Loading...
HomeMy WebLinkAboutR22410 JPA CV Home-Purchase Finance Authority PALM DESERT REDEVELOPMENT AGENCY STAFF REPORT REQUEST: REVIEW AND APPROVE A JOINT POWERS AGREEMENT BETWEEN COACHELLA VALLEY HOME-PURCHASE FINANCE AUTHORITY AND THE PALM DESERT REDEVELOPMENT AGENCY SUBMITTED BY: TERESA LAROCCA, DIRECTOR OF HOUSING DATE: FEBRUARY 26, 2004 CONTENTS: JOINT POWERS AGREEMENT DRAFT UNDERWRITING CRITERIA Recommendation: By Minute Motion, that the Redevelopment Agency approve a Joint Powers Agreement by and between the Coachella Valley Home-Purchase Finance Authority and the Palm Desert Redevelopment Agency for the purpose of creating a First Time Home Buyer Program valley-wide. Executive Summary: In order for CVAG to move forward with the creation of a First Time Home Buyer Program valley- wide, it is necessary to form a consortium of local banks that will provide the necessary funding to prospective buyers. In order for the consortium to commit their financing resources, they are requiring a commitment from the various participating cities to be part of the Coachella Valley Home-Purchase Finance Authority. Without this commitment, the program will not go forward. Discussion: In 2002, the Palm Desert Housing staff investigated the possibility of creating a First Time Home Buyer Program through the use of a consortium of banks who would create a pool of monies to provide down-payment assistance to qualified buyers. As a result of that research and numerous meetings with various bank representatives, it was determined that in order for a bank consortium to participate, they would need a large pool of potential buyers to draw from in order for the First Time Home Buyer Program to be successful, participation by most, if not all, cities within the Coachella Valley would be necessary. In order to accomplish this, staff met with CVAG to request that they take the lead on creating a valley-wide First Time Home Buyer Program that would benefit all cities. CVAG took the lead and, in conjunction with the cities, has prepared the attached Coachella Valley Home-Purchase Finance Authority Joint Powers Agreement (attached). Both the Agency's legal counsel and the City Attorney have reviewed and provided input to CVAG's legal counsel on the content of the Joint Powers Agreement. CVAG is now requesting a commitment from the Agency to be part of the Joint Powers Agreement. G:\RDA\Maria Hunt\WPDATA\LAROCCA\STFRPTS\021204cvhomepurchasefinauthagm.wpd Staff Report - Closed Session Review and Approve Joint Powers Agreement between Coachella Valley Home-Purchase Finance and the Palm Desert Redevelopment Agency Page 2 aG February 1e, 2004 The public agencies (cities/agencies) shall be the members of the Coachella Valley Home- Purchase Finance Authority. CVAG shall be the ex-officio member organization of the Authority and shall have the powers and duties of administering the program, and the Executive Director shall serve as the General Manager/Secretary of the Authority. The purpose of the Agreement is to provide for the joint exercise, to the Authority, of powers common to each of the parties to provide down payment assistance to qualified, moderate income, first time home buyers, in the form of secured loans, and administer such an assistance program, and to do all acts related thereto. Attached for your review is the draft "Underwriting Criteria" that will be finalized by the Loan Committee of the Consortium once established. The consortium members (banks)will provide financing through a provision of first mortgages and second trust deeds. If a city is interested in further buying down a mortgage for a prospective home buyer, it can participate in a form of a third trust deed. The CVAG program is geared to moderate income households of 80% to 120% of the County median, as it has been determined that families in this income category have the ability to make monthly payments, but in many cases do not have down payment savings in order to purchase a home. A Unit Regulatory Agreement will be recorded by the Agency requiring 45 year covenants and a payback provision upon sale of the property. Past history of the consortium has been extremely successful as they have been operating a program in Orange County for the past five years and in Los Angeles County for the past four years and have not experienced any defaults to date. Submitted by: Approval: Te es . LaRocca J i McCarthy Director of Housing CM edevelopment mh Approval: Carlos L. Orte/ dpPialf, ___ BY RDA Executive Dir-ctor ON VERIFIED BY G:\RDA\Maria Hunt\WPDATA\LAROCCA\STFRPTS\021204cvhomepurchasefnauthagm.wpd Original on file with ity Clerk's Office I JOINT POWERS AGREEMENT COACHELLA VALLEY HOME-PURCHASE FINANCE AUTHORITY This Agreement is made and entered into, pursuant to Government Code Sections 6500 et seq. and under the sponsorship of the Coachella Valley Association of Governments, by and between the following public agencies : (a) County of Riverside [Redevelopment Agency] (b) City of Blythe [Redevelopment Agency] (c) City of Coachella [Redevelopment Agency] (d) City of Indio [Redevelopment Agency] (e) City of La Quinta [Redevelopment Agency] (f) City of Indian Wells [Redevelopment Agency] (g) City of Palm Desert [Redevelopment Agency] (h) City of Rancho Mirage [Redevelopment Agency] (i) City of Cathedral City [Redevelopment Agency] (j ) City of Palm Springs [Redevelopment Agency] (k) City of Desert Hot Springs [Redevelopment Agency] These public agencies are sometimes referred to herein as "Parties" and/or "Members . " RECITALS WHEREAS, California Government Code Sections 6500, et seq. , provide that two or more public agencies may by agreement jointly exercise any power common to the contracting Parties; WHEREAS, the Parties to this Agreement each have and possess the power to provide down-payment assistance for first-time moderate-income homebuyers in the form of loans, including but not limited to the power to borrow monies from private lenders to fund such first-time home-buyer assistance programs; 12/21/03 Draft 1 Finance Authority JPA WHEREAS, numerous programs and special subsidies are available to low and very-low income borrowers, but not to moderate-income buyers; WHEREAS, the absence of programs directed at the moderate-income buyer has created an affordability gap for the prospective buyer who cannot save enough for a down payment on a first home, but who has an income too high to qualify for low or very-low income assistance programs; WHEREAS, private lending institutions are required by federal law, the Community Reinvestment Act, to participate in programs to assist such buyers; WHEREAS, individually, the Member agencies can not offer a program large enough to attract significant participation of private lending institutions; WHEREAS, collectively, the Member agencies can offer a program large enough to attract the participation of several private lending institutions in a regional program for the benefit of moderate-income, first-time homebuyers in Blythe and the Coachella Valley; WHEREAS, the participation of several private lending institutions seeking to meet their obligations under the Community Reinvestment Act will allow the Member agencies, collectively, to secure a funding source at a cost that is expected to be below the cost of administrating the loan program; WHEREAS, the Parties to this Agreement desire to join together for the purpose of jointly contracting with a consortium of private lenders to underwrite and create (a) pool (s) of funds from which secured loans might be made available by the contracting agencies to qualified, moderate-income, first-time homebuyers; and 12/21/03 Draft 2 Finance Authority JPA WHEREAS, the Parties to this Agreement desire to join together for the further purpose of jointly administering such a program; NOW, THEREFORE, it is agreed by and between the Parties hereto as follows : Article 1 Definitions Section 1 . 1 Definitions . As used in this Agreement, unless the context requires otherwise, the meaning of the terms set forth below shall be as follows : (a) "Accrue, " in the context of the date that an obligation of the Authority accrued, shall not refer to the date of a demand or claim. Rather, where there is one act, omission or event giving rise to the obligation, the date of that one act, omission or event shall be the date the obligation accrued. However, where an obligation arises out of more than one act, omission or event, the accrual date shall refer to the entire period of time running from the first act, omission or event through the date of the last act, omission or event related to the same obligation. (b) "Authority" shall mean the Coachella Valley Home- Purchase Finance Authority created by this Agreement . (c) "Consortium" shall mean, collectively, the private lending institutions that contract with the Authority to underwrite and provide the 12/21/03 Draft 3 Finance Authority JPA pool (s) of funds from which the Authority shall provide loans to qualified homebuyers . (d) "CVAG" shall mean the Coachella Valley Association of Governments . (e) "Law" or "the Law" shall mean the Joint Exercise of Powers Act, being Articles 1 and 2 of Chapter 5 of Division 7 of Title 1 of the California Government Code (Sections 6500, et seq. ) . (f) "Loan Committee" shall mean a committee that, subject to approval of the Board of Directors, sets all underwriting standards, rates and policies . (g) "Member" shall mean any public agency listed in the opening paragraph of this Agreement that becomes a signatory to this Agreement or any new Parties as permitted pursuant to Article 14 (Admission and Withdrawal of Parties) . (h) "Moderate-income" means eighty (80) to one hundred twenty (120) percent of the median Riverside County income as determined by the U. S . Department of Housing and Urban Development . (i) "Represented Member Agency" refers to the Member agency represented by a Director, i . e. , the Member agency that appointed a particular Director. (j ) "Treasurer" for the Authority shall be the Treasurer of CVAG, or any other person designated by the Board, who is to perform the duties of the Treasurer and Auditor-Controller of the Authority. 12/21/03 Draft 4 Finance Authority JPA Article 2 Creation of the Authority Section 2 . 1 Creation. There is hereby created pursuant to the Law a public entity to be known as the "Coachella Valley Home-Purchase Finance Authority, " which shall be an agency or entity that is separate from the Parties to this Agreement . Article 3 Powers and Duties of CVAG Section 3 . 1 CVAG' s Participation. CVAG shall be an ex-officio member organization of the Authority and shall have the following powers and duties : (a) To provide all administrative services for the Authority and its Initial Program; (b) To empower its Executive Director to serve as the General Manger and Secretary of the Authority; (c) To exercise such other powers and duties as the Board of Directors deems necessary to achieve the purposes of this Agreement. Section 3 . 2 Principal Office. The principal office of CVAG shall be the principal office of the Authority. The Board of Directors is hereby granted full power and authority to change said principal office from said location to another within the Coachella Valley. Article 4 Term of Agreement Section 4 . 1 Term. This Agreement shall become effective and the Authority shall exist at such time as 12/21/03 Draft 5 Finance Authority JPA this Agreement has been executed by the Member public agencies identified hereinabove. Article 5 Membership Section 5 . 1 Membership. With the exception of CVAG which shall be an ex-officio member, each public agency which has executed or hereafter executes this Agreement, and any addenda, amendments or supplement thereto, and which has not, pursuant to the provisions hereof, withdrawn or been terminated, shall be a Member of the Authority. Article 6 Purposes and Powers Section 6. 1 Purpose. The purpose of this Agreement is to provide for the joint exercise, through the Authority, of powers common to each of the Parties, as described in the Recitals above, to provide down-payment assistance to qualified moderate-income, first-time homebuyers, in the form of secured loans, and to fund, originate, and administer such an assistance program, and to do all acts related or incidental thereto, either by the Authority alone or in cooperation with the Consortium or other entities, in order to educate and assist moderate-income buyers with their first purchase of a home. Section 6. 2 Powers . The Authority shall have the power to exercise any power common to all the Parties as authorized by the Law and is hereby authorized to do all acts necessary for the exercise of these common powers, including, but not limited to, any of the following: (a) To exercise jointly the common powers of its Members to implement, manage and administer the 12/21/03 Draft 6 Finance Authority JPA Initial Program and any Specific Project Agreements; (b) To make and enter into contracts; (c) To incur debt, liabilities or obligations; (d) To acquire, hold, and dispose of property by lease, lease purchase or sale as necessary to the full exercise of its powers; (e) To lease, acquire, construct, manage, maintain, and operate any buildings, works, or improvements; (f) To sue and be sued in its own name; (g) To contract for the services of engineers, attorneys, planners, educators, housing assistance entities, technical specialists, financial consultants, and separate and apart therefrom, to employ such other persons as it deems necessary; (h) To issue bonds, notes and other indebtednesses, and to enter into leases, installment sale and installment purchase contracts, all as provided for in Section 12 . 9 (Issuance of Bonds, Notes and Other Indebtedness) . (i) To apply for, accept and receive state, federal or local licenses, permits, grants, loans or other aid from any agency of the United States of America, the State of California or other public or private entities necessary for the Authority' s full exercise of its powers; (j ) To receive gifts, contributions and donations of property, funds, services and other forms of financial assistance from persons, firms, corporations and any governmental entity; 12/21/03 Draft 7 Finance Authority JPA (k) To adopt rules, regulations, policies, bylaws and procedures governing the operation of the Authority; (1) To perform all acts necessary or proper to carry out fully the purposes of this Agreement; and (m) To the extent not hereinafter specially provided for, to exercise any powers in the manner and according to the methods provided under the laws applicable to the County of Riverside. Section 6. 3 Initial Program. The Authority shall contract with a Consortium to obtain (a) pool (s) of monies from which the Authority shall make loans to qualified, first-time, moderate-income homebuyers . Such loans shall be secured against property to be purchased within the geographical boundaries of any Member agency, in a second priority position, in an amount roughly proportional to the equity position required by the lender providing the first mortgage (or trust deed) . Underwriting for each loan considered by the Authority shall be conducted by an agency approved by the Consortium, and no loan shall be given except upon approval by the underwriting agency and at least two of the three Consortium representatives on the Loan Committee. The interest rate charged to the Authority by the Consortium for the use of funds advanced from the loan pool (s) shall be at least one percent (1%) below the rate to be collected from the homebuyer on the corresponding second mortgage. Further, the interest rate charged to the homebuyer for the second mortgage shall not exceed the interest rate charged by the lender on the first mortgage. Thus, the loan pool funds shall be advanced by the Consortium at a rate to the Authority that is at least one 12/21/03 Draft 8 Finance Authority JPA percent below the rate to be paid by the homebuyer on the first mortgage, as well as at least one percent below the rate to be paid by the homebuyer on the second mortgage. Section 6. 4 [Reserved. ] Article 7 Board of Directors Section 7 . 1 Governing Body. The Authority shall be governed by a Board of Directors consisting of one Director appointed by and serving at the pleasure of each Member agency. Each Director shall have the voting rights provided for in Section 7 . 13 (Voting) . CVAG shall be represented as an ex-officio, non-voting member organization. The Board shall exercise all powers and conduct all business of the Authority, either directly or by delegation of authority to other bodies or persons pursuant to this Agreement and applicable law. Section 7 . 2 Qualifications . Each Director shall be a current member of the governing body of the appointing Member agency. Termination of office with the Represented Member Agency shall automatically terminate membership on the Board. Section 7 . 3 Regular Board Meetings . The Board shall hold at least one regular annual meeting and shall provide for such other regular meetings as it deems necessary. Meetings of the Board of Directors shall be held at such locations in the Coachella Valley and at such times as may be designated from time to time by the Board of Directors . Section 7 . 4 Special Meetings of the Board. Special meetings of the Board may be called by the Chair, to be held at such times and places within the Coachella Valley as may be ordered by the Chair. Five percent or more of 12/21/03 Draft 9 Finance Authority JPA the Directors may also call a special meeting for any purpose. Section 7 . 5 Quorum. The Board of Directors shall act only upon a majority of a quorum. A quorum of any meeting of Directors shall consist of a majority of the Directors then designated by and serving on behalf of the Members . In the event that a Member has failed to designate a Director, or a Member' s designated Director has died, resigned, left office, been terminated or is otherwise unwilling or unable to act as the designating Member' s representative, and a replacement Director has not yet been designated such that the Member has no duly acting representative on the Board of Directors, that Member' s vacant board seat shall not be included when calculating the number of Directors necessary to constitute a quorum. Except as otherwise provided in this Agreement, every act or decision made by a majority of the Directors present at a meeting duly held at which a quorum is present is the act of the Board. In the absence of a quorum, any meeting of the Directors may be adjourned from time to time by a vote of the majority present, but no other business may be transacted except as provided for in this section. The Directors present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough Directors to leave less than a quorum, if any action taken, other than adjournment, is approved by at least a majority of the number of Directors required to constitute a quorum. Section 7 . 6 Chair and Vice-Chair. The Board of Directors shall annually elect from its membership a Chair and Vice-Chair to serve for a one-year term. 12/21/03 Draft 10 Finance Authority JPA Section 7 . 7 Conduct of Meetings . The Chair or, in the absence of the Chair, the Vice-Chair, shall preside at all meetings of the Directors . Section 7 . 8 Termination of a Director. Any Director may be terminated for cause by a two-thirds (2/3) vote of the Directors. Additionally, any Director may resign effective on giving written notice to the Board of Directors, unless the notice specifies a later time for the effectiveness of such resignation. A successor shall be appointed by the Represented Member Agency as provided for in this Agreement . After the effective date of termination or resignation and prior to the appointment of a successor, the departing Director' s seat shall not be counted when calculating the number of Directors necessary to constitute a quorum. Section 7 . 9 Vacancies on the Board. A vacancy on the Board of Directors shall exist (a) on the death, resignation or termination of any Director, (b) upon removal by the Represented Member Agency, (c) at the end of any Director' s term on the governing body of the Represented Member Agency, (d) whenever the number of Directors is increased, or (e) on the failure of the Member agencies to appoint the full number of Directors authorized. Vacancies on the Board of Directors may not be filled by the Directors . A vacancy shall be filled only by the Represented Member Agency for whom a Director is not then serving. Section 7 . 10 Other Officers . The Executive Director of CVAG or his/her designee shall be the secretary of the Authority. Any officer, employee or agent of any Member of the Authority may also be an officer, employee, or agent of any of the Member agencies . The appointment by the Members 12/21/03 Draft 11 Finance Authority JPA of such person shall be evidence that the two positions are compatible. Section 7 . 11 Minutes . The secretary of the Authority shall cause to be kept minutes of regular, adjourned regular and special meetings of the Board of Directors . Section 7 . 12 Rules . A majority of Directors may adopt rules governing meetings if not inconsistent or in conflict with this Agreement . In the absence of rules adopted by the Directors, Roberts' Rules of Order, as they may be amended from time to time, shall govern the meetings of the Directors in so far as they are not inconsistent or in conflict with this Agreement or any Authority bylaws . Section 7 . 13 Voting. Except as otherwise provided by this Agreement, each Director shall have one vote. Section 7 . 14 Compensation. Directors shall serve without compensation from the Authority. Article 8 Conduct of Meetings Section 8 . 1 Compliance with Brown Act. All meetings of the Board of Directors, or directors of any Specific Project, including, without limitation, regular, adjourned regular and special meetings, shall be called, noticed, held and conducted in accordance with applicable provisions of the Ralph M. Brown Act, California Government Code Sections 54950, et seq. Section 8 . 2 Teleconferencing. The Board of Directors and the directors of any Specific Project may use teleconferencing in connection with any meeting in conformance with, and to the extent authorized by, the Ralph M. Brown Act . 12/21/03 Draft 12 Finance Authority JPA h. Article 9 Loan Committee Section 9. 1 Loan Committee. There shall be a five (5) person Loan Committee. Subject to approval of the Board of Directors, the Loan Committee shall establish all underwriting criteria consistent with applicable government regulations, any requirements established by the members of the Consortium, and secondary-loan-market participants . Section 9. 2 Qualifications . Subject to approval of the Board of Directors, the Loan Committee shall be composed of three (3) representatives of the participating lenders proposed by the Consortium; one (1) representative proposed by the Board of Directors; and one (1) representative proposed by the underwriting agency. Section 9 . 3 Terms of Office. The terms of office for individuals serving on the Loan Committee shall be two (2) years commencing with the date of the first meeting of the Loan Committee. Each Committee person shall hold office until his or her successor is elected or appointed and qualified for such office. Committee persons shall be eligible for re-election, provided they continue to meet the qualifications required by this Agreement . Article 10 Other Committees Section 10 . 1 Committees . From time to time the Board may create by majority vote various committees to carry on the business of the Authority. 12/21/03 Draft 13 Finance Authority JPA Article 11 Employees Section 11 . 1 General Manager and Staff. The Executive Director of CVAG shall serve as the General Manager of the Authority. Unless the use of outside employees or contractors is approved by the Board, the General Manager shall utilize CVAG staff as may be necessary to accomplish the purposes of the Authority. CVAG staff time, as well as office expenses, direct and indirect overhead, shall be charged to the Authority utilizing direct billing and other accounting practices that provide for a clear separation of funds . Section 11 . 2 Status . Where CVAG' s or other Member agency' s staff are utilized to accomplish the purposes of the Authority, all of the privileges and immunities from liability, exemption from laws, ordinances and rules, all pension, relief, disability, worker' s compensation, and other benefits which apply to the activity of officers, agents, or employees of any of the Members when performing their respective functions shall apply to them to the same degree and extent when engaged in the performance of any of the functions and other duties under this Agreement . However, no staff employed directly by the Authority, if any, shall be deemed, by reason of their employment by the Authority, to be employed by any of the Members or, by reason of their employment by the Authority, to be subject to any of the employment requirements of the Member agencies . 12/21/03 Draft 14 Finance Authority JPA i Article 12 Financial Provisions Section 12 . 1 Fiscal Year. The fiscal year of the Authority shall be from July 1 of each year to the succeeding June 30 . Section 12 . 2 Depositary. The Treasurer shall be the depositary and have custody of all money of the Authority from whatever source and shall perform the duties specified in Government Code Section 6505 . 5 . All funds of the Authority shall be strictly and separately accounted for, and regular reports shall be rendered to the Board and the Members of all receipts and disbursements at least quarterly during the fiscal year. The books and records of the Authority shall be open to inspection by a Member or Director at all reasonable times upon reasonable notice. The Treasurer shall contract with an independent certified public accountant to make an annual audit of the accounts and records of the Authority, which shall be conducted, at a minimum, in accordance with the requirements of the State Controller under Section 26909 of the California Government Code, and shall conform to generally accepted auditing standards . Section 12 . 3 Property Bonds . The Board shall from time to time designate the officers and persons, in addition to the Treasurer, who shall have charge of, handle, or have access to any property of the Authority. Each such officer and person, including the Treasurer, shall file a bond in an amount designated by the Board. When fixing the amount of such bonds, the Board of Directors shall be deemed to be acting for and on behalf of the Represented Member Agencies in compliance with Government Code Section 6505 . 1 12/21/03 Draft 15 Finance Authority JPA Section 12 . 4 Budget . As soon as practicable after the effective date of this Agreement, and thereafter at least thirty (30) days prior to the commencement of each fiscal year, the General Manager shall present a proposed budget to the Board for the forthcoming fiscal year. Prior to the commencement of the fiscal year, the Board shall adopt a budget for the new fiscal year. Section 12 . 5 Working Capital Account . A Working Capital account, which is to be used for the purpose of funding general overhead and administrative expenses for the ongoing operations of the Authority, shall be established by the Board in an amount approved in connection with the annual budget process . Funding for the Working Capital Account shall be obtained by a "start-up" contribution from the Consortium equal to one percent (1%) of the first (and any subsequent) loan pools established. Additionally, a loan origination fee shall be charged for each loan originated by the Authority, which fee amount may be set and changed from time to time by majority vote of the Board. The Authority shall also collect interest on the funds in the loan pool (s) prior to use, as well as interest on funds in the Loan Loss Reserve Account funded by the Consortium for each loan pool . Additionally, the Authority shall earn income represented by the difference between the interest rate charged to the Authority by the Consortium for the use of the money and the interest rate collected by the Authority from the homebuyers . Grants and other gifts may also be solicited and utilized. Section 12 . 6 Additional Funding. In the event that funding for the Working Capital Account as described in Section 12 . 5 (Working Capital Account) is insufficient, an advance or grant may be requested from CVAG and/or any 12/21/03 Draft 16 Finance Authority JPA A Member agency. Should such request be declined, and necessary funds be unavailable, the Authority shall dissolve. Section 12 . 7 Other Contributions . Contributions or advances of other funds and of personnel, equipment or property may be made to the Authority by any Member for any purpose of this Agreement, and credited to the Member' s obligations, with the consent of the Board. Any such advances may be made subject to repayment, and in such case shall be repaid in the manner agreed upon by the Member making the advance and the Authority. Section 12 . 8 Return of Contributions and Revenue. In accordance with Government Code Section 6512 . 1, repayment or return to the Members of all or any part of any contributions made by Members and any revenues received by the Authority may be directed by the Board at such time and upon such terms as the Board may decide. The Board shall hold title to all funds, and property acquired by the Authority during the term of this Agreement. Section 12 . 9 Issuance of Bonds, Notes and Other Indebtedness . The Authority may issue bonds, notes or other forms of indebtedness if such issuance is approved by a two-thirds (2/3) vote of the Directors . The Secretary shall notify all of the Members by registered mail, return receipt required, of the approval for incurring of such indebtedness within ten (10) days after its approval. Any Member may within thirty (30) days of the receipt of such notice withdraw from this Agreement by giving written notice to the General Manager, provided that such withdrawal does not in any way impair any contracts, or other indebtedness of the Authority then in effect . This right to withdraw is in addition to the Member' s right to 12/21/03 Draft 17 Finance Authority JPA withdraw set forth in Article 14 (Admission and Withdrawal of Parties) . No such bonds, notes or indebtedness shall be issued before the expiration of the time given in this Section to Members to withdraw from this Agreement . Section 12 . 10 Disbursements . The General Manager shall request warrants from the Treasurer in accordance with budgets approved by the Board of Directors subject to quarterly review by the Board of Directors . The Treasurer shall pay such claims or disbursements and such requisition for payment in accordance with rules, regulations, policies procedures and bylaws adopted by the Board of Directors . Section 12 . 11 Accounts . All funds will be placed in accounts and the receipt, transfer, or disbursement of such funds during the term of this Agreement shall be accounted for in accordance with generally accepted accounting principles applicable to governmental entities and pursuant to Government Code Section 6505 et seq. and any other applicable laws . All revenues and expenditures shall be reported to the Board of Directors . Section 12 . 12 Expenditures Within Approved Annual Budget . All expenditures shall be made within the approved annual budget . No expenditures in excess of those budgeted shall be made without the approval of a majority of a quorum of the Board of Directors . Article 13 Relationship of the Authority and Its Members Section 13 . 1 Separate Entity. The Authority shall be a public entity separate from the Parties to this Agreement . The debts, liabilities and obligations of the Authority shall not be the debts, liabilities or obligations of the Parties . No Member shall be jointly or 12/21/03 Draft 18 Finance Authority JPA severally liable for any debt or obligation of the Authority or any of its Members . All property, equipment, supplies, funds and records of the Authority shall be owned by the Authority, except as otherwise provided in this Agreement . Article 14 Admission and Withdrawal of Parties Section 14 . 1 Admission of New Parties . Additional public entities may become Members of the Authority upon such terms and conditions as provided by the Board of Directors and the consent of two-thirds (2/3) of the then- existing Parties to this Agreement, to be evidenced by the execution of a written addendum to this Agreement signed by all of the Parties including the additional Parties . Section 14 . 2 Withdrawal of Membership. Withdrawal of any Party hereto, either voluntarily or involuntarily, unless otherwise provided by the Board of Directors, shall be conditioned as follows : (a) In the case of a voluntary withdrawal, written notice shall be given to the Authority one year and ninety days prior to the effective date of withdrawal; (b) Withdrawal shall not relieve the Party of its proportionate share of any debt or other liability of the Authority that accrued prior to the effective date of the Party' s notice of withdrawal or assessments related to the administration of outstanding loans secured by real property within the departing Member' s geographical jurisdiction; 12/21/03 Draft 19 Finance Authority JPA (c) Withdrawal shall result in the forfeiture of that Party' s rights and claims relating to the distribution of property and funds upon termination of the Authority as set forth in Section 14 . 4 (Disposition of Property Upon Termination) . Section 14 . 3 Involuntary Termination. The Board of Directors may terminate, for reasonable cause, any Member of the Authority on a two-thirds (2/3) vote of the Directors . Section 14 . 4 Disposition of Property Upon Termination. In the event of the termination of this Agreement, any property interest remaining in the Authority following the discharge of all obligations shall be disposed of as the Board of Directors shall determine with the objective of returning to each Party a proportionate return on the contributions made by each, less previous returns if any. Section 14 . 5 [Reserved. ] Article 15 Provision for Bylaws Section 15 . 1 . Bylaws . As soon as practicable after the first meeting of the Board of Directors, the Board shall cause to be developed Authority bylaws to govern the day- to-day operation of the Authority. Article 16 Contribution and Indemnity Among Members Section 16. 1 No Third Party Beneficiaries . This Article shall reflect the Members' rights and obligations as by and among themselves . Nothing herein shall create any right in any third party to enforce any right or 12/21/03 Draft 20 Finance Authority JPA obligation set out in this Agreement as against any Party hereto. Section 16. 2 Hold Harmless and Indemnity. Each Party hereto agrees to indemnify and hold the other parties harmless from all liability for damage, actual or alleged, to persons or property arising out of or resulting from the negligent or wrongful acts or omissions of the indemnifying Party or its employees/agents . Section 16. 3 Limitations on Liability. Except as Section 16. 2 may apply and the obligations therein are performed, the Authority shall be authorized to defend, indemnify and hold harmless any Director, officer, agent or employee for actions taken or not taken within the scope of the authority given or granted by the Authority and from and against any claim or suit arising out of any act or ,, omission of the Authority, the Board or any Director, officer, agent or employee in connection with this Agreement and may purchase insurance as the Board may deem appropriate for this purpose. In contemplation of Section 895 . 2 of the Government Code, and pursuant to the authority contained in Sections 895. 4 and 895 . 6 of that Code, and except to the extent that Section 16. 2 (Hold Harmless and Indemnity) may apply, each of the Members assumes that portion of the liability imposed upon the Authority or any of its Members, officers, agents or employees by law for injury caused by any negligent or wrongful act or omission that is not covered by insurance, that is in the proportion that, as of the date the obligation accrued, the outstanding loan balances in that Member' s geographical jurisdiction bears to the total then outstanding balance of all loans originated by the Authority. Where an obligation accrued over a period of time, each Member' s share shall be 12/21/03 Draft 21 Finance Authority JPA fairly apportioned among all agencies participating during the applicable period. To achieve such purposes, each Member shall to the extent provided herein indemnify and hold harmless the other Members for any loss, costs or expenses that may be imposed on such other Members solely by virtue of Section 895 . 2 . The Parties acknowledge that, given the possible variables, determination of a proper apportionment may be difficult . Therefore, the Parties agree that the Board' s good faith determination of a fair apportionment shall be final, binding and enforceable as a term of this Agreement . The provisions of this Article shall survive the termination of this Agreement and/or the withdrawal of any or all Members . Article 17 Miscellaneous Provisions Section 17 . 1 Notices . Notices to Members hereunder shall be sufficient if delivered to the principal office of the respective Member. Section 17 . 2 Amendments . This Agreement may be amended or terminated at any time at any duly constituted meeting of the Board of Directors by a two-thirds vote of the Directors . Section 17 . 3 Prohibition Against Assignment . No Member may assign any right, claim or interest it may have under this Agreement, and no creditor, assignee, or third- party beneficiary of any Member shall have any right, claim or title to any part, share, interest, fund, or asset of the Authority. This Agreement shall be binding upon, and shall inure to, the benefit of the successors of each Party. 12/21/03 Draft 22 Finance Authority JPA Section 17 . 4 Agreement Complete. The foregoing constitutes the full and complete Agreement of the Parties . There are no oral understandings or agreements not set forth in writing herein. Section 17 . 5 Severability. If any one or more of the terms, provisions, sections, promises, covenants or conditions of this Agreement shall to any extent be adjudged invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, each and all of the remaining terms, provisions, sections, promises, covenants and conditions of this Agreement shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. Section 17 . 6 Multiple Originals . This Agreement may be executed in counterparts, each of which shall be deemed an original. Section 17 . 7 Execution. The Board of Supervisors of the County of Riverside, [the City Councils of the City Members] [governing boards of the Redevelopment Agency Members] , and the Executive Committee of CVAG have each authorized execution of this Agreement, as evidenced by the authorized signatures below. [Signature blocks . ] 12/21/03 Draft 23 Finance Authority JPA DRAFT COACHELLA VALLEY HOME-PURCHASE FINANCE AUTHORITY SECOND MORTGAGE PRODUCT UNDERWRITING CRITERIA [Toni-Here's the latest version. Yellow indicates something I added. . Thanks. Roz] Approved 2003 I. INTRODUCTION In accordance with the provisions of the Equal Credit Opportunity Act, there shall be no discrimination against any applicant applying to the Coachella Valley Home- Purchase Finance Authority (CVHPFA) for loan assistance on the basis of age, sex, race, marital status, sexual orientation, national origin, religion or disability. All information obtained by CVHPFA staff and/or loan committee in packaging and evaluating a loan applicant's eligibility shall be kept confidential. All references to CVHPFA's loan applicants and customers in board meetings, agendas, staff reports, etc. shall be by loan number only. Original documents that are part of CVHPFA loan records, such as notes, deeds of trust, etc. shall be stored in a secure, fireproof place, such as a safe deposit box in a local financial institution. Any loan applicant who falsifies information during the application process, or refuses any reasonable request from CVHPFA for verification of income and/or expenses will be deemed an ineligible borrower, and the application will be denied. The CVHPFA offers a second-mortgage product that is used strictly in conjunction with a first mortgage funded by one of the participating investors in the CVHPFA loan pool. The maximum second-mortgage loan amount is $50,000. Mortgages from the CVHPFA shall be used in the area represented by the member entities of the Coachella Valley Association of Governments, which comprises the incorporated cities and unincorporated county territory in the Coachella Valley, and the city of Blythe. Only owner-occupied single-family homes, townhouses and condominiums will be considered. Maximum loan-to-value of the first and second mortgages shall not exceed 100%. The current rate of interest returned to investors is determined by adding 100 basis points to the one-year Constant Maturity Treasury. The minimum interest rate returned to investors will be 2.00%. The CVHPFA lending rate is 100 basis points 1 above the return to investors, not to exceed 7.00%. The rate of interest charged on CVHPFA second-mortgage loans shall not exceed the rate of interest charged on first-mortgage loans to those same home buyers. Requests for exceptions to the criteria shall be reviewed by the CVHPFA loan committee upon written request by CVHPFA loan staff. The request shall include an explanation of why the exception is requested and supporting documentation. If the loan committee, by majority action, accepts the exception, that documentation shall accompany the paperwork for the second trust deed application. II. UNDERWRITING CRITERIA - GENERAL Income This program is restricted to persons with incomes not exceeding 120% of the Riverside County median income at the time of application. This income restriction shall be adjusted according to family size. Family size shall be determined by identifying minor children and other dependents claimed on the most recent federal tax return. Adult children or others living in the household and not applying for the loan shall not be included in the family-size determination. Total income shall be calculated by combining the annual incomes of the loan applicants. In reviewing a loan application, the underwriter must be assured the applicant's income is of a stable nature. The underwriter must be assured the source of the applicant's funds for minimum required investment is verified and the credit report demonstrates the applicant is a good credit risk. The applicant's motivation to repay the debt in a timely manner also must be established. Debt ratios The minimum front-end ratio shall be 25%. The maximum back-end ratio shall be 45%. Divorce In cases of pending divorce, the credit judgment will be based solely on the income, debts and credit history of the party who will be both borrower and owner of the property. CVHPFA will require that the loan be secured by (1) execution of a security instrument by both parties or (2) execution of a quit-claim deed by the non-borrowing party, and recording of the quit-claim deed prior to CVHPFA closing. In either situation, the note will be signed by the CVHPFA borrower only. Insurance CVHPFA requires loan recipients to provide, prior to closing, certificates of insurance with evidence of homeowner hazard or property insurance in an amount sufficient to cover all mortgages, including the CVHPFA loan. The CVHPFA must be included as a mortgage holder, additional insured and loss payee on the policy. If the borrower fails to maintain hazard or property insurance, CVHPFA may provide such insurance, at the borrower's expense. The cost of such coverage will be added to the loan balance. CVHPFA reserves the right to increase monthly loan payments to cover the cost of the premium without extending the loan term. Prepayment Loans may be prepaid in whole or in part at any time, without penalty. Appraisal Loan applicants who have paid the cost of the property appraisal will receive a copy of the appraisal, provided by the first-mortgage lender. In reviewing the appraisal report, the underwriter must be able to follow the appraiser's logic, reasoning, judgment and analysis, and to question those areas of the report requiring further clarification to support the assigned value. CVHPFA staff shall have the option of requesting an appraisal or title search prior to sending the loan application to the loan committee. This option may be taken if there is doubt as to the property value or question as to clear title. If this option is taken, the applicant will be requested to deposit with CVHPFA the appropriate amount of funds to pay for the appraisal or title report. Credit risk The borrower's application must contain sufficient information for the underwriter to reach an informed decision about whether to approve the mortgage. The application must also include all other documentation necessary to verify, clarify and substantiate information in the application. To reach a decision, the underwriter must be assured all questions in the loan application have been adequately answered and supported. The underwriter must be assured the applicant represents a good credit risk and, in the event of a default, the property could be resold quickly and losses recovered. Required documentation Residential loan application Verification(s) of employment Verification(s) of deposit Verification(s) of other loans Credit report Income tax returns (state and federal) for past three years Internal Revenue Service W-2 forms for past three years Bank statements for past two months Paycheck stubs for past 60 days Any additional documentation needed to verify, clarify or substantiate the above III. UNDERWRITING CRITERIA - SPECIFIC Income and employment history Many components make up income potential, including the borrower's occupation and/or training, education, employment tenure and opportunities for advancement. CVHPFA has specific requirements and procedures to evaluate or calculate borrowers' income and employment stability, type of income, and income potential. Borrowers must establish long-term, stable income from employment and other sources. The underwriter must verify the borrower's employment for the two full years that preceded the loan application. If the borrower has an employment history of less than two years and was previously in school or the military, the underwriter must obtain a copy of his or her diploma or discharge papers. The underwriter must determine the probably stability and continuance of employment. Borrowers who are in a field of work in which advancement is possible because of continuing demand for that type of work, and who have demonstrated the ability to maintain full employment and advance standing, should receive favorable consideration. For borrowers who recently entered the job market, the potential for future income can have a positive influence. These borrowers should be considered favorably if adequate future income can be anticipated because their education and/or training will expand their job opportunities. A borrower who has changed jobs frequently to advance within the same field of work and is successful in that work should receive favorable consideration. On the other hand, a history of job-hopping without advancement, or from one line of work to another, may indicate inability to master a job and could lead to unstable income. Borrowers with questionable employment histories must have offsetting positive financial factors to be considered for maximum financing. Salary and wage income Adequacy and continuance of income are as important as employment stability. The underwriter must verify employment for two full consecutive years. Usually, the verification of employment can be used to determine adequacy and continuance of income. 4 When verifying salary and wage income, the underwriter must pay particular attention to: Employment gaps: The borrower must explain any employment gaps longer than one month. Employment continuation: The underwriter must determine the borrower's probability for continued employment. Negative comments from an employer could be a reason for decline of an application. Military income: Military personnel may be entitled to different types of pay in addition to their base pay. The underwriter can accept flight or hazard pay, rations, clothing and/or quarters allowance, and pro-pay as part of stable income as long as its continuance can be established. Past year and year-to-date earnings: Verification of earnings for past year and year-to-date must be completed by the employer. If the information is not completed, the underwriter can reference the applicant's current paycheck stubs and the past year's W-2 form to verify the income shown. The figures on the check stubs and W-2's should correspond to the monthly income figures shown on the application. If the figures do not correspond, there may be justification, such as recent promotion, change in pay structure, etc. The employer should explain any discrepancies in prior income. Commission income: Commission income is subject to fluctuation. Therefore, the underwriter must develop an average of the last two years' income to evaluate the borrower's income qualifications. Commission income must be supported by signed federal and state income tax returns for the past two years. Fewer than two years' commission income will be acceptable only if there are significant compensating factors. The underwriter must establish a trend for commission income. Annual earnings that are level or increasing from year to year are acceptable. However, if earnings show a decline toward the current year, there must be offsetting factors for the commission income to be acceptable. Overtime and bonus income: Can be used to qualify the applicant if the employer verifies the overtime or bonus income will in all probability continue. The underwriter must establish an earning trend for overtime and bonus income. Annual earnings that are level or increasing from year to year are acceptable. However, if earnings show a decline toward the current year, there must be strong offsetting factors for the overtime or bonus income to be acceptable. Future raises: Future raises indicated by the employer of the employment verification form may be acceptable under certain circumstances. To be acceptable, the raise must be verified in writing by the employer and must take effect before the date of the first mortgage payment. If the raise is not in effect by the date of the first payment, then the anticipated raise may be considered a compensating factor with proper documentation of when the raise will take effect. The employer must show the amount and effective date of the raise on the employment verification form or in a separate letter. There must be strong offsetting factors and the housing expense-to-income and total obligations-to- income ratios must conform to the standards required by the CVHPFA. Other income: Other income may come from many different sources. Income from these sources can be considered qualifying income as long as it is properly documented: Part-time or second-lob income: May be used if it can be verified as having been uninterrupted for the previous two years and if it has a strong likelihood of continuing. Income tax and W-2 forms must support the income claim. Retirement income: May be verified by a letter from the organization providing the income, copies of retirement-award letters, tax returns and/or W-2 forms. Social Security income: Requires acceptable verification, including a copy of the Social Security Administration's award letter or copies of the borrower's bank statements to confirm regular deposit of the payment. Benefits that have a defined expiration date must have a remaining term of at least three years to be considered as income. Standard terms of Social Security benefits: Disability benefits: Are subject to discontinuance if the beneficiary's condition improves. A letter from Social Security must support continuation. A written request for the information must be obtained from the borrower and forwarded to the Social Security Administration. Student benefits: Usually are discontinued when the student reaches age 19. Sometimes, benefits are discontinued when the parent remarries. Continuation may be assumed based on the age of the beneficiary. Retirement benefits: May be received if the beneficiary is age 62 or older. Continuation may be assumed based on age. 6 Other benefits: For verification of continuance of other types of Social Security benefits, the borrower must send a written request for this information to the Social Security Administration. Alimony and child support: Alimony and/or child support must continue for at least three years after the date of the mortgage application to be considered as income. Copies of divorce decrees and separation agreements are acceptable as verification. The verifying document must specify the amount of the award and the period of time over which it will be received. The borrower must provide evidence that the funds have been received for the last 2 months. Acceptable evidence includes deposit slips, bank statements, court records and tax returns. Notes receivable: A copy of the note to establish the amount due and length of payment is required. Payments must continue for at least three years beyond the loan application date. Borrowers must provide evidence they have received the funds for the last 12 months Acceptable evidence includes deposit slips, bank statements and tax returns. Interest and dividends: May be used it is properly documented and has been received for the past two years. However, the underwriter must take an average of the interest and/or dividend income for the last two years to evaluate income qualifications. Copies of tax returns or account statements may be used to verify this income. Veterans Administration benefits: Most VA benefits are acceptable income if documented by a letter or distribution form from the Veterans Administration and will continue for at least three years. Education benefits are not acceptable because they are offset by educational expenses. Unemployment and welfare benefits: May be considered as acceptable income if properly documented by letter or exhibit from the paying agency. The amount, frequency and duration of the payments must be stated in the verifying letter or exhibit. If unemployment payments are a regular part of the borrower's income, copies of tax returns for the past two years are required to establish a history of receipt. Checking and savings accounts: If a borrower has a recently opened account or a large increase in an existing account, the source of the funds must be explained by the borrower and verified by the underwriter. The deposit verification form should include an average balance for the last two months. Funds required for the 3% cash requirement from the borrower for closing and related costs shall be seasoned for a minimum of three months. The borrower's maximum cash-on-hand resources shall not exceed $5,000 after closing. Liabilities The borrower's liabilities include all installment loans, revolving charge accounts, stock pledges, alimony, child support and other debts of a continuing nature. The total monthly obligations are the sum of the monthly housing expense, payments on installment and revolving debt that extend beyond 10 months, and any alimony, child support or maintenance payments. Student loans should be included in this calculation unless they are deferred for two years or longer. For each liability, the underwriter must determine the unpaid balance, terms and the borrower's payment history. Generally, factual-data credit reports that provide this information meet CVHPFA requirements. Installment and revolving-debt information that does not appear on the credit report may be obtained using the loan verification request form. The underwriter must verify any other liability not shown on the credit report. Verification forms must pass directly between the underwriter and the creditor and may not be handled by any other party. The underwriter must investigate any adverse credit, such as slow payment, charge- offs, undisclosed debt, judgments, bankruptcy, etc. In many instances, a letter from the borrower can provide a sufficient explanation. The underwriter must review the letter with care to determine if the explanation makes sense and is consistent with the other credit information. Because the letters often raise new questions, the underwriter must use careful underwriting judgment in evaluating them. If necessary, the underwriter may require the borrower to provide additional exhibits. Credit history A good credit history will include at least four trade lines with a positive payment history of a minimum of 12 months. Less than that, alternate credit may be considered if rent plus at least two forms of alternate credit are available. The underwriter should relate the borrower's liabilities to assets and credit history. A borrower who has a history of making payments on outstanding or previous credit obligations in conformance with the contractual terms may be considered favorably. If the credit history shows the borrower has had difficulty making monthly payments, 8 the credit history must be analyzed to determine the reason for the slow-payment record. If the credit history reflects a slow-payment record, lawsuits or judgments for non-payment of obligations, there must be offsetting factors if the borrower is to receive favorable consideration. Either the actual payment amount or, if not stated, 3% of the outstanding balance of any revolving credit card will be considered the monthly required payment. Any revolving credit card with a $0 balance will not be counted as potential debt. No debt that can be paid in full in 10 months after the close of escrow will be counted toward the borrower's liabilities. Credit report A credit report from an independent credit-reporting agency is required of all borrowers. The credit report should reflect the borrower's credit history and the results of a public-records search for each locality in which the borrower has lived during the two-year period that precedes the report's issuance. However, the credit agency should report, and the underwriter must consider, any finding that occurred before the two-year period, as long as it can be considered under the limitations of the Fair Credit Reporting Act. The credit report must contain legal information for the past seven years. Joint credit reports on married couples obtained from credit repositories do not always contain all debts of both parties. When this occurs, the underwriter should obtain individual credit reports. The results of both reports may be combined in one factual-data credit report if the report clearly indicates the combination. The credit report should list the historical status of each account, which must be in a "number of times past due" format. The credit report must provide the terms, balances, and ratings for all debts listed on the credit application, and all adverse credit 30 or more days old or older. The credit report also must reflect any debts not disclosed in the application. If the credit report does not contain a reference for each significant open debt on the application, the underwriter must obtain a separate written verification for each debt that was not reported. All information on the applicant's credit report shall be obtained from or verified by sources other than the applicant. In reviewing the credit report, the underwriter should pay close attention to: Slow payments: The borrower must provide a written explanation of recent slow payments or an excessive number of slow payments. All accounts must be brought current before closing. Undisclosed debt: If the credit report reveals significant debt not disclosed on the application, the borrower may have been attempting to conceal liabilities. The borrower must provide an acceptable explanation for the omission. After careful review of the explanation and other available documentation, if the underwriter concludes the loan applicant was attempting to falsify information by not disclosing the debt, the applicant will be deemed an ineligible borrower, and the application will be denied. Judgments, garnishments and liens: Shall be paid in full before closing. The borrower must furnish a letter of explanation and should have reestablished good credit as evidenced by a factual-data credit report. Bankruptcy: A bankruptcy must have been discharged fully and the borrower shall have reestablished good credit and demonstrated the ability to manage financial affairs. The CVHPFA considers an elapsed time of four years between discharge of bankruptcy and mortgage application as sufficient time to reestablish credit. Reestablishment of good credit will include four trade lines with a positive payment history for at least 12 months. A bankruptcy that resulted from events beyond the borrower's control, such as an extended family illness, will receive more favorable consideration than a bankruptcy that occurred because of poor financial management. In all cases, the borrower must furnish a written explanation and copies of the bankruptcy petition, debt schedules, and discharge showing the schedule of debts discharged. Mortgage foreclosure: Generally, the loan application will not be approved if the borrower had a foreclosure in the past seven years. The borrower must have reestablished good credit. If the foreclosure resulted from extenuating circumstances beyond the control of the borrower, such as a serious long-term illness, death of the principal wage earner, or loss of employment due to reduction in workforce or shutdown, the borrower shall have reestablished good credit and demonstrated the ability to manage personal financial affairs. Collection accounts: Shall be paid in full prior to or at loan closing. Explanations of any collection accounts must be provided in writing by the borrower. Self-employed borrowers A borrower who has 25% or greater ownership of a business is considered to be self- employed and is required to submit: 10 Tax returns: Individual returns for the last three years, which include the borrower's signature, are required. These returns must include all schedules and statements. A profit-and-loss statement also shall be included. Financial statement: A current statement, including a balance sheet and year- to-date profit-and-loss statement if more than three months have passed since the end of the last tax year. An audited statement is preferred; if not, a statement prepared by an accountant is acceptable. Partnership documentation: If the business is a corporation or partnership, the application must include copies of signed federal business income tax returns for the last two years with all applicable schedules attached. Length of self-employment: The underwriter may consider income from self- employment as stable income if the borrower has been self-employed for two or more years. A person who has been self-employed between one and two years must have had at least two years of previous successful employment in the same occupation to be eligible for a loan. Income generated form self- employment of less than one year's duration may not be included for income- qualifying purposes. 11