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R 4058 z RESOLUTION NO. 4058 ,A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO i GRANDE ADOPTING PROGRAM REGULATIONS IMPLEMENTING THE 1 CITY OF ARROYO GRANDE'S AFFORDLE HOUSING PROGRAM AND ADOPTING THE COUNTY OF SAN LUIS OBISPO'S AFFORDABLE HOUSING STANDARDS FOR DETERMINATION OF MAXIMUM SALES PRICES AND RENTS FOR AFFORDABLE HOUSING UNITS WHEREAS, Goal A of the City's Housing Element is to provide a continuing supply of affordable housing to meet the needs of existing and future Arroyo Grande residents in all income categories; and WHEREAS, The City's Housing Element sets forth inclusionary housing requirements for all residential projects over two (2) units to include a percentage of moderate, low and very low income units; and WHEREAS, the City Council desires to establish issues related to buyer eligibility requirements, unit financing and affordability standards, participation in affordable housing programs, and submission for City approval through the adoption of guidelines for the City's affordable housing program; and WHEREAS, The City Council deems that it is in the best interest of the City to establish specific standards for determining the maximum sales price for affordable housing units. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Arroyo � Grande hereby adopts Program Regulations for the City of Arroyo Grande's Affordable Housing Program, attached hereto as Exhibit "A" and incorporated herein by this reference. BE IT FURTHER RESOLVED that the City Council of the City of Arroyo Grande hereby adopts the formula and standards for determining the maximum sales prices and rents for affordable housing units established by the County of San Luis Obispo, updated and provided in its monthly bulletin for inland areas. This Resolution shall take effect upon the effective date of Ordinance No. 595. On a motion by Council Member Fellows, seconded by Mayor Pro Tern Arnold, and by the following roll call vote to wit: AYES: Council Members Fellows, Arnold, Guthrie, Costello, and Mayor Ferrara NOES: None ABSENT: None the foregoing Resolution was adopted this 11th day of December 2007. RESOLUTION NO. 1105$ PAGE 2 TON ERA.. , MAYOR ATTEST: � i L , , KELLY TM•RE, CITY CLERK APPROVED AS TO CONTENT: STE EN ADAMS, CITY MANAGER APPROVED AS TO FORM: TIM THY J. AEL, CITY ATTORNEY o outoroc EXHIBIT A INCORPORATED Z it JULY 10. 1911 * Program Regulations C4tiFoRte. City of Arroyo Grande Affordable Housing Program The City of Arroyo Grande's Affordable Housing program requires that most new home developers sell a percentage of their homes at affordable below-market prices to buyers who meet certain eligibility requirements. Each developer that is required to produce affordable housing must enter into an Affordable Housing Agreement with the City of Arroyo Grande that includes various requirements for their project. In addition to specifying the number and distribution of affordable units by number of bedrooms and level of affordability (i.e., Very Low, Low and Moderate), these requirements include: • Participating in available local, state and federal housing assistance programs • Verifying the income and eligibility of the buyers of affordable units and providing this info_ rmation to the City, or it's designated agent, prior to the close of escrow These Regulations were developed to assist the City, developers and lenders to implement the Affordable Housing Program, which is based on the City's Affordable Housing Ordinance and the Affordable Housing Agreements. The following areas are addressed in these Regulations: • Buyer Eligibility Requirements • Unit Financing and Affordability Standards • Participation in Affordable Housing Programs • Submission for City Approval Other regulations exist for the various homebuyer assistance programs. 1. Buyer Eligibility Requirements The buyers of affordable homes must meet certain eligibility requirements regarding the program income limits and household size. 1.1 Income Eligibility To qualify to purchase an affordable home, each buyer must earn no more than the income limits established for the target income group established for the specific home to be purchased. These income limits are adjusted for household size. 'With limited exceptions, all income received by all members of the household must be included when calculating the buyer's income. The income of every person who will be on title must be counted even if they do not intend to occupy the property. The buyer's current income must be used and it must be projected for the upcoming twelve months. Trending and three year averaging may only be used for irregular income, such as seasonal employment, part-time employment, self- employment, bonuses and overtime. 'See Appendix A for a definition of a-homebuyer's income. Arroyo Grande Affordable Housing Program Regulations Page 1 of 5 1.2. Household Size Every person who intends to occupy the affordable home must be included when counting household size. In addition, every person who will be on title to the property must be counted as a member of the household. A pregnant woman counts as one household member. 2. `Unit Financing and Affordability Standards The purpose of the Affordable Housing Ordinance is to produce homes that are affordable for households who cannot otherwise afford to purchase a home in this community. The City is concerned about the initial affordability of these units and their affordability over time in order to maintain the inventory of deed restricted affordable units. Consequently, the following standards are established to prevent homebuyers from assuming financial risks that could compromise their ability to maintain ownership of their home in the future. • 2.1. First Loan Standards The City will not approve the sale of an affordable home that will be financed by one of the following types of first loans: • A sub-prime loan2 • An adjustable rate loan • A loan that has negative amortization • A loan with a term of less than 30 years • A loan that is not fully amortized I A loan that has a lower initial interest rate or payments will be approved by the City if the ultimate interest rate is fixed, there is no negative amortization and the loan is fully amortized over its term. 2.2. Second Financing Standards These regulations require that all second mortgages must obtain prior, written approval of the City. 2.2.1. Government Secondary Financing The City will, in all cases, approve secondary financing that is provided by a local, state or federal government agency. 2.2.2. Private Secondary Financing Understanding that it may be less expensive and easier for a buyer to obtain an 80% first loan plus a second loan than to obtain a larger single loan with private mortgage insurance, the City will approve private secondary financing when all of the following conditions are met: 2For the purposes of the Affordable Housing Ordinance and the City/RDA home buyer assistance loans,a Sub-Prime, loan is one that charges a higher interest rate and/or loan fees than what is generally offered in the market for borrowers with good credit. Arroyo Grande Affordable Housing Program Regulations Page 2 of 5 • The combined payments for the first and second loan are less than the payments for a first loan of the same combined loan amount 1 plus private mortgage insurance premiums3 1 • The second loan does not have negative amortization • The second loan has a term of at least 15 years • The second loan does not have a balloon payment 2.3 Combined Loan-to-Value (CLTV) Ratios The maximum loan to value ratio allowed under these regulations is ninety-five percent (95%) unless a higher ratio is specifically allowed in writing by the City. The City will, in all cases, authorize the CLTV to exceed 95% when the buyer will receive government secondary financing. 2.4 Affordability— Payment Ratios In order to ensure that the affordable homes are, in fact, affordable to the buyers of those homes, the City has established the following guidelines for the buyers' payment or debt ratios: • Buyers may not pay more than 45% of their gross income for housing costs; and • Buyers may not pay more than 50% of their gross income for housing costs plus other long-term debt. The following standards and definitions shall apply for the purposes of calculating payment or debt ratios: • Housing costs includes mortgage payments (principle and interest), property taxes and hazard insurance, plus any special assessments, homeowner association dues or mortgage insurance that the buyer must pay. • If the buyer will receive an adjustable rate loan or a loan for which the initial interest rate or payments have been reduced, the payment or debt ratio must be calculated using the fully indexed or non-discounted interest rate and payments that are fully amortized over the term of the loan. • The income used in calculating payment or debt ratios must be fully , documented or the buyer(s) must certify the source and amount of any undocumented income. 3. Participation in Affordable Housing Programs Every Affordable Housing Agreement includes a requirement that the developer participate in local, state and federal housing assistance programs to assist the buyers of both affordable and market rate homes. when comparing mortgage costs,the payments must be calculated based on the same combined loan amount. In addition,if any loan has a reduced initial interest rate or initial payment,the comparison should be based on the fully indexed interest rate and/or full payment. Arroyo Grande Affordable Housing Program Regulations Page 3 of 5 3.1. County of San Luis Obispo • First Time Home Buyer (FTHB) Loans (when funds are available) 3.2. San Luis Obispo Housing Authority Program • Section 8 Homebuyers Assistance Program 3.3. California Housing Finance Agency4 • CaIHFA First Mortgage Loans • CaIHFA Extra Credit Teacher Loans Each and every buyer of an affordable or market rate home who may qualify for CaIHFA's School Fee Down payment Assistance Program must be informed that this grant is available and assisted with an application for assistance regardless of their need. 4. Submission for City Approval The Developer or Lender shall deliver the following forms and documentation to the City's Program Administrator (Housing Authority of the City of San Luis Obispo, 487 Leff Street, San Luis Obispo, CA 93401) no earlier than four weeks and no later than two weeks prior to the scheduled close of escrow for each affordable unit: • Transmittal Form • Buyer's Application and Affidavit • Seller's Affidavit • Lender's Initial Certification of Buyer Eligibility L • Report of Action on Application • Affordable Housing Program Disclosure • Home Purchase Contract/Agreement (copy— signed by both the buyer and seller) • First Loan Application (signed updated Fannie Mae 1003 or equivalent) • Lender's Loan Approval(s) or Commitment(s) • Loan Transmittal Summary (Fannie Mae 1008 or equivalent) • Income Verifications (copies of pay stubs, VOEs, 1040s and/or other documentation) • Asset Verifications (copies of statements, VODs and/or other documentation) • Credit Report • Other information or documentation to support the Buyer's application 5. Maximum Sales Price _ The maximum sales price for an affordable unit shall be determined by the bulletin prepared by the San Luis Obispo County Department of Planning and Building. The Affordable Housing Standards bulletin summarizes the County's affordable housing standards for non-coastal areas, including maximum household incomes, home purchase prices and rents. 4 Information of the CaIHFA's loan programs are available online at www.calhfa.ca.gov/homeownership Arroyo Grande Affordable Housing Program Regulations Page 4 of 5 Appendix A Income Defined "Income" shall mean any of the following: (1) All wages and salaries, overtime pay, commissions, fees, tips, bonuses, and other compensation for personal services before payroll deductions, for all persons in a household over twenty-one (21) who are on title; (2) The net income from the operation of a business or profession, or from the rental of real or personal property (without deducting expenditures for business expansion, amortization of capital indebtedness, or any allowance for depreciation of capital assets); (3) Interest and dividends (including income from assets); (4) The full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts, excluding any portion of a lump sum payment for the delayed start of a periodic payment that exceeds the amount of the on-going periodic payment; (5) Payments in lieu of earnings, such as unemployment, disability compensation, or - severance pay; - i (6) The maximum amount of available public assistance other than the amount of any assistance specifically designated for shelter and utilities; (7) Periodic and determinable allowances, such as alimony and child support payments, and regular contributions or gifts received from persons not residing in the dwelling; (8) All regular pay, special pay and allowances of a member of the Armed Forces (whether or not living in the dwelling) who is the head of the household or a spouse; and - (9) Any earned income tax credit to the extent that it exceeds income tax liability. Arroyo Grande Affordable Housing Program Regulations Page 5 of 5 OFFICIAL CERTIFICATION I, KELLY WETMORE, City Clerk of the City of Arroyo Grande, County of San Luis Obispo, State of California, do hereby certify under penalty of perjury, that the attached Resolution No. 4058 is a true, full, and correct copy of said Resolution passed and adopted at a regular meeting of the City Council of the City of Arroyo Grande on the 11th day of December 2007. WITNESS my hand and the Seal of the City of Arroyo Grande affixed this 13th day of December 2007. , .4 '' ' L% KELLY 'ET FORE, CITY CLERK