review, a clearance notice is sent to the non-profit which indicates whether the site passes or fails. Notice will also include any required mitigation measures. If the site fails review, the non-profit will be informed that another site must be selected. Relocation Issues: If the Property Relocation Profile Form indicates that the housing unit to be sold is occupied by a tenant, the property is not eligible for assistance unless the tenant is to become the homebuyer. b. Pre-rehabilitation Inspection If the house is an existing property, the non-profit shall have a home inspection performed, of which a report must be submitted to the City to document all defects. The City may elect to have the City Inspector performs all pre-inspections. That will save some additional costs to the buyer. The report must include required repairs and must be included in the rehabilitation work write-up or scope of work, where applicable. The non-profit and municipality will be required to review rehabilitation

19 work write-ups to ensure that work is clearly specified and that rehabilitation costs are reasonable. The City Inspector will also perform the inspection once the work is completed. Step 6. Step 7. Final Inspections: Each contractor having a contractual agreement to rehabilitate or construct a new home under this program shall be responsible for coordinating the pre-occupancy inspection with the non-profit, the City and the lender advising in writing of the pending final inspection. Upon the house passing the final inspection, the contractor must provide appropriate agency with a copy of the Certificate of Completion. Income Certifications: The non-profit refers pre-qualified home-buyers to the City for income certification. This particular phase of the process determines (1) if the applicant is eligible for the program and (2) How much HOME funds he/she will receive. CPDD staff shall interview the applicant and determine their eligibility for program participation based on household income, family size and first-time homebuyer status. If the applicant uses a co-borrower(s); the co-borrower(s) must actually occupy the property and shall be included on the mortgage documents. The nonprofit will submit a complete package to the City which will include the following: Copies of at least three (3) most recent pay stubs. Social Security benefit awards letter, if applicable. Documentation of child support and/or AFDC, if received. Copy of signed tax returns and W-2 Form(s) for the past two (2) years. Social Security Card, Alien Card (if applicable), Driver s License and/or photo I. D. Checking and savings account statements for the past three (3) months. Any other supporting documentation that will assist Staff with income determination. Address or legal description of site to be purchased. Birth certificates of all children living in the household. Custody documents of adopted or other children in household. Divorce Decree (if applicable). The referenced information is required from the applicant's spouse, as well as coborrower(s) and any other person occupying the property who is eighteen (18) years old and not a full-time student and receives an income (e.g., pension wages). Documentation provided by the applicant shall be verified through a third party; therefore, staff shall require the applicant to sign applicable verification forms authorizing employer(s) to release information to City Staff. During the interview, Staff shall advise the applicant that any changes in income, family size or credit obligations during processing may cause the applicant to lose their eligible status. 19