CR 01-160 Housing Rehabilitation Loan/GrantSeptember 11, 2001
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NOPKINS
Council Report 2001 -160
HOUSING REHABILITATION LOAN /GRANT PROGRAM GUIDELINES
Proposed Action
Staff recommends adoption of the following motion: Move to approve Housing
Rehabilitation Loan /Grant Program guidelines dated March 1, 2001, subject to legal
review.
With this motion the proposed guidelines will be submitted to the City Attorney and
Hennepin County for their review and approval.
Overview
The City of Hopkins has offered a loan and grant program to low and moderate income
Hopkins homeowners since the 1970's. The program is funded for the most part with
Community Development Block Grant (CDBG) funds. Although federal rules dictate the
eligible use of the funds, the City does have some discretion regarding how the program
is administered which is defined through program guidelines.
The guidelines, in particular the maximum loan or grant amounts, have not changed for
over 20 years. In addition to a significant increase in the cost of home improvements,
recent changes in federal law have put additional requirements on the use of the funds
which increase the cost of required improvements. Primarily, new lead based paint
(LBP) regulations mandate the testing and removal of LBP prior to the start of the
rehabilitation project.
Staff is recommending that the guidelines be changed to increase the maximum
loan /grant amount from $15,000 to $20,000 and the availability of an additional $15,000
in lead abatement grant funds. Other changes provide for assistance in emergency
situations and are being recommended to better reflect how the program is being jointly
administered by the City and the County. If approved, the new guidelines would be in
effect as of March 1, 2001, to include those projects in progress.
Primary Issues to Consider
Why are these changes being recommended?
What is the impact of the change?
Supporting Information
Propos
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ehabilitation Loan /Grant Program guidelines
Financial Impact: $ NA Budgeted: Y/N Source:
Related Documents (CIP, ERP, etc.):
Notes:
City of Hopkins
Housing Rehabilitation
Loan /Grant Program
Guidelines
Dated March 1, 2001
I. DEFINITIONS
A. Housing Rehabilitation Deferred Loan - means the commitment of funds
on behalf of recipients for the purpose of making eligible improvements
to eligible properties, as described in Sections IV, V and VI of these
Procedural Guides.
B. Applicant - means an individual or household submitting an application
for a loan who has not yet been approved for funding.
C. Borrower - means an individual or household meeting the requirements
of Section VI who receives a loan.
D. Loan Package - consists of all applicable documents listed below and
explained in Section VIII.
• Homeowner Application for Loan
• Individual Data Confidentiality
• Lead-Based Paint Poisoning Notification
• Income Verification including Federal Income Tax Return(s)
• Asset Verification
• Mortgage Status Verification (ifneeded)
• Title Verification
• Repayment Agreement
For loans administered in part by the Hennepin County Office of
Planning and Development, the project file shall consist of
• Property Inspection Report
• Scope of Improvements/Work Proposal
• Rehabilitation Work Summary
• Letter to Historical Society (ifneeded)
• Contractor Bids
• Work Contract
• Amendment Request Certificate (ifneeded)
• Contractor Bills
• Sworn Construction Statement
• Lien Waivers
• Completion Certificate
• Data on Individual Loans
• Complaint Record (ifneeded
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E. Resident - means a person, other than a renter, living in the household for at
least nine months of the year.
F. Household Gross Income - means the annual income of all residents of the
applicant's/borrower's household, as determined in accordance with Section VI.
G. Assets - means the property, real or otherwise, of an applicant/borrower, not
including the dwelling to be improved, its contents, up to two surrounding acres
of land and one motor vehicle as determined in accordance with Section VI.
H. Handicapped Person - means a person who has a permanent physical condition
which substantially impairs the ability to function independently in a residential
setting, or which substantially limits the ability to become employed or to
participate in the community. A person with a condition such as chronic
emphysema, arthritis, heart disease and other "invisible" conditions not
requiring the use of devices to increase mobility shall not be deemed a
handicapped person, unless a licensed physician verifies in writing that a
particular condition does substantially limit the ability to function
independently in a residential setting or to become employed or to participate in
the community.
I. Accessibility Improvements - include improvements, to one or two unit
dwellings, which are designed to enable a handicapped person to function
independently in a residential setting, such as provisions for adequate space for
maneuvering, access and egress, (both in exterior and interior spaces), and
location of the equipment to facilitate ease of use.
J. Administering Entity - means the person and/or agency processing the loan.
K. Participating Community - means Hennepin County, any city or town,
cooperating as a participant in the Urban Hennepin County Community
Development Block Grant Program with funds made available from that
program for use in an Urban Hennepin County housing rehabilitation program.
L. Emergency Situation - means a condition requiring immediate and urgent
attention which threatens or imperils the health and/or safety of the applicant
household. The written opinion of a city building or housing inspector detailing a
code or safety violation or violations may, at the discretion of the administering
entity, be an acceptable definition of an emergency situation.
M. Hennepin County - means the Development Planning Unit of the Office of
Planning and Development.
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II. CONDITIONS GOVERNING ADMINISTRATION
A. Amendments; Directives
These Procedural Guides may be amended or supplemented by Hennepin
County and the City of Hopkins by issuance of revised pages, which shall be
effective as of the date of issue, or such later date as the amendment shall
specify. Administrative memoranda may also be issued which discuss policy
interpretations, clarification of procedures and other administrative matters.
Any administering entity wishing to deviate in any way from these Procedural
Guides must first describe in writing the proposed change to, and then be
granted written approval by, Hennepin County and the City of Hopkins
B. Federal. State and Local Regulations
Nothing in these Procedural Guides shall be construed in such a manner as to
conflict with, alter, or amend any Federal, State and Local regulation.
C. Administrative Subcontracts
The participating community may enter into agreements with other
agency(ies) for the purpose of obtaining assistance in the performance of
certain administrative tasks with respect to the delivery of loan funds.
Regardless of such agreements, the participating community shall fulfill the
following requirements:
1. Responsibility for the performance of any subcontracting
agency with respect to the loan program. Such
performance shall include, but is not limited to, the full
adherence to policies and procedures set forth in these
Procedural Guides.
2. Full liability for all warranties and representations
made regardless of who does the actual originating
and/or packaging of grants.
3. Exercise the option to allow Hennepin County to administer
the program on its behalf. In this event, Hennepin
County will assess a fee equal to twelve per cent (12 %)
total CDBG funds allocated by the participating
community for housing rehabilitation and will assume
full responsibility for meeting the requirements of C1
and C2 above.
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An administering entity may recapture only those expenses directly related to
the operation of the rehab deferred loan program. No more than twenty per
cent (20 %) of CDBG funds allocated for housing rehabilitation may be used for
administrative costs.
D. Delivery of Loan Funds
The administering entity will disburse funds to contractors for completed
work, in compliance with Sections III and X.
Loans made and delivered by the administering entity cannot exceed the
amount stated in Section III unless approved in writing by Hennepin County.
E. Approval of Loan Packages
No work shall commence on any structure prior to the proper completion of a
Work Contract and Proceed to Work Order referring to specific work items
under that particular loan.
F. Certifications
1. The administering entity is legally authorized and constituted to
administer the Housing Rehabilitation Loan/Grant Program in the
State of Minnesota.
2. No payments, fees or remuneration of any type whatsoever have been
solicited or received from any applicants or borrowers.
3. The administering entity has no knowledge that any improvement
covered by the loan is in violation of any applicable zoning law or
regulation.
4. Any employee of the administering entity who is authorized to sign or
countersign checks, drafts, or to certify vouchers shall be covered by
a fidelity and forgery bond in an amount at least equal to the lesser
of (1/3) of the administering entity's total authorized loan funding;
such an employee must be an authorized signatory as evidenced by
a written instrument of the governing body.
5. The administering entity shall maintain documentation accounting for
all funds received through the collection of liens as prescribed in the
Repayment Agreement. Such funds must be submitted to
Hennepin County since they are identified as program income.
Hennepin County shall return the funds to the relevant project
account.
6. If an administering entity disburses loan funds without meeting all of
the certifications contained in Section II, then Hennepin County
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may, at its option, take whatever action it deems necessary,
including legal action, to recover from the recipient and /or the
administering entity, the loan funds so disbursed in violation of
such warranties.
G. Expediency of Loan Processing
Loans shall be processed in a reasonable length of time in an efficient and
accurate manner. Normally, a loan shall be completed, with the repayment
agreement filed, within six (6) months from the date loan processing is begun.
H. Maximum Loan Amount
For loans completed after March lst, 2001, the maximum loan amount shall be
$20,000.
In order to address the requirements of the US Department of HUD's Lead
Safe Housing Regulation (effective March 15th, 2001) as stated in the
Guidelines for the Evaluation and Control of Lead-Based Paint Hazards in
Housing, additional CDBG funds can be made available for lead-based paint
hazard reduction. As of the effective date, the impact of this regulation on
housing rehabilitation in suburban Hennepin is not known. Until sufficient
experience has been gained, any improvements carried out solely for the
purpose of mitigating lead-based paint will be funded as a grant and will not
be part of the lien amount placed against the property. The maximum funding
allowed under this grant will be $15,000, although Hennepin County reserves
the right to exceed this amount if exceptional circumstances exist directly
affecting the health and safety of borrowers and/or residents in their
neighborhood This policy will be reviewed annually until 2006 when sufficient
experience should allow for a more permanent policy.
In an attempt to best address both client needs and funding availability,
wherever possible, program funds should be used in conjunction with funds
from the Minnesota Housing Finance Agency (MHFA). If necessary, the
combined maximum loan amounts of $20,000 (CDBG) and $15,000 (MHFA)
may be used. However, in order to conserve resources, efforts should be made
to limit the CDBG funded portion to $10,000 or less.
III. RESPONSIBILITIES OF THE ADMINISTERING ENTITY
A. Outreach and Public Information
The administering entity will be primarily responsible for the promotion
of the housing rehabilitation loan program within its boundaries. The
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administering entity must exercise care in avoiding any advertising or
outreach methods which may be deemed to systematically exclude
potentially eligible applicants. Access to program materials may not be
denied to any person for any reason.
The program should include efforts to reach those persons who traditionally
would not have been expected to apply for housing programs In order to
develop an affirmative marketing program, the administering entity should
review its normal outreach methods to ensure that the loan program is made
available to persons who otherwise might not apply for assistance.
B. Inspection of Properties
1. The administering entity is responsible for carrying out a minimum of
two inspections of each approved. property. The first inspection
shall be performed immediately following the establishment of
applicant's eligibility. The Property Inspection Report is a formal
record of that first which lists all deficiencies in the dwelling and is
used to establish that sufficient funds are available to render the
dwelling reasonable habitable, safe and energy efficient.
The second mandatory inspection shall take place after the work is
finished, to determine that all work has been completed in a satisfactory
manner consistent with these guides, the Scope of Improvements, the
contractors bid and the Work Contract.
2. The administering entity may conduct interim inspections of the
property as it deems necessary.
C. Applicant Selection Criteria
A "first come, first served" applicant selection process will govern the
administration of the program except that priority may be given to applicants
who require CDBG funding so that work funded by the Minnesota Housing
Finance Agency and /or the Sustainable Resources Center or Energy
Assistance Program can proceed.
An administering entity may, at its discretion, elect to allow preference to
applicants requiring emergency assistance. The administering entity may
elect to limit assistance to the correction of the emergency situation (after
which the applicant will be returned, or added to, the waiting-list) or the
administering entity may elect to access the applicant to all available and
necessary loan funds at the time that the emergency situation is being
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addressed. The administering entity should notify Hennepin County of its
intentions regarding the use of CDBG funds for emergency improvements.
It is imperative that each application be dated immediately upon receipt. The
date of receipt shall be used as the sole criteria for recording priority ranking
of the applicants.
The administering entity shall adhere to the following guidelines:
1. The process must be uniformly applied during the entire funding year.
2. No eligible applicant shall be rejected on the basis of judgements as to
personal character or lifestyle as outlined in Section XII.
3. Where no funds are available for assistance to applicants, the following
procedure shall be used:
a. Explain to the applicant that the funding for the current year has
been either depleted or allocated.
b. Inform the applicant of the other possibilities which include the
MHFA Rehabilitation Loan Program, the MHFA Low Interest
Loan Program, and other local, state and federal programs.
c. Send the applicant a letter indicating that the application has been
placed on a waiting list but that there is no guarantee of
future funding. This letter should outline the other possible
avenues of obtaining home improvement funds.
D. Preparation of Scope of Improvements/Work Proposal
The Scope of Improvements is based on the Property Inspection report and
shall list all eligible improvements for which contractors shall provide bids.
The administering entity shall provide the homeowner with copies of the
Scope of Improvements as described in Section VII of these guides.
E. Preparation of Loan Package
The administering entity is responsible for the thorough and accurate
completion of all program documents, as specified in Section VII of these
Procedural Guides. Care must be taken to maintain current information on
the eligibility of the borrower consistent with Section VIII.
The administering entity shall assist the borrower with the preparation of the
loan package, upon request, although the solicitation of bids on the borrowers
behalf should be done only at the written request of the borrower.
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The borrower must be notified that the administering entity does not endorse
or recommend any contractor(s) and that the administering entity accepts no
responsibility for the performance of the contractor(s) appointed to carry out
the work.
F.Requests for Changes in Loan Amount
At the discretion of the administering entity, an expenditure of funds in excess
of the approved loan amount may be improved in the event of justifiable over
runs in the cost of improvements. The administering entity must document
increases or decreases in the loan amount according to the following
procedures:
1. All requests for increases, decreases or changes must be submitted on an
Amendment Request Certificate, signed by the borrower and
contractor; and
2. The administering entity shall inspect the property to determine that
the increase or decrease is justified; and
3. The administering entity will issue authorization for those loan amount
increases or decreases which meet the eligibility criteria set forth in
Section VII of these Procedural Guides. Such authorization will be
given by the administering entity signing the Amendment.
4. Where a new contractor is chosen, a Work Contract must be executed by
the borrower and contractor.
5. Should unforeseen circumstances arise while work is in progress which
require that the maximum loan amount stated in Sections VIII and
XI be exceeded, the administering entity must provide Hennepin
County with written justification of the need for additional funds.
The additional funds used must not exceed twenty-five per cent
(25 %) of the maximum loan amount adopted by the administering
entity.
6. Notwithstanding the terms of Section III.F.5. above, an administering
entity may elect to exceed the maximum loan amount by more than
twenty -five per cent (25 %) before work contracts are signed provided
that the participating community provides Hennepin County with
written authorization detailing the revised loan amount and the unique
and specific circumstances requiring the additional loan funds. This
written authorization must include formal acknowledgement that a
precedent has been established which would allow future applicants
access to the revised loan amount if they experience the same unique and
specific circumstances.
G. Disbursement of Funds
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The administering entity shall bear the responsibility of disbursing funds to
contractors who have performed work as described in the Improvement
Certificate.
No disbursement for any work completed shall be made until the property has
been inspected and a Completion Certificate has been signed, according to the
procedures set forth in Section X.
H. Prohibition of Service Fee Charges
No applicant or borrower shall be charged any application, processing, or other
fee.
IV. ELIGIBLE PROPERTIES
A. The property to be improved must not be in violation of applicable
zoning ordinances Properties being improved must constitute a
permitted use or be subject to a conditional or special use permit under
the applicable zoning ordinances
B. The property must be located within the jurisdiction of the
administering entity and must be used primarily for residential
purposes, and must contain no more than two dwelling units, one of them
owner-occupied. Improvements can only be made to the owner-occupied
unit, unless the improvement serves both units. Improvements that can
be made to both sides include re-roofing; painting, re-siding or re-
stuccoing; replacement of doors and windows; upgrading of shared
heating or electrical systems and commonly vented plumbing fixtures.
C . Loan funds must be used to finance only improvements upon or in
connection with existing structures.
D. The property to be improved must be permanent structure. That
includes owner-occupied mobile homes located on land owned by the
applicant. Trailers or mobile homes located on land not owned by the
applicant, are not eligible.
E. No property shall be eligible for a housing rehabilitation loan or grant if
it has been improved through the process of such a loan or grant within
the five-year period immediately preceding the date on which application
for such a loan is made, except in extraordinary circumstances relating to
damage to the property as a result of events beyond the control of the
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applicant or relating to health and safety concerns, as determined by the
administering entity or by the building or housing inspector. In such
circumstances, provided that funding is available, the borrower, if still
eligible, can receive assistance limited to correcting the damaged or
failed system(s) only. No other eligible work can be carried out until
another five year period has elapsed, except in the extraordinary
circumstances outlined above.
F. Urban Hennepin County CDBG rehab monies can only be used when
federal flood insurance is in effect. The administering entity will comply
with the flood insurance purchase requirements of Section 102 (a) of the
Flood Disaster Protection Act of 1973, Pub. L. 93-234, 87 Stat. 975,
approved December 31, 1973. Section 103 (a) requires the purchase of
flood insurance in communities where such insurance is available as a
condition for the receipt of any federal financial assistance for
construction or acquisition purposes for use in any area that has been
identified by the Secretary of the Department of Housing and Urban
Development as an area having special flood hazards. The phrase
"federal financial assistance" includes any form of loan, grant, guarantee,
insurance payments, rebate, subsidy, disaster assistance loan or grant,
or any other form of direct or indirect federal assistance.
V. IMPROVEMENT STANDARDS
Goals for housing rehabilitation assistance for homeowners have been
established in the Urban Hennepin County Consolidated Plan. For the
property to be counted toward meeting housing rehabilitation goals in the
Consolidated Plan, it must be determined to be substandard and suitable for
rehabilitation. Upon completion of rehabilitation the housing unit must meet
minimum Section 8 existing housing quality standards pursuant to 24 CFR, as
follows:
Dwellings improved under this program shall generally meet the Performance
Requirements and Acceptability Criteria set forth in this section except for
such variations as are proposed by the administering entity and approved by
HUD. Local climatic or geological conditions or local codes are examples
which may justify such variations.
A. Sanitary Facilities
1. Performance Requirement. The dwelling unit shall include its own
sanitary facilities which are in proper operating condition, can be
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used in private, and are adequate for personal cleanliness and the
disposal of human waste.
2. Acceptability Criteria. A flush toilet in a separate, private room, a
fixed basin with hot and cold running water, and a shower or tub
with hot and cold running water shall be present in the dwelling
unit, all in proper operating condition. These facilities shall utilize
an approved public or private disposal system.
B. Food Preparation
1. Performance Requirement. The dwelling unit shall contain suitable
space and equipment to store, prepare, and serve foods in a
sanitary manner. There shall be adequate facilities and services for
the sanitary disposal of food wastes and refuse, including facilities
for temporary storage where necessary.
2. Acceptability Criteria. The unit shall contain the following
equipment in proper operating condition: a cooking stove or range
and a refrigerator of appropriate size for the unit and a kitchen sink
with hot and cold running water. The sink shall drain into an
approved public or private system. Adequate space for the storage,
preparation and serving of food shall be provided. There shall be
adequate facilities and services for the sanitary disposal of food
wastes and refuse, including facilities for temporary storage where
necessary (e.g., garbage cans).
C. Thermal Environment
1. Performance Requirement. The dwelling unit shall have and be
capable of maintaining a thermal environment healthy for the
human body.
2. Acceptability Criteria. The dwelling unit shall contain safe heating
facilities which are in proper operating condition and can provide
adequate heat to each room in the dwelling unit to ensure a healthy
living environment. Unvented room heaters which burn oil or
kerosene are unacceptable.
E. Illumination and Electricity
1. Performance Requirements. Each room shall have adequate
natural or artificial illumination to permit normal indoor activities
and to support the health and safety of occupants. Sufficient
electrical outlets shall be provided to permit use of essential
electrical appliances while assuring safety from fire.
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2. Acceptability Criteria. Living and sleeping rooms shall include at
least one window. A ceiling or wall type light fixture shall be
present and working in the bathroom and kitchen area. At least
two electric outlets shall be present and operable in the living area,
kitchen area and each bedroom area.
F. Structure and Materials
1. Performance Requirements. The dwelling unit shall be structurally
sound so as not to pose any threat to the health and safety of the
occupants and so as to protect the occupants from the environment.
2. Acceptability Criteria. Ceilings, walls and floors shall not have any
serious defects such as severe bulging or leaning, large holes, loose
surface materials, severe buckling or noticeable movement under
walking stress, missing parts or other serious damage. The roof
structure shall be firm and the roof shall be weathertight The
exterior wall structure and exterior wall surface shall not have any
serious defects such as serious leaning, buckling, sagging, cracks or
holes, loose siding, or other serious damage. The condition and
equipment of interior and exterior stairways, halls, porches,
walkways, etc. shall be such as not to present a danger of tripping
or falling. In the case of a mobile home, the home shall be securely
anchored by a tie down device which distributes and transfers the
loads imposed by the unit to appropriate ground anchors so as to
resist wind overturning and sliding.
G. Interior Air Quality
1. Performance Requirement. The dwelling unit shall be free of
pollutants in the air at levels which threaten the health of the
occupants.
2. Acceptability Criteria. The dwelling unit shall be free from
dangerous levels of air pollution from carbon monoxide, sewer gas,
fuel gas, dust and other harmful air pollutants. Air circulation
shall be adequate throughout the unit. Bathroom areas shall have
at least one operable window or other adequate exhaust ventilation.
Water Supply
Performance Requirement.
contamination.
Acceptability Criteria. The unit shall be served by an approved
public or private sanitary water supply.
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The water supply shall be free from
I. Lead Based Paint
1. Performance Requirement. The dwelling unit shall be in
compliance with HUD Lead Based Paint regulations, 24 CFR, Part
570, issued pursuant to the Lead Based Paint Poisoning Prevention
Act. 42 U.S.C. 4801.
2. If the property was constructed prior to 1978, the family, upon
occupancy, shall have been furnished the notice required by HUD
Lead. Based Paint regulations and procedures regarding the
hazards of lead based paint poisoning, the symptoms and treatment
of lead poisoning and the precautions to be taken against lead
poisoning. Documentation of the applicants receipt of the notice
must be included in the file.
3. Acceptability Criteria. Same as Performance Requirement.
J. Access
1. Performance Requirement. The dwelling unit shall be usable and
capable of being maintained without unauthorized use of other
private properties, and the building shall provide an alternate
means of egress in case of fire.
2. Acceptability Criteria. The dwelling unit shall be usable and
capable of being maintained without unauthorized use of other
private properties. The building shall provide an alternate means
of egress in case of fire (such egress through windows).
K. Site and Neighborhood
1. Performance Requirement. The site and neighborhood shall be
reasonably free from disturbing noises and reverberations and
other hazards to the health, safety and general welfare of the
occupants.
2. Acceptability Criteria. The site and neighborhood shall not be
subject to serious adverse environmental conditions, natural or man
made, such as dangerous walks, steps, instability, flooding, poor
drainage, septic tank back-ups, sewage hazards or mud slides,
abnormal air pollution, smoke or dust, excessive noise, vibration or
vehicular traffic, excessive accumulations of trash, vermin or rodent
infestation or fire hazards
L. Sanitary Conditions
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1. Performance Requirement. The unit and its equipment shall be in
sanitary condition.
2. Acceptability Criteria. The unit and its equipment shall be free of
vermin and rodent infestation.
VI. ELIGIBLE IMPROVEMENTS
A. Each improvement must be a permanent general improvement.
Permanent general improvements shall include such alterations,
renovations, or repairs upon or in connection with existing structures,
which correct defects or deficiencies in the property affecting directly the
safety, habitability or energy consumption of the property. A permanent
general improvement must be economically viable in terms of a
determination that after the improvement is made:
1. The structure will have remaining useful life such that the total
amount of the repairs required to bring the house up to Section 8
quality standards may be amortized over such life in an
economically prudent manner. Generally, the total amount of the
required repairs should not exceed 50% of the estimated market
value of the property as indicated on the property tax statement.
2. For the term of the repayment agreement, the lien should be
collectable. Thus all existing mortgages, contracts for deed, and
other encumbrances, including the repayment agreement, should
not exceed the value of the property as stated in the County
Recorder's office. Any Administering Entity wishing to waive this
requirement must provide Hennepin County with written
justification and must receive written approval from Hennepin
County in return. In communities where Hennepin County acts as
the Administering Entity, the city must formally approve this
waiver. Examples where the waiver might be requested include an
emergency situation or circumstances where repairs are needed to
make a vacant property habitable for a low-income family intending
to purchase it.
3. The structure will be reasonably livable, safe and habitable.
Permanent general improvements shall not include materials,
fixtures, or landscaping of a type or quality exceeding that
customarily used in the locality for properties of the same general
type as the property improved.
B. Each improvement must be made in compliance with all applicable
health, fire prevention, building and housing codes and standards.
However, no application for a loan shall be denied solely because the
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improvements will not bring the property into full compliance with all
such codes and standards.
Further, when work is done on any system within the house, upon
completion of the work, that entire system must meet applicable codes
and standards; however, the entire structure may still contain other
systems, on which no work was done, which are not up to applicable
codes and standards.
C. Loan funds may be used for the portion of improvements located on the
property which will bring an individual water supply system or an
individual sewage disposal system (including septic systems) into
compliance with local, state or federal environmental and sanitary
standards provided no public utility service is available. Payment of
applicable SAC charges are an eligible grant expense.
D. No loan funds shall be used in whole or in part for the purpose of
refinancing or paying off an existing indebtedness. All such funds must
be used to finance improvements begun after the execution of a Work
Contract prepared by the loan administrator and signed by the loan
recipient and the contractor.
E. The city may approve special improvements only in the described
circumstances indicated below:
1. Bedroom additions may be allowed in cases of severe overcrowding.
For the purpose of this program, a dwelling will generally be
considered "overcrowded" if there is an average of more than one
person per room (excluding bathroom) in the dwelling, or as
otherwise approved by the city.
2. Bathroom additions may be allowed in cases of inadequate indoor
bathroom facilities only if no other space in the structure is
appropriate for such facilities.
NOTE: In cases of applicants with impaired mobility, request for
room additions will be reviewed in compliance with procedures
for loans including accessibility improvements, as outlined in
Section XI.
F. Demolition of out buildings is allowed only when such clearance is
required by the local building code. Loan funded improvements cannot
be limited to demolition only, except in circumstances determined as
exceptional by the loan administrator.
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G. Reconstruction of sidewalks and driveways is allowed only on private
property and only if existing conditions are a clear and imminent safety
hazard.
H. Water drawn from a valid well must be potable (safe for drinking) and
must be free of sand, grit or other material which might damage the
pump or plumbing. Water need not be free from minerals which may
make it cloudy nor must it be free from odor. NO FUNDS WILL BE
DISBURSED BY THE CITY UNTIL AND WHEN WATER IS STRUCK.
It is an eligible improvement to connect a house to city water and /or
sewer when conditions affecting the health of the residents are present or
when required by local law.
I. Exterior finishing (painting or siding) is allowed only to the extent that
there is severe deterioration of current exterior finishing. Exterior
finishing requested solely for cosmetic purposes will not be approved.
J. Where property is not reasonably energy efficient, loan funds must be
used to the extent necessary to increase such efficiency. Energy saving
features shall be consistent with the energy standards promulgated as
part of the State building code, but such improvements need not bring
the housing into compliance with such energy standards.
K. Smoke detectors must be installed in all dwellings being improved with
loan funds, unless detectors are already properly installed. At least two
detectors are required for each dwelling unit. If a smoke detector is
already properly installed, that must be reported on the inspection
report. All properties being improved must contain adequate smoke
alarms following completing of the rehabilitation work.
L. Where the house numbers are not present or are not installed to
applicable city codes and ordinances, they shall be installed properly.
M. The installation, replacement or repair of cook tops, oven ranges and
refrigerators is eligible provided that it is absolutely necessary and
consistent with Section V. B. 2.
N. CDBG Housing Rehabilitation Program Procedural Guides: Lead-Based
Paint
1. Applicable to all clients:
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a. The use of lead paint in any structure rehabilitated
with CDBG funds is prohibited.
b. Inspection and/or test results for all clients will be maintained
for three years.
2. Applicable to clients whose properties were constructed prior to
1978:
All such clients will receive a copy of "Lead-Based Paint
Poisoning Notification." Upon receipt of this notification, the
client will sign and date a form verifying receipt of this
information.
3. Applicable for clients whose house was constructed prior to 1978
and occupied by children under age seven:
a. The administering entity must inspect for defective paint
surfaces. Defective paint surfaces are defined as all exterior
and interior surfaces of a residential structure where the
paint is cracking, scaling, chipping, peeling or loose.
b. Defective paint conditions are to be included in the inspection
report and treatment of the defective areas must be included
in the work write-up. (See TREATMENT /ABATEMENT
section).
4. Applicable to all clients whose home was constructed prior to 1978
and with a child under seven with an identified Elevated Blood
Level condition:
a. In order to receive any CDBG funds, the client must agree to
the following:
i) The lead content of chewable surfaces, which are all
chewable protruding paint surfaces up to five feet from
the floor or ground and which are readily accessible to
children under seven years of age (protruding corners,
window sills, frames, doors) will be tested using an X-ray
fluorescence analyzer (XRF) or another HUD approved
method. Test readings of lmg. cm2 are considered
positive for the presence of lead-based paint
If lead-based paint is present, all interior chewable
surfaces in any affected room shall be treated. Where
exterior chewable surfaces are found to contain lead -
based paint, the entire exterior chewable surface will be
treated. Treatment of any lead-based paint will be
included in the work write-up. Testing and treatment
for lead -based paint (see TREATMENT/ ABATEMENT)
is an eligible loan expense.
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Treatment of defective areas shall be completed before
the final inspection and approval of work.
5. Treatment /Abatement of lead-based paint.
The work write -up shall include either a covering or a removal
method approved by HUD.
Covering: Adding a layer of gypsum wallboard or fiberglass cloth
barrier. Permanently attached non-strippable
wallpaper. Covering or replacing trim surfaces.
Removal: Accomplished by scraping, heat treatments (infra-red or
coil type heat guns) or chemicals.
METHODS NOT ALLOWED: Machine sanding and use of propane
torches, washing and repainting without thorough removal or
covering.
O. The installation, repair or replacement of a central air conditioning unit
is eligible provided that the client has produced a written statement from
a physician indicating that the good health of a permanent occupant of
the dwelling is dependent upon such an installation, repair or
replacement. A statement that a permanent occupant will "benefit" from
central air conditioning is not sufficient justification.
P. Work on exterior decks, attached to the house and used as a means of
entry is eligible provided that:
1. The condition of the existing deck is unsafe.
2. The work shall be limited to making the deck safe and structurally
sound.
3. Bids are obtained on both:
a.. the cost of repairing the deck to make it safe and structurally
sound; and
b. on replacing the deck with steps or stairway which meet code
requirements; and that the loan funded improvements are
limited to the lesser or the two costs. (If replacement with
steps or stairway is the cheaper option the client can elect to
use those funds toward repairing or replacing the deck itself
provided that the balance of the cost is met by the client.)
4. If the deck is made of pine or other untreated or non-water
resistant material, it must be removed and replaced with steps or
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VII. ELIGIBLE RECIPIENTS
A. Ownership
stairway because it will not retain its structural integrity
throughout the lien period.
If a client refuses to accept the replacement of a deck with steps or
stairway and declines to contribute towards the cost of
repair /replacement then, the maintain eligibility, the client must
sign a waiver acknowledging the condition of the deck and holding
the administering entity and Hennepin County harmless.
Applicants must meet all the requirements set forth in these Procedural
Guides.
1. The property to be improved must be the borrowers principal place
of residence (i.e., for nine months in any twelve month period), and
the borrower must have a qualifying interest in the property
although that interest may be aggregated with the ownership
interest of other individuals occupying the property as their
principal place of residence. A qualifying interest shall consist of
a. A valid life estate. Such life estate must be recorded and must
appear in the records of the County; or
b. A one-third interest in the fee title. Such interest may be
subject to a mortgage; or
c. A one-third interest as a purchase in a contract for deed in the
property to be improved. Such contract for deed must be
recorded and must appear in the records of the County.
2. All individuals having an ownership interest in the property to be
improved must sign the Repayment Agreement, except in the case
of a Life Estate where only one of the remaindermen need
sign.
3. Ownership shall be based on the information recorded in the
appropriate County Recorder's Office.
4. The borrower must be current on contract for deed payments,
mortgage payments and property taxes on the property to be
improved. If any of these payments are in arrears, they must be
made current before the application can be approved for funding. If
the applicant is delinquent on any of these above mentioned
payments or taxes, the loan may only be given if the applicant is
current on a payment schedule with the appropriate agency.
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B. Household Gross Annual Income
1. To be eligible for a Residential Rehabilitation Grant, the borrower
must have a household gross annual income at or below 50% of the
Area Median Income for the household. size, (also known as Section
8 Very Low Income). To qualify for half of the rehab cost in the form
of a grant and the remaining half in the form of a loan, the
borrower's gross annual household income cannot exceed 65% of the
Area Median Income for the household size. To be eligible for a
Residential Rehabilitation Loan, the gross annual household
income cannot exceed 80% of the Area Median Income.
Gross annual income is defined as the gross annual income, from all
sources before taxes or withholding, of all individuals not paying
rent who expect to continue living in the housing unit for at least
nine (9) months of the twelve month period immediately following
the date upon which eligibility processing is begun.
The administering entity should be aware that non-recurring types
of income should be included as assets rather than as income.
Items for inclusion under this category may include a single gift of
cash from a party or parties, cash sales of property, receipt of one
time survivor benefits, etc. A one time sale of stock does not count
as income, but rather the proceeds are counted as assets.
2. Gross annual income includes:
a. Any public assistance, including, but not limited to: welfare,
AFDC, SSI, and unemployment compensation.
b. Salaries (including commissions, bonuses, overtime pay and
tips).
c. Alimony and/or child support.
d. Interest and dividends.
e. Pensions and annuities, include P.E.R.A. and social security.
f. Rental income, farm rental income.
g. Estate or trust income.
h. Gains from the sale of property.
i. Payment received from properties being sold on contracts for
deed.
j. Partnerships.
k. Personal and/or business loans.
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1. Miscellaneous income (including recurring gifts from a party
or parties).
3. Gross annual income shall be based upon annualized weekly or
monthly income as of the date of verification.
4. In cases where the gross income of the applicant's household is
extremely low, the applicant must produce written verification of
the household's monthly expenditures, clearly itemizing the amount
of money and its source on all of, but necessarily only, the following
applicable items: mortgage; contract for deed; insurance; loans;
income and property taxes; transportation expenses; charge
accounts; health costs; food.; utilities; clothing; and entertainment.
These expenses shall determine the household maintenance
income.
5. Any income determination which results in a net LOSS of income
must be considered as $0 income. That is, an income loss from one
source may not be subtracted from a separate source of income for
the purpose of determining total household gross annual income.
6. Projected bonus and/or overtime will be determined by the loan
administrator through contacting an employer. The amount may
be based prior to years figures or average amounts awarded to
other employees with the same status. The most recent IRS tax
return may also be used for these purposes.
Q Self-employed persons must submit signed copies of IRS tax
returns, as sent, for the previous two years. Applications processed
before April 15th of any given year may use the IRS tax returns
from the second and third preceding years if that for the first
preceding year is not available Applications processed after April
15th of any given year must use the IRS tax returns from the first
and second preceding years. The administering entity will
determine gross annual income by averaging the income from the
two submitted returns. Normal out-of-pocket business expenses
such as office rents, telephone, etc., are generally deductible items.
Property or equipment depreciation and entertainment are not
deductible and must be added back to establish income for program
purposes.
S. Individuals who have been self-employed for less than two years
must submit both a Net Worth Statement and a properly prepared
cash basis Profit and Loss Statement detailing the business income
and expenditure. Both Statements should be prepared and signed
by a reputable third party although the applicant may prepare one
provided that it is endorsed by a reputable third party and that it
includes a declaration that all information contained in the
Statement is accurate and complete and that the applicant is aware
21
that any errors or evasions may result in prosecution. If the
individual can produce a signed IRS return for one complete year of
self-employment and a Profit and Loss Statement for the
subsequent period, that will be acceptable.
9. Income from rental properties, including rents from the property to
be improved, shall be included in gross income. A statement, signed
and dated by the tenant(s), which shows the monthly rent paid is
adequate verification of rental income. Expenses allowable for
deduction for rental purposes include a proportional share of
mortgage interest payments, utilities, taxes, insurance, and
maintenance. In no event shall such deductions exceed gross rental
income.
10. The Calculation of Gross Annual Income may NOT be based on
temporary condition such as unemployment or temporary worker's
compensation. Households receiving unemployment compensation
are ineligible for assistance unless:
a. unemployment recurs on a regular basis and is a
consistent element in gross annual income. In such
instances, income from this source shall be determined as
follows. Establish the anticipated annual income if the
individual were to be employed for twelve months at the
weekly rate current at the time of verification; deduct the
average number of weeks the individual received
unemployment for the past two years (from the federal
income tax returns); add an amount equal to the average
number of weeks unemployed multiplied by the weekly
amount to which the individual is or;
b. the individuals income, when working, was such that it
would not have been an obstacle to eligibility. The
individual must be able to demonstrate at least two years
history of employment at such anincome (either with
copies of federal income tax returns or by statements from
former employers if the income received was too
low to require tax returns to be filed.) In instance where
two years of such employment cannot be verified, the
administering entity should consult Hennepin County.
Gross Annual Income may not be based on temporary nonrecurring
unemployment of known duration, such as that due to lay-offs,
maternity leave, sabbatical leave, etc. Rather, income shall be
22
calculated based on the normal annual Income of the temporarily
unemployed person.
Application of those who are unemployed for an unknown period of
time shall not be considered until the unemployed household
member has exhausted all eligibility for unemployment
compensation and the employer indicates a callback date is
unknown. At that time, the household must be able to demonstrate
that it is both income eligible and capable of meeting its monthly
obligations, as outlined in paragraph VII B 4 above.
If worker's compensation is permanent income, it must be verified
by the insurance company.
C. Deductions from Gross Income
The following list is not complete and it is suggested that Hennepin
County be consulted when an administering entity encounters any
unusual income situations.
1. Personal loans which must be repaid at a later date, (a copy of the
loan agreement /payment schedule must be included in the file).
2. Alimony or child support payments to individuals not residing
permanently in the property to be improved, (a copy of the
pertinent section of the divorce decree must be included in the file)
3. The income of any resident under the age of eighteen.
4. Payments received for the care of foster children.
5. The income of a live-in aide.
6. Educational grants or scholarships, including VA educational
benefits, provided that the recipient is registered for classes in the
quarter during which the eligibility verification occurs or for the
quarter immediately following.
D. Asset Determination
1. "Gross Assets" shall generally be defined as the current market
value of an item listed minus existing indebtedness on that item,
including:
a. Cash on hand.
b. Cash in checking accounts.
c. Cash in savings accounts, including accounts held in trust.
d. The cash value of life insurance policies.
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e. The cash value of securities, bonds, mutual funds, cash value
of a life insurance policy, etc. Employer sponsored or
qualifying individual retirement programs are NOT included
as assets.
f. The current market value of all interest in real estate, not
including the structure to be improved and a parcel of real
property of not more than two (2) acres on which the structure is
located. Included in this determination is any land in which any
household resident holds title or is selling on contract for deed.
The value of the contract for deed property shall be defined as
100% of the outstanding balance on the contract at a time twelve
months following the date of the income and other asset
verifications. The dollar amount of the difference between the
outstanding balance at the time of the verifications and the
outstanding balance twelve months later shall be included as
household income.
g. All other property, exclusive of household furnishings, clothing,
and one vehicle. This section includes, but is not limited to:
business equipment, boats, snowmobiles, motorcycles, farm
stock and additional vehicles.
h. If the applicant owns a business, in full or in part, and that
business is incorporated, then the business equipment is not a
personal asset. An exception exists when the corporation is an
S Corporation with members of the household as
shareholders. In this instance, the household is regarded as
having assets equal to the proportional value of the shares
held to the total assets held by the S Corporation. If the
business is not incorporated, the business equipment is then
considered a personal asset. The value of the ownership of the
business by the applicant is a personal asset. If the applicant
owns less than 100% of the business, written, notarized proof
of the percent of ownership must be provided by the applicant
to the administering entity.
2. Borrower's asset limit: The gross assets of the borrower, excluding
the residential property to be improved, shall not exceed $25,000
except in those instances where at least 50% of the borrowers
annual gross income is derived from interest earning assets. In
such cases the asset limit may be raised to $35,000.00
VIII. LOAN APPLICATIONS
In order to assist in the monitoring of individual loans, file folders shall be
divided into two parts. The right hand side of the file folder shall contain, in
24
chronological order, all correspondence, memos to the file, any photographs, all
unused bids, a copy of the filed Repayment Agreement, (item T) and any other
relevant documentation including, if necessary, the Complaint Record, (item
U). The left-hand side of the file folder shall contain, either front to back or
back to front, the documents, identified as items A through S, in the following
order:
A. Homeowner Application for Loan
The application shall be completed in full and signed and dated by the
Applicant.
The Homeowner Application for Loan provides:
1. Household information.
2. Income information.
3. Assets information.
4. Property information.
B. Individual Data Confidentiality
The applicant's rights as a subject of data are fully described in this
form This form is given to the applicant and not retained for the grant
package. The file should, however, include the receipt portion signed and
dated by the applicant.
C. Lead Based Paint Poisoning
The file must contain a signed and dated receipt from the applicant,
acknowledging that the H.U.D. approved information on the dangers of
Lead Based Paint Poisoning has been received.
D. Letter to the Minnesota Historical Society
If the property to be improved is more than fifty (50) years old, Historical
Society Clearance must be secured from the Minnesota Historical
Society. A form letter to be used in these instances will be provided by
Hennepin County.
E. Income Verification
All sources of income listed on the Homeowner Application for Loan must
be verified by the administering entity. EVIDENCE OF SUCH
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VERIFICATION MUST BE INCLUDED IN THE LOAN PACKAGE.
The following is a list of acceptable forms of income verification evidence:
1. Written verification from employers or other income providers.
2. Copies of four recent checks or check stubs, which must include the
Year-to-Date earnings.
3. IRS forms only in the case of self-employed individuals (See Section
IV.)
4. Statements of deposit from bank.
5. Copies of deposit slips indicating the deposits of a particular check.
6. Income derived from rent must be verified by the renter in writing
or by examining copies of checks or rent receipts.
The date of document used in verifying income must not be more than
180 days previous to the date of approval. If it is more than180 days,
income(s)must be reverified before a loan application can be approved
F. Asset Verification
All assets listed on the Homeowner Application for loan must be verified
by the administering entity. EVIDENCE OF SUCH VERIFICATION
MUST BE INCLUDED IN THE LOAN PACKAGE, The following is the
only acceptable form of asset verification evidence:
1. Written verification from banks, insurance companies or other asset
holders.
2. Copies of bank statements, insurance policies, premium notices and
the like.
The date of document used in verifying assets must not be more than180
days previous to the date of approval. If it is more than 180 days old, the
assets must be reverified before a loan application can be approved.
G. Mortgage Status Verification
The administering entity must ensure that the mortgage(s) and /or
contract for deed(s) on the property to be improved are current. If
payments are in arrears, the applicant must be given four weeks to make
them current. The date of the document used in verifying the mortgage
and/or contract for deed must not be more than 180 days previous to the
date of approval. If it is more than 180 days old, the mortgage status
must be reverified before a loan application can be approved.. If the
mortgage company charges a fee for verification of mortgage status, that
26
fee must be paid by the applicant. .Alternatively, the administering
entity can accept copies (front and back) of cancelled checks accounting
for mortgage payments for the last six months.
H. Zoning Status Verification
The property to be improved must be in compliance with all applicable
zoning requirements.
I. Title Verification
1. The administering entity must obtain the following information
from the County Recorder or Registrar of Titles regarding each
property:
a. The full name(s) and marital status of all owners of record,
exactly as they appear on the title.
b. Whether it is Torrens or Abstract.
c. Confirmation that applicants are either current on their
property tax payments or are current on a Confession of
Judgement to repay delinquent taxes.
d. The relevant document number (plus book and or page,
number if necessary) of the deed establishing the applicant's
interest in the property.
e. A complete and accurate legal description of the property to be
improved.
2. Upon obtaining this information, the administering entity must
determine that the applicant individually or in the aggregate has a
qualifying interest in the property consisting of at least:
a. A valid life estate Such life estate must be recorded and must
appear in the records of the County; or.
b. A one-third interest in the fee title. Such interest may be
subject to a mortgage; or
c. A one-third interest as a purchaser in a contract for deed with
respect to the structure being improved.
3. In addition, the applicants must occupy the property as the
principal place of residence. To consider a property the principal
place of residence, an individual must:
27
a. Reside in the property at the time of application (except where
extraordinary circumstances have made the property
temporarily uninhabitable); and
b. Occupy the property for at least nine months of the year.
4. For the purpose of complying with ownership requirements, the
borrower may aggregate his/her interest in such property with the
ownership interest of other individuals occupying the property as
their principal place of residence.
J. Property Inspection Report
1. Must be included in the loan package and must include the
following items:
a. General condition of the structure.
b. Structural soundness.
c. Plumbing systems, including: water supply, waste disposal,
fixtures and piping systems.
d. Heating systems.
e. Electrical systems.
f. Roof.
g. Energy efficiency including: insulation, infiltration, windows,
doors and ventilation.
h. General exterior conditions.
i. General interior conditions.
An explanation should be provided for any deficiency which appears
on the inspection report but does not appear on the Rehabilitation
Work Summary for correction. The inspection report must be
signed and dated by the inspector performing the inspection.
2. Major infractions of the city building codes constituting a health
and/or safety hazard or seriously diminishing the habitability of the
residence will be noted and explained to the applicant. The
applicant will be required, as a condition of funding, to contact the
City Building Inspector to establish that repair of these major
infractions is within the scope of available monies. A copy of the
City Building Inspectors written report must be included in the file.
If it is determined that the cost of necessary repairs exceeds the
available monies, then the loan application will be withdrawn.
K. Scope of Improvements and Work Proposal
28
This listing of all eligible improvements should be kept on file in case the
borrower requires additional copies. At least three copies will be sent to
the borrower along with a mandatory cover letter encouraging the
consideration of minority or women-owned contractors as potential
bidders and including information on how to access such contractors. A
copy of this letter must also be included in the file.
The Scope should allow contractors the opportunity to submit alternates
or amendments to work items; however, funding of any such alternate or
amendment is dependent upon the existence of a second bid for the same
alternate or amendment. The Scope must also contain an explanation of
the bidding procedures, contract procedures, contract amendment
procedures, completion procedures and payment procedures.
L. Rehabilitation Work Summary
The administering entity in conjunction with the borrower, determines
the work to be done with the funds available. If the borrower disagrees
with the administering entity's choice of improvements, items may be
waived by the borrower, in writing, at the discretion of the administering
entity. The Rehabilitation Work Summary lists;
1. The improvements as itemized on the Scope of Work, with the cost
of each work item along with the name of the contractor performing
the work.
2. The total cost of the work to be performed
M. Contractor Bids
The borrower should obtain a minimum of two bids for each of the
authorized improvements. All bids must conform to the minimum
standards of the technical specifications. (The unused bids should be
kept on the right hand side of the file folder). Under certain
circumstances, such as extremely adverse working conditions,
uncooperative clients or unusual or uncommon types of improvements,
the administering entity may elect to secure only one bid, provided that
the file contains a proper cost estimate (prepared by the administering
entity) which demonstrates cost reasonableness. Cities acting as their
own administering entity must secure the written agreement of
Hennepin
29
County. In instances where Hennepin County is acting as administering
entity, the written agreement of the city providing the rehabilitation
funds must be secured.
N. Work Contract
The contractor submitting the lowest acceptable bid must sign a Work
Contract provided by the administering entity. A copy of each bid for all
work to be performed by each contractor must be included in the Work
Contract as Schedule A. Work shall be completed within the time frame
specified on the Work Contract. The city may grant an extension under
unusual circumstances. This extension must be in writing with a copy
given to the homeowner and contractor.
0. Amendment Request Certificate or Change Order Request
30
P. Contractor Bills
Q.
The form outlines all changes in the approved loan amount, either
additions or subtractions by each contractor. It must be signed by
the contractor and the borrower and approved by the
administering entity. A revised bid must be attached. Every effort
must be made to keep Amendment Requests to a minimum. The
use of excessive Amendment Requests tends to indicate failures in
either the Property Inspection Report and /or the Scope of
Improvements and this in the administration of the program itself.
Since housing rehabilitation is not an exact science, it is
appropriate to use the Amendment Request as a means of dealing
with unforeseeable problems.
Bills must be obtained from each firm or individual contracted to
perform work on the residence (in other words, a general
contractor can submit bills on behalf of a sub-contractor) Bills
must be provided for all payments, interim or final.
Sworn Construction Statement
Any firm or individual contracted to perform work on the residence
must submit a Sworn Construction Statement along with the bill
before any payment, interim or partial, can be released. The
Sworn Construction Statement must list all subcontractors and/or
suppliers contributing to the work for which the bill is being
submitted and must b signed by the contractor holding the Work
Contract. The contractors signature must be notarized. The
purpose of this form is to ensure that the contractor holding the
Work Contract is liable for any failure to pay sub-
contractors/suppliers involved in the project.
R. Lien Waivers
Original lien waivers referred to in the Sworn Construction
Statement, plus the lien waiver from the contractor holding the
Work Contract, must be included in the file and must be secured
before any payment is released. Copies of all lien waivers may be
passed onto the borrower following close-out of the file.
S. Completion Certificate
31
This form should be signed by the borrower and the contractor
when the loan work undertaken by the contractor is completed. If
the work involves a building permit, or if code work is involved,
then the relevant inspector should sign in the space provided. If
the approval of more than one inspector is required, then copies of
the Inspection Notice(s) should be attached. The Completion
Certificate must always be accompanied by a bill for the work
done. Funds can ONLY be released in the amount authorized by
the borrower's signature on the Completion Certificate. No
payments can be made if the borrower refuses to sign a
Completion Certificate.
T. Data on Individual Loans
Regardless of the manner in which documents A through S are
placed in the file, when the loan is closed out, this form should be
at the front of the file on the left hand side. The form provides
information pertaining to environmental assessment, historical
preservation, Section 8 quality housing standards, census tract
data and household size and annual income. It is required that
the Flood Zone information (line 7) be properly completed. The
administering entity must list the Flood Zone Classification (A, B,
or C) and the National Flood Insurance Rate Map Number
U. Repayment Agreement
The original Repayment Agreement, or the copy returned by the
Registrar of Titles, must be included in the loan package and
should be located on the right-hand side of the file. As specified in
the provisions of the Repayment Agreement, the borrower shall be
required to notify the administering entity immediately upon sale,
transfer, conveyance or cessation of residency of the property. A
copy of the Repayment Agreement must be sent to the borrower
and to any other signatories requesting a copy Administering
entities may elect to keep the Repayment Agreements in a
separate file dedicated for that purpose.
1. The Repayment Agreement provides that in the event that
the improved property is sold, transferred, or otherwise
conveyed by the borrower within the term of the loan (12
years) or grant (6 years) from the date upon which the project
was completed, or in the event that such property ceases to
be the borrower's principal place of residence during the
loan/grant term, then the borrower shall repay the balance of
32
the loan or grant. The Repayment Agreement is a lien on the
improved property, in favor of the administering entity, as
security for the loan/grant amount.
2. The administering entity must exercise extreme care in the
execution of the Repayment Agreement document to ensure
that the lien is valid. Any inaccuracy or omission may have a
negative effect on the validity of the lien.
Pior to the approval of the loan package, the administering
entity must ensure that the Repayment Agreement be
properly completed in as much as
a. The property description must be exactly as it appears
in the property records. If the applicant owns property
other than that on which the structure to be improved
is located, only the description of the property to be
improved should be included.
b. The record names (the names exactly as they appear in
the property records) must be used by all whose
signatures are required.
The following is a brief discussion of the signatures
required under particular property ownership
situations:
i. Any JOINT TENANCY--signatures of all joint
tenants are required.
ii. Property held by ONE SPOUSE--signatures of
BOTH spouses are required.
iii. Property held in LIFE ESTATE--signatures of the
applicant (life estate holder) and signature of
sufficient remaindermen to comprise one
interest, or remaindermen.
iv. Property being purchased on CONTRACT FOR
DEED - -signatures of the applicant and all
individuals who are aggregating their interest to
meet the ownership requirement; and the fee
title holder (and spouse or others, as applicable)
of the property; and the signatures of any
intervening vendees of the contract for deed.
v. Under normal circumstances, contract for deed
vendors, separated spouses or others not in
residence and adequate numbers of
remaindermen MUST execute the Repayment
33
Agreement to render it legally binding. However,
administering entities can elect to waive this
requirement and record a Repayment Agreement
only under the applicants interest SOLELY
because the funds secured by the Repayment
Agreement are required to address issues
severely affecting the health and safety of the
applicants household or to correct chronic
structural problems identified by the city
building official. Cities acting as their own
administering entity must secure the written
agreement of Hennepin County. In instances
where Hennepin County is acting as
administering entity, the written agreement of
the City of Hopkins must be secured.
c. i. All required signatures must be notarized,
including the "mark" of a signatory who is unable
to write (such a mark must be witnessed by at
least two persons other than the notary).
Additional acknowledgements may be added to
the Repayment Agreement form to accommodate
any necessary notarizations.
ii. All dates (except those in the notary's
acknowledgements) in the Repayment Agreement
shall be left blank until the loan is approved.
d. In order to best protect its interest in the property to be
improved, the administering entity should record the
Repayment Agreement, in the amount of the contracted
work, before any work begins. The administering entity
shall, in writing, inform the borrower and all selected
contractors that no amendments to the loan amount
will be approved without first obtaining a signed
repayment agreement indicating the altered loan
amount. At a minimum, the administering entity
MUST secure the Owners Duplicate Certificate of Title
for torrens properties before any work is begun. If this
early recording of the repayment Agreement is regarded
as being administrative burdensome, the administering
entity has the following options:
i. The loan amount in the Repayment Agreement
should be left blank at the time the loan package
is approved. This allows the administering entity
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3. If any loan funds are used for purposes other than an eligible
improvement upon an eligible property or if the borrower
application is found to contain a material misstatement of
fact, the borrower shall be liable for repayment of all or part
of the originally approved loan funds. In addition, any
fraudulent use of funds may subject the recipient to fines
and/or imprisonment under the Minnesota Criminal Code.
e. The Repayment Agreement shall be filed with the
proper recording office in such a manner as to create a
valid lien against the property
V. Complaint Record
flexibility with regard to amendment requests by
not requiring a new agreement to be signed should
the loan amount change upon completion of the
work (but it may also allow the property to be sold
before the work is completed, thus rendering the
Repayment Agreement invalid) ; or
ii. The administering entity may accept the
document with the maximum loan amount in
place, recognizing that a new document must be
executed to reflect the final loan amount.
This form should be used to document any complaints brought to
the attention of the administering entity, pertinent to the
administration/implementation of the program and the response of
the administering entity to the complaint.
X. ACCEPTANCE PROCEDURES
The administering entity objectives are to encourage necessary
improvements whereby the structure will be reasonably livable, safe,
habitable and energy efficient.
A. Applications will be processed as follows:
1. Applicants must submit their request for a Rehabilitation
Loan on Hennepin County Loan Application form. It should
be submitted to the administering entity.
2. The administering entity will review the individual packages
using the qualifications as outlined in Section VI. Loan
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packages shall contain all of the necessary documents listed
in Section VII of these Procedural Guides.
The administering entity may reject unacceptable packages
and hold them until the necessary information is provided
after notification of same to the applicant. If the necessary
information is not provided within a reasonable time, the
application may be withdrawn and the file closed out.
3. The decision of the administering entity will be final.
However, appeals may be made in those cases where
applicants believe they were not treated equitably. Appeals
shall be in written form submitted to the administering
entity outlining the applicant's concerns. The administering
entity should review the concerns and respond to them in
written form to the applicant within fifteen (15) days. If,
after this review, disagreement is still evident, the
satisfactory resolution is not reached, the complaint will be
resolved by Hennepin County.
B. Notification of Ineligibility
If the applicant, or the applicants dwelling, is determined to be
ineligible, the administering entity must notify the applicant of
that denial, in writing, within five (5) days of the denial indicating
the reason(s) for denial and outlining the appeal process as stated
above.
C. Loan Approval
a.
b.
Upon approval of a loan package, the administering entity
must notify the applicant of that approval.
The Repayment Agreement for each approved loan will be
held by the administering entity. The Repayment
Agreement will have been executed by the administering
entity and dated according to the date on which the loan
package was approved.
D. Pre-Construction Meeting
In as much as it is feasible to do so, the administering entity
should strive to hold a pre construction meeting with the client
and the contractor(s) before the Work Contract is signed so that
the approved work can be discussed in detail. By doing so it can
be ensured that all parties are in complete agreement on the work
to be done and the manner in which it is to be done. While the
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administering entity may elect to waive the pre-construction
meeting when one contractor and limited improvements are
involved, any project involving a general contractor and a number
of tradesmen should include a pre-construction meeting before any
work is authorized.
X. COMPLETION AND DISBURSEMENT PROCEDURES
A. Completion Procedures
No loan will be considered complete until the following steps have
been accomplished:
1. Inspection of the Property. All improvement work, as
specified in the Rehabilitation Work Summary, must be
inspected for completeness, conformity to specification and
quality of workmanship. The administering entity must
require completion or correction of any item found lacking.
Failure of a contractor to comply with such a request for
completion or correction of work is considered grounds for
withholding payment.
2. Completion Certificate. Following the final inspection and
successful completion of work, a Completion Certificate must
be signed by the borrower, each of the contractors holding
Work Contracts, and the administering entity. Loan funds
can ONLY be released in the amount approved by the
borrower's signature on the Completion Certificate.
3. Recording of the Repayment Agreement. The administering
entity must insert the amount of the loan in the Repayment
Agreement and check the document for completeness and
accuracy. The Repayment Agreement must then be recorded
by the administering entity with the Registrar of Deeds or
the Registrar of Titles.
NOTE: For property registered according to the Torrens
system, the Repayment Agreement must be accompanied by
Owner's Duplicate Certificate of Title at the time of
recording. Documents recorded pm Torrens property are not
returned to the person requesting the recording Therefore,
the administering entity must either retain a copy of the
agreement prior to recording and obtain the recording
information (document number) from the recorder, or must
obtain a certified copy of the document after recording.
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B. Disbursement Procedures
1. No disbursement of funds shall be made to a contractor until
the administering entity is in receipt of
a. a completion certificate signed by the contractor,
inspector and borrower and
b. a bill from the contractor for the amount of the work
performed; and
c. a properly completed Sworn Construction Statement;
and
d. lien waivers provided by the contractor and/or sub -
contractor(s) and/or supplier's for the amount of the
work performed.
Upon receipt of the above items, payment may be made to
the contractor using funds from the general revenue fund of
the administering entity. Payment will normally be made
within three weeks of receipt by the administering entity of
the bill, the signed completion certificate and the lien
waivers.
The originals must remain in the applicant files with the
administering entity.
I. PROCEDURES FOR ACCESSIBILITY IMPROVEMENT LOANS
A. Accessibility Improvements
1. Accessibility Improvements may include:
a. Structural Improvements:
Construction installation or modification of ramps,
handrails, kickplates and door widths; repair or
replacement of doors; relocation of doorways;
installation of lever-action hardware; construction
or expansion of rooms.
b. Exterior Improvements:
Construction of exterior ramps, railing, walkways,
landings and porch extensions; site grading and
other site improvements.
c. Bathroom Improvements:
Installation of elevated water closets, grab bars,
shower stalls, tub seats, hand-held showers;
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accessible sinks, electrical outlets, medicine
cabinets and other accessories. Modification or
expansion of bathroom area to allow a five foot
turning radius.
d. Kitchen Improvements:
Construction, modification or replacement of
cupboards or shelves to provide access to sinks,
cook tops, ovens, or storage areas; installation of
accessible electrical outlets and switches, lever -
action hardware, garbage disposals; insulation of
hot water pipes; modification or expansion of
kitchen area to allow for a five-foot turning radius
in the workspace; installation of "lazy susans" in
cupboards; replacement of floor covering in order
to improve wheeling surface.
e. Other Improvements:
In exceptional circumstances, installation of
central air conditioning and/or stair glides or
electric lifts when the need for these
improvements is verified by the handicapped
person's doctor in writing.
2. Improvements which are not determined by the
administering entity to be eligible as accessibility
improvements may be funded under the other provisions of
these procedural guides.
B. Requirements for Participation
Loans may be made to handicapped persons for accessibility
improvements only if the conditions of Section VI (except the
portion thereof relating to Eligibility of Improvements) of these
procedural guides have been fully satisfied.
C. Responsibilities of the Administering Entity
With respect to loans for accessibility improvements, the
administering entity shall:
1. Be governed by the general conditions set forth in Section II
of these procedural guides.
2. Assist the handicapped person with the preparation of the
Application form, upon request. Such assistance shall
include a personal visit by the administering entity to the
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home of the handicapped person or to any other reasonable
location which is accessible to the handicapped person should
the offices housing the administering entity not be deemed
accessible in accordance with Chapter 751, Laws of
Minnesota, 1978.
3. Carry out the duties required of the administering entity
pursuant to Section III, of these procedural guides, including
the duty to complete the loan package for accessibility
improvements. A complete loan package for accessibility
shall include all required materials.
D. Standard Procedure for Compiling Accessibility Portion of Loan
In addition to all the documents described in Section VII, a loan
package including handicapped improvements must include the
following:
1. Accessibility improvements inventory containing a
description of the accessibility improvements to be made
shall be included with the inspection report.
2. A letter describing:
a. the level and specific type of disability experienced by
the handicapped person signed by a licensed physician;
and
b. the specific accessibility improvements requested by the
physician.
3. Bids from contractors.
4. Architectural drawings, if needed.
5. Any other materials requested
XII. GENERAL CONDITIONS RELATING TO LOANS
A. All programs funded through the Hennepin County CDBG
program must provide equal access to employment, programs and
services without regard to race, color, creed, religion, age, sex,
handicap, marital status, affectional preference, public assistance,
criminal record, or national origin. Areas not specifically
mentioned in this statement will still be governed by the spirit of
this statement. If an applicant or borrower believes they have
been discriminated against, they should contact the Affirmative
Action Programs Department, A-303 Government Center,
Minneapolis, Minnesota, 55487, 348-4096.
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B. The administering entity shall have full responsibility for program
implementation including public information, reviewing and
screening applicants, choosing recipients, and assuring that work
will be satisfactorily completed.
C. No application, processing, or other fees shall be charged to an
applicant.
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Rehabilitation Guidelines
Council Report 2001-160
Page 2
Analysis of Issues
Why are these changes being recommended?
The changes are being proposed for a number of reasons including the following:
Increased cost of rehabilitation work
. Desire to be consistent with program changes in Hennepin County rehabilitation
program
Changes in the administration of the program which have not been reflected in
the guidelines
Increased flexibility in program administration and eligibility determination
Examples of increased flexibility in eligibility determination are as follows: not including
funds in qualified retirement accounts towards $25,000 asset limit; not including the
income of anyone under 18 towards the total household income; allows for loans or
grants in excess of maximum loan/grant amount in unique and specific circumstances.
What is the impact of the change?
The City of Hopkins does have a significant balance in our rehabilitation account which
needs to be spent by May 30, 2002. Because of this, increasing the loan/grant amount
will not limit the number of projects we will be able to complete over the next two years
based on current demand for the funds.
If the demand for the funds begins to surpass the availability it may be necessary to
revisit the maximum loan/grant amount at a future date.
Alternatives
The City Council has the following alternatives regarding this issue:
Adopt the proposed Housing Rehabilitation Loan/Grant Program guidelines
. Amend the proposed Housing Rehabilitation Loan/Grant Program guidelines
Make no changes to the existing program guidelines.