HomeMy WebLinkAboutAGENDA REPORT 1994 0817 CC SPC ITEM 04ArA •' r L)-4 V L
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A G E N D A R E P O R T
C I T Y O F M O O R P A R K
TO: The Honorable City Council ��/
FROM: Jaime Aguilera, Director of Community Development%
Deborah S. Traffenstedt, Senior Planner
DATE: August 12, 1994 (CC Special Meeting of 8-17-94)
SUBJECT: CONSIDER AMENDMENT TO LOAN AGREEMENT FOR LOT NO. 48 OF
TRACT 4147 (HICKMAN) TO ALLOW TEMPORARY RENTAL
Background
Barry and Peggy Hickman are homeowners in the Villa Campesina
neighborhood, Tract 4147. In conjunction with the development of
that residential tract, the City provided partial financing to all
of the original home buyers, in the form of a second mortgage. The
current Loan Agreement between the City and Mr. and Mrs. Hickman
requires that the Borrower, or a member of the Borrower's immediate
family, must at all times reside on the property. Mr. and Mrs.
Hickman have requested an amendment of the Loan Agreement, to allow
them to temporarily rent their house, for a one-year period, due to
an employment situation (see attached letter).
Discussion
The language in the current Loan Agreement does not allow staff to
authorize the rental of the Hickman home to anyone other than a
family member. In comparison, the agreement language for the Tract
3963 First Time Home Buyer Program does allow the City to approve
rental of the home, which approval may be withheld in the sole and
subjective discretion of the City.
Staff contacted Farmers Home Loan Administration to verify that
rental of the Hickman home was approved by the holder of the first
mortgage. We were informed that Farmers will allow rental of the
home, generally for a maximum of two years, if there are special
circumstances which justify the rental. During the time that the
home is rented, the homeowner no longer receives any interest
credit, and must pay the full monthly mortgage. The interest
credit is a benefit of the Farmers Home Loan, and is based on the
income of the homeowner. For those homeowners that receive an
interest credit on a monthly basis, all or a portion of that
dst-08-12-9411:40pmC:\WP51\TR-4147\CC8-17.L48
The Honorable City Council
August 12, 1994
Page 2
accumulated interest would be paid back to Farmers at the time of
sale or refinancing of the home. Because Mr. and Mrs. Hickman are
not eligible for the interest credit during the time that their
home is rented, their monthly payment has increased from
approximately $280 to $512 per month.
Based on the Hickman's circumstances, staff believes that it may be
appropriate to amend the Loan Agreement to allow them to rent their
home for a one-year period. In fact, staff has been notified that
Mr. and Mrs. Hickman have already moved to Utah, and have signed a
lease agreement for their home. The tenants are expected to move
into the Hickman home as of August 15. Staff has requested a copy
of the lease agreement, because we want to review the rental
agreement to determine whether Mr. and Mrs. Hickman are profiting
from the rental to the extent that an interest charge for the
City's loan may be appropriate. The current Loan Agreement states
that interest shall begin to accumulate from the date of default of
any loan obligation. Since the Loan Agreement also requires that
the Borrower or an immediate family member reside on the property
at all times, Mr. and Mrs. Hickman are currently in default of a
loan obligation.
If after review of the rental agreement staff finds that a
reasonable rent is being charged that maintains the affordability
of the unit, then we would propose that no interest be charged
during the one-year rental period. If after one year Mr. and Mrs.
Hickman find that their employment situation requires that they
must continue to rent out their house, we will require repayment of
the City's loan, consistent with the requirements of the Loan
Agreement.
Recommendation
Approve amendment to agreement subject to final language approval
by the City Manager and authorize the City Manager to sign
amendment.
Attachment: Letter dated 7-20-94
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