AgdaPkt 2000-08-28 - Laserfiche WebLink

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REPORT To the Redevelopment Agency Board August28,2000 Subject First Time Homebuyer Program (FTHB) Changes Recommendation Staff recommends that the Board, by motion, consider making changes to the FTHB, as detailed under the Issues section of this report. Background When the FTHB was approved in June, staff noted that the program documents might go through some modifications to satisfy various regulatory agencies. The Board gave staff the authorization to approve such changes administratively. It was agreed that the FTHB would only be brought back to the Board if more significant changes were proposed to the program. The Federal National Mortgage Association (Fannie Mae) has now indicated that it requires certain changes to the program structure before approving the documents. These changes are as follows. Issues A. Teachers and City Employees 1. Principal Forgiveness The original design would, for teachers and City employees, have forgiven 10% of the principal of the note starting in year six. Also starting in year six they would have started to make principal and interest payments on the remaining balance. If they lost eligibility by changing employers, the borrower would have continued paying off the note but would have lost the principal forgiveness feature. Fannie Mae's change would still allow 10% of the note to be forgiven each year starting in year six. However, the borrower would not be required to make principal and interest payments on the remaining balance. If the borrower changed jobs (was no longer a teacher or City Employee) they would still lose the principal forgiveness and would pay interest on the remaining balance at an interest rate 2% over the cost-of-funds index. 2. Equity Participation If the borrower sold during the first five years they would owe the Agency 1.5 times the Agency's share of the investment in the house e.g. if the Agency contributed 30% of 1 'ï'""'-""-""T""