Making Housing More Affordable

    I. Introduction


    In 2022 the Housing Authority of the County of Marin (commonly referred to as “Marin Housing Authority” or “MHA”) was awarded a grant by the State of California Department of Housing and Community Development (HCD) for the purpose of funding and operating a rehabilitation loan program for low‐income homeowners. MHA approved utilization of the grant funds for Owner-Occupied Rehabilitation loans for single-family homes, mobile homes, accessory dwelling units (ADUs), and jr. accessory dwelling units (jADUs). In the event of conflict between these Program Guidelines and the existing Policy Statement, these Program Guidelines shall prevail.


    • THE PURPOSE of the CalHome Owner‐Occupied Rehabilitation Loan Program (“Loan Program”) is to facilitate rehabilitation single-family homes, mobile homes, and ADUs/jADUs (collectively referred to as “units”) owned and occupied by lower income households within the County of Marin. Lower income households are those whose income is 80% or less than Marin County’s area median income (AMI) as defined by California’s Department of Housing and Community Development (HCD), adjusted for household size.


    • THE OBJECTIVE of the CalHome Owner-Occupied Rehabilitation Loan Program is to provide safe, sanitary, and sustainable housing for low‐ income residents of Marin through the correction of actual or potential health and safety problems.


    • FAIR HOUSING LENDER MHA is an equal opportunity, fair housing lender and makes all programs available to low-income families regardless of age, race, color, religion, sex, national origin, sexual preference, marital status, or handicap.


    • CONFLICT OF INTEREST No member of the governing body of the Housing Authority of the County of Marin and no other official, employee, or agent of the County of Marin government who exercises policy, decision-making functions, or responsibilities in connection with the planning and implementation of the program shall directly or indirectly be eligible for this program, unless the application for assistance has been reviewed and approved according to applicable California Department of Housing and Community Development (HCD) guidelines.

      A contractor with a vested interest in the property cannot bid on a rehabilitation job. Such a contractor may act as owner/builder, subject to Section V. Construction Standards. (Owner/builders are reimbursed for materials purchased which are verified by invoice/receipt and used on the job. Reimbursement occurs after the installation is verified by the Construction Supervisor to be part of the scope of work. Owner/builders are not reimbursed for labor.)

    II. Eligibility


    A household is defined in terms of financial relationships and can include any owner partnerships as long as their combined gross, annual income meets the eligibility guidelines. To be considered a member of a household, a person must either be (1) on title or (2) claimed as a dependent on the tax returns of a household member who will appear on the title and loan for the CalHome loan.


    1. OWNERSHIP AND RESIDENCY REQUIREMENTS
    a) Units to be rehabilitated must be the principal residence of the owner (“Owner Occupied”).
    b) Borrowers are required to recertify annually that they are the residents and owners of the unit
    c) Each homeowner must be named on the property’s title evidenced by a preliminary title search of the property address.
    d) Each homeowner must sign all program and loan documents.
    e) Continued residency is monitored and verified on an annual basis with the submission of (a) a copy of a current utility bill, and (b) signing the Form of Owner Occupancy Certification.

    2. HOUSEHOLD INCOME AND ASSET LIMITS
    a) All household occupants over the age of 18 must demonstrate income eligibility.
    b) Eligible borrowers must be households with incomes not to exceed 80% of AMI, adjusted for household size, and must be the owner‐occupants of the unit.
    c) AMI shall be in accordance with HCD guidelines as amended from time to time.
    d) Household income shall be computed as described in these Program Guidelines.
    e) There will be a cap on the level of assets allowed for program eligibility for homeowners.


    • Household assets cannot exceed 150% of AMI for a household of four persons*as provided for below.
    • Elderly or permanently disabled** households may have assets not exceeding 300%of AMI for a household of four persons.


    a. Hereinafter, an “eligible household” will be one who meets ownership and residency, property and income requirements. Eligible households who receive funding will hereinafter be called “borrower”.


    3. ELIGIBLE PROPERTIES
    a) Rehabilitation Loans may be made for improvements to units located within the county limits of the County of Marin.
    b) Property must be current on property taxes and contain a legally sited structure,
    c) Secondary residences are not eligible for the Loan Program.
    d) If the unit is a mobile home sited on leased space:


    a. Park owners or their representative must be willing to execute a CalHome Owner‐Occupied Units Rehabilitation Loan Program Acknowledgment (“Acknowledgement”)provided by MHA.


    b. HCD registration and space rent must be current subject to a current lease agreement or other space agreement, if applicable.


    4. ELIGIBLE IMPROVEMENTS
    Improvements must be of a permanently fixed nature. Repairs and improvements for each unit should be completed in the following priority. In no event will MHA approve a Rehabilitation Loan for any work unless all identified items described in IV.A. 1, 2 and 3 below are corrected as a result of the work carried out in conjunction with the Rehabilitation Loan.


    1. Improvements to correct health and safety hazards, including lead hazard removal, and to maintain the structural integrity of the unit.
    2. Repairs to correct cited code violations.
    3. Repairs to correct other code items (items that have not been cited but are known tobe code violations by the inspector).
    4. Repairs to correct incipient code items. An incipient code violation exists if, at the time of inspection, it is thought that the physical condition of an element in the unit will deteriorate into an actual code violation within one year.

      4a) The addition of air conditioning may be an eligible improvement if deemed necessary for health reasons.

      INELIGIBLE IMPROVEMENTS

    a. Items which exceed MHA’s established moderate quality standards for fixtures, windows, floor coverings, finishes or other items;

    b. Improvements of a recreational nature; and

    c. Luxury improvements including, but not limited to swimming pools, spas or other items that do not meet HCD’s definition of eligible improvements.


    MHA will not approve a Rehabilitation Loan for work required to repair a condition for which the applicant has received, or will receive, an insurance settlement or funds from another source, such as FEMA or SBA, to pay for the repair, except to augment the insurance or other funds in cases where such funds are insufficient to make the required repairs in compliance with all applicable codes or ordinances.

    All work funded in whole or in part by the Rehabilitation Loan is subject to the permit processes of HCD.

    • All work must be done as required by the State of California Department of Housing and Community Development Codes and Standards (“Code”). Work shall be inspected by MHA for completeness and adherence to Code prior to issuance of progress payments to the contractor by MHA.
    • The proper HCD permit(s) will be obtained by Contractor for all work that requirespermits. MHA will assure contractor has obtained proper permits for all work. The cost of permits to be paid by borrower may be covered in the budgeted use of funds from the Rehabilitation Loan.


    “Self‐Help” work by the borrower may not be a part of the contract or Rehabilitation Loan. No volunteer assistance is allowed.

    III. Rehabilitation Loan Terms and Conditions


    MHA will offer Rehabilitation Loans at 3% simple interest to borrowers.


    1. Term

    The Rehabilitation Loan term shall be 20 years. No payments will be required prior to the twentieth (20th) anniversary of the Rehabilitation Loan, however, the deferred payment Rehabilitation Loan will be due and payable in full prior to 20 years should one or more of the following occur:


    • The borrower dies, unless the Rehabilitation Loan is assumed by another eligible borrower;
    • The unit or any interest therein is sold, conveyed or transferred;
    • Property taxes, mortgage, or space rent becomes delinquent;
    • The borrower no longer occupies the unit as his or her principal residence for reasons other than medical treatment, disability, education, family matters or similar situations, subject to the prior written approval of the Executive Director. All such absences shall require demonstration of a temporary alternate residence;
    • The borrower is in default on any other Rehabilitation Loan requirement;
    • Fire, flood and other insurance is not maintained with MHA as loss payee; or
    • Borrower fails to keep all registration fees, levies and/or taxes current.


    At the beginning of the 21 st year, the deferred payment Rehabilitation Loan and all accrued interest are due and payable in full.


    If the borrower meets certain conditions to modify the Rehabilitation Loan at the 21 st year, the Executive Director may:


    • Amend the note to defer the amount due at Rehabilitation Loan maturity for up to an additional 20 years, at 0% additional interest for any extension term, on a singleoccasion; OR
    • Convert the principal and interest at Rehabilitation Loan maturity to an amortized Rehabilitation Loan, repayable in 15 years at 0% additional interest for the additional 15-year repayment period.


    To be considered for a Rehabilitation Loan amendment or conversion as noted above, the borrower must demonstrate that:

    1. Repayment of the Rehabilitation Loan causes a hardship;
    2. The borrower is still the owner‐occupant of the unit;
    3. The borrower is not in default of any of the Rehabilitation Loan terms; and
    4. The dollar amount of any other (senior or junior) lien(s) does not exceed the dollar amount of lien(s) in effect when the MHA Rehabilitation Loan wasmade

    A borrower may repay the outstanding balance of the Rehabilitation Loan, or any portion thereof, at any time without penalty. A borrower may choose to make irregular, periodic payments on the Rehabilitation Loan. All such prepayments will be credited first to the interest due, if any, and then to the principal balance of the Rehabilitation Loan.


    2. Interest

    Interest will be simple interest and shall accrue on the unpaid principal balance from the date on which the Notice of Completion is executed. The annual interest rate for deferred payment Rehabilitation Loans is 3%.


    3. Limits

    An eligible owner may qualify for the full cost of rehabilitation work needed to comply with California Building Code standards. Maximum assistance with CalHome funds is $100,000.00 for rehabilitation and/or reconstruction.


    The combined loan-to-value ratio for an owner-occupied rehabilitation loan with all other indebtedness secured by the property shall not exceed 105% of the estimated after-rehabilitation value. An estimate of after-rehab value will be made prior to making a commitment of CalHome funds.


    Total value of the unit after rehabilitation shall not exceed 100% of the current median sales price of a single-family home in Marin County. Sales Price/Value limits will be according to Marin County Assessor-Recorder’s Annual Real Estate Sales Date at (https://www.marincounty.org/depts/ar), and reference annual median values for the county to makes its assessment.

    IV. Rehabilitation Loan Procedures


    1. Application Process

    1. Rehabilitation Loan applications will be distributed by MHA.
    2. Completed Rehabilitation Loan applications will be submitted to MHA in person or by US Mail at 420 Civic Center Drive, San Rafael CA 94903. MHA will process, evaluate, and consider complete applications on a first‐come, first‐served basis. An application will be deemed complete when all required information has been supplied by the unit’s owner(s). Required information includes:

    3. Proof of unit ownership and/or real property ownership, if applicable;
    4. Income information (employment, income and asset documentation including a minimum of three months of bank statements);
    5. Copies of property tax bills;
    6. Proof of current registration, if applicable;
    7. Proof of insurance.

    8. MHA will confirm property eligibility by verifying that the unit is within the county limits, legally sited and owned by the applicant through title search or a preliminary title report, as applicable.
    9. MHA will verify income eligibility at 80% of AMI or less using HCD income guidelines through review of the income of all household members. Documents utilized may include but may not be limited to credit reports, employment verification, income verification, award letters, asset verification, tax returns, bank statements and tax bills.


    2. Underwriting Criteria

    In all instances, MHA’s underwriting standards will be employed in a consistent, equitable manner. MHA will at all times utilize sound judgment in making Rehabilitation Loans to ensure that the public funds are adequately protected. MHA’s underwriting standards will generally follow private lending practices.


    The following underwriting criteria will be used to evaluate each application: 


    a. Rehabilitation Loan applicants must be the registered owner of the unit and must have the CalHome Owner‐Occupied Rehabilitation Loan Program Guidelines Page 6 authority to encumber the property. b. A preliminary title report shall be made for properties owned by the unit owner.

    c. A formal title search will be conducted for allRehabilitation Loans.

    d. Unreported income is fraudulent and will result in denial of the Rehabilitation Loan.

    e. Property taxes, unit registration fees and space rent (if applicable), and property insurance must be current in order for an applicant to be considered for a Rehabilitation Loan and all of these must be paid when due during the term of the RehabilitationLoan.

    f. Unit value will be established through an appraisal prepared by a State licensed or certified appraiser or through recent comparable sales.

    g. Senior liens on any unit will be allowed only if:

    i. The loan is not negatively amortized;

    ii. The loan terms do not contain provisions for any balloon payment whichwould come due during the term of the Rehabilitation Loan; and

    iii. Open lines of credit are calculated as the maximum credit available to the borrower for purposes of determining loan‐to‐value ratio.


    3. Rehabilitation Loan Approval and Processing

    1. After making preliminary approval of an application, MHA will inspect the unit to determine a rough scope of work and cost estimate in consultation with the borrower. If the scope of work and cost estimate are within the maximum Rehabilitation Loan amount, MHA will proceed to obtain the following documents, if not already obtained:
    2. Appraisal of both before/after rehabilitation value of the unit; appraisal requirement may be met using recent sales comparables;
    3. Preliminary title report and/or HCD title search, if applicable;
    4. Based on MHA’s inspection, structural pest reports, and other inspections or reports necessary to determine the unit’scondition (example. lead and asbestos risk assessment reports).

      There will be no charge for these services if MHA does not recommend approval of the Rehabilitation Loan. If the borrower makes a voluntary decision not to proceed with the Rehabilitation Loan after approval, and if there is no other reason why the project cannot proceed, the borrower may be requested to reimburse MHA for all usual and customary direct costs incurred.

    5. Property insurance, including fire and flood if applicable, will be required during the life ofthe Rehabilitation Loan. The applicant must have sufficient insurance to cover the amount of the Rehabilitation Loan and all senior liens, or the value of the unit whichever is higher. Coverage deficiencies must be corrected as a condition of Rehabilitation Loan approval. The Housing Authority of the County of Marin shall be named on the policy as mortgagee/loss payee for the full term of the Rehabilitation Loan.
    6. After complete review of each application for completeness and consistency with underwriting standards, MHA Management will make a final approval or denial of the Rehabilitation Loan application.
    7. If applicable, MHA will obtain the park owner’s or owner’srepresentative signature on the Acknowledgment prior to commencement of any rehabilitation work.
    8. Upon Rehabilitation Loan approval, MHA shall prepare for signature the following (hereinafter CalHome Owner‐Occupied Rehabilitation Loan Program Guidelines Page 7 “Loan Documents”):

      • Promissory Note;
      • Deed of Trust, or HCD 480 Statement of Lien (if applicable);
      • Rehabilitation Loan Agreement
      • Fair Lending Notice;
      • Truth‐in‐Lending Disclosure;
      • Notice of Right of Rescission; and
      • Request(s) for Notice of Default and Sale (if applicable).

    9. The borrower shall execute Loan Documents and MHA shall record any of these documents or take any such actions necessary to perfect the lien.
    10. Upon completion of the rehabilitation work, Commission shall supply a final loan package to the Housing Authority. The final loan package (“Final Loan Package”) shall include all of the following:• All original Loan Documents;

      • Proof of insurance;
      • The fully executed Notice of Completion;
      • Copy of contract for rehabilitation work;
      • All construction documentation, including permits; and
      • Proof of contractor payment in full.

    11. Upon receipt MHA will securely store all documents related to each Rehabilitation Loan, as appropriate.


    4. Rehabilitation Loan Documents

    • Loan Documents are defined in V.C.8 above.
    • All owners shall execute all documents required to complete the Rehabilitation Loan, as appropriate. Non‐occupant parents, ex‐spouses, siblings and/or children who are listed on title to the real property or as registered owners of the unit will be required to co‐sign the Loan Documents and shall be equally liable to repay the Rehabilitation Loan. Spouses andregistered domestic partners shall sign the Loan Documents unless title is clearly held as the owner’s sole and separate property.
    • Any borrower financial contributions necessary for completion of the rehabilitation project shall be held by the Authority for disbursement to the contractor, or in payment of other Rehabilitation Loan costs, on behalf of the borrower.

    V. Construction


    1. Competitive Bidding

    After a Rehabilitation Loan is approved, MHA will coordinate the competitive bidding process to obtain fixed‐price bids from qualified, licensed contractors.

    a. Contractors are required to be licensed with the State of California and be active and in good standing with the Contractors’ License Board.

    b. Contractors will be checked against HUD’s federally debarred list of contractors. No award will be granted to a contractor on this list.
    c. At a minimum, all contractors must carry Workers’ Compensation, Commercial General CalHome Owner‐Occupied Rehabilitation Loan Program Guidelines Page 8 Liability and Employer Liability insurance as required by California law.
    d. Contractor must agree to comply with all CalHome regulations.
    e. The homeowner may be allowed to do his own work if he has a valid California Contractor’s license.

    Contracting Process:

    a) Contracting will be done on a competitive basis.

    b) The homeowner will be the responsible agent, but the MHA will prepare the work write-up, prepare and advertise the bid package, and assist the owner in negotiating the construction contract.

    c) The City does not warrant any construction work, or provide insurance coverage.

    d) The borrower may select any responsible contractor whose bid does not exceed 110% of MHA’s staff’s in‐house cost estimate for the rehabilitation work.


    2. Construction Contract

    MHA staff will coordinate contracting for all rehabilitation work funded through the Rehabilitation Loan or from borrower financial contributions to the work, manage the contracts, assure required permits are secured by contractor, inspect the work and approve and disburse any payments to contractor.


    1. The contract for the work will be executed by the borrower and the contractor.
    2. MHA staff will assist the borrower with the control, supervision, and direction of the work to be performed under the contract.
    3. Changes to the services to be provided under the contract and amounts to be paid pursuant to the contract may be made only by written change order by and between the borrower and the contractor and only upon approval by the MHA so long as the changes are within the Rehabilitation Loan budget.
    4. During the performance of the contract, the borrower shall not enter into any additional agreements with the contractor, whether written or verbal, without the written approvalof MHA.
    5. Inspections will be made by MHA staff prior to the disbursement of any payments to the contractor.
    6. The borrower must accept the work performed before any payments can be made by MHA under the contract for such work.
    7. Upon satisfactory completion of all work in the contract, the borrower shall sign the Notice of Completion evidencing borrower’s acceptance of the work, which shall be provided to Housing Authority.

    VI. Rehabilitation Loan Administration and Collections


    1. Subordination

    MHA will subordinate the Rehabilitation Loan to a new senior loan only in the case where the borrower wants to refinance an existing first mortgage and the borrower will not take any cash out from the refinance, and then only on a standard form of subordination, provided that the Housing Authority’s financial position in the property will not be negatively impacted in any way.


    2. Transfer and Assumption

    Rehabilitation Loans provided through this Loan Program cannot be transferred to, or assumed by, CalHome Owner‐Occupied Rehabilitation Loan Program Guidelines Page 9 future owners of the unit except in the case of transfer to a qualified occupant spouse, sibling, registered domestic partner or child as detailed in these Program Guidelines.


    3. Deferred Payment Rehabilitation Loan Collection

    The borrower shall make full repayment of the Rehabilitation Loan when due in accordance with the Promissory Note. Recipients of deferred payment Rehabilitation Loans will be allowed to make periodic prepayments directly to MHA in order to reduce the amount of their indebtedness. Payments will be applied first to interest and then to the Rehabilitation Loan principal.


    4. Rehabilitation Loan Defaults

    In the event of any default by borrower of one or more of the Rehabilitation Loan terms included in the Loan Documents, the Executive Director, with the advice of General Counsel, may initiate foreclosure proceedings.

    VII. Definitions


    Assets: Assets of the applicant and household members shall be considered in determining household income. Household assets include: 

    • Amounts in savings and checking accounts (the greater of the current amounts or the average balance for the last two months in savings and checking accounts).
    • Stocks, bonds, savings certificates, money market funds and other investment accounts.
    • Equity in real property other than the applicant’s principal residence or other capital investments. Equity is the estimated current market value of the asset less the unpaid balance on all loans secured by the asset.
    • The cash value of trusts that are available to the household, not including irrevocabletrusts.
    • Annuities in the applicant’s name that could be liquidated.
    • Assets which, although owned by more than one person, allow unrestricted access by the applicant.
    • Lump‐sum receipts such as inheritances, capital gains, lottery winnings, cash from sale of assets, insurance settlements and other claims.
    • Personal property held as an investment such as gems, jewelry, coin collections, antique cars, etc.
    • Cash value of life insurance policies.
    • Household assets do not include
    • Personal property except as noted above;
    • Interest in Indian trust lands;
    • Assets not accessible by the household (e.g., irrevocable trusts);
    • Assets that are a part of an active business or farming operation; or
    • Retirement plans which, if withdrawn, would result in a penalty.


    Below Market Interest Rate: An interest rate lower than the interest rate generally accepted for use by commercial lenders at the time of consideration.


    Borrower: Any member of the household who is listed on title to the real property or mobilehome


    Codes and Standards: All applicable housing, planning, fire prevention, building, zoning, health codes and other pertinent local or state ordinances.


    Disabled Household: A household in which any applicant or co‐applicant is physically or mentally disabled. It may include two or more disabled persons living together, or one or more of these persons living with one or more live‐in aides or other household members.


    Elderly Household: A household in which any applicant or co‐applicant is 62 years of age or older. It may include two or more persons 62 years of age or older living together, or one or more of these persons living with one or more live‐in aides or other household members.


    Final Loan Package: The Final Loan Package shall include all of the following:

    • All original Loan Documents;
    • Proof of insurance;
    • The fully executed Notice of Completion;
    • Copy of contract for rehabilitation work; and
    • Proof of contractor payment in full.


    General Property Improvements: Items not specifically required by code which will generally improve the appearance and/or livability of the property and the neighborhood.


    Gross Income: The total income of the household before any withholdings are taken.


    Incipient Code Violations: An incipient code violation exists if, at the time of inspection, it is thought that the physical condition of an element in the unit will deteriorate into an actual code violation within one year. Examples are an old roof that is beginning to leak or a furnace that can reasonably be expected to become inoperative or hazardous because of its age or condition.


    Income: All income from persons in a household must be included in the household income. Income from minors/dependents is not included in household income except for Survivor’s Social Security, SSI, other public assistance or disability payments and pension payments. Annual household income includes:


    • Annual gross amounts of wages, salaries, tips and commissions;
    • Net annual income from operation of business or profession;
    • Net annual income from rental of real or personal property. If one or more of the bedrooms of an owner‐occupied unit is rented to non‐household members, the non‐household members’ incomes shall not be included in income calculations for the owner’s household. However, the rent paid to the borrower shall be included in income calculations from the owner’s household;
    • Actual or imputed income from assets. If household assets are $5,000 or more, the actual income earned from assets will be compared to an imputed income earned figure arrived at by multiplying the total assets greater than $5,000 by HUD’s imputer income rate, also known as the passbook rate. This rate is periodically adjusted by HUD. The higher of the actual income earned or the imputed income earned figures will be added to the household income;
    • Annual income from periodic payments such as Social Security, insurance, retirement funds, pensions, alimony, or child support;
    • Annual amount of payment in lieu of earnings such as unemployment, disability or workers’ compensation;
    • Annual amount of public assistance allowances or grants.


    Total annual income divided by 12 equals monthly income. The income shall mean the anticipated income CalHome Owner‐Occupied Rehabilitation Loan Program Guidelines Page 11 of a household for the twelve‐month period following the date of determination of income.


    Loan Documents: Loan Documents include the Promissory Note, the Deed of Trust, the Rehabilitation Loan Agreement, the HCD 480 Statement of Lien, a Fair Lending Notice, a Truth‐in‐ Lending Disclosure, a Notice of Right of Rescission and Request(s) for Notice of Default and Sale, if applicable.


    Loan Recommendation Package: Loan Recommendation Package includes a cover sheet summarizing the loan amount, applicant eligibility to include proof of ownership (title search or preliminary title report), supporting documentation for borrower eligibility and underwriting, loan‐to‐value ratio and any supporting analysis, potential scope of work, estimated cost of work, executed Acknowledgement, and any reports obtained regarding the value or condition of each unit.


    Low‐Income: Low‐income households are those whose income is 80% or less than the Sonoma County median income limit as determined by HCD from time to time, adjusted for household size.


    Minor/Dependent: Members of the household other than the borrower(s) who are under 18 years old or who are full‐time students and live at home, or who are disabled in such a manner as to require ongoing dependency.


    Unit: For purposes of this program, a unit is defined as a structure designed for use as a dwelling and may sometimes also be called a mobile home, manufacture home, single-family dwelling, accessory dwelling unit, or junior accessory dwelling unit.


    Non‐Household Members: A single person or a collective body of two or more persons who rent one of the bedrooms of a single‐family house or mobilehome and who do not share common income with the owner‐ occupant household.

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