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REQUEST FOR ECONOMIC DEVELOPMENTAUTHORITYACTION <br />Date:4/18/2017 <br />Item No.:7.d <br />Department ApprovalExecutive DirectorApproval <br />Item Description: Review and Consider Contract Services for the Roseville Housing Rehabilitation <br />Loan Program and Housing Construction AdvisoryServices <br />B <br />ACKGROUND <br />1 <br />At the Roseville Economic Development Authority (REDA) onJanuary 9, 2017,information was <br />2 <br />provided regardingconcern overthe financial status of the Greater Metropolitan Housing Corporation’s <br />3 <br />(GMHC) Housing Resource Center (HRC).The REDA was advised that the GMHC Board would <br />4 <br />make amore conclusive decision regarding long term operations of their HRC by the end of March, <br />5 <br />2017.The GMHC Board did meet but decided that they wanted to wait untiltheend of May, 2017as <br />6 <br />they would be getting an update onprogram funds from Minnesota Housing Agency.The REDA <br />7 <br />directed staff to come up with alternative options for program administration of the loan and <br />8 <br />construction advisoryservices based upon the situation. <br />9 <br />CA <br />URRENT RRANGEMENT <br />10 <br />Earlier this year,the REDA approved aquarterly contract with GHMC for the HRC services that <br />11 <br />increased construction advisoryservices from $12,000 to $15,000 a year.TheREDA also agreed to pay <br />12 <br />loan fees of $375 per each loan closed versus just the borrow paying the application fee of $75 and the <br />13 <br />origination fee of $350making the total cost of $800 per each loan closed. <br />14 <br />The City of Roseville has had a loan program in place for over 15 years. At one point the program <br />15 <br />targeted familieswith children,and had income restrictions to the borrower. In 2008 the RHRA <br />16 <br />modified the loan to only be income restricted. In 2014 the RHRA modified the loan restrictions to <br />17 <br />target the loan to home values less than median value,which currently is $226,800,removed the income <br />18 <br />restrictions, raised the maximum loan amount to $40,000 and lowered the interest rate to 3%. Program <br />19 <br />changes in 2014 increased use of the programas well as allowed the REDA to target-market the <br />20 <br />program. <br />21 <br />Current home improvement loans that originatewith banks or credit unions have interest ratesbetween <br />22 <br />4%-6.5% based upon credit scores and loan amount. In most cases the bank/credit union will require an <br />23 <br />appraisal of the home which averages $475.00. There may also be closing fees associated with the <br />24 <br />nd <br />recording of a2mortgage. Borrower assumesall costs for the loanunder this model. Currently,a <br />25 <br />REDA loan costs the borrower$425 and the REDA pays $375 to HRC for the loan origination services. <br />26 <br />That is a total of $800 for the loan origination fee. The REDA costs are coming out of the revolving <br />27 <br />loanfunds,which has a balance of roughly $660,000. The REDA could pass along all costs to the <br />28 <br />borrowerbut may see a reduction on the loan useas it would be similar to what banks are charging. <br />29 <br />Page 1of 2 <br /> <br />