San Francisco Redevelopment Agency

NEW SALES

The Agency will review the loan application, the good faith estimate and other documents to ensure compliance with Program guidelines and eligibility.

Types of Mortgages:
The Agency allows only 30-year, fixed-rate, fully ammortizing purchase money loans.  Interest-only loans, adjustable rates, Home Equity Lines of Credit (HELOC) and Lines of Credit (LOC) are not permitted as part of a home purchase or refinance.  The lender must be an accredited financial institution. 

Loan-to-value and Mortgage Insurance:
The Agency's Program is a restricted resale program.  However, it has been structured so that the resale restrictions terminate in the event of foreclosure.  In other words, the full Fair Market Value ("FMV") of the home is available for distribution if there is an uncured default.  Therefore, the purchase money loan should be underwritten based on the FMV of the home rather than on the Affordable Purchase Price (often one third or less of FMV).  The result when the loan is underwritten in this fashion is that the loan-to-value of the purchase money loan will often be 30-40%, and certainly far less than the 80% threshold for Private Mortgage Insurance ("PMI").  The Agency requires that lenders providing mortgages to purchasers in the Program will underwrite in this manner and will therefore not require or charge for PMI in any form.  Lenders who work with Fannie should note the March 2006 notice from Fannie indicating that programs structured  like our Program (where the restrictions terminate in the event of foreclosure) allow the underwriters to use the higher of the FMV or purchase price for loan-to-value analysis.  These loans must be manually underwritten.  For your convenience, find the relevant Fannie Mae Announcement 06-03 (March 22, 2006) below.  See in particular Sections D and I of the attached Fannie notice. 

Debt to Income Ratios:  The Agency will allow up to a 45% back-end ratio.

Down Payment:  The Agency requires a minimum 5% down payment.  Of the total 5%, 3% must be the borrower's own funds and 2% can be gift funds.  Total down payment cannot exceed 50% of the sales price.

Credit Policy (effective May 1, 2010):  The Agency requires a minimum 620 middle score for the household (all adult members).  The score is based on a tri-merge credit report (one that combines credit reports from all three of the credit bureaus) within 90 days prior to the application date.  However, if credit has not been established, we will allow no credit score.

Title/Loan Policy:  The Agency requires that all adult household members be on title, first mortgage and Agency loan documents.  However, if an individual adult household member who is not the head of household is unable to obtain a loan, we will allow the following two exceptions to this policy:

  1. Dependant: defined as a current member of the household who is claimed as a dependent on the most recent federal income tax return.
  2. Those with less than two years of credit history who meet one of the following criteria: 1) minimum 620 middle score or 2) have not established credit.

For applicants that are unable to qualify for a loan and who meet our criteria for an exception, send a request with the details and documentation.  All adults will still need to be on title and on Agency loan documents.

First Mortgages- SUSPENDED as of June 29, 2011
In general, the Agency will subordinate its Deed of Trust to a First Deed of Trust.  The Agency may consider further subordination on a case-by-case basis.  

Mayor's Office of Housing ("MOH")
The following MOH programs are compatible with the Agency's Limited Equity Home Ownership Program:

1) Teacher Next Door
2) Police in the Community
3) Mortgage Credit Certificates ("MCC") (certain restrictions apply based on project funding)

The following MOH programs are NOT compatible with the Agency's Program:
1) City Second
2) DALP

   Visit the MOH website for more information.

CalHFA
The Program is approved for use with CalHFA loan programs, and a CalHFA first mortgage should be compatible with the Program.  However, in terms of secondary financing from CalHFA, lenders should only assume that CalHFA's CHDAP and School Facility Fee Grant can be used in conjunction with the Program.  CalHFA will subordinate the CHDAP and the School Facility Grant to the Agency; the Agency will not subordinate to CalHFA's other subordinate financing at this time.  Visit theCalHFA website for more information on CHDAP and CalHFA's other programs.

Subordination and Use With Other Programs- 
NOTE: As of June 29, 2011 the Agency is no longer able to process subordination requests.  

Many of you are aware that Governor Brown has signed several budget trailer bills to implement the State Budget for Fiscal Year (FY) 2011-2012 that was approved by the Legislature and sent to the Governor on the evening of June 28, 2011.  Among the signed trailer bills are two addressing redevelopment that significantly modify the California Community Redevelopment Law (the "CRL"): ABx1 26 (the "Dissolution Act" and ABx1 27 (the "Voluntary Program Act"; and together with the Dissolution Act, the "Redevelopment Restructuring Acts" or "Acts").  If upheld against anticipated constitutional challenge, the Redevelopment Restructuring Acts will fundamentally alter the future of California redevelopment.

Working in tandem, the Act provides as follows:
(1) The Dissolution Act first immediately suspends all new redevelopment activities and the incurrence of indebtedness, and dissolves redevelopment agencies ("RDSs") effective October 1, 2011; and 
(2) The Voluntary Program Act then allows RDAs to avoid dissolution under the Dissolution Act by opting into an "alternative voluntary redevelopment program" (the "Voluntary Program") requiring specified substantial annual contributions to local school and special districts.  If all RDAs were to opt-in to the Voluntary Programs, these contributions would amount to $1.7 Billion for FY 2011-2012 and appear intended to amount to $400 Million in each succeeding year (subject to certain adjustments).*

What this means for SUBORDINATIONS/REFINANCING:

Our Agency is not able to enter any new commitments or contractual obligations until the City of San Francisco adopts an ordinance stating that the City will agree "to comply with the Voluntary Program" by making the required payments (by October 1, 2011).  The adoption of the ordinance will permit the Agency to "recommence normal redevelopment activities under the CRL."  

*Excerpted from "SUMMARY OF ENACTED STATE BUDGET LEGISLATION REGARDING REDEVELOPMENT (ABX1 26 AND ABX1 27), July 6, 2011, written by Goldfarb and Lipman LLP.