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City of Mobile

Neighborhood Revitalization Revolving Loan Fund

PROGRAM SUMMARY

The Neighborhood Revitalization Revolving Loan Fund Program will make construction loans available to Developers or potential homebuyers attempting to acquire and rehabilitate blighted properties within Mobile City Council District Two. The Neighborhood Revitalization Revolving Loan Fund is being funded by an allocation of Community Development Block Grant (CDBG) funds from the U.S. Department of Housing and Urban Development (HUD). The City of Mobile allocated $586,000 to the revolving loan fund.

The Neighborhood Revitalization Revolving Loan Fund will be administered by the City in partnership with a selected financial institution (FI). The Fund will provide construction loans to Developers and /or potential homebuyers seeking to acquire and renovate blighted, residential properties for sale or occupation in District 2. Projects must either be located in a District Two CDBG-Eligible neighborhood or be undertaken for the purposes of providing affordable housing in District Two.

Funding preference may be given to:

1) the acquisition and rehabilitation of vacant and/or blighted properties located in the South Oakleigh/Texas Street neighborhoods and The Bottom (see Attachment 1, Map of District Two, CDBG-eligible census tracts and target neighborhoods); or,

2) rehabilitations that will create homeownership opportunities for low–moderate income homeowners earning no more than 80% of the area median income based on HUD income limits.

The funding is provided in form of a construction loan. Loan funds may not exceed $50,000 per residential unit. Applicants are encouraged to use CDBG funds to leverage financing from other sources. Once the rehabilitation project has been completed, the City will require all Borrowers to sell or refinance the Property within a specified period of time in order to return the loan amount to the Fund.

The following is the summary of the loan program description that will guide the policies and procedures.

1) Program Status: Notice of funds available has been released.

2) Eligible Borrowers: Developers and/or potential homebuyers will be eligible to borrow under the Loan Program. For any capital funds allocated to the Loan Program by the FI, FIs must set lending criteria that will broaden access to credit for Developers proposing to rehabilitate property in the Target Neighborhoods.

3) Eligible Projects: Residential structures located in District 2 CDBG-eligible neighborhoods or the rehabilitation of a residential structure in District 2 for the purpose of providing affordable housing.

4) Project and Loan Application: The Community Planning and Development Department will provide the Project application and Standard construction / property rehabilitation loan application materials will be provided by the FI. At a minimum, the Loan Application shall include a proposed scope of work, estimated project costs, sources of financing, and a schedule of work for completing the project.

5) Loan terms. To be proposed by the FI.

6) Interest rate. Interest rates will be market-based (or below market if the FI elects) for the type of loan product. Rates will be fixed for each Loan at the time of Loan application approval. FI will be asked to provide a published interest rate index as a benchmark for Loan pricing. However, the FI may include a proposal to use a portion of the funds as interest rate buy-downs, if this is perceived to increase participation in the lending program.

7) Loan amount: CDBG funding may not exceed $50,000 per residential unit. The City anticipates entering a total of 12 loan agreements over the next two years. Milestones for lending will be agreed upon and set forth in the Program Implementing Agreement. The actual parameters for the minimum and maximum loan size will be determined in the Agreement between the City and the FI partner.

8) Loan underwriting guidelines and security. To be proposed by FI. Both secured and unsecured Loan products may be offered. For residential-secured Loans, construction loan agreements and mortgages are expected to be required with maximum loan-to-value ratios of up to 80% of the projected fair market value of the finished project or a maximum loan-to-value of 90% the actual costs of the renovation. Borrower contribution, if needed, can be paid by personal cash contribution or equity in the property.

9) Loan disbursement & flow of funds during project construction: To be proposed by FI.

10) Payment schedule: To be proposed by the FI.

11) Prepayment option: Option to prepay the outstanding Loans in whole without penalty will be sought. Partial prepayment option is not anticipated.

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