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RESOLUTION
BE IT RESOLVED by the Common Council of the City of Rochester that the City adopt
policy guidelines for the City's Single Family 2% Rehabilitation Loan Program. A copy of the
policy guidelines is attached.
PASSED AND ADOPTED BY THE COMMON COUNCIL OF THE CITY OF
ROCHESTER, MINNESOTA, THIS Y OF 2012.
PRESIDENT OF SAID COMMON COUNCIL
ATTEST: �fAJ,0111 Q/yl
fury CI RK
APPROVED THIS DAY OF Q 2012.
MAYOR OF SAID CITY
(Seal of the City of
Rochester, Minnesota)
Res 101Adopt.Rehab Loan Policyl
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City of Rochester
Community Development Block Grant
Single Family 2%
Rehabilitation Loan Program
Policy Guidelines
Rochester-Olmsted Planning Department
Housing Division
2122 Campus Drive SE, Suite 100
Rochester, MN 55904
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City of Rochester Single Family 2%Rehabilitation Loan Guidelines
i Y g
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TABLE OF CONTENTS
Introduction 3
Chapter 1 Definitions 4
Chapter 2 Eligible and Ineligible Costs 6
Chapter 3 Property and Applicant Income Eligibility 8
Chapter 4 Type of Assistance and Conditons 11
Chapter 5 Processing and Submission for Program Assistance 13
Chapter 6 Inspection, Specifications and Cost Estimates 15
Chapter 7 Contracting for Rehabilitation Work 17
Chapter 8 Payment of Rehabilitation Work and Fiscal Management 18
Chapter 9 Miscellaneous Provisions 21
Chapter 10 Numbering Loan Applications 22
Chapter 11 Target Areas 23
Chapter 12 Forms 24
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
• Introduction
This program is funded by the United States Department of Housing and Urban Development
(HUD) through the Community Development Block Grant (CDBG) program. The funds are
provided to the City of Rochester (grantee) and are appropriated by the Rochester City Council
for program use. The dollar amount of program funds is contingent upon the annual allocation.
This program is authorized by the City of Rochester utilizing Title I assistance under the Housing
and Community Development Act of 1974, as amended.
Administration for the City of Rochester Single Family 2% Rehabilitation Loan Program is
provided by the Rochester-Olmsted Planning Department through a Cooperative Services
Agreement between the City of Rochester and Olmsted County.
To obtain additional information regarding this program, please contact:
Rochester-Olmsted Planning Department
2122 Campus Drive SE, Suite 100
Rochester, MN 55904
Phone: 507-328-7150
i Fax: 507-328-7959
! Adopted
May 7, 2012
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
CHAPTER 1 •
Definitions
The following are definitions of various terms as used with respect to the CDBG Single Family
Rehabilitation Loan Program.
Adult. A person 18 years of age or older.
City. City of Rochester, Minnesota
Dwelling Unit. A dwelling unit is one or more rooms including a separate kitchen and
bathroom facilities designed as a unit for occupancy by one family for the purpose of cooking,
living and sleeping.
Contractor-Homeowner Agreement. Construction contract agreement between the contractor
and the homeowner for the rehabilitation work to be completed.
Emergency. Emer en conditions are generally defined as property damage beyond the
Emergency g Y
homeowner's control or that are necessitated by a system or structural failure that has caused
or could cause the home to be uninhabitable.
Family/ Household. Family/household includes the applicant and any other person or
persons residing in the dwelling unit.
Fee Owner. One or more persons who hold legal title to the property to be rehabilitated.
HUD. United States Department of Housing and Urban Development.
Housing Staff. An employee of the Rochester-Olmsted County Planning Department assigned
the duties of administering all aspects of rehabilitation, including inspections, cost estimating,
specification writing, owner and contractor guidance, public information, construction
compliance, eligibility determination, application processing and final disposition accounting.
Housing Unit. A property used for residential purposes containing no more than two (2)
dwelling units, one of them being owner occupied.
Investor-Owned Property. A property used entirely for residential purposes that is either (1)
not occupied by the owner, or (2) contains three or more dwelling units whether or not
occupied by the owner.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
• Monitoring. Inspection by housing staff, employees of Olmsted County, employees of the City,
or HUD staff, of the property,the rehabilitation work and all contracts, materials, equipment,
payrolls and conditions of employment pertaining to the rehabilitation work.
Owner-Occupied Property. A property occupied by the owner that is used entirely for
residential purposes and that contains one or two dwelling units.
Records. Maintained records required by the US Department of Housing and Urban
Development (HUD) and the City of Rochester with respect to the rehabilitation work and fiscal
management of the program.
Recipient. The approved loan applicant that has executed a Home Improvement Loan
Repayment Agreement (Mortgage) through the City of Rochester Single Family 2%
Rehabilitation Loan Program.
Rehabilitation Costs. The total cost of the repairs and improvements and other costs for
rehabilitation to be incurred by the applicant that are included in a rehabilitation loan,whether
or not financed in part with funds from the rehabilitation loan program or other sources.
Rehabilitation Standards. Requirements of the Housing Code Chapter 32.01, Rochester Code
of Ordinances, adopted by the City of Rochester, State and Local Health requirements, Section
8 Housing Quality Standards and all rehabilitation specifications that are part of the bid.
•
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City of Rochester Single Family 2/o Rehabilitation Loan Guidelines
CHAPTER 2 •
Eligible and Ineligible Costs
A rehabilitation loan may be made only to cover the cost of rehabilitation necessary to make
the property conform to the Rehabilitation Standards. Staff will determine, with the owner,
what improvements will be eliminated from the bids, if the costs exceed the amount of funds
that are available.
1. Eligible Costs
a. The rehabilitation or removal of elements of the dwelling structure, including basic
equipment and/or other improvements to the property such as steps, walkways and
driveways. The term "basic equipment" includes such items as furnace, air conditioning
units, water heater, electrical and sanitary lines and fixtures.
b. The provisions of sanitary or other facilities, such as a bedroom, including the provision,
expansion and finishing of space necessary to accommodate those facilities.
c. The provision of any improvements required by the Rehabilitation Standards.
d. Grading,filling or landscaping of the grounds, if required by the Rehabilitation Standards.
e. Energy conservation measures such as doors,windows and insulation.
f. Correction of all code deficiencies.
g. Removal of lead-based paint hazards. All units built prior to 1978 are required to be
tested for the presence of lead-based paint hazards through a lead-based paint risk
assessment procedure, at the time of the initial rehabilitation inspection.A lead paint
clearance report must be completed and the unit must pass the clearance test at the
time of rehabilitation completion. Costs of the risk assessment and the first clearance
shall be paid by the City of Rochester on behalf of the applicant. If the first clearance test
does not pass,the contractor must bear the cost of all additional clearance tests.
h. A rehabilitation loan may be utilized to modify, alter or replace components of a
structure that in their present state or by their absence impede physically limited
occupants from enjoying the full benefits or comfort and livability normally experienced
by non-handicapped dwellers. The construction contract shall specify as applicable,
ramps, wider doorways, height of plumbing fixtures or light switches, installation of
secondary toilet rooms, baths and/or laundry facilities and other items specific to a given
structure and its occupancy. The staff shall exercise prudent judgment in selecting
construction options to provide ready access at moderate cost.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
• 2. Ineligible Costs
a. New construction, additions or expansions not required by the Rehabilitation Standards.
This does not limit remodeling or improvements to assist handicapped or physically
impaired family members.
b. Materials,fixtures, equipment or landscaping of a type or quality which exceeds those
customarily used in the locality or written in the work specifications.
c. Appliances not required by the Rehabilitation Standards.
d. Acquisition of land.
e. Detached Structures.
•
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
CHAPTER 3 •
Property and Applicant Income Eligibility
(Terms and Conditions)
This chapter describes the eligibility requirements in regard to the property and the applicant
for a rehabilitation loan. Rehabilitation Loans are available only for properties located within
the TARGET AREAS (Chapter 10), as designated by the City of Rochester. Emergency cases
outside the target area will be considered with staff approval. All eligible applicants will be
processed on a first-come-first serve basis.
1. Property Eligibility
a. The applicant must own or have a life estate in the property being improved, and it must
be the applicant's principle place of residence. The applicant must possess a fee simple
deed registered in the applicant's name for the property to be improved. Properties
being purchased under a Contract for Deed are ineligible.
b. The property must be used for residential purposes and must contain no more than two
dwelling units, one of them being owner occupied.
c. The property must be classified as homesteaded by the Olmsted County Assessor's •
Office.
d. The fee owner must have title to the property for a minimum of six (6) months prior to
the date of application.
e. Eligible properties in the 100 year flood plain zone must carry flood insurance that will
cover the cost of the improvements that are made to the property through the
rehabilitation loan program for the remaining economic life of the improvements.
2. Applicant Income Eligibility
a. Assets. Cannot exceed $25,000 per housing unit (excluding the property being
rehabilitated and personal property (i.e. furnishings, appliances and one vehicle).
b. Annual Income Requirements. Annual income cannot exceed the Low income limits
(80% of Median Income), as determined by the Department of Housing and Urban
Development (HUD), Section 8 Program. The low income limits are determined by the
number of persons in the housing unit. To be eligible for CDBG assistance, the gross
annual income of the total housing unit(s) must be occupied by a low income household.
The low income limits are determined by the total number of persons in each housing
unit.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
• c. Annual Income Verification. Gross annual income data including, but not limited to the
following:
• All income earned by head of household, spouse, and other family member's age
18 years of age or older who reside at the residence and income earned by the
occupants of a rental unit, if the residence is a duplex.
• Any other income source (interest, child support, etc.)
• Income from Social Security, Pensions, Annuities,general relief, unemployment,
MFIP (Minnesota Families Investment Program).
• Average net income for self-employed applicants being the average annual
income from the previous two years, excluding depreciation, as reported in the
tax return.
• Income contributed or paid to the applicant on a regular basis by a person not
living in the housing unit.
• Portion of Income derived from Rental Unit: If the rehabilitated property
• contains one rental unit,that portion of the applicant's income that is derived
from the property shall be reported on the application as a net figure
determined as follows:
The net income from a rental unit in the owner-occupied property is the gross
rental income, less expenditures allowable to the rental unit. These allowable
expenditures includes mortgage payments, average of two years or more
mortgage insurance premiums, hazard insurance, real estate taxes and special
assessments and cash expenditures for the property such as advertising
vacancies. If the applicant has not owned the property for two or more years,
the staff shall estimate the income and expenditures on the available
information.
The allocation of expenditures to the rental unit may be established by dividing
total monthly expenditures for the entire property by the number of units (2) in
the property. The result is the shared expenditures allowable to the owner-
occupied dwelling unit,which when subtracted from the expenditures for the
entire property produces the monthly expenditures allowable to the rental unit
(i.e. often units are rented with heat and water but under separate electrical
meters, in these cases,the heat and water are shared expenses but the electrical
• cost to the tenants is not part of the building expense.)
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
d. Income not to be included with the application: •
• Income of family members under 18 years of age.
• Income of family members who are full-time students, subject to the HUD
income determination requirements.
•
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
CHAPTER 4
Type of Assistance and Conditions
Applicants whose income and assets are in accordance with the established guidelines may
qualify for the following:
1. Loan Amount.The amount of the loan shall not exceed the lesser of:
a. The actual and approved cost of the repairs necessary to make the property conform to
all rehabilitation standards.
b. $24,999
2. Terms. The Deferred Loan is a two percent (2%) simple interest loan which is due and
payable to the City of Rochester within thirty (30) days according to the following terms:
a. If the property is sold, transferred, or otherwise conveyed (whether by deed, contract
for deed, or otherwise); and whether voluntary or involuntary, either while the
applicant(s) is/are living or by reason of death of the applicant(s), excluding the transfer
. of said property by operation of law or devised to a surviving applicant,joint tenant or
former tenant-in-common, for so long as said surviving applicant,joint tenant, devise or
owner occupies said property as his/her principle place of residence; or
b. If the rehabilitated property ceases for any reason to be the applicant's principal place
of residence.
c. At the end of the 30 year loan term.
3. Delinquency. If the Loan is not paid within 30 calendar days of the terms stated above,the
applicant(s) will be charged an interest rate of 15% per calendar year on the amount past
due and remaining unpaid, until such time as the rehabilitation loan is paid in full. The City
of Rochester also retains the right of foreclosure on the property to ensure payment.
4. Payment. The Applicant(s) may only repay the amount due in full. No periodic payments
will be accepted. Payment is to be made to the City of Rochester and paid at the City
Finance, City Hall, 201 Fourth Street SE, Rochester, MN 55904.
S. Mortgage. The Deferred Loan shall be secured by a Home Improvement Loan Repayment
Agreement (Mortgage). (See Chapter 11—Forms.)
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City of Rochester Single Family 2%Rehabilitation Loan Guidelines
6. Subordination. The City of Rochester is willing to subordinate the position of the CDBG
Home Improvement Loan Repayment Agreement (Mortgage) upon request by the owner.
7. Emergency Cases within the Target Area. The use of program funds for emergency cases
within the target areas will be considered for improvements that need immediate
correction (i.e.furnace or roof replacement, medical necessity). Program funds will be used
for the emergency improvement(s) only, and will be determined by staff on a case-by-case
basis and the availability of funding. Applications for emergency cases will remain on the
program waiting list for any additional improvements the property may need. All
emergency case applicants will need to meet all program eligibility guidelines for program
participation.
8. Emergency Cases Outside the Target Area. The use of program funds for emergency cases
outside the target area will be considered by staff, with the City of Rochester approval, on a
case-by-case basis and the availability of funding.
•
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
• CHAPTER 5
Processing and Submission for Program Assistance
This chapter describes the functions to be performed by the staff in connection with
rehabilitation assistance, and sets forth the policies and procedures to be followed by the staff
in preparing, processing and approving an application for a rehabilitation loan and in canceling
an approved rehabilitation loan.
1. Outline of Staff Functions:
a. Interview and advise the applicant on the rehabilitation objectives and standards.
b. Advise the applicant on the availability and eligibility of the possible rehabilitation
assistance and other programs that may be available.
c. Assist the applicant with completing the application.
d. Verify applicants income, assets, housing expenses, ownership of the property and
necessary insurance requirements with all supporting documentation being retained in
the applicant's file. If verifications are dated more than 180 days before determining
program eligibility, new verification forms shall be completed.
e. Verify property eligibility, applicant's income and asset eligibility and establish amount of
program funds applicant may receive.
f. Inspect the property to determine existing conditions.
g. Prepare a work write-up describing, in detail,the improvements to be completed.
h. Obtain lead-based paint risk assessment for subject property.
i. Prepare bid specification documents and have applicant obtain contractors proposals for
the rehabilitation work and review proposals received.
j. Assign application number and enter on the application, and all related documents.
k. Execute Home Improvement Loan Repayment Agreement (Mortgage).
I. Assist applicant with execution of Contractor-Homeowner Agreement which serves as the
construction contract.
m. Notify and witness the Contractor-Homeowner Agreement with contractor.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
n. Inspects rehabilitation work as it progresses. •
o. Process partial payment requests,verifying work is completed as specified and the
appropriate lien waivers have been received and the required homeowner and
contractor's signatures are obtained on the completion certificate.
p. Make final inspection of completed rehabilitation work and obtain homeowner and
contractor's signatures on completion certificate.
q. Obtain lead-based paint hazard clearance test for subject property.
r. Obtain from general contractor all guarantees of work, manufacturer and suppliers
warranties and release of lien from general contractor and subcontractors.
s. Prepare voucher for disposition of funds.
t. Close out rehabilitation file.
2. Processing and approval of application.
a. The staff shall prepare the application, based on information furnished by the applicant
and obtained from other sources, as documented in the file. Entries of money amounts, •
shall be made rounded to the nearest dollar. If no money is involved from an entry for a
particular application,the entry shall be "0".
b. Staff shall notify the applicant and contractors who submitted bids and proceed with the
remainder of the functions for which it is responsible in order to complete the
rehabilitation work.
c. If the staff determines that an application cannot be approved, a written statement of
the reasons for determination shall be mailed to the applicant with a copy retained in
the application file. The applicant has the option of appealing the denial before the
Rochester City Council at a scheduled meeting. An application number shall be assigned
and the cased filed.
3. Loan Cancellation
a. An approved rehabilitation loan may be cancelled if the applicant has requested
cancellation or is unwilling or unable to proceed with the rehabilitation work.
b. To cancel an approved rehabilitation loan, staff shall prepare a letter of cancellation and
i
mail the original to the applicant and retain one copy in the applicant's file.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
• CHAPTER 6
Inspections, Specifications and Cost Estimates
This chapter sets forth the responsibilities of the assigned staff for determining the
rehabilitation work necessary to bring a property into conformance with the Rehabilitation
Standards.
1. Property Inspection. The staff shall inspect the property and prepare an inspection report
that identifies each deficiency with respect to the Rehabilitation Standards and other
deficiencies which may be corrected with rehabilitation funds. An inspection report
prepared in this manner will later serve as the basis for preparing a work write-up and cost
estimate.
2. Consultation with Prospective Applicant and Cost Estimates. As soon as possible after
inspection of the property, the staff shall consult with the prospective applicant on the
preliminary work write-up and cost estimate. The applicant shall be advised which items of
work are required to meet the Rehabilitation Standards and which are not required, but
may be financed with a rehabilitation loan. The staff should be prepared to eliminate or
modify any items in the preliminary work write that are not specifically required by
• Rehabilitation Standards. The final work write-up shall be the basis for the property owner
to solicit bids and proposals from contractors.
3. Bid Specifications in Construction Contract Documents. Each specification in a
construction contract document shall be written so that it provides a clear understanding of
the nature and scope of the work to be done, and a basis for carefully determining bids and
proposals from contractors. Each specification shall show the nature and location of the
work and the type of materials required. The specification may refer to manufacturer's
brand names or to association standards to identify the quality of materials and equipment
required, and shall make provision for acceptable substitutes.
Specifications, based on the work write-up and illustrative sketches, if any, covering the
specific rehabilitation work for each property shall be prepared by the staff. Drawings shall
be prepared only when essential to show the scope of the work involved so that a fair bid
for the work can be obtained, and to avoid misunderstandings. The specifications and
drawings shall be based on the work write-up resulting from the inspection of the property
and consultation with the applicant.
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City of Rochester Single Family 2%Rehabilitation Loan Guidelines
CHAPTER 7
•
Contracting for Rehabilitation Work
This chapter sets forth requirements and procedures with respect to construction contracts for
rehabilitation financed through the rehabilitation loan program. This work shall be undertaken
only through a written contract between the contractor and the applicant.
1. Invitation to Contractors for Bid and Proposal
a. Contractor Selection. The applicant shall secure, at a minimum,two contractors to
submit bids on the rehabilitation of their property. If the applicant does not know two
contractors or any contractors, the staff shall provide a list of approved contractors
maintained by the staff. Separate subcontractor bids shall not be sought or accepted.
b. Bid Review. Upon receipt of the bid proposal from all bidding contractors, staff shall
review the bids for completeness and accuracy making special note to assure that the
specifications have been adhered to.
c. Maintenance of the Contractor List. The staff shall be responsible for maintaining a list
of all contractors who have expressed an interest in bidding on rehabilitation •
construction with the list open for public review.
d. Acceptable Contractors. A selected contractor shall be of good reputation and qualified
to do the required work. If the improvements to be completed include the removal of
lead-based paint hazards,the contractor must be trained, certified and licensed
according to the Department of Housing and Urban Development Lead Safe Housing
Regulation and the requirements of the Environmental Protection Agency. Contractor
firm shall be licensed as a Lead Based Paint Abatement Firm by the Minnesota
Department of Health. Staff shall frequently monitor its list of contractors to assure that
they continue to be licensed according to all applicable Federal, State, and local
requirements. Contractors subject to Federal, State, local or administrative disbarment
shall be removed from the list, based on confirmed cases of noncompliance of
contractual obligations.
2. General Conditions. The staff shall prepare provisions of general conditions for general use
in all construction contracts for the rehabilitation of the property.
a. Form of Contract. The construction contract will consist of a document, prepared by
staff, signed by the contractor and the applicant following approval of the applicant by
the staff. It shall contain a bid and proposal, the general conditions,the specifications for
the work to be performed, and the lead based paint risk assessment, if applicable.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
•
b. Change Orders. Change orders to the contract during work being performed are
permitted with the completion of a Change Order form, provided by staff and approved
by staff,the applicant and the contractor.
3. Award of Construction Contract. The contract shall be awarded by having the applicant and
the contractor properly execute the contract. The Contract shall be awarded to the bidder
that provides the greatest value to the homeowner. Upon award of the contract, the staff
shall notify the successful bidder that they have been awarded the contract.
a. Supplemental Loans. In a case involving a supplemental loan, the contract award shall be
made only after the staff has received a firm commitment from the local lender stating
that the loan has been approved.
b. Award within 90 days of Cutoff Date. In order for the bid and proposal to be binding,the
award shall be made within a period of 90 days from the bid submitted deadline
established for the receipt of the bid and proposal, unless a later date is agreed upon in
writing by the contractor.
c. Contract Award. In the award of a construction contract for rehabilitation,the contractor
and owner shall execute three original contract documents. Staff shall distribute the
• executed contract documents as follows:
• One executed copy to the contractor
• One executed copy to the applicant/owner
• One executed copy retained in the applicant's file
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City of Rochester Single Family 2%Rehabilitation Loan Guidelines
CHAPTER 8 •
Payment of Rehabilitation Work & Fiscal Management
This chapter sets forth the requirements for the inspection of rehabilitation work financed in
whole or in part through this program.
1. Responsibility for Making Inspections. Staff shall make on-site inspections of all
construction work in cases involving assistance through this program. To accomplish this,
staff shall make:
a. Partial payment inspections, as requested,to assure that construction work is completed
in accordance with the construction contract.
b. A final inspection to determine that the construction work has been completed in
accordance with the construction contract.
2. Partial Payment. An inspection of the rehabilitation work shall be made before the staff
makes a partial payment on the contractor's invoice or request for partial payment.
a. Inspection by Staff. Staff shall prepare a Completion Certificate for the work items that •
the contractor has submitted and identified on their invoice or request for payment.
Staff shall make an inspection to determine if the work has been satisfactorily
completed.
b. Submissions required by contractor. Staff shall obtain from the contractor a release of
liens, an executed sworn construction statement and a copy of each warranty due the
applicant for work. After receipt of a release of liens, including releases from all
subcontractors and a copy of each warranty, the staff shall process a partial payment in
accordance with contract requirements.
c. Payment of Satisfactory Work. If the work completed is satisfactory and the Completion
Certificate has been executed for approval by the applicant, contractor and staff, a
partial payment check payable to the contractor shall be submitted for processing.
d. Obtaining Corrective Action. If the work completed is not in accordance with the
construction contract for a partial payment,the staff shall advise the owner of any
noncompliance in the construction work, or of an incorrect invoice submitted by the
contractor. Staff shall obtain appropriate corrective action from the contractor. No
payment shall be made on a construction contract until the contractor has satisfactorily
completed the necessary corrective action.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
3. Final Inspection. Upon completion of the rehabilitation work and receipt of the contractor's
final invoice or request for payment, staff shall arrange for inspection of the work
completed.
4. Final Payment. An inspection of the rehabilitation work shall be made before the staff
makes a final payment on the contractor's invoice or request for final payment.
a. Inspection by Staff. Staff shall prepare a Completion Certificate for the work items that
the contractor has submitted and identified on their invoice or request for payment.
Staff shall make an inspection to determine if the work has been satisfactorily
completed.
b. Submissions required by contractor. Staff shall obtain from the contractor a release of
liens, an executed sworn construction statement and a copy of each warranty due the
applicant for the work. After receipt of a release of liens, including releases from all
subcontractors and a copy of each warranty, the staff shall process and make final
payment in accordance with contract requirements. The contractor shall provide a copy
of the final inspection approval from the building official, when applicable.
c. Lead-based Paint Requirements. Prior to issuing final payment, any unit completing
rehabilitation improvements for the removal of lead-based paint requires an approved
lead-based paint clearance test.
d. Payment of Satisfactory Work. If the work completed is satisfactory and the Completion
Certificate has been executed for approval by the applicant, contractor and staff a final
payment check payable to the contractor shall be submitted for processing.
e. Obtaining Corrective Action. If the work completed is not in accordance with the
construction contract for a final payment,the staff shall advise the owner of any
noncompliance in the construction work, or of an incorrect invoice submitted by the
contractor. Staff shall obtain appropriate corrective action from the contractor. No
payment shall be made on a construction contract until the contractor has satisfactorily
completed the necessary corrective action.
S. Supplemental Inspection. In some cases, defects and inadequacies in the construction
work, not apparent at the time of final inspection, may show up after final payment for the
work is made. Most of these are minor, such as doors and windows that stick after painting.
However, others are serious, such as roof leaks not ascertainable until after a rain, defects in
heating systems installed during the non-heating season that were not revealed in the
• limited tests after installation, or plumbing leaks that did not show up in the final inspection.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
a.Two-Year Guarantee on Work by Contractors. All work performed by the contract is •
covered by a two-year guarantee but applicants are not always aware that for a period of
two years they may require the contractor to correct insignificant defects and
inadequacies in the work performed under this contract. For this reason,the staff shall
inform the applicant of the guarantee requirements upon completion of the
rehabilitation requirements.
b. Disputes. Any controversy or claim that cannot be settled by staff, arising out of or
relating to the contracted improvements, or any breach of contract, shall be settled
through the arbitration process. All parties agree that either party hereto and staff shall
have the right to submit such claim to arbitration, provided that nothing herein shall
result in any imposition of liability on the City of Rochester or Olmsted County. The
applicant, contractor and staff shall agree to which arbitrator will be used. In addition,
the applicant and contractor will share all costs of arbitration equally. No payments to the
contractor shall be made until the dispute has been settled to the satisfaction of all
parties.
6. Fiscal Management
a. The Finance Department for the City of Rochester shall establish and maintain a separate
record for each applicant who has received a rehabilitation loan.
b. Disbursements from the rehabilitation escrow account shall be by check made payable to
the contractor or by an Electronic Fund Transfer (EFT)for the following purposes, as may
be appropriate.
• Make partial and final payments for rehabilitation work completed.
a Close out the rehabilitation escrow account by appropriately disbursing any
unutilized funds remaining in the rehabilitation escrow account.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
CHAPTER 9
Miscellaneous Provisions
1. Outreach. As necessary, the Policy Guidelines for the Single Family 2% Rehabilitation
Loan Program will be forwarded to all social service agencies that serve low income or
minority persons and other agencies and financial institutions which provide home
improvement programs. Additionally, should any changes be made to the Policy
Guidelines,those changes will be forwarded to the agencies and organizations
previously listed.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
CHAPTER 10
Numbering Loan Applications
This chapter sets forth the requirements and procedure for assigning numbers for rehabilitation
loans.
1. Number to be Assigned Every Application. Staff shall assign a number to every application
for an approved rehabilitation loan in accordance with the requirements of this chapter.
Staff shall enter the assigned number in the space provided on the application and
documents related to the rehabilitation file.
2. Numbering of Applications. The number assigned by the staff to every approved loan
application and related documents shall consist of the following two parts,with each part
separated by a slash (/).
a. Last two digits of calendar year.
b. Number assigned consecutively in sequence for each use.
3. Reuse of Application Numbers not Permitted. An application number once assigned by .
staff shall not be reused or reassigned. If a previous case to which the staff has assigned an
application number is not approved and is resubmitted at a later date,the staff shall
assigned the resubmitted case a new application number with the sequence number
applicable at that time.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
CHAPTER 11
Target Area
Xe-
CDBG SINGLE FAMILY HOME
REHABILITATION PROGRAM
TARGET AREAS - 2012
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City of Rochester Single Family 2%Rehabilitation Loan Guidelines
CHAPTER 12 •
Forms
Home Improvement Loan Repayment Agreement
(Mortgage)
THIS AGREEMENT is made as of the day of 20_ by and between
, a single person, and the CITY OF ROCHESTER, 201 Fourth Street SE, Rochester, Minnesota 55904, a
body politic and corporate of the State of Minnesota.
Preliminary Statement of Facts
Recipient is the owner and occupant of the property located at (Property Address),the City
of Rochester, Minnesota, legally described as follows, and all buildings, structures, improvements,
fixtures, annexations, access rights, easements, rights of way or use, servitudes, licenses, tenements,
hereditaments, appurtenances, minerals, mineral rights, water and water rights, now or hereafter
belonging or pertaining to the real property(the Property):
II
Legal Description of Property
On , 20_(the Loan Date), the City of Rochester loaned to the Recipient the sum of Dollars
($ .00), the PRINCIPAL BALANCE SECURED BY THIS AGREEMENT (the Loan), which Loan is to be
used specifically and exclusively for the following purposes (the Permitted Purposes):
Rehabilitation of the buildings located on said property
The parties wish to agree upon the conditions upon which the Loan is to be repaid to the City of
Rochester by the Recipient, and to create a mortgage lien encumbering the Property to secure
repayment of the Loan.
NOW,THEREFORE, in consideration of the Loan,the parties agree as follows:
1. Loan. The obligation to repay the Loan and accrued interest and other charges according to the
terms of this Agreement is the personal obligation of the Recipient, and their respective heirs,
successors, administrators and assigns. To secure the repayment of all amounts owing
hereunder, the Recipient does hereby MORTGAGE, GRANT, BARGAIN, SELL AND CONVEY unto
the Agency, its successors and assigns forever, and A SECURITY INTEREST AND MORTGAGE to
the City of Rochester, its successors and assigns, in the Property. The recipient covenants with
the mortgage the following statutory covenants; 1) to warrant the title to the premises, 2) to
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
pay the indebtedness as herein provided, 3) To pay all Taxes, 4) To keep the building insured
against fire and other hazards for the protection of the mortgagee, 5)That the premises shall be
kept in repair and no waste shall be committed, and 6)That the whole of the principal sum shall
become due after default, in the payment of any installment of principal or interest, or of any
tax, or in the performance of any other covenant, at the option of the mortgagee.
2. Interest. Interest shall accrue on the unpaid balance of the Loan from the date of the Loan until
the Loan is repaid in full or until , 20--- (the Thirtieth Anniversary Date), whichever occurs
first, at the rate of two percent (2%) per annum. No interest shall accrue on the unpaid balance
of the Loan after the Thirtieth Anniversary Date.
3. Multiple Disbursements. At the request of the Recipient, the City of Rochester may make
multiple disbursements hereunder up to the full amount of the Loan,for any Permitted Purpose,
directly to contractors hired by the Recipient upon Recipient's approval of work completed by
such contractors and the City of Rochester's inspection of such work and receipt of required lien
waivers and other additional documentation reasonably required by the City of Rochester. In
any event, interest shall accrue on the full amount of the Loan from the date of Loan closing.
4. Loan Repayment and Loan Subordination. The entire unpaid principal balance of the Loan and
all unpaid interest thereon shall be due and payable in full on the earlier date of a) the date
when the property is sold, transferred or conveyed; b) the property is no longer used as your
principal residence; or c)thirty (30)years from the Loan Date. The repayment obligation will be
. triggered if the Recipient sells, transfers, leases or otherwise conveys all or any part of the
Recipient's interest in all or any part of the Property. The Recipient may repay the full amount
of the Loan at any time without penalty. In the event that the Recipient asks the City of
Rochester to subordinate its lien and security interest to the lien of a new mortgage or security
interest, the City of Rochester may, at its discretion, effect such subordination either by
refinancing the Loan and entering into a new Home Improvement Loan Repayment Agreement
that will have an original principal balance equal to the unpaid principal balance of this Loan plus
accrued interest, or by entering into a subordination agreement with the first mortgage lender.
The Recipient will be required to pay the City of Rochester its fees and administrative costs in
connection, such as, refinance or subordination. Those fees and costs will be disclosed to the
Recipient prior to the refinancing or subordination of this Loan.
All payments received by the Agency pursuant to this Agreement shall be applied first to interest
accrued and then to the unpaid principal balance of the Loan.
5. Events of Default. The Recipient shall be required to pay the entire unpaid balance of the Loan
plus all accrued interest to the City of Rochester upon the occurrence of any one or more of the
following events (Events of Default):
a. The Property is sold at a mortgage foreclosure sale; or
b. There is a default under any other loans or mortgages secured by the Property; or
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
C. The Recipient enters into a mortgage, security agreement, or other agreement pursuant •
to which all or any part of the Property is encumbered or pledged or subjected to a lien
as security for any debt, which agreement has not first been approved in writing by the
City of Rochester, including without limitation any refinance, modification, restatement,
amendment, extension, or other change to any such mortgage, security agreement, or
other agreement;or
d. The Recipient causes or permits any lien for materials or labor to encumber the
Property; or
e. The Recipient files a petition in a bankruptcy proceeding or is adjudicated bankrupt in an
involuntary proceeding; or
f. The Recipient uses the Loan for a purpose that is not one of the Permitted Purposes;
provided, however,that transfers pursuant to subparagraphs b, c, or d of this Section 5 shall not
be deemed Events of Default hereunder to the extent that exercise of the City of Rochester's
rights of enforcement will violate the restrictions on exercise of due on sale clauses set forth at
12 CFR 591.5(b) or similar restrictions that may be applicable under state or federal law from
time to time.
6. Enforcement. Upon the occurrence of an Event of Default hereunder, the City of Rochester
may, immediately and without notice to the Recipient, declare the entire unpaid principal
balance owing hereunder, together with all other unpaid interest and charges incurred by the •
City of Rochester, to be immediately due and payable and thereupon all such unpaid principal
balance together with all accrued interest thereon and all other indebtedness secured hereby
shall be and become immediately due and payable, and the Recipient hereby authorizes and
fully empowers the City of Rochester to foreclose this Mortgage by judicial proceedings or by
advertisement with full power and authority to sell the Property at public auction and convey
the same to the purchaser in fee simple, all in accordance with and in the manner prescribed by
law, and out of the proceeds arising from sale and foreclosure to retain the principal and
interest due hereunder and the indebtedness secured hereby, together with all such sums of
money as the City of Rochester shall have expended or advanced pursuant to this Mortgage or
pursuant to statute, together with interest thereon as herein provided and all costs and
expenses of such foreclosure, including lawful attorneys' fees, with the balance, if any, to be
paid to the persons entitled thereto by law. In addition and cumulative to the rights afforded
the City of Rochester hereunder, the City of Rochester may enforce the obligations of the
Recipient herein by any and all available legal proceedings or remedies, including without
limitation a personal action for a deficiency judgment in the manner permitted by applicable
law. If the City of Rochester commences suit or foreclosure for collection of the Loan,the City of
Rochester shall be entitled to recover from the Recipient all costs and expenses related to such
actions that are permitted by applicable law, including reasonable attorneys'fees.
7. Waiver of Demand Provisions. The undersigned hereby waives presentment for payment,
demand, protest, notice of protest, notice of dishonor,and notice of nonpayment of this Loan.
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City of Rochester Single Family 2% Rehabilitation Loan Guidelines
IN WITNESS WHEREOF, the Recipient has executed this Agreement as of the day and year
above written.
RECIPIENT:
STATE OF MINNESOTA )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this_day of , 20
by:
Notary Public
STATE OF MINNESOTA )
ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _ day of 20 by:
Notary Public
The City Of Rochester
201 Fourth Street SE
Rochester, Minnesota 55904
Ardell F. Brede, Mayor(Current Mayor)
Attest:
Judy Scherr, City Clerk(Current City Clerk)
Prepared by: Reviewed by:
Rochester/Olmsted Consolidated Planning Department Rochester City Attorney's Office
2122 Campus Drive SE 201 Fourth Street SE
Rochester, Minnesota 55904 Rochester, Minnesota 55904
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