#4 Loan Servicing
NEIGHBORHOOD SERVICES MEMORANDUM
June 12, 2009
TO: Community Development Authority (CDA)
FROM: Carrie Clark, Housing Financial & Rehabilitation Specialist
SUBJECT: Review and Approval of Policy Addition to Home Improvement Program (HIP) manual
– Loan Servicing
Executive Summary / Recommendation:
The Neighborhood Services (NS) Department currently operates several programs, including the Down
Payment & Closing Cost Program (DPCC) and Home Improvement Program (HIP) where we are providing
financing to Program participants in the form of a secured loan. In some circumstances, the financing requires
a monthly payment to be made by the recipient/borrower. NS services all the loans they originate in that all
payments are receipted, tracked and reported by NS.
NS has had a loan servicing practice in place for some time. Borrowers are provided with a payment coupon
booklet upon closing of their loan they may use to remit payment. A monthly review of payments received by
th
loan is performed monthly on or around the 20 of each month. Delinquent borrowers are notified of their
status by a letter of varying degree. Borrowers who are more than 120 days delinquent are invited to appear
before the CDA for review and action. This practice has generally proven to be very effective in maintaining a
low overall loan portfolio delinquency rate .
A recent monitoring was performed by the Department of Housing and Urban Development (HUD) of the HIP
Program, and as a result, HUD has suggested that NS incorporate their loan servicing practices into their policy
handbook. NS has developed a set of guidelines to be incorporated into the DPCC & HIP Program manuals
that is consistent with our current servicing practices.
The following servicing guidelines are set forth for your review and comment. Upon your review, staff is
recommending that the guidelines be approved and incorporated into the DPCC & HIP Program manuals.
Background
The following set of loan servicing guidelines are proposed to be added to Chapter 4, Loan Defaults of the HIP
Program manual:
Loan Servicing Procedures
Payments Due
I.Under all Programs including the Fix-Up, Home Improvement and Recently Purchased Programs,
where a monthly payment is due, the monthly payment shall be due on the first of each month.
The minimum monthly payment to be made under these Programs is $50. Payments are to be
made to:
- 1 -
The City of Janesville
Neighborhood Services
P.O. Box 5005
Janesville, WI 53547
Acceptable means of payment include cash, personal check, bank check or money order.
Automatic ACH withdrawal is not available.
Late Fees
th
I.A late fee of $3 will be assessed on the 16 day of the month the payment is due if the payment
th
is not received by the close of business on the 15 of each month.
Notification to Borrowers
I.Each Borrower will be provided with a payment booklet that may be used to accompany their
payment. The payment coupon will contain the Borrower’s Name, Address, City, Loan Number,
and Lender Address.
II.Payment Coupon Booklets will be sent to the Borrower annually, on or around the anniversary
date of loan and after review of income as described in Loan Repayment Schedule (attached).
Default of Payment
I.Borrowers are to be notified of any default of payment via mail. A letter of varying degree to the
Borrower will be sent upon the following default rate(s):
?
30 – day
?
60- day
?
90-day
?
120-day
A copy of each letter is attached by addendum. The Borrower will be notified of any default on a
th
monthly basis, on or around the 20 of each month. A payment history and payment coupon will
accompany each default letter.
II.Defaults greater than 120 days are subject to invitation to attend the Community Development
Authority (CDA) Meeting. The CDA will have the discretion to instruct staff to initiate foreclosure
or other collection activity on a case-by-case basis.
A set of sample collection letters and loan repayment schedule also to be incorporated into the HIP
manual are attached.
Analysis/Recommendation:
Staff believes that the loan servicing guidelines set forth are effective as collection measures to ensure the
timely repayment of our loans. A motion to approve the HIP Program manual amendment is in order.
- 2 -