HomeMy WebLinkAboutR-1995-070 Federal Home Administration / Demonstrated Ability Program.• RESOLUTION NO. R-95 70
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A RESOLUTION authorizing and directing the City Manager of the City of
Yakima to execute a Memorandum of Understanding with
the Federal Home Administration for funding of the
Demonstrated Ability Program.
WHEREAS, the Federal Home Administration has a program available to
cities to assist its citizens in purchasing single family properties, and
WHEREAS, the City Council of the City of Yakima deems it to be in the
best interests of the city to execute a Memorandum of Understanding for
participation in the purpose mentioned above, now therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF YAKIMA
R A Zais, City Manager of the City of Yakima, is hereby authorized and
directed to execute the attached and incorporated Memorandum of
Understanding, including all understandings and assurances contained therein,
with the Federal Home Administration for city participation in the purpose
mentioned above, and he further is hereby designated as the official
representative of the City to act in connection with the program and to provide
such additional information as may be required.
ADOPTED BY THE CITY COUNCIL this a"� day of, 1995
ATTEST
Gth��►^� � � G w► c..
City Clerk
U.S. Department of Housing and Urban Development
Seattle Office, Northwest/Alaska Area
Seattle Federal Office Building
909 First Avenue, Suite 200
Seattle, Washington 98104-1000
47-/7/
February 2, 1995
DIXIE KRACHT
OFFICE OF NEIGHBORHOOD CONSERVATION
112 SOUTH 8TH STREET
YARIMA WA 98901
,7v-,d70G
Dear Ms. Bracht:
I am writing to invite you to attena a meeting on the
Demonstrated Ability Pilot Project, (D.A.). It will be held on
February 10, 1995. The time is from 9:00 to 11:00. Juan Aguilar
of Keybank has offered to host the meeting. His office is
located at: 1411 4th Ave, Seattle.
Production under the program has been poor with only one
case closing. In an effort to improve acceptance and
participation, we liberalized the underwriting criteria and asked
Headquarters for a two year extension. The extension was
granted.
The purpose of our meeting is to openly discuss the revised
criteria. In addition, we would like your input on approaches
that would contribute to the program's success.
There are specific issues that need to be addressed.
be prepared to offer comments and suggestions in the following
areas:
* Lender commitment
* Office contact
* Marketing
* Follow-up
* Ways FHA can help
F E B 07 1995
HOUSING
Enclosed please find the Memorandum of Understanding
(M.O.U.) for signature. We look forward to meeting with you and
getting this program off to a "new" start. If you have any
questions, please contact Eileen B. Solomon at (206) 220-5219.
Sincerely,
Raymond S. Lockwood
Supervisory Special Assistant
Single Family Production
MEMORANDUM OF UNDERSTANDING
for
THE DEMONSTRATED ABILITY PROJECT
PARTIES: KEY BANK
CHASE MANHATTAN
U.S. HOME LOAN
WASHINGTON MUTUAL SAVINGS BANK
YAKIMA OFFICE OF HOUSING AND NEIGHBORHOOI) CONSERVATION
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT,
WASHINGTON STATE OFFICE
The purpose of this agreement between the above lending industry
partners and government is to facilitate home ownership for
employed individuals and families who are currently denied
mortgages solely on the basis of their inability to meet
conventional underwriting ratios. Historically, data has shown
that these debt to income ratios are prudent for the general
population and have been closely followed over the years.
However, it is recognized that cultural diversification of our
population together with economic factors have created a class of
working people who no longer fit long rooted underwriting
criteria and as a result are poorly served in their housing
needs.
This target population is unique because it has established
lifestyles that accommodate unsubsidized housing costs (rent) of
40 and 50% of gross monthly income. In spite of this, they have
established savings patterns and make minimal use of credit.
When consumer debt is found, excellent payment histories
accompany it. While employment may be divided between more than
one employer, stable full time work has been established.
Because of skill levels and the employment market in which they
work, this group has and, in all probability, willcontinue to
spend up to half of its gross income for housing. Most
importantly, these people have demonstrated their ability to
successfully meet higher housing ratios and it is believed they
represent an acceptable risk under certain underwriting
parameters and restrictions shown on Attachment 1.
Therefore, the PARTIES have jointly developed this pilot project,
to be known as DEMONSTRATED ABILITY (Ihn.A.) and have agreed to
specific underwriting criteria (Attachment 1.). In consideration
for meeting these more restrictive requirements, HUD agrees to
insure mortgages originated by the ABOVE PARTICIPATING LENDERS
with housing/debt ratios of up to a maximum of 41/41.
It is understood by the parties that this Dm.A. pilot project is
limited to Yakima County, Washington only and shall terminate
upon 30 days written notice by HUD or on March 31, 1997,
whichever occurs first, unless extended in writing by HUD.
Termination of this pilot project shall also terminate this
Page 2 of 3
Memorandum of Understanding. It is also understood that in no
case shall more than 50 mortgages be underwritten per year with
the provision that more than 50 mortgages may be underwritten in
the second year if fewer than 50 were closed in the first year
and the total for both years does not exceed 100 loans.
The YARIMA OFFICE OF HOUSING AND NEIGHBORHOOD CONSERVATION (OHNC)
agrees to:
A. Screen and refer potential applicants which it believes meet
the specific criteria established for Dm.A. (attachment 1)
B. Make available block grant funds for this project with the
purpose of assisting CDBG eligible participant home buyers to
meet unexpected major home repairs. These funds will be secured
through a second mortgage consistent with the borrowers ability
to pay, aka "Soft Seconds". The OHNC shall determine and
establish terms of repayment on a case basis and consistent with
those terms it offers to low and moderate homeowners served with
similar funds. May do landlord verification on request.
PARTICIPATING LENDERS (LENDERS) agree to:
A. Originate loans under Dm.A. cases with the words "Direct
Endorsement" process consistent with specific underwriting
criteria shown on Attachment 1.
B. Document all Dm.A. cases with the words "DEMONSTRATED
ABILITY" on the HUD case file jacket as shown on Attachment 2.
The purpose of identifying these specific cases is for HUD's use
in tracking loan performance.
C. If the loan is sold, the LENDER will notify HUD of who has
taken the servicing. Notification shall be made to HUD's
Processing Support Branch, telephone number: (206) 220-5209.
D. Escrow one monthly payment at closing and conduct the 3 and 6
month post closing contact as required under the specific
underwriting criteria. LENDERS agree to perform this duty
regardless of whether they have held the serving. They shall
continue to hold the escrow payment until either released to the
borrower upon twelve timely payments or released to the serving
lender flowing a 60 day default.
E. Make contact with a borrower, upon HUD's notification of a
default status, and make an appointment for the borrower with
YASC for counseling and/or assistance to preserve the mortgage.
LENDERS will work with OHNC in an advisory role and in a spirit
of finding solutions to resolve delinquency.
Page 3 of
HUD agrees to:
A. Assure insurance endorsement on D.E. originated mortgagees
with housing ratios of up to a maximum of 41/41 provided they are
underwritten to the standards outlined on Attachment 1.
(Compensating factors may not justify exceeding these ratios.)
Except as modified by this agreement, all other requirements of
Handbook 4155.1, REV 4 and related notices and directives remain
in effect.
B. Track loan performance and evaluate project success.
C. Notify participating lenders when the maximum 50 loans per
calendar year have been reached„
D. Monitor performance and notify the originating lender of
defaults for intervention by the lender as discussed above„
ALL PARTIES RECOGNIZE THE INCREASED RISK ASSOCIATED WITH THESE
LOANS AND AGREE TO BE PRUDENT IN UNDERWRITING TO ENSURE ONLY
THOSE CASES WITH A HIGH PROBABILITY OF SUCCESS. IT IS EMPHASIZED
THAT DOCUMENTED EVIDENCE OF ONE'S ABILITY TO MEET THE HIGHER
HOUSING RATIOS IS THE KEY TO SUCCESS.
*******************************
KEY BANK CHASE MANHATTAN BANK
By By
TitleDate Title_ Date
U.S. HOME LOAN
By_
Title
Date
WASHINGTON MUTUAL SAVINGS BANK
By_
Title Date
U.S. DEPARTMENT OF HOUSING YAKIMA OFFICE OF HOUSING AND
AND URBAN DEVELOPMENT NEIGHBORHOOD CONSERVATION
By By
Title
Date Title
Date
ATTACHMENT 1
8/15/94
DEMONSTRATED ABILITY PILOT PROJECT; YAKIMA COUNTY
Page 1 of 1
These underwriting criteria are a part of the Yakima DEMONSTRATED ABILITY
PROJECT outlined in a MEMORANDUM OF UNDERSTANDING between participating
lenders and the Yakima Office of Housing and Neighborhood Conservation, aka
Housing Service Center and the US Department of Housing and Urban Development;
Seattle Office. This criteria may only be used by the parties to this '
agreement.
Except as modified, all other requirements of Handbook 4155.1, REV 4 and
related notices and directives remain in effect.
1. A MINIMUM OF TWO YEARS
SEASONAL AND PART-TIME
REQUIREMENT IF REGULAR
2. DOCUMENTED EVIDENCE OF
HOUSING AND TOTAL DEBT
TO THAT SOUGHT UP TO A
CONSISTENT EMPLOYMENT IS REQUIRED.
INCOME MAY BE INCLUDED TO MEET THIS
AND EXPECTED TO CONTINUE. (DOCUMENT)
SUCCESSFULLY MANAGING A LIFESTYLE WHEREIN
OVER A TWO YEAR PERIOD YIELDS RATIOS EQUAL
MAXIMUM OF 41/41.
3. MUST HAVE A NEAR PERFECT CREDIT HISTORY.
BE VIEWED FAVORABLY FOR THIS PROGRAM.
4. EVIDENCE OF A SAVINGS PATTERN SHOWING FUND TO CLOSE. CASH ON
MAY BE ACCEPTABLE. DOCUMENTATION MAY BE ACHIEVED THROUGH
ALTERNATIVE MEANS IF THE BUDGET LETTER (ITEM 5) SUPPORTS THE
SAVINGS PATTERN AND ALL EVIDENCE MEETS "WITH THE SATISFACTION
THE UNDERWRITER". GOOD DOCUMENTATION MUST BE PROVIDED ON THE
MORTGAGE CREDIT WORKSHEET.
GIFT FUNDS AND SOFT SECONDS FROM NON -PROFITS AND LOCAL GOVERNMENTS
WILL BE ACCEPTABLE IN ACCORDANCE WITH STANDARD GUIDELINES.
5. LETTER FROM APPLICANT WITH CURRENT BUDGET SHOWING HOW THEY MANAGED
IN THE PAST AND WILL BE ABLE TO MANAGE IN THE FUTURE. LETTER
SHOULD ADDRESS HOW REPAIRS WILL BE HANDLED.
6. HAS ATTENDED IN PERSON AND RECEIVED A CERTIFICATE OF COMPLETION
FROM THE COMMUNITY HOMEBUYERS OR SIMILAR FORMAL HOMEOWNERSHIP
TRAINING PROGRAM OF NO LESS THAN 4 CLOCK HOURS.
ADDITIONAL LIMITATIONS: * OWNER OCCUPANTS ONLY. NON -OCCUPANT
CO -BORROWERS ARE NOT PERMITTED.
NON-USE OF CREDIT SHALL
HAND
OF
* CONSUMER DEBT MAY NOT BE PAID OFF TO QUALIFY.
* ONLY 30 YEAR FIXED MORTGAGES. NO ARMS.
* NO BUY DOWNS MAY BE USED TO QUALIFY.
PLEASE REMEMBER TO CLEARLY IDENTIFY YOUR CASE FILE AS "DEMONSTRATED ABILITY"
WHEN SUBMITTING FOR ENDORSEMENT. DO NOT HOLD CLOSED D.A. CASES. SUBMIT AS
SOON AS POSSIBLE TO ASSIST IN TRACKING.