HOMEBUYER ASSISTANCE PROGRAM OLICY RECAPTURE … · 2013. 4. 15. · City of Vancouver Community and Economic Development – CDBG & HOME Programs ... cost of developing a property

City of Vancouver Community and Economic Development – CDBG & HOME Programs P.O. Box 1995 Vancouver, Washington 98668-1995

www.cityofvancouver.us/cdbg

HOMEBUYER POLICY AND PROCEDURES

HOMEBUYER ASSISTANCE – PROGRAM POLICY RECAPTURE RESALE RECAPTURE CALCULATION EXAMPLE RESALE CALCULATION EXAMPLE RECAPTURE AGREEMENT EXAMPLE RESALE AGREEMENT EXAMPLE COVENANT EXAMPLE PLEASE NOTE: HOMEBUYER ASSISTANCE POLICY IS UNDER

REVIEW BY HUD

Homeowner Assistance Policy

HOMEBUYER ASSISTANCE ‐ PROGRAM POLICY

For use with CDBG or HOME

OVERVIEW

The City of Vancouver (COV) administers the federal HOME and CDBG program which allows for a funding mechanism to assist low income people in achieving homeownership. The City of Vancouver will contract with non‐profit agencies in the community to administer the program.

The information below is provided as a guideline for staff, contracted developers, contracted non‐profit agencies and potential homebuyers.

Homebuyer Requirements:

Only single family, modest housing as determined by Section 203(b) of the National Housing Act

Acquired by low‐income family as its principle residence

Property carries a resale or recapture provision

Purchaser must attend a homebuyer class sponsored by the contracted non‐profit agency

Properties being considered for purchase must obtain an appraisal prior to purchase. An inspection may be required.

The maximum property purchase price per loan shall not exceed the Single Family Mortgage Limits

under Section 203(b) of the National Housing Act (12 U.S.C. 1709(b)). The FHA Mortgage Limits

website is currently located (as of 3/2013) at: https://entp.hud.gov/idapp/html/hicostlook.cfm

Use of Funds:

Subsidize interest rates and mortgage principal amounts/principal reduction

A subordinate loan for a portion of the purchase price

Finance the cost of acquiring property already occupied by the household at terms needed to make

the purchase affordable

Pay any or all of the reasonable closing costs associated with the home purchase on behalf of the

purchaser (not including prior encumbrances, i.e., prior loan payoffs, credit card debt, personal

loans, judgments

Purchase property for non‐profit developer to build or reconstruct a house for a low‐income

household

Pay up to 50% of the down payment required by the mortgagee for the purchase on behalf of the

purchaser

Affordability Period: The COV homebuyer program requires an affordability period until the home is no longer the primary residence or is refinanced, unless the resale restrictions are required. See the resale and recapture information detailed in this document. These requirements will be incorporated in an agreement with the homeowner and through the deed, note and covenant on the property. The COV will certify compliance with these requirements annually. Default: The COV can demand payment in full for any of the following reasons: • Breach of any stated covenant or failure to satisfy any stated condition or regulation

1


• Failure to stay current on property taxes owed

• Failure to maintain insurance to the insurable value of the property

• Change of use of the property

• Failure to maintain property as principal residence

• Transfer of all or any part of the property or interest in the property

Low Income Family: Family income must be at or below 80% of Area Median Income meeting the HOME Program definition upon purchase, and occupy the property as the family’s principal residence during the entire Period of Affordability. COV calculates income for the homebuyer program using the IRS Form 1040 Adjusted Gross Income method.

HOME and CDBG Funds: The COV will issue the HOME or CDBG funds as a loan to the developer or homeowner, with loan terms identified in the agreements, deed of trust and note. Amount: The amount available as a loan per property is negotiated during contracts with the selected agency. Generally the loan is between $20,000 to $50,000 per property. Capital Improvements: Approved capital improvements will be credited toward the Fair Return and Shared Net Proceeds Calculations. Capital improvements must be professionally installed and approved by the City of Vancouver prior to commencing work. Capital Improvements made without approval by the COV will not be credited with the Fair Return calculation. Approved Capital Improvements include the following:

Energy upgrades such as solar hot water system or heating system or increased insulation

Replacement kitchen or bathroom

Kitchen modernization

New flooring

Increase of home footprint

Addition of driveway, sprinkler systems, retaining walls or fence Excluded: Prior to any capital improvements being made, the owner shall submit plans and

specifications to COV for approval as a capital cost.

Remediation of any deficiencies identified during inspection will not be considered in the capital

improvement calculation.

Maintenance costs are excluded

Subordination Policy: Many program borrowers refinance their homes or borrow against the value of their homes, and request that their HOME/CDBG assistance loans’ lien position be subordinated to another loan. The policy of the COV is not to subordinate.

RECAPTURE PROVISIONS – Loan provided to a homebuyer

The COV uses Recapture Provisions when HOME funds are provided to a homebuyer. The loan enables the homebuyer to purchase the unit at an affordable cost. The loan includes any assistance that reduces the purchase price from fair market value to an affordable cost. If HOME or CDBG funds are used for the

2


cost of developing a property and the unit is sold below fair market value the difference between the fair market value and the purchase price is considered to be directly attributable to the HOME or CDBG funding.

The Recapture approach requires COV funds to be repaid from the net‐proceeds of the sale. All of the loan provided to the homebuyer can be recaptured from the net proceeds of the sale. The COV will not require repayment of anything other than the funds available through the net‐proceeds.

The recapture provisions will be enforced through an upfront agreement with the homebuyer and through a recorded Low Income Housing Covenant, Deed of Trust, and a Promissory Note.

Agencies: The COV has no programs that are using this model that are currently operating. However, there are some loans using HOME funds that meet this requirement.

Homebuyer agreement: The recorded agreement will include:

Amount and use of the loan

Period of affordability

Equity sharing provision

Capital improvement list

Requirement that the property be the primary residence of the family

Recapture Triggers: The Recapture provisions are triggered when the following occurs:

House is occupied by other than the approved purchaser

Non‐compliance with the residency requirement will require the immediate payback of HOME

or CDBG funds invested into the property

Shared Equity/Shared Net‐Proceeds: The borrower and the COV will share the appreciation at the time of sale or refinance. The calculation and payment of appreciated value of the property is described below:

Determining Value:

The value is determined by an appraisal satisfactory to the COV; the sales price if sold; the

appraised value if refinanced; or any insurance or condemnation proceeds received; or an

appraisal required for condemnation or insurance proceeds. The appraisal shall take into

account any covenants or restrictions which will remain in place; less

The actual reasonable approved costs of sale (if the Property is sold), including appraisal, real

estate commissions, real property excise tax, escrow fees, recording fees, title and insurance

premiums; less

Cost of depreciable improvements made to the Property subsequent to completion of the work

funded or financed by this loan.

Shared Appreciation (SA):

The Shared Appreciation is due and payable at the time any property is sold, refinanced or

discontinued in service to the population it was intended to serve.

3


Shared Appreciation is the Borrower’s proportionate share of the appreciated value of the

Property, together with the appreciated value of the improvements constructed on the

property.

Shared Appreciation (SA) is represented in the following formula:

SA=(NP‐TODC) x (OP/TODC) where (SA) is the product of the Net Proceeds (NP) less Total

Original Purchase Costs (TODC) multiplied by the fraction whose numerator is the Original

Principal (OP) amount of the City of Vancouver Program Award (loan) and whose denominator is

the total Original Development/Purchase Costs.

TODC costs include:

The appraised fair market value of the Property at the time of the loan or certification of cost if

mutually agreed upon by the parties. The agreed upon purchase price of the Property at the

time of the loan is $_________________.

Net Proceeds shall be calculated as follows:

The value is determined by an appraisal satisfactory to the COV; the sales price if sold to a bona

fide third party; the appraised value if refinanced; or any insurance or condemnation proceeds

received; or an appraisal required for condemnation or insurance proceeds. The appraisal shall

take into account any covenants or restrictions which will remain in place; less

o The actual reasonable approved costs of sale (if the Properties are sold), including appraisal,

real estate commissions, real property excise tax, escrow fees, recording fees, title and

insurance premiums, less

o Cost of capital improvements made to the Properties subsequent to completion of the work

funded or financed by this loan. Improvements must meet the Capital Improvement section

of this policy.

NOTE: The COV will not require repayment of anything other than the funds available through

the net‐proceeds.

See Attached Example of Recapture calculations

RESALE PROVISIONS – Loan to Developer, selling at Fair Market Value

Resale Provisions are required when HOME assistance is provided to an owner/developer but with no additional assistance paid to the Homebuyer. Resale provisions will be enforced through an upfront agreement with the homebuyer, a recorded Low Income Housing Covenant, Deed of Trust, and Promissory Note.

Agencies: The COV has agreements with Evergreen Habitat for Humanity and the Southwest Washington Land trust that use this method.

4


• Projects that use Resale provisions must be occupied by a low‐income household for the entire affordability period.

• An appraisal of the property must be provided prior to the purchase by the initial homebuyer. • Upon sale of the property by the initial homebuyer during the period of affordability period, the

subsequent homebuyer must be a low or moderate income household that will occupy the property as their principal residence and the initial buyer must receive a fair return on their investment.

Agreement: An upfront agreement between the initial homebuyer and the COV must be signed prior to purchase. This must state the amount of HOME subsidy, the Period of Affordability, and the Fair Return. A Capital Improvement list will be included. Fair Return to Initial Buyer: Upon sale of the property by the initial homeowner, the homeowner must receive a “fair return” on their investment. Fair Return is defined as the return of the homeowner’s original investment (i.e. down payment) plus any capital improvements, less the amount of deferred maintenance that does not meet HUD Housing Quality Standards. The fair return will use the percentage of increase in national area “CPI‐U for all items”. This is calculated by subtracting the CPI‐U on the sale date from the CPI‐U on the initial purchase. That amount is divided by the initial CPI‐U to obtain the percent gain. The fair return will only apply to sales within the HOME affordability period. Consumer Price Index (CPI‐U): measures changes in the price level of consumer goods and services purchased by households for the region. The COV will using the annual Consumer Price Index for all Urban Consumers (CPI‐U) for all items, Portland‐Salem, OR, WA metropolitan area as provided by the U.S. Department of Labor, Bureau of Labor Statistics, to define fair return on investment. EXAMPLE

$20,000 HOME Investment by the COV

$5,000 Investment from low‐income homebuyer

$9,000 Kitchen Improvements

225 CPI‐U – July 2010

Low Income Owner sells at year 8

240 CPI‐U – December 2018

6% Increase in CPI‐U (240‐225)/225

$840 Fair Return is increase in CPI‐U multiplied by initial investment and capital Investments ($14,000 * 6%)

$ 14,840 Total return to buyer [buyers investment + capital improvements +fair return] Subsequent Homebuyers: During the affordability period all homeowners must, at time of purchase, be between 35% and 80% of Area Median Income adjusted for family size as determined by HUD. The property must be affordable to a reasonable range of low‐income homebuyers who pay no more than 33 percent of the household adjusted gross income for PITI (Principal, Interest, Taxes, and Insurance) or as determined by the lender at their discretion. The COV will not use the presumption of affordability to meet the resale provisions.

Resale Process: When a Resale is triggered during the Period of Affordability the homeowner and developer shall immediately notify the COV of Vancouver HOME and CDBG program staff.

5


The COV shall agree to the new sale price with consultation from the contracted agency and written third party appraisal

Confirm the Fair Return calculation to the seller and equity‐sharing amounts to the seller, developer and the COV

Review the income eligibility of the subsequent buyer and ensure the buyer will use the property as its principal residence

Determine whether the subsequent homebuyer will continue the Period of Affordability in effect

New HOME funds invested for the subsequent low‐income homebuyer will extend the period of affordability according to HOME regulations.

Documents Available

Shared net proceeds example

Income Limits

Deed

Note

Covenant

Home buyer agreement

6

[Type text]

Recapture Homeowner Agreement

When Recorded Return To: City of Vancouver CDBG and HOME Programs PO Box 1995 Vancouver, WA 98668-1995 Attention: Peggy Sheehan, (360) 487-7952

CITY OF VANCOUVER, WASHINGTON

RECAPTURE HOMEOWNER AGREEMENT THIS AGREEMENT is made this ______ day of _________________, 2013, between homeowner__________ (hereinafter “Homeowner”), whose address is _________________Vancouver, WA __________, and the City of Vancouver, Washington, a municipal corporation, by and through its HOME Program Vancouver, WA (hereinafter “City”), whose address is P.O. Box 1995, Vancouver, WA 98668-1995. 1. PURPOSE This Agreement is made and entered into this ___________day of _______________, 2013 by and between the City of Vancouver, Columbia Non-Profit Housing, and the Homeowner. Whereas, the City of Vancouver has provided HOME Investment Partnerships Program funds via Columbia Non-Profit in the amount of (amount_______________) for the purpose of providing principal reduction in the form of a silent –second/subordinate loan recorded on DATE under Auditor’s number _____________ Whereas, the Homeowner’s participation in the program is conditioned on Homeowner’s agreement to recapture restrictions. The purpose of these restrictions are to ensure that these funds are used for the purchase of affordable housing. The City of Vancouver will recapture the funds when the house ceases to be used as the borrower’s primary residence. The HOME regulations require an affordability period as defined in 24 CFR 92.2. The City of Vancouver imposes the affordability period through the recapture restrictions until the home is no longer the borrower’s primary residence. The property address is address and legally described as follows: Assessor’s Parcel Number: __________________________ Legal Description: ___________________________ The property assessed value at the time of purchase is $___________ The property purchase price is $_______________ The amount of HOME loan for the property is $_______________ 2. DEFINITIONS

7

[Type text]


a. Agreement means this HOME Funded Homeowner Agreement, which may from time to

time be amended.

b. Breach of Agreement means failure to comply with, any covenant, agreement, term or condition contained in this Agreement.

c. CITY means the City of Vancouver, a municipal corporation. d. Columbia Non-Profit Housing means the organization that originated the loan and

eligibility of the homeowner and is no longer operating a homebuyer program. e. HOME means HOME Investment Partnerships Program, sponsored by U.S. Department of

Housing and Urban Development (HUD).

f. Homeowner means the owner(s) as set forth at the beginning of this Agreement, or any successor in title to the property.

g. Principal Residence means Homeowner will maintain the Property as their principal

residence and not move out and leave the Property vacant or move out and rent the Property.

h. AMI means Annual Median Income according to HUD. Numbers are calculated annually

and published by HUD.

i. PITI means principle interest, taxes and insurance that is included in the mortgage.

j. Term means the period of affordability commencing on the date of the original loan and continuing until the property is sold or refinanced.

k. Capital Improvements mean those improvements that are pre-approved by the CITY

and must be professionally installed by a licensed contractor. 1. The remediation of any deficiencies identified during inspection will not be

considered in the capital improvement calculation. 2. Maintenance costs are excluded. 3. Prior to any capital improvements being made, the owner shall submit plans and

specifications for approval as a capital cost. 4. Capital Improvements made without approval by CITY will not be credited with the

Fair Return calculation. 5. Approved Capital Improvements

i. Energy upgrades such as solar hot water system or heating system, increased insulation

ii. Replacement kitchen or bathroom iii. Kitchen modernization iv. New flooring v. Increase of home footprint vi. Addition of driveway, sprinkler systems, retaining walls or fence

l. Shared Equity/Shared Net-Proceeds: The borrower and the COV will share the

appreciation at the time of sale or refinance. The calculation and payment of appreciated value of the property is described below:

Determining Value: The value is determined by an appraisal satisfactory to the COV; the sales price if sold

to a bona fide third party; the appraised value if refinanced; or any insurance or condemnation proceeds received; or an appraisal required for condemnation or insurance proceeds. The appraisal shall take into account any covenants or restrictions which will remain in place; less

8

[Type text]


The actual reasonable approved costs of sale (if the Property is sold), including appraisal, real estate commissions, real property excise tax, escrow fees, recording fees, title and insurance premiums; less

Cost of depreciable improvements made to the Property subsequent to completion of the work funded or financed by this loan.

Shared Appreciation (SA):

The Shared Appreciation is due and payable at the time any property is sold, refinanced or discontinued in service to the population it was intended to serve.

Shared Appreciation is the Borrower’s proportionate share of the appreciated value of the Property, together with the appreciated value of the improvements constructed on the property.

Shared Appreciation (SA) is represented in the following formula: SA=(NP-TODC) x (OP/TODC) where (SA) is the product of the Net Proceeds (NP)

less Total Original Purchase Costs (TODC) multiplied by the fraction whose numerator is the Original Principal (OP) amount of the City of Vancouver Program Award (loan) and whose denominator is the total Original Development/Purchase Costs.

TODC costs include: The appraised fair market value of the Properties at the time of the loan or certification

of cost if mutually agreed upon by the parties. The agreed upon purchase price of the Property at the time of the loan is $__________________.

Net Proceeds shall be calculated as follows:

The value is determined by an appraisal satisfactory to the COV; the sales price if sold to a bona fide third party; the appraised value if refinanced; or any insurance or condemnation proceeds received; or an appraisal required for condemnation or insurance proceeds. The appraisal shall take into account any covenants or restrictions which will remain in place; less

o The actual reasonable approved costs of sale (if the Properties are sold), including appraisal, real estate commissions, real property excise tax, escrow fees, recording fees, title and insurance premiums, less

o Cost of capital improvements made to the Properties subsequent to completion of the work funded or financed by this loan. Improvements must meet the Capital Improvement section of this policy.

NOTE: The COV will not require repayment of anything other than the funds available through the net-proceeds.

3. USE AND OCCUPANCY OF THE PROPERTY

a. It is agreed that during the Term, the Homeowner will maintain the Property as his/her

principal residence. b. It is agreed that during the Term, the Homeowner will maintain the Property in accordance

to the minimum standards set forth in the CITY Policies and Procedures for their Homebuyer Program defined as U.S. Department of Housing and Urban Development Housing Quality Standards.

4. REPRESENTATIONS AND WARRANTIES OF HOMEOWNER a. The Homeowner represents and warrants that he/she has validly executed this Agreement

and the same constitute the binding obligation of the Homeowner. The Homeowner has full power, authority, and capacity to enter into the Agreement, to carry out the Homeowner’s

9

[Type text]


obligations as described in this Agreement, and to assume responsibility for compliance with all applicable federal rules and regulations

b. To the best of the Homeowner’s knowledge, the making of this Agreement and the

Homeowner’s obligations hereunder:

1. Will not violate any contractual covenants or restrictions between the Homeowner or any third party affecting the Property;

2. Will not conflict with any of the instruments that create or establish the Homeowner’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 Homeowner, without regard to capacity, any person with whom the Homeowner 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 owner’s knowledge,

threatened against the Homeowner 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.

d. The Homeowner agrees to indemnify and hold harmless the CITY from and against all

liabilities, losses, claims, damages, judgments, costs, and expenses (including, without limitation, reasonable attorney’s fees) incurred by the CITY as a result of any material inaccuracy in any of the representations and warranties contained in this Agreement.

5. BREACH OR TERMINATION OF AGREEMENT In the event of a breach of this Agreement, the CITY reserves the right to recapture funds in an amount to compensate the CITY for the noncompliance in addition to any other remedies available at law or in equity. In the event of termination for any reason, all agreements and/or contracts with individuals made as a result of this agreement shall insure to the benefit of the CITY. 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: CDBG & HOME PROGRAM PO BOX 1995 VANCOUVER, WA 98668-1995

FOR HOMEOWNER: _________________ ____________________________________

b. Subordination. The CITY’s policy is not to subordinate.

c. 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 the CITY and its successors, and shall pass to and be binding upon the BORROWER’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.

10

[Type text]


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. The CITY, at the BORROWER’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 BORROWER 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 the CITY to enforce this Agreement.

IN WITNESS WHEREOF, the BORROWER has executed this instrument this ___________ day of_______________________, 2013. ____________________________________ Address:

NOTARY

STATE OF WASHINGTON ) )SS CLARK COUNTY) On this ______________________day of ___________________, 2013, before me the undersigned, a Notary Public in and for the State of Washington, duly commissioned and sworn, personally appeared __________________to me known to be the individual(s) described in and who executed the foregoing Trust Deed, and acknowledged to me that he and/or she signed and sealed the said instrument as his and/or her free and voluntary act and deed, for the uses and purposes therein mentioned. WITNESS my hand and official seal affixed the day and year above written. ________________________________________________ NOTARY PUBLIC in and for the State of Washington Residing at: ______________________________________ Term Expires: ____________________________________

11

exampleIDIS:

Date:

Improvements**

Appraisal fee $100.00

Doc prep $100.00

Processing fee $50.00

Underwriting fee

Settlement

Title Insurance

Recording fee

Reconveyance fee $150.00

TOTAL: $400.00 $0.00

Homeowner Last Name:

1/1/2012

Closing Costs*

*Closing Costs: Acceptable closing costs are any closing costs required by the title company. This does not include consumer debt or a home warranty policy. **Value of Improvements: Did the homeowner make improvements to the Property? If so, does the language in the Promissory note call for the factoring in of the cost of improvements or the value of improvements?

i. If the Promissory Note calls for the factoring in of the value of improvements: Owner needs an appraisal or Letter of Opinion showing the value added of the improvements. If there is no appraisal, and the owner is not willing to obtain an appraisal or opinion letter, the owner must provide a detailed list of Capital Improvements, supported with receipts, not estimates. Review the documentation and support for allowable Capital Improvements. Use IRS Publication 523: Selling Your Home for guidance on what is an eligible capital improvement.

ii. If the Promissory Note calls for the factoring in of the cost of improvements: The owner must provide a detailed list of Capital Improvements, supported with receipts, not estimates. Review the documentation and support for allowable Capital Improvements. Use IRS Publication 523: Selling Your Home for guidance on what is an eligible capital improvement.

Shared Equity Example 12

Homeowner Agreement Resale

When Recorded Return To: City of Vancouver CDBG and HOME Programs PO Box 1995 Vancouver, WA 98668-1995 Attention: Peggy Sheehan, (360) 487-7952

CITY OF VANCOUVER, WASHINGTON

RESALE HOMEOWNER AGREEMENT THIS AGREEMENT is made this ______ day of _________________, 2013, between name , (hereinafter “Homeowner”), whose address is address Vancouver, WA_______, and the City of Vancouver, Washington, a municipal corporation, by and through its HOME Program Vancouver, WA (hereinafter “City”), whose address is P.O. Box 1995, Vancouver, WA 98668-1995. 1. PURPOSE This Agreement is made and entered into this ___________day of _______________, 2013 by and between the City of Vancouver, Evergreen Habitat for Humanity and the Homeowner. Whereas, the City of Vancouver has provided HOME Investment Partnerships Program funds via Evergreen Habitat for Humanity in the amount of (AMOUNT OF LOAN ) for the purpose of purchasing property upon which a residence for a low-income homebuyer will be constructed/is constructed using the Habitat for Humanity model. Whereas, the Homeowner’s participation in the program is conditioned on Homeowner’s agreement to resale restrictions on the Homeowner’s ability to sell to a subsequent homebuyer and receive a fair return on their investment. The purpose of the restrictions are to ensure that these funds are used for the purchase of housing which is retained as affordable housing for 10 – 20 years from the project completion date as defined in 24 CFR 92.2 (“HOME Affordability Period”). The property address is __________________________ and legally described as follows: Assessor’s Parcel Number: ___________________________ Legal Description:

________________________________________________________________________________

The property assessed value at the time of purchase is $_________ The property purchase price is $__________ The amount of HOME loan for the property is $____________ The CPI-U at time of sale is ___________________ The affordability period is ________________________

13


2. DEFINITIONS a. Agreement means this HOME Funded Homeowner Agreement, which may from time to

time be amended.

b. Breach of Agreement means failure to comply with, any covenant, agreement, term or condition contained in this Agreement.

c. CITY means the City of Vancouver, a municipal corporation.

d. Consumer Price Index (CPI-U) measures changes in the price level of consumer goods and

services purchased by households for the region. The COV will use the annual Consumer Price Index for all Urban Consumers (CPI‐U) for all items, Portland‐Salem, OR, WA metropolitan area as provided by the U.S. Department of Labor, Bureau of Labor Statistics, to define fair return on investment.

e. Fair Return to Initial Buyer means the initial homeowner receives a fair return on their investment. Fair Return is defined as the return of the homeowner’s original investment (i.e. down

payment) plus any capital improvements, less the amount of deferred maintenance that does not meet HUD Housing Quality Standards. The fair return will use the percentage of increase in national area “CPI‐U for all items”. This is calculated by subtracting the CPI‐U on the sale date from the CPI‐U on the initial purchase. That amount is divided by the initial CPI‐U to obtain the percent gain. The fair return will only apply to sales within the HOME affordability period.

f. Evergreen Habitat for Humanity means the organization that originated the loan and

eligibility of the homeowner and holds the original deed and note for the property and will be monitoring the payments and primary residency requirements.

g. HOME means HOME Investment Partnerships Program, sponsored by U.S. Department of

Housing and Urban Development (HUD).

h. Homeowner means the owner(s) as set forth at the beginning of this Agreement, or any successor in title to the property.

i. Principal Residence means Homeowner will maintain the Property as their principal

residence and not move out and leave the Property vacant or move out and rent the Property.

j. AMI means Annual Median Income according to HUD. Numbers are calculated annually

and published by HUD.

k. PITI means principle interest, taxes and insurance that is included in the mortgage.

l. Resale to Low-income homebuyer means during the affordability period all subsequent homeowners must, at time of purchase, between 35 to 80% or below of Area Median Income adjusted for family size as determined by HUD. The property must be affordable to a reasonable range of low‐income homebuyers who pay no more than 33 percent of the household adjusted gross income for PITI (Principal, Interest, Taxes, and Insurance) or as determined by the lender at their discretion.

m. Term means the period of affordability commencing on the date of the initial occupancy

and continuing for the following _______________number of years.

n. Capital Improvements mean those improvements that are pre-approved by the CITY and must be professionally installed by a licensed contractor.

1. The remediation of any deficiencies identified during inspection will not be considered in the capital improvement calculation.

2. Maintenance costs are excluded.

14


3. Prior to any capital improvements being made, the owner shall submit plans and specifications for approval as a capital cost.

4. Capital Improvements made without approval by CITY will not be credited with the Fair Return calculation.

5. Approved Capital Improvements i. Energy upgrades such as solar hot water system or heating system, increased

insulation ii. Replacement kitchen or bathroom iii. Kitchen modernization iv. New flooring v. Increase of home footprint vi. Addition of driveway, sprinkler systems, retaining walls or fence

3. USE AND OCCUPANCY OF THE PROPERTY a. It is agreed that during the Term, the Homeowner will maintain the Property as his/her

principal residence. b. It is agreed that during the Term, the Homeowner will maintain the Property in accordance

to the minimum standards set forth in the CITY Policies and Procedures for their Homebuyer Program defined as U.S. Department of Housing and Urban Development Housing Quality Standards.

4. RESALE PROVISIONS FOR HOMEBUYER a. Term.

The term of this agreement and the HOME resale provisions will be in effect for ten (10) years beginning after the transfer of the property to the Homeowner as evidenced by the Mortgage Agreement.

b. Sale during Period of Affordability/Term.

Upon sale of property during the period of affordability, the property must be sold to an income qualified buyer who is between 35% and 80% AMI and will be paying no more than 33 percent of income for PITI. The buyer must use the property as his or her principal residence. The new fair market sales price will be calculated as the percent change in the Consumer Price Index during the period of ownership.

c. Fair Return on Investment.

Upon sale of property during period of affordability, the Homeowner is entitled to a fair return on their investment in the property. An example of the calculation follows: $20,000 HOME Investment by the COV

$5,000 Investment from low‐income homebuyer

$9,000 Kitchen Improvements

225 CPI‐U – July 2010


240 CPI‐U – December 2018

6% Increase in CPI‐U (240‐225)/225

$840 Fair Return is increase in CPI‐U multiplied by initial investment and capital Investments ($14,000 * 6%)

$ 14,840 Total return to buyer [buyers investment + capital improvements +fair return]

4. REPRESENTATIONS AND WARRANTIES OF HOMEOWNER a. The Homeowner represents and warrants that he/she has validly executed this Agreement

and the same constitute the binding obligation of the Homeowner. The Homeowner has full power, authority, and capacity to enter into the Agreement, to carry out the Homeowner’s obligations as described in this Agreement, and to assume responsibility for compliance with all applicable federal rules and regulations

15


b. To the best of the Homeowner’s knowledge, the making of this Agreement and the

Homeowner’s obligations hereunder:

1. Will not violate any contractual covenants or restrictions between the Homeowner or any third party affecting the Property;

2. Will not conflict with any of the instruments that create or establish the Homeowner’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 Homeowner, without regard to capacity, any person with whom the Homeowner 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 owner’s knowledge,

threatened against the Homeowner 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.

d. The Homeowner agrees to indemnify and hold harmless the CITY from and against all

liabilities, losses, claims, damages, judgments, costs, and expenses (including, without limitation, reasonable attorney’s fees) incurred by the CITY as a result of any material inaccuracy in any of the representations and warranties contained in this Agreement.

5. BREACH OR TERMINATION OF AGREEMENT In the event of a breach of this Agreement, the CITY reserves the right to recapture funds in an amount to compensate the CITY for the noncompliance in addition to any other remedies available at law or in equity. In the event of termination for any reason, all agreements and/or contracts with individuals made as a result of this agreement shall insure to the benefit of the CITY. 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: CDBG & HOME PROGRAM PO BOX 1995 VANCOUVER, WA 98668-1995

FOR HOMEOWNER: _________________ ___________________________________________

b. Subordination. The CITY’s policy is not to subordinate.

c. 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 the CITY and its successors, and shall pass to and be binding upon the BORROWER’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.

16


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. The CITY, at the BORROWER’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 BORROWER 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 the CITY to enforce this Agreement.

IN WITNESS WHEREOF, the BORROWER has executed this instrument this ___________ day of_______________________, 2013. ____________________________________ Name: Address:

NOTARY

STATE OF WASHINGTON ) )SS CLARK COUNTY) On this ______________________day of ___________________, 2013, before me the undersigned, a Notary Public in and for the State of Washington, duly commissioned and sworn, personally appeared _________________ to me known to be the individual(s) described in and who executed the foregoing Trust Deed, and acknowledged to me that he and/or she signed and sealed the said instrument as his and/or her free and voluntary act and deed, for the uses and purposes therein mentioned. WITNESS my hand and official seal affixed the day and year above written. ________________________________________________ NOTARY PUBLIC in and for the State of Washington Residing at: ______________________________________ Term Expires: ____________________________________

17

$20,000

$5,000

$9,000

225

CPI‐U – December 2018 240

6%

$840

$14,840

Investment from low‐income homebuyer

Kitchen Improvements

FAIR RETURN CALCULATION

Increase in CPI‐U (240‐225)/225

Fair Return is increase in CPI‐U multiplied by

initial investment and capital Investments

($14,000 * 6%)

Total return to buyer [buyers investment +

capital improvements +fair return]

CPI‐U – July 2010


HOME Investment by the COV

Resale Calculation Example 18

Low Income Covenant

When Recorded Return To: City of Vancouver CDBG and HOME Programs PO 1995 Vancouver, WA 98668-1995 Attention: _____________________________

________________________________________________________________________ CITY OF VANCOUVER

LOW INCOME HOUSING COVENANT AGREEMENT Grantor/Borrower: ________________________________ Beneficiary: City of Vancouver by and through CDBG and HOME Program Frunding Source: HOME & CDBG Grantee/Trustee: title company Assessor’s Tax ID#: ____________________________________________ Address: ____________________________________________ Contract Number: _______________________________________________ This Low Income Housing Covenant Agreement (the "Covenant") is made between ___________________, a Washington public entity, with its mailing address at ___________________________________in consideration for the financial assistance provided by the City of Vancouver CDBG and HOME Program ("Lender"), to _________________ pursuant to a CDBG and HOME Agreement, Contract Number ____________________________ (the "Contract"), for the rehab of of real property ("Property") know as ___________________ legally described as follows: __________________________________________________________ This Covenant will be filed and recorded in the official public land records of Clark County, Washington and shall constitute a restriction upon the use of the property described herein, subject to and in accordance with the terms of this Covenant, for the required housing affordability period of fifteen (15) years. The covenants contained herein are to be taken and construed as covenants running with the land and shall pass to and be binding upon the Grantor, his successors and assigns heirs, grantees, or lessees of the Property, beginning __________________ and continuing from that date for ________________years until ____________. Each and every contract, deed or other instrument covering or conveying the Property, or any portion thereof, shall be conclusively held to have been executed, delivered and accepted subject to such covenants, regardless of whether such covenants are set forth in such contract, deed, or other instruments. NOW, THEREFORE, it is hereby covenanted, that beginning on ______________ until __________________ , is as follows:

19

Low Income Covenant

The Agency will preserve this property as a long-term affordable housing to individuals with incomes at eighty percent (80%) or less of the median income in Clark County, Washington, adjusted for family size, as estimated from time to time by the United States Department of Housing and Urban Development (HUD). If HUD ceases to provide such estimates of median income, then median income shall mean such comparable figures for Clark County, Washington published or reported by a federal, state, or local agnecy as the County shall select. Tenant income must be determined upon occupancy and annually thereafter. In keeping with the responsibility that accompanies the use of public funds, Grantor shall keep all records and make any reports relating to compliance with this Covenant Agreement that the Lender may reasonably require. In addition, Grantor agrees that Lender, by and through the City of Vancouver staff, may at any reasonable time and upon reasonable notice review Grantor for matters consistent with this Covenant, in accordance with applicable law.

The Grantor will provide safe and sanitary housing, and will comply with all State and local land use, environmental, habitat, erosion control, property, housing codes, licensing requirements, and other requirements regarding the condition of the structure and the operation of the project in the jurisdiction in which the housing is located. DEFAULT: If a violation of this Covenant occurs, the City of Vancouver may, after 30 days notice to the Grantor, institute and prosecute any proceeding at law or equity to abate, default the loan, prevent, or enjoin any such violation or to compel specific performance by the Grantor of its obligations hereunder; provided that, the Grantor shall not be required by any provision herein to evict a residential tenant. No delay in enforcing the provisions hereof as to any breach or violation shall impair, damage, or waive the right of any party entitled to enforce the provisions hereof or to obtain relief against or recover for the continuation or repetition of such breach or violations or any similar breach or violation hereof at any later time. IN WITNESS HEREOF, _____________________, a Washington State _______________ has executed this Covenant on the __________ day of _________________, 2_______. GRANTOR: ____________________ a Washington state _______________ By: Print Name: _______________________________

20

Low Income Covenant

STATE OF WASHINGTON ) ) ss. COUNTY OF CLARK ) I certify that I know or have satisfactory evidence that is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the ___________________ of _______________________,

Washington State __________________ to be the free and voluntary act and deed of such limited liability company on behalf of such limited liability company for the uses and purposes mentioned in the instrument. DATED:__________________________________ _________________________________________ Notary Public in and for the State of Washington residing in the county of _____________________ My appointment expires: _____________________

21