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• Staff Memo - Proposed Loan Program March 16, 1998 Page 4 ($1,000 income deduction for each family member). The MHFA has proposed an amendment to the Community Fix-up Fund program which would allow participating cities to buy down interest rates for their programs. As the program currently stands, interest rates may not be bought down. The MHFA board will review the proposed changes at their March 26th meeting. Center for the Energy and the Environment(CEE) Home improvement loans may be provided at 4-6%with general loan funds provided by the City of Mounds View. CEE processes applications, assists in the marketing of the program and provides servicing of the loans through Community Reinvestment, an outside loan servicing company. Remodeling Counselors may also be made available for$75 - $125 per consultation Western Bank Option 1. Rate Buy Down Western Bank uses current underwriting guidelines. The city may adopt parameters for granting loans; i.e. income, type of improvements, etc.. Western Bank provides the funds for loans and the City of Mounds View either keeps money on deposit or pays a fee per loan to by down the interest rate. The city would not have to lend out money. All loan risk, administration, compliance with regulations and collection would be the responsibility of Western Bank. • Program Guidelines: • Maximum of$25,000 loan without regard to equity in the home. Current rates range from 8% - 13%. ♦ Loan minimum for a mortgage is $5,000. Loan minimum for all other loans are $3,000. • Applicants would pay normal closing costs. These may be financed with the loan. Closing cost for a$25,000 loan are typically$195. • Consolidation of other debts are available to accommodate the home improvement payment. Option 2. Revolving Loan Fund The City of Mounds View would set aside a specific amount of funds that Western Bank would lend according to the bank's parameters. Western would originate and administer the loans, collect and place payments in a separate account and provide monthly reporting. Western Bank and the City of Mounds View would agree to typical collection efforts that Western would provide as it relates to delinquent loans. Interest rates may be set by the city. Option 3. Matching Loan Fund Both the City of Mounds View and Western Bank would set aside an amount of money to lend according to agreed upon parameters. This arrangement could be in full recourse or non- recourse depending on how it is set up. Two loans would be made to the customer. Mounds 11111 Views portion would be at a low rate and Westerns portion would be closer to market rate for a