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CC Memo-Home Improvement Loan Program <br /> September 3, 1998 <br /> Page 2 <br /> As proposed,the program is comprised of two separate programs which creates one overall <br /> program. The first program provides an interest subsidy to existing MHFA home improvement <br /> loans. MHFA loans have income limits established as part of each program. The maximum <br /> income limit eligible to Mounds View residents for MHFA loans is $69,920, available through the <br /> Community Fix-up Fund. The second component of the proposed program would provide an <br /> interest subsidy to existing market rate loans. By subsidizing existing market rate loans, all <br /> qualifying homeowners within the city would be eligible to receive an interest subsidy for home <br /> improvement loans regardless of household income. <br /> 2. City obligations for administering the program. <br /> Because the program proposes to subsidize existing loans currently offered through lending <br /> agencies, there would be minimal administration for city staff The proposal provides that an <br /> administrative fee of$75 be paid to participating lenders for each originated loan. City staff will <br /> provide follow-up on each loan ensuring the improvements are completed according to loan <br /> agreements. Staff will also provide reports to the EDA periodically for formally approval of loans <br /> and to update the commission on the programs status. <br /> 3. What are the income limits for the loan program? <br /> There was some discussion at the last council meeting regarding the need for income limits. As <br /> the loan programs are currently structured, the MHFA programs currently have income limits in <br /> place. Whereas, the Market Rate component of the proposed program has no income limits <br /> associated with loan requirements. <br /> 4. Eligibility of'HP funds and subsequent requirements. <br /> Legal staff has reviewed TIF fund requirements for the purposes of subsidizing home <br /> improvement loans. It was determined that TIF funds may be used to subsidize home <br /> improvement loans for the purpose of housing redevelopment. According to the Minnesota State <br /> Statutes governing TIF, funds may be used for redevelopment purposes as outlined in the city's <br /> adopted TIF Plan. The Ilk Plan for the City of Mounds View has identified funds be used for. <br /> home improvement and redevelopment purposes. Also, the EDA may be obligated to formally <br /> approve each loan. The city may not delegate the decision making to participating lenders. Each <br /> lender would approve eligibility requirements as they pertain to income qualifications,however the <br /> city may be required to approve each loan. <br /> Available TIF Funds <br /> As previously discussed,the city has allocated$130,000 for 1998 to be used for Housing Rehabilitation <br /> related programs (see Exhibit B). So far this year, $5,600 of the allocated TIF funds have been used for <br /> housing. The EDA also recently approved the purchase of an HRP home located at 6991 Pleasant View <br /> Drive for$60,500. <br /> The program proposes to allocate a total of$75,000 for purposes of subsidizing interest rates for home <br /> improvement loans for two separate existing programs. Of which, $40,000 will be used to subsidize and <br /> administer MHFA loans (i.e. provide approximately 25 reduced rate loans at$10,000). The other <br /> program would propose to allocate$35,000 for subsidizes to Market Rate loans (i.e. provide <br /> approximately 22 subsidized loans at$10,000). The end result would be approximately$470,000 of <br />