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1986-0715_BANK OF AMERICA_Loan Agreement"City Copy" PR911EY REHABILITATION LOAN AGREEMW COMPREHENSIVE FORM THIS AGREEMENT is made by the City of San Juan Capistrano, a municipal corporation in the State of California (herein called "Authority"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association (herein called "Bank"). R E C I T A L S A. Authority has authorized a Housing Rehabilitation Loan and Grant Program for low and moderate income residents in the Los Rios neighborhood as part of an adopted Community Development Block Grant Program (as may be amended and modified from time to time) hereinafter collectively called "Program". B. As part of Authority's implementation of Program, Authority has requested Bank to make below—market interest rate property rehabilitation loans ("Loans" or "Program Loans") primarily to low and moderate income owners of residential real property within Authority and approved by Authority as recipients of Loans ("Applicants"). The purpose of the Loans would be the rehabilitation of said real property in accordance with Program. In addition, Authority has requested a choice of several types of Loans to Applicants. C. To support these objectives, and based on an initial deposit of Community Development Block Grant funds, Bank is willing to provide Authority and Applicants with Collateralized Loans (Part Three), Deferred Payment Loans (Part Four), and other services at rates and terms not available to the general public or to Authority independent of this Agreement. NOW, THEREFORE, for and in consideration of the foregoing and the mutual agreements made herein, and for other good and valuable consideration, Authority and Bank agree as follows: • PART ONE 0 DEPOSIT OF COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS 1. Authority shall deposit up to $110,000 of Community Development Block Grant rehabilitation funds available to Authority under the Housing and Community Development Acts of 1974 and 1977, as amended, as part of this Agreement. 2. Authority's deposits of Community Development Block Grant funds may be made in any of the following forms: (a) A deposit to the Warehouse Account, the funds in which are unallocated to Loans. (b) A deposit to Collateralized Loan Account(s) which are non-interest bearing savings accounts which subsidize Loans and are pledged as Loan collateral. (c) A deposit to a Collateralized Loan Account which is a non-interest bearing savings account which Collateralizes Loans and is pledged as Loan collateral as described in paragraph 11(a) (2). (d) The purchase from Bank of time certificate(s) of deposit from which all proceeds are allocated to future Program Loans. Bank will pay, at Authority's election, the highest interest rate permitted by law and this Agreement on all accounts described above. If legal interest rate limitations are removed, Bank will pay its highest rate offered to the public. 3. Authority relinquishes the use of and control over accounts described in paragraph 2(b). These accounts will be used only for the Loan purpose described in this Agreement. 4. Authority retains full accessibility to all deposits which are unallocated to the existing Program Loans. -2- 5. Authority agr*ll interest earnings will be Od to the Warehouse Account and will be used in accordance with Community Development Block Grant Regulations contained in 24 CFR 570.513.(c). (a) Authority agrees that the terms and conditions of this Agreement are subject to the provisions governing lump -sum drawdowns for property rehabilitation, section 570,513 of the HUD regulations on Community Development Block Grants, 24 CFR Part 570. PART TWO APPLICATION PROCEDURES 6. At the request of Authority, Bank, through its San Juan Capistrano Office shall consider making Loans to qualified Applicants directed to Bank by Authority. Bank shall notify the respective Applicant(s) in writing of any such request it receives from Authority. The notification shall contain the following statement: "The City of San Juan Capistrano has requested the San Juan Capistrano Office of Bank of America National Trust and Savings Association, 31902 Del Obispo, San Juan Capistrano, CA 92675, to consider making a specific extension of credit to you". A qualified Applicant shall be identified by Authority or its agents, using Authority's established standards, which must consider, without limitation: (a) Applicant is "the owner of record" of the property subject to rehabilitation. (b) Applicant has verifiable income(s) which can be used to repay the proposed Loan. (c) Authority has determined that the proposed Loan, given Program options available, will best serve the rehabilitation needs of Applicant and the Program objectives. -3- 7. Authority sha*rnish to Bank, with respect tach Loan application as required throughout the process: (a) an introductory letter stating that Authority desires Bank to consider making a Loan to Applicant; (b) a general breakdown of the costs involved in the rehabilitation work to be performed on Applicant's real property; (c) a description of the work; (d) an estimate of the value of the real property offered as security for the Loan; (e) a copy of any contractor bid accepted by Applicant; (f) a specific borrower interest rate as described in paragraphs 9 and 11; and (g) a statement including the name of the contractor who will perform the rehabilitation work, and that Authority has satisfied itself with respect to the competence and reliability of the particular contractor. 8. Bank shall perform its customary credit evaluation with respect to the Applicant, render its judgment with respect to the creditworthiness of the Applicant, and recommend appropriate Loan terms. 9. Upon completion of its credit evaluation, Bank shall furnish to Authority copies of all income, employment and account verifications as well as the credit report with an analysis and recommendation whether to proceed with the Loan or not, and if to proceed: (a) a recommendation as to use of either a Collateralized, or Deferred Payment Loan, or some combination thereof; and (b) an indication of which of the following Loans (for which Bank assumes all or part of the credit risk, as indicated parenthethically below) Bank is willing to make to Applicant: -4- (1) a 5.00% C*eralized Loan (10% credit rio (2) an 9.00% Collateralized Loan (45% credit risk); 10. After having determined the exact nature and scope of the rehabilitation work to be performed on Applicant's real property, Authority may request Bank to grant Applicant a Loan, which either must be from among those designated by Bank pursuant to paragraph 9 above or must be a Loan pursuant to paragraph 11(a) (100% collateralize) or paragraph 24 (Deferred Payment Loan). A one-time fee shall be paid to Bank on all approved loans. This fee shall be one half percent (.005) of the requested loan amount, with a minimum of $100.00. In addition, all bank "out-of-pocket" costs, such as title costs, appraisal fees, filing fees, etc. will be collected. Any or all fees and charges may be added to the contract at the discretion of "Authority" and "Bank". PART THREE COLLATERALIZED LOANS 11. (a) Each Collateralized Loan shall be supported by a non-interest bearing deposit made by Authority to a Collateralized Loan Account, an account that shall at all times be at least equal to: (1) 100Y of unpaid principal for each 4.50% Loan for which Bank has not designated the Applicant pursuant to paragraph 9(b) as a party to whom Bank is willing to make a (partially) Collateralized Loan; (2) 90% of unpaid principal for each 5.00% Loan; or (3) 55% of unpaid principal for each 9.00% Loan. plus, in each case, 100% of accrued unpaid interest. Authority hereby assigns the Collateralized Loan Account to secure the Collateralized Loans. -5- (b) Bank willoover from Authority or Applicoits actual out-of-pocket expenses as specified for title search reports and property appraisals required to originate Program Loans. 12. (a) Unless Authority requests one note only, each Collateralized Loan shall be evidenced by two notes, effective in succession, as provided herein. (b) The note first effective shall be a short-term commercial note, the term of which shall coincide approximately with the rehabilitation period (although all references herein to the short-term commercial note are singular, a Loan could include more than one short-term commercial note). The term of any one short-term commercial note may not exceed ninety (90 days, although the note may be extended, renewed, or refinanced. The Loan proceeds thereof shall be disbursed by Bank in a number of draws, each to follow completion of an applicable state of construction, as certified to Bank by Authority. Interest shall accrue only on the disbursed portion of the Loan. (c) Promptly after Bank's disbursement of the final draw under the short-term commercial note, that note shall be refinanced by an installment note, as provided for at subparagraph (d) below or, alternatively, as provided in Part Four (Deferred Payment Loans). At the time the short-term commercial note is refinanced by the installment note, Applicant may either pay Bank the accrued interest on the short-term commercial note or may have it added to the principal of the installment note. (d) The term of the installment note shall be determined by Bank for the Loan in question, but may not exceed fifteen (15) years, and the installment note shall be amortized in equal monthly installments over its term. Interest will be calculated on a simple interest basis for each installment note. 13. With respect to Collateralized Loans: (a) On both t0hort-term commercial note and# installment note, interest and other finance charges shall be such as to bear interest at an annual rate of 4.50%,, 5.00%, 9.00%, which shall be calculated on a simple interest basis. (b) The Loan shall be documented using Bank's standard forms. (c) Both the short-term commercial note and the installment note shall, at Bank's or Authority's option, be secured by a deed of trust covering the real property that is the subject of the rehabilitation for which the proceeds of the Loan are to be used. 14. Authority shall make a relevant deposit to the Collateralized Loan Account in the percentage of Loan amount provided for at paragraph 11, when the commercial note and deed of trust are signed by Applicant and when interest on a short-term commercial note becomes added to the principal of a subsequent installment note. At the end of each calendar month ending 180 days after Authority's first deposit hereunder, Bank shall remit to Authority the amount by which the Collateralized Loan Account exceeds the paragraph 11 percentages of the unpaid balances of Collateralized Loans. Funds that Bank thus remits to Authority shall be deemed funds that Authority deposited at least 180 days before. 15. If a Collateralized Loan remains in default for a continuous period of ninety (90) days on account of nonpayment of any sum of money due pursuant to the terms thereof or of any instrument or document related thereto, Bank may withdraw from the Collateralized Loan Account, and pay to itself, an amount equal to the then outstanding principal balance of the loan multiplied by the same percentage as the percentage of the Loan amount that was deposited to the Collateralized Loan Account pursuant to paragraph 11, plus 100% of accrued unpaid interest on the Loan through the 90th day of default. -7- Bank shall have no recce against Authority or the Co#eralized Loan Account for any amounts in excess of those permitted under this paragraph. During any ninety (90) day default period, Bank shall perform its customary collection procedures with respect to the Loan. 16. After a withdrawal from the Collateralized Loan Account under paragraph 10 above, in the case of a Loan for which the deposit to the Collateralized Loan Account under paragraph 11 was less than 100%, of the Loan amount: (a) Bank need not assign the deed of trust to Authority upon completion of the withdrawal; but may, for it's own account, exercise rights under the deed of trust to recover the remaining outstanding and unpaid principal of the Loan plus accrued unpaid interest thereon after the 90th day of default. (b) At its election, Bank may assign to Authority such rights as may be necessary for Authority to attempt to recoup any funds withdrawn from the Collateralized Loan Account in connection with any Loan default. Authority agrees to recoup funds, as much as possible, for the benefit of Bank as well as itself. Funds recovered shall be credited as follows: (1) to withdrawals from the Collateralized Loan Account; (2) to the costs of recovery; (3) to Bank's Loan charge-off. (c) If Bank subsequently recovers funds with respect to a defaulted Loan (as, for example, but without limitation, if a voluntary sale of the property takes place), Bank shall, after deducting the previously unreimbursed percentage of Loan loss to which Bank is entitled, plus Bank's cost of recovery, return and pay over to Authority all amounts in excess thereof. 17. After a withdol from the Collateralized Loa#count under paragraph 15 above, in the case of a Loan for which the deposit to the Collateralized Loan Account under paragraph 11 was 1007 of the Loan amount, Bank shall assign the Loan to Authority, the assignment to be accomplished by: (a) the due endorsement by Bank to Authority of the promissory note evidencing the Loan, without recourse or warranty; and (b) the delivery of the promissory note and the assignment and delivery of the deed of trust. 18. Collateralized Loan, as described in paragraph 11 through 17, are priced on an average loan size of $6,000, which provides Authority favorable rates and terms based on this average Loan volume. Since operating costs associated with a smaller average Loan size are significantly greater, Authority's Collateralized Loans will be analyzed every 180 days from contract approval. If average $6,000 Loan amounts are not maintained, Bank may make adjustments affecting the pricing of future activity as follows: (a) increase borrower interest rate of new Loans; (b) increase collateral requirements for new Loans; or (c) assess an origination fee for new Loans. These options are as negotiated and mutually accepted by Bank and Authority. PART FOUR DEFERRED PAYMENT LOANS 19. In the event Authority requests Bank to make a Loan, the terms of which are other than as provided in Part Three above, Bank shall comply with Authority's request. In that case, after Baas obtained Applicant's note #erms Authority has requested for the Loan, Bank shall, promptly after completion of the respective rehabilitation work, assign the Loan to Authority according to the same procedure, and for the same price, as would be applicable under paragraphs 15 and 16 (Part Three) in the case of the assignment following default of a Collateralized Loan for which the deposit to the Collateralized Loan Account under paragraph 11 was 100%. Promptly after the assignment, Authority shall pay to Bank a fee to cover its internal administrative and out-of-pocket expenses, as specified by Bank, but in no event less than SEVENTY-FIVE AND N0/100 DOLLARS ($75.00) nor more than ONE HUNDRED FIFTY AND NO/100 DOLLARS ($150.00) for each Loan so made. Such fee shall be at Authority's sole expense and shall not be recovered from Applicant(s). 20. Prior to the making of the first Deferred Payment Loan, Authority shall furnish Bank an opinion of its legal counsel. (a) stating that Authority has established rates and terms for its Deferred Payment Loan Program note; (b) designating whether any Deferred Payment Loan fee 15 a "charge to be financed" or a "prepaid finance charge" under Regulation Z; and (c) that Authority has delivered this information and note to Bank's San Juan Capistrano Office. PART FIVE GENERAL PROVISIONS 21. On Authority's request, Bank shall, for its customary fees therefore, accept for collection purposes, pursuant to Bank's then current installment collection procedures, a Program Loan that has been transferred to Authority. -10- 22, On Authority'oquest Bank shall, for its cusory fees therefore, provide foreclosure services with respect to a defaulted Program Loan that has been transferred to Authority, in which case Bank shall be substituted for Continental Auxiliary Company/Authority as trustee under the applicable deed of trust. 23. (a) The term of this Agreement shall mature on August 1, 1987. This agreement may be terminated or amended by either of the parties hereto at six (6) month intervals from August 1, 1984 provided written notice of intent is given to the other party at least fifteen (15 days prior to the termination date. (b) The interest rates for the Collateralized Loans shall be reviewed on February 1, 1986. Any subsequent rate modification shall not affect Program Loans outstanding at the time of the modification. (c) Any termination of this Agreement shall not affect program Loans outstanding at the time of termination. (d) At termination, Bank shall retain the Collateralized Loan Account and shall remit monthly to Authority the amount by which the Collateralized Loan Account exceeds the paragraph 11 percentages of the unpaid balances of Collateralized Loans. 24. Bank covenants and agrees that nothing in this Agreement or any agreement made pursuant hereto shall be deemed or construed by Bank to make Authority a surety or guarantor of any Loan, and that Bank's rights with respect to a Collateralized Loan shall be limited to those set forth at paragraphs 16 and 17 hereof. 25. Authority and Bank shall comply with all applicable statutes and regulations including without limitation, where applicable, the Federal Truth in Lending Act and Regulation Z thereto, the Consumer Credit Reporting Act, and the Equal Credit Opportunity Act and Regulation B thereto. -11- s 26. Except as spe#cally required by this A ree , Authority waives any- right it may have to require Bank to; (a) proceed against any Applicant or other person; (b) proceed against or exhaust any collateral for the relevant Loan; or (c) pursue any other remedy in Bank's power; and waives any defense arising by reason of any disability or other defense of Applicant or any other person, or by reason of the cessation from any cause whatsoever, other than full payment, of the liability of an Applicant or any other person. 27. Bank and Authority acknowledge the "Special Purpose" nature of the Program and Program Loans. To serve this "Special Purpose", a Loan shall be considered in default after the date of a transfer of the deed of trust property which, according to the provisions of the note, make the entire principal and interest of the note due and payable, regardless of Bank's ability or inability to enforce those provisions of the note. 28. Any communications between the parties hereto may be given by mailing the same, postage prepaid, to Bank at its San Juan Capistrano Office, 31902 Del Obispo, San Juan Capistrano, CA 92675, and to Authority at its Office of the City Manager, San Juan Capistrano, CA 92675, or to such other address as either party may in writing hereafter indicate. 29, This Agreement and any agreement, document, or instrument attached hereto or referred to herein integrate all terms and conditions mentioned herein or incidental hereto, and supersede all oral negotiations and prior writing with respect to the subject matter hereof. In the event of any conflict between the terms, conditions, and provisions of this Agreement and any such agreement, document, or instrument, the terms, conditions, and provisions of this Agreement shall prevail. -12- 30. Authority sha ndemnify and hold harmless B against all claims and damages, alleged or otherwise, of whatsoever nature arising out of or in any way connected with the acts or omissions of any contractor performing rehabilitation work in connection with this Agreement; provided, however, that Authority's obligations under this paragraph shall not extend to negligent or willful acts or omissions by Bank. All contractors shall operate as independent contractors and nothing herein is intended to affect such independent contractor status. 31. Bank may, at its option, decline to make additional Loans from and after the date when the principal balance of all Loans outstanding has exceeded SEVEN HUNDRED FIFTY THOUSAND DOLLARS (1750,000.00). 32. This Agreement may be executed in as many counterparts as may be deemed convenient, each of which, when executed, shall be deemed an original. 33. The operating aspects of this Agreement, including but not limited to target area boundaries, may be altered from time to time through a letter of understanding, accepted by mutually by Authority's Mayor and Bank's Community Development Department, Los Angeles, California. Dated this 15th day of July , 1986. -13- CITY SAN JUAN CAPISTRANO By�'-/I� Kenneth E. Friess Title Mayor APPROVED AS TO FORM: Attached is a true and correct copy of the extract of Council Minutes. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION APPROVED: / O /lam K - �4l, By Deborah A. Moore Community Development Dept. Title Ass't Vice President Community Development Dept. Concurred: By Title Vice President Community Development Dept. ttorney City Clerk Shaw Mary Ann Hanover ** S$k Extract of Council Minutes. -14-