HomeMy WebLinkAbout2021 02-22 CCPCITY COUNCIL
MEETING
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February 22, 2021
AGENDA
1. Invocation - Lawrence -Anderson - 7 p.m.
2. Call to Order Regular Business Meeting
Vt p o K c r
s n,��1*n m
CENTER
A7 THEiCENTER
This meeting is being conducted electronically under Minnesota Statutes, section 13D.021 due
to the pandemic. For those who are connected to this meeting, please keep your microphone
muted. If there is an opportunity for public comment, you may unmute and speak when called
upon. Please do not talk over others and anyone being disruptive may to ejected from the
meeting. The packet for this meeting is on the City's website, which is linked on the calendar or
can be found on "City Council" page.
3. Roll Call
4. Pledge of Allegiance
5. Approval of Agenda and Consent Agenda
The following items are considered to be routine by the City Council and will be enacted by one
motion. There will be no separate discussion of these items unless a Councilmember so
requests, in which event the item will be removed from the consent agenda and considered at
the end of Council Consideration Items.
6. Presentations/Proclamations/Recognitions/Donations
7. Public Hearings
The public hearing on this matter is now open. I will first call on those who notified the Clerk that
they would like to speak to this matter, then I will ask if anyone else on this meeting would like to
speak during this hearing. When I do, please indicate your name and then proceed when I call
on you. Please be sure to state your name and address before speaking.
a. Resolution Approving the Projected Use of Funds for the 2021 Urban
Hennepin County Community Development Block Grant Program and
Authorizing Signature of a Subrecipient Agreement with Hennepin County
- Motion to open public hearing, take public comment, and close public
hearing
- Motion to approve a resolution approving the projected use of funds for the
2021 Urban Hennepin County Community Development Block Grant
program and authorizing signature of a subrecipient agreement with
Hennepin County
8. Planning Commission Items
Council Consideration Items
10. Council Report
11. Adjournment
Council Regular Meeting
DATE: 2/22/2021
TO: City Council
FROM: Curt Boganey, City Manager
THROUGH: Meg Beekman, Community Development Director
BY: Jesse Anderson, Deputy Director of Community Development
SUBJECT: Resolution Approving the Projected Use of Funds for the 2021 Urban Hennepin County
Community Development Block Grant Program and Authorizing Signature of a
Subrecipient Agreement with Hennepin County
Background:
It is recommended that the City Council conduct the Public Hearing and accept input from the public
regarding use of funds for 2021 Urban Hennepin County Community Development Block Grant Program.
Staff has prepared a resolution allocating funds as discussed at the February 8, 2021, work session.
Funding Allocation Options
Housing Rehab Program - As CDBG funds are the only source of funding to maintain the City's
existing single family housing stock, one option would be to increase the allocation of CDBG funds
to this use. 86 percent of Brooklyn Center's housing supply is single family homes, nearly all of
which were constructed prior to 1975. Many of these homes are in need of maintenance, and for
low income home owners this cost can be overly burdensome. Maintaining the city's housing stock
through this program not only provides stable home ownership for low income home owners, but
also maintains an affordable housing stock for new buyers as well.
Down Payment Assistance - Brooklyn Center allocated $100,000 towards home buyer assistance
with the 2020 CDBG funding. The City is contracting with Center for Energy and Environment
(CEE) to administer the program. The city has had two down payment loans closed. Due to the
pandemic and the lower number of homes available on the market the program has had a slower
then anticipated start. Staff made the following modification to the attached guidelines based on
the City Council Direction:
• Expanded Residency Eligibility
• Work in Brooklyn Center
• Have a family member who attends school in Brooklyn Center
• Own a business in Brooklyn Center
• Currently a resident in Brooklyn Center
• Removed minimum debt to income ratio
• Removed Citizenship Requirement
Also discussed at the February 8 work session was removing the first-time home buyer
requirement and expanding the program to include move -up buyers as well. In discussions with the
County, this alteration to the program raised several questions. One question was if the program
would require someone to sell their current home before gaining access to these funds. The risk in
not doing this is that someone could convert an existing home to a rental property, while using the
program to purchase a new home. However, the safe guard to this would require someone to
prove that they did not have an ownership interest in another property at the time of closing. This
requires additional documentation and may not be possible if someone is purchasing a new home
contingent on the sale of their current one, or has only recently sold their home prior to the closing.
This adds a layer of uncertainty to the closing as well.
The options available to addressing this issue are:
1. Require proof that there is no ownership in another home at the time of closing.
2. Require proof that there is no ownership in another home at time of purchase agreement.
3. Require that the new home is their primary residence, but allow ownership in other properties.
4. Keep the policy as -is in terms of serving first-time home buyers.
General CDBG Information:
CDBG funds are provided by the U.S. Department of Housing and Urban Development (HUD) to help with
community development activities that benefit low and moderate income persons. The funds are primarily
intended for bricks and mortar improvements, as opposed to public service activities.
Hennepin County receives CDBG funds directly from HUD as part of a consolidated pool of funds, which is
administered on behalf of participating suburban Hennepin County communities. Bloomington, Eden
Prairie, Minnetonka and Plymouth do not participate in the consolidated pool and receive CDBG funds
directly from HUD. Brooklyn Center is considered a Direct Allocation City and is a sub -recipient of the
funds through Hennepin County.
CDBG Statutory and Administrative Requirements
The Federal Authorizing Statute for the CDBG program requires that each funded CDBG activity
meet one of three national objectives:
1. Benefiting low income persons
2. Preventing or eliminating slums and/or blight
3. Meeting urgent community needs.
The Federal Law also specifies that each recipient receiving funds must insure at least 70 percent
of the CDBG expenditures during the program year be used for activities benefiting low and/or
very low income persons. Each city must meet this requirement at the local level.
As part of the administration of the CDBG funds, Hennepin County adopts a 5-year funding plan,
which further defines the priority needs of the program and clarifies what activities are eligible for
funding. Last year Hennepin County adopted a new 5-year funding plan. Overall, the priority needs
are around continuing what's working, while shifting the focus to preserving affordability and
reducing disparities in housing stability.
These include:
Priority Need 1: Preserve & Create Rental Opportunities
Priority Need 2: Preserve & Create Homeownership Opportunities
Priority Need 3: Housing Opportunities for Homeless Populations
Priority Need 4: Support Education, Outreach, and Services
Priority Need 5: Encourage Neighborhood Revitalization
Priority Need 6: Stimulate Economic Development
2021-2022 CDBG Allocation
We do not yet know the exact amount of CDBG allocation for the 2021-2021 cycle. Therefore, we have
been advised by Hennepin County to use the estimate of $258,000 for the purposes of determining the
allocation of funds. However, this allocation amount could be adjusted once HUD provides final amounts.
Hennepin County receives the lump sum from HUD and determines the allocation among the participating
cities based on a formula that takes into account population and need.
Resolution
A resolution has been prepared for City Council's consideration to approve the 2021 CDBG program.
Total preliminary City Allocation for CDBG Program Year 2021 is estimated $258,000. The following
allocation is based on the work session discussion.
CDBG Activity
City Council
Requested
Allocation
Home Rehabilitation Program
$158,000
Down Payment/Home Buyer Assistance
$100,000
Total CDBG Funds
$258,000
The resolution included with this memorandum also authorizes signature of a Subrecipient Agreement,
which is the agreement between Hennepin County and the City of Brooklyn Center relative to CDBG funds.
This agreement is a standardized agreement developed by Hennepin County and will be submitted after
approval of the City's 2021 CDBG program.
Budget Issues:
CDBG funds are exclusively federal dollars.
Strategic Priorities and Values:
Resident Economic Stability
ATTACHMENTS:
Description Upload Date Type
Resolution 2/12/2021 Resolution Letter
Updated Down Payment Program Guidlines 2/12/2021 Exhibit
Member introduced the following resolution and moved its
adoption:
RESOLUTION NO.
RESOLUTION APPROVING PROJECTED USE OF FUNDS FOR 2021 URBAN
HENNEPIN COUNTY COMMUNITY DEVELOPMENT BLOCK GRANT
PROGRAM, AUTHORIZING SIGNATURE OF SUBRECIPIENT AGREEMENT
WITH HENNEPIN COUNTY
WHEREAS, the City of Brooklyn Center, through execution of a Joint
Cooperation Agreement with Hennepin County, is cooperating in the Urban Hennepin County
Community Development Block Grant (CDBG) Program; and
WHEREAS, the City of Brooklyn Center has developed a proposal for the use of
Urban Hennepin County CDBG funds made available to it; and
WHEREAS, the City of Brooklyn Center held a Public Hearing on February 22,
2021 to obtain the view of citizens on housing and community development needs and priorities
and the City's proposed use of $258,000 from the 2021 Urban Hennepin County Community
Development Block Grant; and
WHEREAS, the City of Brooklyn Center, through execution of a Joint
Cooperation Agreement with Hennepin County, is a Subrecipient community in the Urban
Hennepin County Community Development Block Grant Program; and
WHEREAS, pursuant to the Subrecipient Agreement between the City of
Brooklyn Center and Hennepin County, the City agrees to assume certain responsibilities for the
utilization of Community Development Block Grant funds; and
WHEREAS, a notice to solicit public comment was published and comments
were solicited for a period of 10 days, ending on February 22, 2021.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Brooklyn Center that it approves the following project(s) for funding from the 2019 Urban
Hennepin County Community Development Block Grant Program and authorizes submittal of
the proposal to Urban Hennepin County.
Proj ect
Budget
Home Rehabilitation Program (Rehabilitation of Private Property) $158,000
Housing Purchase Assistance $100,000
BE IT FURTHER RESOLVED, that the City Council hereby authorizes and directs
the Mayor and its' City Manager to execute the Subrecipient Agreement and any required Third
Party Agreement on behalf of the City to implement the 2021 Community Development Block
Grant Program.
BE IT FURTHER RESOLVED, that should the actual amount of FY2021 CDBG
available to the city be different from the preliminary amount provided to the City, the City
Council hereby authorizes the city manager to adjust the following activity budget(s) at this rate:
Project Budget Adjustment
Home Rehabilitation Program (Rehabilitation of Private Property) 100%
Housing Purchase Assistance 0%
Date Mayor
ATTEST:
City Clerk
The motion for the adoption of the foregoing resolution was duly seconded by member
and upon vote being taken thereon, the following voted in favor thereof:
and the following voted against the same:
whereupon said resolution was declared duly passed and adopted.
City of Brooklyn Center
Homebuyer Program Guidelines
Program Overview
The City of Brooklyn Center offers a financial assistance program for homeownership funded by the
Community Development Block Grant (CDBG) program. The Homebuyer Program provides financial
assistance for low and moderate income households to become homeowners.
Administration of the Homebuyer Program and the functions and responsibilities shall be in
compliance with the U.S. Department of Housing and Urban Development (HUD), CDBG regulations as
well as all Federal, State and local nondiscrimination laws and with the rules and regulations governing
Fair Housing and Equal Opportunity in housing and employment.
No family or individual shall be denied the equal opportunity to apply for or receive assistance under the
First Time Homebuyer Program on the basis of race, color, gender, religion, creed, national origin, age,
familial or marital status, handicap or disability, sexual orientation or reliance on public assistance.
Program Goals
The Homebuyer Program has the following two goals:
a. Assist low and moderate income families to purchase homes within the City of Brooklyn
Center by providing assistance with down payment, closing costs and mortgage principle
reduction.
b. Promote responsible home ownership
Program Administration
The program will be administered through Center for Energy and Environment.
Program Policies
Financial Assistance
The financial assistance is in the form of a loan of up to $7,500, but no more than 10% of the purchase
price. There is no interest on the loan and no payments are required. The loan is forgiven after 10 years
and is reduced by 20% each year after the 51h year. If the home is sold, the title transferred or no longer
owner -occupied within the first 10 years after the purchase date, then the remaining pro -rated amount
will be become due.
The Financial Assistance may be used to:
1. Pay up to 50% of the amount the homebuyer is required to provide toward the down payment
under the particular mortgage program they are utilizing. The homebuyer must contribute a
minimum of $1,000 of their own funds towards the down payment.
Pay up to 100% of the homebuyer's eligible closing costs. Borrowers are permitted to use
program funds for interest rate buy downs if documentation is provided from the lender that
shows the buy down is necessary to secure their primary mortgage.
3. Reduce the mortgage principal up to 10% of the purchase price, up to $10,000. The applicant(s)
housing ratio cannot exceed 35% of their gross monthly qualifying income. The housing ratio is
calculated using the current year's projected income. Under certain circumstances, the HRA
Executive Director may allow the DTI to exceed 35%.
The financial assistance will be provided at a minimum amount of $5,000 and a maximum amount of
$10,000. In certain situations, the City may allow assistance in excess of the maximum at their discretion.
The Center for Energy and Environment will review the applicant's verified income and assets, estimated
closing costs, purchase agreement and lender's recommendations for financial assistance in compliance
with uses described above. Lenders must provide a pre -approval letter indicating the maximum amount
of financing the borrower would qualify for from the first mortgage lender.
The Center for Energy and Environment will verify an applicant's income and assets through written
verifications as provided by either the lender or by the applicant. The City staff may re -verify income
and asset information provided by the lender. The Center for Energy and Environment will calculate the
applicant's gross annual income using lender verification or paystubs and recent tax returns or other
qualifying verification as determined by City staff to ensure the applicant(s) qualifies as a low or
moderate income household as required by CDBG regulations and to determine the maximum amount
of assistance.
Financial assistance will be provided at the time of closing on the property with the following conditions:
1. Selected applicants must meet the requirements of the program and be eligible for the financial
assistance throughout the entire application process.
2. The housing unit to be purchased and the purchase price must be accepted by the City as
meeting the intent and requirements of the program.
3. The financial assistance provided by the program is in the form of a no -interest loan that is
forgiven 10 years from the initial purchase date. If the house is sold, transferred or no longer the
primary place of residence within that 10 year period, the loan will be repaid on a pro -rated basis.
4. The homebuyers must enter into a second mortgage and execute a Repayment Agreement with
the City providing for repayment of the indebtedness 10 years from the initial purchase date or
when the house is sold, transferred or no longer the primary place of residence, whichever occurs
first.
Responsibilities Homebuyer
The responsibilities of the prospective homebuyers are to:
1. Obtain mortgage pre -qualification for a 1st mortgage.
2. Submit a pre -application and mortgage pre -qualification to CEE.
3. Complete, sign and return the full application packet, authorization for release of information
form and other certification and verification forms within the time frame specified.
4. First Time home buyers must register and attend the Home Stretch or Framework —
Homebuyers workshop such as those offered by Community Action Partnership of Hennepin
County (CAP-HC), Neighborhood Development Alliance (NeDA), NeighborWorks Home Partners,
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or PRG Inc. More information about homebuyer education can be found online at:_
http://www.hocmn.org/buyingahome/homebuyer-education/. Classes must have been
completed within 12 months prior to closing. The applicant will be provided with a certificate of
attendance. A copy of this certificate should be forwarded to the lender and the CEE.
5. Select a real estate agent, if one is desired.
6. Select a dwelling in Brooklyn Center for purchase that is an eligible dwelling under the
program.
7. Provide information throughout the process as required by the lender or the Citystaff.
8. Execute the purchase agreement that includes the Environmental Review addendum supplied
by Hennepin County, and any subsequent Amendments.
9. Execute the lender's mortgage and related documents.
10. Execute the City's mortgage, loan agreement and promissory note.
11. Close on the property within the time frame specified in the purchase agreement.
12. Execute other required forms within the time frame specified or required.
13. Take occupancy of the dwelling within 30 days after closing, homestead the property and
continue to occupy the dwelling as a principal place of residence.
14. Make principal, interest, property tax and insurance payments as required.
15. Reimburse the City in accordance with the City's mortgage, loan agreement, and promissory
note should the first time homebuyer trigger repayment through sale, moving, transfer of
ownership or foreclosure within 10 years or default on any other terms of these documents.
Responsibilities of the Lender
The lender must:
1. Verify the prospective homebuyer's income and assets to determine that they meet the
requirements of the program and submit a copy of the verification to the CEE. These copies
must be submitted to the CEE as part of a completed application.
2. Compute the mortgage, down payment, mortgage payments and closing costs of acceptable
loans approved by the program to determine the most cost-effective and appropriate form of
financing for the homebuyer to use.
3. Provide a title search and review the documents.
4. Provide CEE with a pre -approval letter stating the maximum mortgage amount the
applicant is approved for.
5. Provide CEE other verification materials as requested by the City.
6. Process a mortgage consistent with the program.
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7. Meet all deadlines in a timely fashion, especially those that relate to the closing. All documents
must be completed at least 14 days prior to the closing and be delivered to CEE at least seven
days before the closing.
8. Appraise property to determine the loan -to -value ratio. Provide copy to CEE.
Responsibilities of the City:
The responsibilities of the HRA for the program are to:
1. Establish Program requirements.
2. Modify or terminate the program as maybe appropriate or required.
3. Reimburse CEE as needed throughout the program year.
Responsibilities of the Center for Energy and Environment:
The responsibilities of the HRA for the program are to:
1. Administer the program.
2. Send applicants the application form, the authorization for release of information form and
other certification and verification forms.
3. Review the application and other material for eligibility.
4. Establish the initial eligibility of participants via the information provided in the pre -application
process. Full approval will be determined upon completion and submission of a full application
and supporting documents.
5. Notify applicants when ineligible.
6. Direct prospective buyers to register for the homebuyer workshops and provide information
and forms related to the program.
7. Provide liaison services involving the prospective buyer, lender and any real estate agent that
might be involved in the transaction.
8. Review appraisal, purchase agreement, eligibility and mortgage for consistency with the
program requirements.
9. Prepare and execute the city mortgage, loan agreement, and promissory note.
10. Provide financial assistance according to program guidelines to the applicant at the time of
closing.
11. Service the city mortgage, loan agreement, and promissory note.
12. Request reimbursement to the City as needed.
13. Provided income documentation relating to CDBG reporting requirements.
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Pre -Application Process
At the time of application, applicants must provide CEE with the following information and meet the
eligibility requirements:
1. Names and ages of all household members who will occupy the purchased property.
2. Address and telephone numbers.
3. Total gross annual income documentation.
4. Lease start and end dates.
5. Letter from lender indicating the amount of a home loan for which applicant is pre -qualified.
6. Authorization for release of information/data privacy signed by all adults in the household.
The information listed above will provide CEE sufficient information to determine if the applicant is
eligible for the Program. The pre -application must be submitted prior to the execution of a purchase
agreement. Applicants will be notified of their eligibility based on the information provided in the pre -
application.
It is the responsibility of each applicant to ensure that the information is correct and that CEE
receives his or her application.
Eligibility Requirements
To be eligible to participate in the program, the applicant must meet the following requirements at the
time of application and throughout the process up until closing.
1. Residency Requirements
a. Must work in Brooklyn Center
b. Have a familv member who attends school in Brooklvn Center
c. Own a business in Brooklyn Center
d. Currently a resident of Brooklyn Center
2. Must not have a gross annual Income that exceeds the maximum income limits which are revised
annually to reflect the current year's CDBG maximum income limits. Income is calculated using
prior year tax returns and verified by most recent paystubs. For information on calculating
income, please contact a Brooklyn Center Housing Specialist.
Household
Size
Household Income
1
below $21,000
$21,001 - $35,000
$35,001 - $52,850
over $52,850
2
below $24,000
$24,001 - $48,000
$48,001 - $60,400
over $60,400
3
below $27,000
$27,001 - $54,000
$54,001 - $67,950
over $67,950
5
4
below
$30,000
$30,001 -
$60,000
$60,001
- $75,500
over $75,500
5
below
$32,400
$32,401 -
$64,800
$64,801
- $81,550
over $81,550
6
below
$34,800
$34,801 -
$69,600
$69,601
- $87,600
over $87,600
7
below
$37,200
$37,201 -
$74,400
$74,401
- $93,650
over $93,650
8
below
$39,600
$39,601 -
$79,200
$79,200
- $99,700
over $99,700
3. Must not have gross assets exceeding $10,000, excluding retirement savings.
4. Borrowers are required to invest at least $1,000 of their own monies towards the purchase
price of the home.
5. Must meet the requirements of a lender and qualify for a first mortgage.
6. Loan must be a fixed-rate, prime loan. No adjustable or balloon mortgages.
7. Must fulfill the program obligations in a timely manner and must remain eligible to participate
based on the program requirements and those of the lender through the time of closing.
8. Must not have a previous loan through the City that ended in foreclosure or any other loan that
ended in foreclosure within the previous five years.
9. Must not buy dwelling with a contract for deed.
10. Must not have ownership interest in another property at time of purchase.
Denial of Eligibility
CEE will review and verify all applications for eligibility. Those applicants not meeting the eligibility
requirements will be sent a written notice explaining the reason(s) for denial of program participation.
Appeals regarding interpretation of eligibility requirements may be made in writing, first to the Deputy
Director of Community Development for the city of Brooklyn Center, then to the Director of Community
Development and then to the City Manager. Appeals that clearly do not meet eligibility requirements
will not be considered.
Eligible Dwellings
To be eligible, the property must meet the following requirements:
1. Be located within the City of Brooklyn Center.
2. Be a single-family dwelling, a townhouse unit, duplex or a condominium unit.
3. Be a conforming use property as defined by the Brooklyn Center Zoning Ordinance.
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Applicant Outreach
The City and CEE will publicize and disseminate information to make known the availability of
homeownership assistance on a regular basis through a variety of media and other suitable means. The
availability of assistance will be communicated to other services providers, realtors and lenders in the
community and advise them of the guidelines so that they can make proper referrals for the program.
Realtors and lenders will be encouraged to provide additional services to eligible clients to ensure their
successful utilization of the program.
Applicant Pool
The applicant pool for the program shall consist of all those who have completed and returned to
CEE a pre -application form, written verification from their lender of pre -approval and who have
acknowledged that they will meet the eligibility requirements.
Funds will be available to the applicant pool on a first come, first serve basis. Eligible applicants will be
approved for funding when they or their lender notify CEE of the applicant's approved purchase
agreement and the full application packet is completed and returned. If funding is limited, and more
than one applicant is at the purchasing stage, CEE will provide funding to the applicant who qualifies for
the most preference points.
Preference points have been established to meet the goals of the City. Each preference category is
worth one (1) point. The maximum points any one household could receive is five (5) points.
Households with the highest point totals will be selected first. In the event of a tie, a drawing or lottery
will be held to rank the applicants within each of the preference categories.
1. Applicant with dependents under age 18.
2. Applicant has lived in Brooklyn Center longer than 6 months prior to closing.
3. Head or co-head of household have primary, longer -term employment in Brooklyn Center.
4. Applicant has never owned a home (versus having owned a home over three years ago).
Approval from the applicant pool is tentative and conditional. Families selected for participation must
fulfill the program obligations in a timely manner and must remain eligible to participate based on the
program requirements and those of the lender through the time of closing.
Repayment of Assistance
Repayment of the down payment assistance loan shall occur upon the earliest of:
1. Sale or transfer
2. The property ceases for any reason to be the homebuyer's principal place of residence.
3. Default on the mortgage with the City or any superior mortgage on the property.
Repayment of the loan shall be pro -rated, with the principal amount due reduced by 20% for each year
after 5 years of the homeowner's tenancy in their Brooklyn Center home, as established by the loan
7
date on the filed mortgage with the HRA.
AGE OF LOAN 9W
0 -1 year
AMOUNT OF PRINCIPAL LOAN AMOUNT DUE
100 % of principal loan amount due
1- 2 year
100 % of principal loan amount due
2 - 3 years
100 % of principal loan amount due
3 - 4 years 100 % of principal loan amount due
4 - 5 years 100 % of principal loan amount due
5 - 6 years 100 % of principal loan amount due
6 - 7 years
80% of principal loan amount due
7 - 8 years
60% of principal loan amount due
8 - 9 years
40% of principal loan amount due
9 -10 years
10+years
20% of principal loan amount due
0% due, Loan Fully forgiven
When a loan made by the City is paid in full or forgiven, a document satisfying the lien will be prepared
by CEE, executed by the City Manager or his or her delegate and delivered to the borrower for
recording. The borrower is responsible for the cost of recording the satisfaction. Contact the
Community Development Department for more information about repayment of a City loan.
Subordination of Mortgages
Brooklyn Center City loan recipients requesting subordination of the interest of the City in real property
must submit a Subordination Request Form, the required supporting documentation, and a processing
fee. Request should be made to CEE.
The following information must be submitted with the Subordination Request Form:
1. A typed letter dated and signed by the mortgagor, stating the reason for the requested
subordination and the use of any equity being removed as part of the loan transaction.
2. A copy of the current appraisal (dated within six months of application) or other
evidence of market value of the property that is acceptable to the HRA.
3. A copy of current title work (must indicate all debt against the property).
4. Explanation of remaining debts or liens with supporting documentation (i.e. most recent
mortgage bill).
5. Estimated closing costs/settlement statement, where applicable.
6. A copy of the mortgagor's loan application.
7. Additional documentation may be required.
The City will subordinate its mortgage interest if all of the following conditions are met, to the extent
that they are applicable:
Closing costs are reasonable. Generally this shall mean that the sum of all discount
points, origination fees and lender ancillary fees shall not exceed 3% of the new first
8
mortgage amount.
If the City believes that the payment terms of the refinance are within the financial
means of the borrower.
The overall value of superior debt must not be increased by more than 50%.
Property taxes, if not escrowed by the superior mortgage holder, must be current.
The City will not subordinate to reverse mortgages. In most cases, interest -only loans or loans with
interest -only options, revolving lines of credits or debt consolidation will not be allowed unless the City
determines that an acceptable reason warrants this type of loan.
The City may approve other subordination requests not meeting the conditions above on a case -by -case
basis that are clearly in the best interests of the City, where the security of the City loan remains
acceptable and denial of the request will cause or contribute to a documented hardship on the part of
the borrower.
Subordination requests will be processed by CEE staff, who will submit the request with a
recommendation for action, to the City. The City Manager has the authority to grant a subordination
request when, based on his or her discretion, the subordination is reasonable based on the criteria set
forth in this Policy.
Targeted Funding
At various times, the City may target program funding for purchases in specific developments.
Applicants purchasing in those developments would receive program funding prior to all other
applications.
Modification and Termination of Program
The City may modify or terminate the program as it deems appropriate or as required by HUD. Once
the City has provided financial assistance and the mortgage executed, financial assistance shall not be
rescinded except as provide for in the executed HRA mortgage, loan agreement, and promissory note.
PEI
APPENDIX A
DEFINITIONS
Acceptable Loans — Portfolio Products, Freddie Mac, Fannie Mae, FHA, VA and ARM's that at a minimum
are at a fixed rate for the first seven years.
Applicant — an individual or household submitting an application for a loan.
Application —The form used to request assistance for the City's First Time Homebuyer funds.
ARM or Adiustable Rate Mortgage — a mortgage that offers an initial rate that is fixed for a certain
number of years of repayment; the rate then adjusts every year thereafter for the remaining life of the
loan.
CEE — The Center for Energy and Environment, which administers the City's First Time Homebuyer
Program.
CDBG or Community Development Block Grant Program — an annual entitlement program provided to
the City of Brooklyn Center through the U. S. Department of Housing and Urban Development (HUD).
City —The City of Brooklyn Center.
Clearance — A lead based paint Certification that all lead issues have been remediated.
Closing — The consummation of the real estate transaction. The closing includes the delivery of a deed,
financial adjustments the signing of notes, mortgages, and the disbursement of funds necessary to
complete the sale and loan transaction.
Closing Costs — Those costs required by the lender to be paid by the buyer for various fees, credit report
costs, insurance, etc., at the time of closing on a property.
Conventional Mortgage —A type of residential mortgage loan, usually from a bank or savings and loan
association, with a fixed rate and term. It is repayable in fixed monthly payments over a period usually
30 — 40 years or less, secured by real property, and not insured by the Federal Housing Administration or
guaranteed by the Veterans Administration.
Down Payment —Atype of payment made by a homebuyer, indicating intention to purchase real
estate offered for sale and obtain financing from a bank or mortgage company.
Environmental Review —The process of verifying that a project meets Federal, State and Local
environmental standards. The environmental review process is required for all HUD -assisted projects to
ensure that the proposed project does not negatively impact the surrounding environment and that the
property site itself will not have an adverse environmental or health effect on end users. Hennepin
County staff is responsible for the completion of the environmental review.
Environmental Review Addendum — An addendum to the purchase agreement that states an
Environmental Review will be completed by Hennepin County prior to closing. The addendum must be
a part of the original purchase agreement in order to be valid. Environmental Reviews take
approximately 45 days to be completed by Hennepin County.
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Fannie Mae or Federal National Mortgage Association — A privately owned and operated corporation
that buys mortgages from such lenders as banks and savings and loans, packages and resells them on
the open market.
FHA or Federal Housing Administration — A Federal agency that administers many loan programs, loan
guarantee programs, and loan insurance programs designed to make more housing available.
Gross Annual Income — The gross annual Income of a household for the purposes of this program is
defined for purposes of reporting under Internal Revenue Service Form 1040 for individual Federal
annual income tax purposes as per 24 CFR 570.3 Income (1)(iii).
Gross Assets —The current market value of the following minus existing indebtedness: (Typically, it does
not include 401 Kfunds, pensions or other deferred compensation funds.)
1. Cash on hand.
2. Cash in checking accounts.
3. Cash in savings accounts, including accounts held in trust.
4. Investment securities (government bonds, municipal bonds).
5. Stocks.
6. Certificate of deposits and annuities.
Guidelines — The set of standards, criteria and specifications to be used in administering the program.
Household — All persons residing in one housing unit; which may include one or more families, a single
person, a married couple or two or more unrelated persons.
Housing Counselor — A person who provides direct customer services, primarily to groups,
individuals, households seeking information and assistance with housing issues.
Housing Ratio - The percentage of income that goes toward housing costs including mortgage
principal and interest, mortgage insurance premium, hazard insurance premium, property taxes, and
homeowners association dues (when applicable).
HUD or U. S. Department of Housing and Urban Development —The principal federal agency
responsible for implementing certain federal housing and community development programs.
Income - The amount of money or its equivalent received during a period of time, in exchange for
labor or services from the sale of goods or property, or as profit from financial investments.
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Lead Risk Assessment — A report that describes the health risk assessment, management process,
estimates of the costs of recovery and summaries of possible defensive measures required per HUD
regulation CFR Part 35: Lead Based Paint Regulations.
Lender — Individual or firm that extends money to a borrower with the expectation of being repaid,
usually with interest.
Loan Estimate — Document disclosing the approximate closing costs a mortgage applicant will pay at or
before the mortgage settlement date.
Low Income Household —A household whose annual income does not exceed the low income limit as
established by HUD with adjustments for smaller and larger families.
Minnesota Housing— The Minnesota Housing Finance Agency; a Minnesota State agency that
administers a variety of first time homebuyer loan programs.
Moderate Income Household — A household whose annual income does not exceed 80 percent of the
median income for the area, as determine by HUD with adjustments for smaller and larger families.
Mortgage — The conveyance of an interest in real property given as security for the payment of a loan.
Principal Place of Residence — To occupy the home as the primary residence on a permanent basis.
Program —The City's First Time Homebuyer Program.
Promissory Note — A written instrument containing a promise by the signer to pay and agreed amount.
Purchase Agreement — An agreement between buyer and seller of real property, setting forth the price,
and terms of the sale; Also known as a sales contract.
Reducing the Mortgage Principal Amount — A method of benefitting the buyer through the use of a
portion or all of the HRA provided financial assistance to lower the mortgage principle amount. In
effect, this assistance acts as a larger down payment and helps to reduce the monthly mortgage
payments. The available amount of assistance is up to 10% of the purchase price to a maximum of
$7,500. The buyer's housing ratio must be between 25% and 35%.
Satisfaction of Mortgage —A document releasing a mortgage lien, indicating the borrower has paid the
debt in full.
Second Mortgage —A loan on a property that already has an existing mortgage (the first mortgage). The
second mortgage is subordinate to the first.
VA Loan — Department of Veterans Affairs, providing below -market financing with no down payment to
veterans of the U.S. Armed Services.
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