#6 Over-limit Request
NEIGHBORHOOD SERVICES MEMORANDUM
To:
Community Development Authority (CDA)
From:
Randy Zwieg
Housing Rehabilitation Specialist II
Date:
August 14, 2009
Subject:
Agenda Item #6
Consideration of a request for Applicant (09-124) to exceed
the loan maximum for a housing rehabilitation project.
Request:
A request is being made on behalf of the owner for the CDA to exceed the maximum funding limit
of $24,999 for a recently purchased loan. A preliminary cost estimate to complete the housing
rehabilitation project is calculated to be approximately $96,000.
A breakdown of the proposed $96,000 loan funding is as follows:
Roofing and Exterior Painting 18,000.00
Mechanicals (HVAC, Elec. & Plumb.) 32,000.00
Windows and Insulation 15,000.00
Interior Renovation 29,000.00
Other (Contingency) 2,000.00
Total Improvements: $96,000.00
Analysis calculation of the available equity would be as follows:
Estimated Fair Market Value 125,400.00
Recently Purchased Loan Factor x 1.20
Maximum Loan Available 150,000.00 (120% LTV)
Existing Property Liens -54,000.00
Available Equity: $96,000.00
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Overview:
The property is a 2,750 square foot home located on Terrace Street. It is a contributing historic
Queen Ann home in the Look West Neighborhood. The property had been previously converted to
a two-unit rental property before being purchased by this applicant. Neighborhood Services has
responded to seven nuisance and code complaints over the last ten years. The applicant has
undertaken interior demolition work and intends to restore the property to a single family owner
occupied home.
Based upon our initial inspection of the property; the project involves extensive interior and
exterior improvements. Present condition of the property is substandard and deteriorating due to
deferred maintenance and lack of timely repairs. The roof leaks, the siding, trim and overhang
needs painting. Windows are original and in generally poor condition. Numerous mechanical
plumbing and electrical do not exist. Wall covering has been removed and insulation is
nonexistent.
Neighborhood Services, is unable to grant the funds needed to complete this project to bring the
property into compliance with minimum Housing Quality Standards under the loan limit. Under the
Recently Purchased Home Improvement Program guidelines, the maximum loan amount of any
combination zero percent installment payment and forgivable loan shall not exceed $24,999. In
order for the property owner to rehabilitate the property to a sound and readily maintainable (decent,
safe and sanitary) condition, preliminary cost estimate of improvement work needed to put the
property into compliance with federal guidelines would exceed the loan limit. The Community
Development Authority reserves the right to determine loan amount on an individual basis.
Without additional funding the property is uninhabitable. Attempts by the borrower to seek
conventional financing have failed. Other alternative financing or nonconventional financing
would be economically infeasible or create an economic burden (i.e. high interest loan).
Recommendation:
CDA authorize a loan of $96,000.00 which would be structured into two (2) separate loans:
?
$48,000.00 would be half forgiven/half pay-back with the installment portion at a higher
payment so as not to exceed a 120 payment amortization.
?
$48,000.00 would be structured as a deferred payment loan for 10 years, after which time it
would convert to an interest bearing loan (5%) with a payment not to exceed a 120
payment amortization.
This loan would address the goals currently established for the home improvement program,
including improving the quality of housing stock for low to moderate income families, promoting
attractive neighborhoods with a variety of housing units, preventing housing stock from becoming
blighted or vacant, preserving historic structures, improving energy efficiency, and promoting the
revitalization and stability of neighborhoods.
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