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HomeMy WebLinkAboutR-1995-070 Federal Home Administration / Demonstrated Ability Program.• RESOLUTION NO. R-95 70 • • 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.