REDEVELOPMENT AGENCY
            REPORT 2009-59                                                        7G

SEPTEMBER 15, 2009



             $10,000 PER LOAN

Adopt a resolution authorizing the Executive Director to approve exceptions to the
First Time Home Buyer (FTHB) Program in an amount not to exceed $10,000 per

On December 2, 2008, the Agency Board approved resolutions adopting revisions to
the First Time Home Buyer Program and contracting with the Bay Area Home Buyer
Agency to manage the First Time Home Buyer Program and Below Market Rate
housing. Changes to the Program revised the maximum allowable loan amount to
utilize a tiered funding approach based on the buyer’s income level.

On May 19, 2009, the Agency Board authorized the sale of two Agency-owned
homes on Maiden Lane as Below Market Rate (BMR) affordable housing units to be
marketed to moderate income households. The May 2009 approval reserved
$100,000 of First Time Home Buyer funds to provide down payment assistance to
qualified buyers. On August 18, 2009, the Board authorized the Executive Director
to enter into a Purchase and Sale Agreement for 609 Maiden Lane; on September 1,
2009, the Board authorized the Executive Director to enter into a Purchase and Sale
Agreement for 620 Maiden Lane.

First Time Home Buyer loans are intended to provide gap financing. Borrowers
must borrow the maximum first mortgage for which they qualify; the Agency loan is
designed to provide the difference. In processing FTHB loans, the Agency and its
consultant, First Home, Inc., work closely with the borrower and first lender to assure
that the Agency is providing only gap financing and that FTHB borrowers are taking
advantage of other available low or no-interest funding sources. The maximum
allowable loan amounts outlined in the Program utilize a tiered funding approach
based on the buyer’s income level.
Redevelopment Agency Report #2009-59
September 15, 2009                                                                  2

           Buyer’s Income Level                    Maximum Loan Amount
             Very low income                            $100,000
               Low income                                $50,000
            Moderate income                              $30,000

Since the 2008 Program updates, the Agency has closed one First Time Home
Buyer loan and has received loan reservations from four additional qualified
households whom are now actively searching for a home to purchase.

As a result of recent legislation, once a property is under contract, lenders are
required to order appraisals from appraisers with whom they maintain an arm’s
length relationship. This often translates into appraisals conducted by appraisers
who may not be familiar with the local market. This requirement, combined with
continued softening in the market and the lack of comparables for a number of
recent sales has led to appraisals coming back lower than anticipated. This has
happened in the case of the sale of the 609 Maiden Lane BMR and which Staff
anticipates may happen in other instances going forward.

In order for the buyers to secure the level of financing necessary to comply with
FTHB and BMR Program requirements, they must demonstrate at least an 80% loan
to value (LTV) ratio on the first loan based on the market value of the property. In
the case of BMR units, a lower than anticipated appraisal decreases the anticipated
difference between the market value and purchase price of the home. Because the
LTV ratio is calculated based on the market rate, a lower market rate for a BMR
requires a higher down payment as the lender will only extend a loan for up to 80%
of the market value of the home. Consequently, additional gap financing is
necessary to provide an adequate down payment to qualify for the loan.

Current market conditions require that the specific financing requirements of each
loan be evaluated on a case-by-case basis and the general tiered financing as
outlined in the FTHB Program may not be adequate to provide gap financing in all
cases. Initial analysis from the appraisal of 609 Maiden Lane has found that due to
a decrease in the appraised value, an additional $10,000 of down payment
assistance is necessary to secure financing from the primary lender. Staff
anticipates this may also prove true for 620 Maiden Lane.

Other alternatives, including decreasing the purchase price or accepting down
payment assistance through other loan programs that would require the Agency to
subordinate its position, may be possible in order to secure the necessary financing.
However, Staff feels that granting the Executive Director the authority to increase
FTHB loan funding to meet minimum gap financing requirements is the best
approach. The additional funds would remain subject to the adopted loan
Redevelopment Agency Report #2009-59
September 15, 2009                                                                3

In the case of the Maiden Lane BMR units, up to $100,000 of First Time Home
Buyer funds were allocated to assist buyers in purchasing the homes. Because the
buyers are moderate income, the general FTHB program requirements allow up to a
$30,000 FTHB loan. Authorizing the Executive Director to approve an additional
$10,000 in funds would not allow for FTHB loan funding for the BMR units in excess
of the approved $100,000 threshold.

This approach allows the Agency to respond quickly in order to meet tight financing
deadlines. Because the exception allows for an increase to the loan amount, the
increased funding will ultimately be returned to the Agency’s Housing Fund and the
Agency does not have to further subordinate its loan. Staff recommends that the
Board authorize the Executive Director to approve exceptions to the FTHB Program
guidelines in amounts not to exceed $10,000 per loan.

The FTHB Program and BMR housing help the Agency meets its goal of assisting in
the development and/or financing of housing for low and moderate-income families
and individuals within the Redevelopment Project Area. By helping borrowers
purchase homes, the Agency will minimize the City’s number of vacant and
unmaintained properties.

No new fiscal impact. Funding in the amount of $500,000 for First Time Homebuyer
Loans is provided for in the Agency’s FY 2009-10 Capital Budget, Line Item First
Time Homebuyer Program Account # 280-40702-0464.

  A. Resolution
  B. First Time Home Buyer Program Guidelines
Redevelopment Agency Report #2009-59
September 15, 2009                                                                   4

                           RESOLUTION NO. ____ - 2009

                   TO EXCEED $10,000 PER LOAN

        WHEREAS, on November 22, 1972, the City Council of the City of Pinole (the
“City”) adopted Ordinance No 313, establishing the Redevelopment Agency of the
City of Pinole (the “Agency”) and approving the Redevelopment Plan for the Pinole
Vista Redevelopment Project (the “Project Area”), as amended and restated by
Ordinance No. 2004-05 on May 5, 2004, and as may be further amended from time
to time (the “Plan”); and

         WHEREAS, pursuant to California Community Redevelopment Law (Health
and Safety Code Section 33000 et. seq.) (the “Redevelopment Law”), the Agency is
authorized to engage in redevelopment activities that alleviate blighting conditions
within the Project Area and that primarily benefit the Project Area, within the
territorial jurisdiction of the Agency; and

        WHEREAS, on December 2, 2008, the Agency adopted Guidelines for the
First Time Home Buyer Program by Resolution 65-2008; and

      WHEREAS, on May 19, 2009, the Agency authorized the sale of the Below
Market Rate units on Maiden Lane by Resolution 37-2009; and

       WHEREAS, current market conditions are requiring that additional gap
funding may be necessary to secure primary funding for buyers utilizing the First
Time Home Buyer and Below Market Rate Programs; and

        WHEREAS, the Agency desires to allow the Executive Director the authority
to approve limited exceptions to the First Time Home Buyer Program loan guidelines
furthering the Program’s intent to provide gap financing for qualified home buyers.


       SECTION 1. The foregoing recitals are true and correct.

      SECTION 2. The Agency authorizes the Executive Director to approve
exceptions to the First Time Home Buyer Program guidelines to allow for additional
funding not to exceed $10,000 per loan for each income category.

     PASSED AND ADOPTED at a regular meeting of the Pinole Redevelopment
Agency held on the 15th day of September 2009 by the following vote:

                                                                         ATTACHMENT A
Redevelopment Agency Report #2009-59
September 15, 2009                     5

       AYES:         BOARDMEMBERS:
       NOES:         BOARDMEMBERS:

Patricia Athenour, CMC
                               REDEVELOPMENT AGENCY OF THE CITY OF PINOLE
                                FIRST TIME HOMEBUYER PROGRAM GUIDELINES
                                            (Non-Resale Restricted)

The Redevelopment Agency of the City of Pinole ("Agency") in its attempt to reduce or eliminate the blighted
conditions within the Pinole Vista Redevelopment Project Area ("Project Area") and continue to develop affordable
home-ownership opportunities, has created a first-time homebuyers affordable housing program ("Program") for
homes located within the City of Pinole. Pursuant to the California Community Redevelopment Act, the Agency is
authorized to produce plans and encourage activities designed to eliminate and prevent the spread of blighted
conditions within the Project Area and provide assistance to increase, preserve or maintain affordable housing within
the City of Pinole.

A.         The Program

         The Program is intended to provide loans to very low, low and moderate income individuals or families in the
form of downpayment assistance to purchase homes within the City of Pinole. Buyers will be encouraged to take
advantage of state and federal loan programs that assist first-time home buyers. At a minimum, applicants are
required to apply for the WISH and CHDAP first time homebuyer programs, as applicable. Agency staff will provide
applicants with additional information for these programs, as needed.

         To qualify, household income cannot exceed moderate income, which is 120% of the area median income
(AMI) as defined by the California Housing and Community Development Department. In 2009, the maximum
amounts by income levels are:

                                                 2009 Maximum Income
                                                      Number of Members in Household
                % of
                Median            1              2                 3           4            5                6
Very Low        50%        $    31,250     $    35,700    $       40,200   $ 44,650     $ 48,200         $ 51,800
Low             80%        $    46,350     $    53,000    $       59,600   $ 66,250     $ 71,550         $ 76,850
Moderate        120%       $    75,000     $    85,700    $       96,450   $ 107,150    $ 115,700        $ 124,300

           Households must submit a program application and satisfy the following eligibility requirements:

       1.       Household income must be certified and cannot exceed applicable very low-income, low-income,
and moderate-income levels determined by household size.

        2.       Housing costs include loan principal and interest payments, property taxes and assessments,
insurance, homeowners association fees, utilities, and maintenance/repair costs (“Housing Costs”). Maximum
Housing Costs are adjusted for family size appropriate for the unit, may not be less than 28% of the actual gross
income of the household, and may not exceed:
                 (i)      very low income – 30% of 50% of AMI
                 (ii)     low income – 30% of 70% of AMI
                 (iii)    moderate-income -- 35% of 110% of AMI.

           3.       Homes eligible for the program consist of any home within the City of Pinole.

          4.       Priority. The Program includes reserved funds for applicants meeting certain priority
criteria. Priority points are accumulated based on the applicant’s qualifying in any number the nine priority
categories described in the table below. For each category in which the applicant can provide verification
of meeting the criteria, he or she receives one priority point. Priority points may be calculated for each

                                                              1                         First Time Homebuyer Program Guidelines
                                                                                                    Pinole Redevelopment Agency
                                                                                                 ATTACHMENT B
member of the applicant’s household whose income is counted in the household annual gross income
calculations. The application will be assigned the points earned by the household member with the
greatest number of points. If the applicant has verified priority points, loan will be funded from the 30%
reserved funds for preferred borrowers. Funding priority within the 30% reserved funds will be allocated to
borrowers with the highest total number of priority points.

                                                  Priority Categories
         Live in the City of Pinole
         Work in the City of Pinole, including employees of companies in the process of moving to Pinole
         Credentialed teachers working at a school in Pinole
         Public safety personnel
         City Staff
         Healthcare service providers
         Pinole business owners
         PVHS alumni

        5.        Applicant must contribute an equity downpayment of at least three percent (3%) of the total
purchase price or $5,000, whichever is greater.

        6.        A first time homebuyer is defined as a person or household who has not owned a principal place of
residence in the past three (3) years.

         7.       Applicant’s eligibility to apply for the program is based on both debt-to-income (DTI) ratio and FICO
                  (i)      Applicant’s debt-to-income ratio (DTI) may not exceed 45%.
                  (ii)     Applicant’s FICO score must be at least 640.
                           a. Applicant with a 640 to 659 FICO score is eligible for consideration only if their total
                               DTI ratio does not exceed 40%.
                           b. Applicant with a 660 or higher FICO score is eligible for consideration only if their total
                               DTI does not exceed 45%.

         8.       Applicant must participate in a first-time homebuyer education seminar designated by the Agency.

B.       The Loan

         1.       Loan Amount. Applicants may request a maximum loan amount of up to:

                  (i)      $100,000 for qualified very low-income households

                  (ii)     $50,000 for qualified low-income households

                  (iii)    $30,000 for qualified moderate income households

         2.         Use of Loan Proceeds. Loan funds will be disbursed by the Agency for the purpose of financing a
portion of the cost of acquisition of a home in the City of Pinole that will be owner occupied. The Loan funds may
only be used to finance that portion of the costs between the mortgage lender's requirements and the buyer's cash
down-payment, plus closing costs. Loan proceeds cannot be used as borrower reserves, to offset the payment of
borrower’s bills in escrow or to pay for property repairs.

                                                           2                            First Time Homebuyer Program Guidelines
                                                                                                    Pinole Redevelopment Agency
        3.       Interest Rates & Terms for Loans. The interest rate will be set at zero percent (0%) for all loans.
Loans will be amortized and repaid over 30 years. The term and deferral period will be determined by the level of
household income:

                    (i)      Very Low Income: Loans will be made for a period of 40 years, with repayment deferred
for the first 10 years.
                    (ii)     Low or Moderate Income: Loans will be made for a period of 35 years, with repayment
deferred for the first 5 years.

The principal amount of the loan and shared appreciation (described below) is due and payable upon the sale or
transfer of the home or refinancing of the initial mortgage or violation of a Program covenant (transfer of the home,
conversion of the home to rental property, unapproved mortgage, etc.).

         4.       Default Rate. No Interest will accrue on the outstanding balance of the loan. However, failure to
pay principal and/or interest within ten (10) days of the due date will result in interest accruing at a default rate of ten
percent (10%) per annum until the loan is brought current.

         5.       Shared Appreciation. In exchange for providing a zero-interest rate loan, the Agency will share a
portion of the home's appreciation when the home is resold or upon repayment of the principal of the loan. The
Agency's share is determined by dividing the original amount of the Agency loan by the original purchase price of the
home; multiplying the resulting percentage by the amount of appreciation (resale/refinance amount less original
purchase price, less closing costs and costs of approved capital improvements). Applicant will sign a Shared
Appreciation Disclosure Statement confirming that they understand their obligation.

         6.       Late Charges. Applicant recognizes that late payment of principal and/or interest will result in extra
administrative expense to the Agency which could result in the inability of the Agency to meet its financial
commitments. The extent of this additional expense and other damage to the Agency is extremely difficult and
economically impractical to ascertain. Applicant therefore agrees that if any amount due remains, and payable to the
Agency, remains unpaid fifteen (15) days after the same is due, without notice to Applicant, the amount due and
payable shall be increased by a late charge to be paid to the Agency by Applicant in an amount equal to five percent
(5%) of the amount due. Applicant agrees that such amount is a reasonable estimate of the loss and expense to be
suffered by the Agency as a result of such late payment by Applicant and may be charged by the Agency to defray
such loss and expense. The provisions of this Paragraph 6 shall not be construed to grant Applicant a grace period
and shall in no way relieve Applicant of the obligation to pay any amount of the loan on or before the date on which it
becomes due, nor do the terms of this paragraph in any way affect the Agency’s remedies pursuant to the event any
amount of the loan is unpaid after the date due.

         7.        Allowable First Mortgage Loans. Level payment fixed rate loans, no interest only loans or
adjustable rate loans are allowed. First mortgage must not have a prepayment penalty and may not exceed ninety
percent (90%) of the purchase price.

         8.       Deed of Trust. The Agency’s loan will be secured by a Deed of Trust recorded against the home.
Such Deed of Trust will only take a junior position to the borrower’s first mortgage described above, unless otherwise
permitted by the Agency in its sole discretion.

          9.       Refinancing. The Loan Agreement allows for refinancing but places restrictions on the loan

         10.      Maintenance. Applicant will sign an agreement to maintain and keep up their home to acceptable
standards. Any violation of the Pinole Municipal Code 8.24 is unacceptable, including, but not limited to:
maintenance of landscaping, storage of garbage cans out of public view, no storage of trash and debris in public
view, no storage of inoperable or unregistered vehicles, and dilapidated exterior of home.

                                                              3                             First Time Homebuyer Program Guidelines
                                                                                                        Pinole Redevelopment Agency
         11.     Impound Account. The first mortgage must include an impound account from which property taxes
and insurance are paid. (Impound Accounts are separate savings accounts set up by mortgage lenders to pay
property taxes and property insurance on behalf of the home owner.)

          12.      Appraisal. The total amount of all loans may not exceed the appraised value of the home.

          13.      No Cash Out. The borrower may not receive any cash back through escrow.

          14.      “As Is” Clause Prohibited. The home must pass inspection and all items cleared before close of

C.        Application Process

          The process for applying for the Program loan is set out as follows:

         1.       Applications are available at the Agency’s offices located at 2131 Pear Street, Pinole, California;
and through the Program Administrator: Bay Area HomeBuyer Agency (BAHBA). If you have any questions
regarding this program, please call 510-724-9000 or BAHBA at (888) 572-1222 ext. 121.

         2.        Completed applications must be returned to the BAHBA at P.O. Box 210580 San Francisco, CA
94121. Upon reviewing the preliminary application, BAHBA will notify the applicant regarding their preliminary
standing and will request additional information to further determine program eligibility.

         3.       The Executive Director of the Agency and his/her designee will review each application, determine
whether the requirements for eligibility have been met and schedule a meeting with all parties involved within thirty
(30) days of receipt of the application by the Agency.

         4.       Consideration of applications will occur on a first come, first served policy. All loan requests will be
submitted to the Executive Director for final approval, based upon health, safety, and welfare considerations, and the
information and documentation provided with the Application.

         5.       Upon application approval, Program funds will be reserved for the applicant for 60 days. Within 60
days, applicant must open escrow on a property with an approved first loan, or the Agency will release the funds
back into the Program for the next qualified applicant. Applicant may request an extension that may be considered
by the Agency.

        6.      Applications, loan agreements, deeds of trust and promissory notes must be examined and
approved by Agency Counsel.

D.        Reporting

          Staff will present the Agency Board with a program report each January beginning in 2010.

                                                            4                            First Time Homebuyer Program Guidelines
                                                                                                     Pinole Redevelopment Agency

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