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.
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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.
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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:
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(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.
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(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.
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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.
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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.
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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.
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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.
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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.
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