CR 92-72 Application Minnesota City Program
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MCPP Application
Rpt. 92-72
page 2
Primary Issues to Consider
o What is the intent of the program?
The primary objective of the MCPP is to provide affordable
mortgage financing for low and moderate income homebuyers
through the issuance of mortgage revenue bonds.
o What are the benefits of participating in this
program?
The following are the benefits of participating in the
Minnesota city Participation Program:
o MHFA will provide administrative support for both the
bond sale and the operation of the program
o MHFA will incur the expenses associated with the
issuance of the bond
o MHFA will assist in marketing each City's program
o Local lender(s) take the applications for the program
and originate the mortgage loans
o Mortgage loan funds are available to eligible
applicants at 1 1/2 to 2% below market mortgage interest
rates
o Only participating cities will have access to MHFA's
Homeownership Assistance Fund which provides monthly payment
and entry cost assistance to lower income applicants
o What is the cost to the city for participating in the
program?
The only direct cost to the city is the refundable deposit
equal to 1% of its requested allocation. Based on a
requested amount of $1.6 million, the required deposit would
be $16,000.00. The deposit must accompany the application
but will be refunded upon the sale of the mortgage revenue
bonds. Indirect costs of the program include any time or
money spent on marketing the program. It is anticipated
that the 1% deposit would be taken from the Economic
Development Fund.
o What are the requirements of the program?
Borrower Eligibility:
o Must be a first-time homebuyer (not having had an
. ownership interest in a principal residence for the past 3
years
o Must occupy home within 60 days
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MCPP
Rpt. 92...72
Page 3
o "Adjusted" gross income must not exceed $38,400 per
year. The most common adjustment for income would be $1000
per family member so that a family of four could actually
gross $42,400 and still qualify for the loan funds.
Property Requirements:
o Properties must be existing one-family homes,
townhomes or condominiums (some duplexes may also be
eligible)
o Residence must be in good repair and meet usual
mortgage underwriting requirements
o Property must not exceed the MHFA Acquisition Cost
Limits of $85,000 for a one-family home
These are the minimum requirements for eligible properties.
The city has the ability to further "target" properties or
eligible participants by incorporating additional
restrictions such as targeted population groups (i.e.
minorities, handicapped, elderly) , specific program
boundaries, etc... Staff recommends that the city propose
to use the minimum requirements (and the maximum income
limits) allowed by MHFA to make the funds available to as
many individuals or families as possible.
o How much money $hould the City request?
In 1991, there were 47 single family homes in Hopkins which
sold for $85,000 or less. There were an additional 33
condominiums and townhomes which sold for this amount. Based
on these figures staff is recommending that the city request
$1.6 million to finance the purchase of 20 homes
(approximately 25% of the eligible properties) .
Under the guidelines of the program, a city must apply for
at least $250,000 and not more than $4 million.
o Who will serve as the City's lender?
Staff has met with representatives of Norwest and they have
agreed to participate in this program as a local lender.
Staff has also informed representatives of First Banks that
the City is participating in the program and that they, too,
are encouraged to become a lender under this program.
Under the guidelines of the program, cities may select one
or more specific lenders to deliver their program or may
specify all lenders within their area that are under
contract with MHFA to provide program delivery. However,
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MCPP
Rpt. 92-72
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the application must identify one lender and include a
letter of intent from that lending institution. Norwest
will be forwarding a letter of intent to participate which
will be included in the application but staff is
recommending to also allow any participating lender to make
loans under our program.
Alternatives
The Council has the following alternatives regarding this
issue:
o Approve the application as recommended by staff.
o Amend the application to further "target" the
program, to request more or less funds, or make other
eligible alterations.
o Decide that they do not wish to participate in the
MCPP and reject the application.
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APPLICATION FOR FUNDING
MINNESOTA HOUSING FINANCE AGENCY
1992
MINNESOTA CITY PARTICIPATION PROGRAM CMCPP)
ELIGIBLE ORGANIZATION
Name and address of organization:
City of Hopkins
1010 First street South
Hopkins, Minnesota 55343
Name and phone number of contact person:
Kersten Elverum, Housing Coordinator
#935-8474
Type of Organization: City
Amount of funds requested and estimated number of
loans to be provided:
$1,600,000.00; 20 loans
Balance of unused Mortgage Revenue Bond or Mortgage
Credit Certificate resources still available in
Hopkins (non-MHFA) : None
ORIGINATING LENDER
Norwest Mortgage
1011 South First Street
Hopkins, MN 55343
HOUSING PLAN
See Attached
PROGRAM SPECIFICS
How the program fits into the comprehensive
housing plan:
The City of Hopkins, through the MCPP will provide
assistance to low to moderate income first-time
homebuyers to purchase a home in Hopkins. This
help meet the need for such assistance, as
identified in the comprehensive housing plan.
The program will also help to keep the overall
housing market strong in Hopkins by linking
eligible properties to interested buyers and then
making the purchase of those homes possible.
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Borrower income limits:
80% of HUD median family income for the Twin
cities MSA, currently at $38,400.
Home purchase price limits:
The home purchase price limit for the Hopkins'
program may not exceed the MHFA price limit,
currently set at $85,000.
Targeting of specific population groups:
The City of Hopkins will not target any specific
population group for the Minnesota City
Participation funds.
Targeting of area or housing stock:
The City of Hopkins will not target an area or
specific housing stock for inclusion in the
Minnesota City Participation Program.
Optional program enhancements: None.
Schedule for release of funds: Immediate.
Why this program is a good candidate for funding:
The Minnesota City Participation Program is
designed to assist low to moderate income first-
time homebuyers in the purchase of their first
home. Hopkins is an ideal community for this
type of program due to several factors.
First, the single-family housing stock is largely
made up of "starter homes" which by value are the
types of properties which qualify for financing
through this program. The City also has a
significant number of condominiums and townhomes
(over 15% of the housing stock).
Secondly, the City of Hopkins has a lower than
average median income which indicates a greater
number of residents who would qualify for the
loan program.
Additionally, the City has the highest percentage
of residents in the 19-29 year old age group,
according to the 1990 Hennepin County census.
Typically, this is the age group which contains
the most first-time homebuyers.
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ECONOMIC VIABILITY
Real estate sales over the past year:
During the period from October 1990 to September
1991 there were a total of 47 single family homes
which sold in Hopkins for $85,000 and under.
There were an additional 33 condominium and
townhomes which sold in this price range.
Combined there were a total of 80 homes sold in
Hopkins which would qualify for the proposed
program.
u.S. Census Data:
According to the 1990 census, the median value of
single family homes in Hopkins is $86,700, just
slightly above the maximum purchase price allowed
under the proposed program. This data indicates
that there is an ample supply of properties which
would be eligible under the proposed program.
NEW CONSTRUCTION REQUIREMENTS
There will be no new construction under the City of
Hopkins program.
SIGNATURES
The information herein is true and correct based on
normal and prudent business inquiry.
Nelson W. Berg Date
Mayor