CR 96-19 Application For MHFA Participation ProgramJanuary 26, 1996 ti 5
O P K
APPLICATION FOR THE MHFA MINNESOTA CITY PARTICIPATION PROGRAM
Proposed Action
Staff approval of the following motion: Approve submission of an application for
the Minnesota City Participation Program (MCP ?).
With approval of this action the application will be submitted to the Minnesota Housing Finance
Agency for their review and approval.
Overview
The Minnesota Housing Finance Agency (MHFA) is soliciting applications for participation in the
Minnesota City Participation Program , a mortgage program for first time home buyers. This
program allows the MHFA to sell mortgage revenue bonds on behalf of participating cities. The
proceeds of these bonds are used to provide below market interest rate home mortgage loans to
low and moderate income first time homebuyers.
The City is required to pay a nonrefundable processing fee of $20 for each $100,000 in allotment
provided. Based on an allocation of $1,000,000, the fee would be $200. The City must also
submit a 1% refundable deposit when the contact is executed. The deposit is returned to the City
• following the sale of the mortgage revenue bonds, estimated to occur in March.
The City has participated in this program since 1992. A total of $1.8 million has been expended
through this program over the past three years. Staff is recommending that the City apply for
$1,000,000 in 1996 MCPP funds with the likelihood that the final allocation will be less that this
amount due to demand on the funds
Primary Issues to Consider:
o What is the purpose of the program?
o What services will be performed on behalf of the City?
o What is the cost to the City for participating in program?
o What are the requirements of the program?
o What is the basis for the amount of the City's request?
o Who will serve as the City's lenders?
Su000rting Information:
o Application for the Mi
attes6 4/1, !AY
erste lverum, Ho,, sing Coordinator
Y
0
ota City Participation Program
Council Report 96 -19
MCPP Application
Rpt. 96 -19
page 2
Primary Issues to Consider
o What is the purpose 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. Through the
MCPP, the City receives a "set- aside" of funds to be used to make loans in Hopkins. The lower
interest rate of these funds attracts home buyers to Hopkins and makes their housing more
affordable.
o What services will be performed on behalf of the City?
The following are the benefits of participating in the Minnesota City Participation Program:
o MHFA will incur the expenses associated with the issuance of the bond
o MHFA will provide administrative support for both the bond sale and the operation of
the program
o MHFA will assist in marketing each City's program.
o Local lender(s) take the applications for the originate the mortgage loans
o Mortgage loan funds are available to eligible homebuyers at an interest rate
approximately 1% below market mortgage interest rates
o Only participating cities will have access to Homeownership Assistance Fund which
provides downpayment or monthly payment assistance to lower income applicants.
o What is the cost to the City for participating in the program?
To apply for the funds, a refundable deposit equal to 1% of its requested allocation must be
submitted along with the application. Based on a requested amount of $1 million, the required
deposit would be $10,000. The deposit must accompany the application but will be refunded
upon the sale of the mortgage revenue bonds.
Additionally, a processing fee must be paid prior to the bonds being sold. The fee is based on the
final allocation and is anticipated to be $200. The 1% deposit and processing fee would be taken
from the Economic Development Fund.
o What are the requirements of the program?
Borrower Eligibility:
o Must be a first time home buyer defined as not having had an ownership interest in a
principal residence for the past 3 years
o Must occupy home within 60 days
o "Adjusted" gross income must not exceed $40,800 per year.
MCPP Application
Rpt. 96 -19
• Page 3
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 $95,000 for a single
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 What is the basis for the amount of the City's request?
Staff is recommending that the City apply for $1 million in mortgage funds, based on past years
usage of program funds and the likelihood that the actual allocation will be reduced due to limited
bond funds. Under the guidelines of the program, a city must apply for at least $100,000 and not
more than the maximum allowable based on available funds.
The program does require each city to spend a minimum of 50 percent of their allocation within
the eight month program period. If this criteria is not met, the city is ineligible for participation in
the program for the following two years.
o Who will serve as the City's lenders?
Under the guidelines of the program, cities may select one or more specific lenders to deliver their
program or allow all MHFA- approved lenders to administer the loan funds. To insure maximum
accessibility to the program funds, staff is recommending that all MHFA- approved lenders be
allowed to participate.
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 changes to the application.
o Decide that they do not wish to participate in the Minnesota City Participation
Program
APPLICATION FOR FUNDING
MINNESOTA HOUSING FINANCE AGENCY
1996 MINNESOTA CITY PARTICIPATION PROGRAM (MCPP)
I. ELIGIBLE ORGANIZATION
A. Name and address of organization:
City of Hopkins 1010 First Street South Hopkins, Minnesota 55343
B. Name and phone number of contact person:
Kersten Elverum, Housing Coordinator #935 -8474
C. Type of Organization: City
II. ORIGINATING LENDERS
Option A - All lenders from MHFA approved - lender list. Attached are confirmation
letters from Bell Mortgage, Inland Mortgage and Residential Mortgage Group, Inc.
III. HOUSING PLAN: See Attached Hopkins Housing Analysis.
IV. PROGRAM SPECIFICS
A. 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 will 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.
B. Borrower income limits:
80% of HUD median family income for the Twin Cities MSA, currently at $40,800.
C. Home purchase price limits:
The home purchase price limit for the Hopkins' program may not exceed the MHFA price
limit, currently set at 95,000.
D. Targeting of specific population groups:
The City of Hopkins will not target any specific population group for the Minnesota City
Participation funds.
E. 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.
F. Optional program enhancements: None.
G. Schedule for release of funds: Immediate.
H. Amount of funds requested and estimated number of loans to be provided:
1,000,000.00; 12 loans
L Minimum Allocation: $100,000
J. Balance of unused Mortgage Revenue Bond or Mortgage Credit Certificate
resources still available in Hopkins (nonMHFA): None
I{. Marketing Option: MHFA Marketing support
V. ECONOMIC VIABILITY
Demand for the MCPP in the Hopkins Housing Market:
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 in Hennepin County, according to the 1990 Hennepin County census, Typically, this
is the age group which contains the most first time homebuyers.
Real estate sales over the past year:
In 1995, there were 47 single family homes sold in Hopkins for $95,000 or less. There
were an additional 130 condominium and townhomes which sold for $95,000 or less.
Combined there were a total of 177 homes sold which would potentially 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, slightly lower 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.
VI. NEW CONSTRUCTION REOUIREMENTS
There will be no new construction under the City of Hopkins program
VII. SIGNATURES
The information herein is true and correct based on normal and prudent business inquiry.
Charles D. Redepenning Phone #
Mayor