City of Culver City, California
Agenda Item Report
RECOMMENDATION:
Staff recommends that the Culver City Redevelopment Agency Board (Board)
review and discuss the Equity Sharing Policy pertaining to the removal of long-term
affordability covenants for homes purchased utilizing the Mortgage Assistance
Program (MAP).
INTRODUCTION:
In 2003, the Board approved an equity sharing option for homes purchased with
financial assistance in the form of a 2
nd
trust deed through the MAP Program. To
date, twenty-one (21) MAP participants have exercised the equity sharing option and
removed the affordability covenant. As a result, the Agency can no longer count
these units as part of the City’s affordable housing stock.
BACKGROUND:
The premise of the Agency’s Housing Set Aside Fund is to create, preserve and
improve the community’s supply of affordable housing opportunities for persons/
families of low and moderate income {Health and Safety Section 33334.2 (a)}.
Various activities are allowed under Redevelopment Law to fulfill this premise.
Providing financial assistance to assist first time homebuyers to purchase a home is
an allowed expenditure.
In 1993, the Board created the MAP. The MAP was designed to lend up to twenty
percent (20%) of the purchase price or $60,000, whichever was less, in the form of a
Meeting Date: 03/08/2010 Item Number: D-2
REDEVELOPMENT AGENCY AGENDA ITEM: Review and Discussion of the
Equity Sharing Policy.
Contact Person/Dept.: Tevis
Barnes/Lillian Ikeda/CDD
Phone Number: 310-253-5780
Fiscal Impact: Yes [ ] No [X] General Fund: Yes [ ] No [X]
Public Hearing: [ ] Action Item: [X] Attachments: [X]
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification: Meetings and Agendas – Redevelopment Agency (03/03/2010)
Department Approval:
Sol Blumenfeld (2/12/10)
Agency General Counsel Approval:
Murray Kane (2/17/10)
Chief Financial Officer Approval:
Mark Scott (by N. Kimball) (03/03/10)
Executive Director Approval:
Mark Scott (03/03/10) City of Culver City, California
Agenda Item Report
|1010|nd
trust deed. No payments or interest was required until the property sold or
transferred title. In exchange for the financial assistance, a ten (10) year affordability
covenant was recorded against the property requiring the property be resold to an
up-to-moderate income household.
From 1993 through 2005, the Housing Division assisted 124 first time homebuyers
through MAP.
On June 2, 2003, the Board voted to allow an equity sharing option for homes
purchased with the assistance of the MAP. This would allow sales of owner-
occupied units prior to the expiration of the covenanted period to someone beyond
the moderate income limits and would remove the covenant recorded against the
property. Proceeds from equity sharing must be deposited back into the Housing
Set Aside Fund {Health and Safety Code Section 33413 (c)(1)}.
It should be noted that the written documents entered into between the Agency and
the MAP participants do not commit the Agency to an equity sharing program. The
equity sharing program was implemented as a policy of the Agency per the 2003
action of the Board mentioned above.
Due to escalating home prices, in December 2005, the MAP was eliminated. After
consultation with the Agency’s financial analyst, Keyser Marston and Associates, it
was determined that the MAP 2
nd
trust deed would need to be in excess of $200,000
per household to fill the affordability gap.
DISCUSSION:
Redevelopment agencies have the responsibility to assure that when agency monies
are spent to make the cost of housing affordable to low-and-moderate income
persons/families, the Agency’s objectives are met and the public funds are not a
“gift”. A covenant or restriction must be recorded which runs with the land for each
housing unit subject to these restrictions {Health and Safety Code Section 33334.3
(e)}.
Affordable housing units assisted with Housing Set Aside Funds must remain
available at an affordable housing cost and are occupied by persons/families of low
or moderate income for the longest feasible time. From 1987 to 2000, the covenant
restriction for owner-occupied units was fifteen (15) years. The length of affordability
was revised from October 2000 to June 2002 and the covenant requirement for
ownership occupied housing was ten (10) years. This requirement was revised again
in 2001 and the covenant restriction was increased for owner occupied units to forty-City of Culver City, California
Agenda Item Report
five (45) years subject to being a shorter time period if permitted by a redevelopment
agency’s equity sharing program.
Since the Agency allowed the equity sharing option, twenty-one (21) MAP units
have been lost through equity sharing. The Housing Set Aside Fund realized
$772,193 of equity share funds.
There are approximately ninety-three (93) homes eligible for equity sharing.
Additionally, five (5) MAP units have foreclosed (covenant restrictions are null and
void upon foreclosure) and five (5) MAP units were resold to income eligible
households.
Equity sharing is based on the percentage borrowed from the Agency at the time of
purchase. An example of equity sharing is depicted below.
$300,000 Original Cost of Property
$ 15,000 Down Payment by Purchaser (5%)
$ 60,000 Assistance from Agency – Second Trust Deed (20%)
$225,000 First Trust Deed Loan
$450,000 Price of Property Sold Now
$225,000 Original First Trust Deed Loan
$ 15,000 Down Payment Contributed by Homeowner
$ 60,000 Assistance from the Agency (20% to be Repaid)
$ 3,000 Escrow Closing Costs (No commissions allowed)
$147,000 Profit
$117,600 80% of the Profit for the Homeowner
$ 29,400 20% of the Profit for the Agency (or percentage borrowed
From the Agency)
FISCAL ANALYSIS:
Since 1993, the Agency expended $3.4 million to create 124 units of affordable
ownership housing. To date, $772,192 of equity sharing proceeds have been
deposited into the Housing Set Aside Fund. A total of twenty-one (21) affordable
ownership units have been lost through equity sharing. The estimated average
market values of these units is approximately $400,000 per unit. Housing staff
estimates the Agency has lost $8.4 million in real property as a result of equity
sharing.
CONCLUSION:
City of Culver City, California
Agenda Item Report
Currently, the remaining ninety-three (93) MAP covenanted units can exercise the
equity sharing option. This has the potential to result in the Agency losing ninety-two
(92) affordable homeownership units valued at today’s housing value of $27.9 million
($300,000 per unit).
ATTACHMENTS:
1. MAP Unit Data Sheet
2. Equity Shared Unit Data Sheet
3. Equity Sharing Staff Report (2005)
MOTION:
That the Redevelopment Agency Board:
(1) Discuss the Equity Sharing Policy and direct the Executive Director as
deemed appropriate.
•••
Address
Date Equity Shared Covenant
_
Expiration Equity Re,ceived
Mortgage Assistance Program — Equity Share Units
February 2010
3341 Helms Avenue
August 2003 2018 $40,227.74
11256 Franklin Avenue
January 2004 2016 $52,919.86
10112 Summertime Lane
May 2004 2011 $25,246.82
5306 Summertime Lane 4109
March 2004 2011 $21,787.83
6375 Green Valley Circle #206
June 2004 2011 S18,484.48
6355 Green Valley Circle #303
August 2004 2010 $35,456.94
5405 Slauson Avenue
October 2004 2016 $22,349.01
5845 Doverwood Dr. #316
November 2004 2011 $42,886.80
5005 Stoney Creek Rd. #437
June 2005 2020 $32,927.63
7304 Summertime Lane July 2005 2017 $37,713.78
5950 Buckingham Pk 4404 August 2005 2019 $35,928.48
6000 Canterbury Dr. 4208D December 2005 2014 $25,298.25
6505 Green Valley Cir. 4301 February 2006 2016 $44,191.76
6050 Canterbury Dr. #E119 October 2006 2020 $52,114.20
5901 Canterbury Dr. 45 November 2006 2047 $38,394.10
3836 Bentley Ave. 41 January 2007 2017 $33,770.58
5845 Doverwood Dr. #209 April 2007 2019 $35,040.09
5651 Sumner Way #203 April 2008 2011 $33,583.40
6375 Green Valley Cir. #302 April 2009 2020 $26,125.72
4363 Globe Ave. August 2009 2016 $32,745.50
5950 Buckingham Pkwy. 4410 October 2009 2018 $85,000
TOTAL EQUITY SHARED —21 TOTAL $772,192.97Attachment 2
Mortgage Assistance Program Participants
February 2010
Address Covenant Expires
-
Description
5900 Canterbury Dr. #B114 03/02/2014 BEGIN 20 YEAR COVENANT
5005 Maytime Lane 06/09/2014
3105 Raintree Cit. #1 06/27/2014
4133 Harter Ave 07/15/2014
5651 Windsor Way #304 08/29/2014
4304 Duquesne Ave 08/30/2014
10731 Oregon Ave 10/17/2014
5215 Sepulveda Bl. #26C 11/28/2014
5815 Doverwood Drive #6 Resold to MAP participant
Originally 5451 Overland
Ave. 10770 Deshire Pl.
02/01/2015
11221 Hannum Ave. 07/18/2015
5007 Stony Creek Rd. #329 09/25/2015
10845 Garfield Ave. 07/18/2015
4207 Neosho Ave 07/10/2015
5950 Canterbury Dr 4C113 07/31/2015
5950 Canterbury Dr. #C205 08/25/2015
3401 Cattaraugus Ave. 08/28/2015
11237 Braddock Dr. 09/12/2015
3410 Fay Ave. 09/11/2015
4830 Hollow Corner Rd. #189 10/04/2015
4828 Hollow Corner Rd. #190 12/21/2015
5427 Emporia Ave. 02/16/2016
4362 Huntley Ave. 03/06/2016
3439 McManus Ave. 03/20/2016
3900 Lenawee Ave. #2 06/18/2016
3594 Wesley St. 05/02/2016
6124 Buckingham Pkwy #205 04/26/2016
5236 Emporia Ave. 06/18/2016
3042 Reid Ave. 08/30/2016
5035 Maytirne Lane 09/12/2016
5900 Canterbury Dr. #A211 10/15/2016
4056 Jackson Ave. #6 11/14/2016
3948 Bentley Ave. #104 12/02/2016
6001 Canterbury Dr. 4103 12/11/2016
11022 Culver Blvd. 03/14/2017
5017 Butterfield Ct. 04/15/2017
5901 Canterbury Dr. 416 05/30/2017
11028 Braddock Dr. 07/14/2017
4450 Elenda St. 08/18/2017Attachment 2
5900 Canterbury Dr. 4A319 08/12/2017
4104 Summertime Lane 09/03/2017
4915 Indian Wood Rd. 4603 12/31/2017
5870 Green Valley Cir. 4319 12/18/2017
4116 Harter Ave. 06/03/2018
5001 Stony Creek Rd. #353 06/12/2018
5950 Buckingham Pkwy.
4403
08/06/2018
3948 Bentley Ave.4102 11/19/2018
5625 Sumner Way 4111 11/25/2018
5027 Overland Ave. 01/26/2019
6525 Green Valley Cir. 4212 02/15/2019
5116 Westwood Blvd. 03/09/2019
6050 Canterbury Dr. 41'122 04/27/2019
6000 Canterbury Drive 41)111 Resold to MAP participant
6375 Green Valley Circle
4206
Resold to MAP participant
6315 Green Valley Cir. 4202 11/19/2019
5900 Canterbury Drive 4A101 Resold to MAP participant
6225 Canterbury Dr. 4108 02/18/2020
4112 Raintree Cir. . 05/31/2020
6050 Canterbury Dr. 4F3 11 09/28/2020
3 610 Helms Ave. 09/29/2020
11116 Matteson Ave. 10/27/2010 BEGIN 10 YEAR COVENANT
5815 Doverwood Dr. 46 11/10/2010
4840 Hollow Corner Rd. 4422 11/13/2010
5950 Buckingham Pkwy.
4412
11/20/2010
5245 Slauson Ave. 12/01/2010
3430 Sherbourne Dr. 12/04/2010
6375 Green Valley Cir. 4306 12/18/2010
5815 Doverwood Dr. #33 12/29/2010
3109 Summertime Lane Resold to MAP participant
6151 Canterbury Dr. #107 03/16/2011
5215 S. Sepulveda Blvd. #9D 04/17/2011
4802 Hollow Corner Rd. 4220 05/11/201.1
4236 Tuller Ave. 06/04/2011
5 625 Sumner Way 4107 06/28/2011
5650 Sumner Way 4304 07/10/2011
3969 Globe Ave. 08/21/2011
4047 Sawtelle Blvd. 10/11/2011
6001 Canterbury Dr. 4307 10/18/2011
4842 Hollow Corner Rd. 4307 10/24/2011
6050 Canterbury Dr. 4E1 17 10/30/2011
3 109 Summertime Lane 4109 11/05/2011Attachment 2
6199 Canterbury Dr. #202 11/05/2011
4900 Overland Ave. 4205 11/12/2011
6305 Green Valley Cir. #303 11/26/2011
6000 Canterbury Dr. 4D111 04/12/2011
6000 Canterbury Dr. 4D306 12/19/2011
5845 Doverwood Dr. #201 01123/2012
4211 Summertime Lane 03/12/2012
6151 Canterbury Dr. 4208 03/12/2012
5870 Green Valley Cir. 4231 07/10/2047 BEGIN 45 YEAR COVENANT
6515 Green Valley Cir. 4106 07/24/2047
4919 Indian Wood Rd. 4395 09/02/2047
6151 Canterbury Dr. 4205 09/17/2047
6050 Canterbury Dr. 4E219 10/31/2047
5900 Canterbury Dr. #A101 12/22/2019
5901 Canterbury Dr. #9 03/18/2048
6050 Canterbury Dr. #F306 05/12/2048
6575 Green Valley Cir. 4214 10/28/2048
Total Mortgage Assistance Program participants 93y2 B 21[3 2
CULVER CIT
HOUSING OFF IC,
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Susan Evans.,5/23. ./03...•:-...; like Thompson 5/27/03"
City Controller Approval Eric Shapiro
RECOMMENDATION:
Attachment
City of Culver City, California
Redevelopment Agency Agenda Item Report
Meeting Date:, 06/02/03:
ifern:Nuniber: 613
AGENDA ITEM:
Approve Modification of the Mortgage Assistance Program (MAP) to Allow Equity
Sharing;
Contact Person/Dept:: Lillian Ikeda Phone Nbniber: (310) 253-5797
.FiSOalijrnpaCt*Yes:' X] No
eneraff4ridt . . :Yes
No Pg
Action Itm.
AttaChrn.entS:
Staff recommends that the Culver City Redevelopment Agency ("Agency") review
and approve modification of the Mortgage Assistance Program (MAP) to allow
equity sharing after the first 24 months (two years).
BACKGROUND:
In 1993, the Agency approved the creation of the Mortgage Assistance Program
(MAP). This program is designed to assist first-time hornebuyers in the form of
Second Deed of Trust loans to eligible homebuyers purchasing in Culver City. To
be eligible, the homebuyer must have an income below one hundred-twenty percent
(120%) of median, and must not have owned a home in the past three (3) years.
Additionally, the buyer must supply five percent (5%) of the purchase price from
his/her own funds for the down payment and have sufficient funds available for
closing costs. To insure that the home is affordable to the buyer and to prevent the
risk of future foreclosure, the buyer's total monthly housing expenses for mortgage
principle, interest, taxes, insurance (PITI), and Homeowner Association dues (HOA)
must be within the affordability limits for moderate—income households as specified
in the State Health and Safety Code, Section 50052.5. MAP loans provide a
qualified borrower with twenty percent (20%) of the purchase price of the home, or
up to a maximum of $60,000 to use towards the down payment. The loans are
interest free and due and payable in full at time of sale, transfer of title, or if the
homeowner refinances their first trust deed loan for any reason other than to lower
their monthly mortgage payments.
PAGE 11 of 16Attachment 3
City of Culver City, California
Redevelopment Agency Agenda Item Report
RECEIVED
MAY 2 9 2003
CULVER Crn
R
OUSING OM&
The MAP Program has assisted 123 Culver City residents achieve the "American
Dream" of homeownership.
DISCUSSION:
The MAP Program is funded under the Redevelopment Agency Property Tax
Increment Housing Set-Aside Fund. Based on this fact, properties purchased
utilizing MAP must be covenanted for affordability to up to moderate income
households. The affordability covenant period for fiscal 2002-2003 is forty-five (45)
years. Under provisions of Assembly Bill 637 (AB 637), which was signed into law in
October 2001, the covenant period was changed from ten (10) years to forty-five
(45) years (State Health and Safety Code, Section 33334.3(f)). Thus, if the
homeowner wishes to sell prior to the expiration of the forty-five (45) year covenant
period, they must sell to a qualified up-to-moderate income buyer.
In fiscal year 2001-2002, twenty-one (21) MAP loans were processed and the
budgeted funds of $800,000 were spent by May 1, 2002. Staff contends that this
was due to the covenant period being only ten (10) years. Conversely, during fiscal
year 2002-2003, only eight (8) MAP loans have been processed to date. There are
also two (2) applications pending. Interest and awareness about the MAP Program
remains high, and the Community Development Depaitment Housing Division
receives six (6) to eight (8) inquiries daily. Thus, the drop in processed loans is not
attributed to lack of interest or public awareness about the program; it is assumed
that the decline in participation is a result of the enactment of the forty-five (45) year
covenant period [Health and Safety Code, Section 33334.3a. In a brief survey
conducted by the Community Development Department Housing Division of
Mortgage Lenders, many expressed concern over the new covenant rule being
longer than the repayment period of the first loan. Staff also reviewed a number of
Mortgage Assistance Programs currently provided by other Redevelopment
Agencies.
Equity Sharing
To address the declining interest in the MAP Program due to the new forty-five (45)
year covenant rule and to increase the marketability of the program, equity sharing
is being recommended.
California Redevelopment provides that the Agency may permit sales of owner-
occupied units prior to the expiration of the forty-five (45) year covenant pursuant to
an adopted program which protects the Agency's investment through an equity
sharing program.
PAGE 12 of 16littachment 3
City of Culver City, California
Redevelopment Agency Agenda Item Report
MEWED
MAY 2 9 2gg3
CULVER
H
OUSING OFFIC
To illustrate, for a typical MAP loan for the purchase of a property priced at
$300,000, the Agency would loan twenty percent (20%) or $60,000 in the form of a
second trust deed. The purchaser puts down five percent (5%) ($15,000), thus
leaving a $225,000 first trust deed loan.
$300,000 Original Cost of Property
$ 15,000 Down Payment by Purchaser (5%)
$ 60,000 Assistance from the Agency — Second Trust Deed (20%)
$225,000 First Trust Deed Loan
Under equity sharing, if after 24 months (2 years) the homeowner wants to sell the
property, now worth $450,000, the owner would repay the first trust deed loan of
$225,000 and receive the five percent (5%) contributed towards down payment.
Additionally, the owner would repay the Agency the twenty percent (20%)
assistance, as well as pay the escrow costs and fees of $3,000. This would leave a
balance of $147,000. With equity sharing, the Agency would receive twenty percent
(20%), or the percentage loaned, of the remaining $147,000 or $29,400 in profit,
and the homeowner would realize a profit of $117,600. The equity sharing scenario
is depicted below.
$450,000 Price of Property Sold —2 years later
$225,000 First Trust Deed Loan
$ 15,000 Down Payment Contributed by Homeowner
$ 60,000 20% Assistance from the Agency
$ 3,000 Escrow Cost and Fees
$147,000 Profit
$117,600 80% of the Profit for the Homeowner
$ 29,400 20% of the Profit for the Agency
FISCAL ANALYSIS:
The Agency's adopted fiscal year 2002-2003 budget allocates a total of $1 million
for the MAP Program.
Loans are not due and payable until the property is sold, title is transferred, or the
property is refinanced. Equity sharing is only implemented if the homeowner sells to
someone who is beyond the moderate income limits. Funds generated under equity
sharing would be returned to the MAP Program to assist additional households
PAGE 13 of 16Attacriment.
City of Culver City, California
Redevelopment Agency Agenda Item Report
oLv...,CE L*P
MAY 2 9 2003
CULVER Cum
HOUSING OFFICL
purchase homes. Modification of the MAP Program to allow equity sharing could
eventually reduce the amount provided to the MAP Program from Tax Increment funds
if equity sharing was able to become a recurring revenue source.
MOTION:
That the Agency approve the modification of the Mortgage Assistance Program
(MAP) to Allow Equity Sharing.
PAGE 14 of 16Attachment 3
CULVER CITY REDEVELOPMENT AGENCY
MORTGAGE ASSISTANCE PROGRAM
EQUITY SHARING
On June 2, 2003, the Culver City Redevelopment Agency ("Agency") approved current
Mortgage Assistance Program (MAP) participants to utilize the option equity sharing
when selling their property.
The MAP Program is funded through the Redevelopment Agency Housing Set-Aside
Fund. Based on this, properties purchased utilizing MAP must be covenanted for
affordability to up-to-moderate income households. Thus, if the homeowners wished to
sell prior to the expiration of their covenant period, they must sell to a qualified up-to-
moderate income buyer.
Redevelopment Law provides that the Agency may permit sales of owner-occupied units
prior to the expiration of the covenanted period pursuant to an adopted program which
protects the Agency's investment through an equity sharing program.
Equity sharing is only implemented if the homeowner sells to someone who is beyond the
'moderate income limits. An example of equity sharing is depicted below.
$300,000 Original Cost of Property
$ 15,000 Down Payment by Purchaser (5%)
$ 60,000 Assistance from Agency — Second Trust Deed (20%)
$225,000 First Trust Deed Loan
$450,000 Price of Property Sold Now
$225,000 Original First Trust Deed Loan
$ 15,000 Down Payment Contributed by Homeowner
$ 60,000 Assistance from the Agency (20% to be Repaid)
$ 3,000 Escrow Closing Costs (No commissions allowed)
$147,000 Profit
$117,600 80% of the Profit for the Homeowner
$ 29,400 20% of the Profit for the Agency (or percentage borrowed
From the Agency)
Capital Improvements may be an allowable deduction. Original receipts and an
inspection by our Senior Structural Rehabilitation Specialist are required.
A penalty will apply if equity sharing is optioned within 24 months of purchase.
For more information, please call the Housing Division at (310) 253-5780.