HomeMy WebLinkAboutResolutions - 1989.05.25 - 17068DATE: May 25, 1989 MISCELLANEOUS RESOLUTION NO. 89137
BY: PUBLIC SERVICES COMMITTEE - RICHARD D. KUHN, JR., CHAIRPERSON
IN RE: COMMUNITY DEVELOPMENT DIVISION - HOME REHABILITATION FUND LEVERAGING
AGREEMENT WITH FIRST OF AMERICA BANK, SOUTHEAST MICHIGAN, N.A.
TO THE OAKLAND COUNTY BOARD OF COMMISSIONERS:
Mr. Chairperson, Ladies and Gentlemen:
WHEREAS, Oakland County has been a recipient of Community Development
Block Grant funds from the U.S. Department of Housing and Urban Development
since 1974; and
WHEREAS, the County of Oakland Community Development Division has operated
a Home Improvement Program with Community Development Block Grant funds since
1976 to provide rehabilitation financing for privately owned, single family
residential structures on behalf of the communities participating in the
Oakland County CDBG program; and
WHEREAS, the County of Oakland and Community National Bank of Pontiac/
(now First of America Bank, Southeast Michigan, N.A.) entered into an agreement
on August 9, 1979 (Attachment A) for the Bank to service County loans made
under the authority of the Community Development Block Grant Program; and
WHEREAS, the U. S. Department of Housing and Urban Development has
established procedures allowing Community Development Block Grant recipients to
draw (in one lump sum) the funds designated for property rehabilitation in
their approved CDBG application in order to establish a Rehabilitation
Leveraging Fund with a private financial institution; and
WHEREAS, the County of Oakland by Miscellaneous Resolution #82283 of
September 21, 1982 adopted the basic concept of utilizing Community Development
Block Grant funds to leverage private financial resources for the
rehabilitation of residential and commercial property; and
WHEREAS/ the County of Oakland by Miscellaneous Resolution #87157 of June
11, 1987 authorized the establishment of a Home Rehabilitation Fund and the
execution of a Rehabilitation Fund Agreement for the period of May 28, 1987
through May 27, 1989; and
WHEREAS, the Community Development Division reconuends the continuation of
a Home Rehabilitation Fund at First of America Bank, Southeast Michigan, N.A.
in order to leverage private resources for the County's Home Improvement
Program; and
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WHEREAS, the Home Rehabilitation Fund Leveraging Agreement with First of
America Bank, Southeast Michigan, N.A. has been reviewed and approved as to
form by the Office of Corporation Counsel;
WHEREAS, the Oakland County Community Development Citizens Advisory
Council recommends approval by a roll call vote of 16 to 0; and
WHEREAS, the Community Development Division has prepared the attached Home
Rehabilitation Fund Leveraging Agreement for execution by the County and First
of America Bank, Southeast Michigan, N.A. to continue operation and servicing
of the County's Home Improvement Program loans; and
WHEREAS, all funds utilized for Home Improvement loans and program
administration shall be allocated from CDBG funds budgeted for rehabilitation
programs, income generated by the lump-sum deposit, and program income received
from the Home Improvement Loans, with no funds utilized from the County General
Fund.
NOW THEREFORE BE IT RESOLVED that the Oakland County Board of
Commissioners approves the attached Home Rehabilitation Fund Agreement with
First of America Bank, Southeast Michigan, N.A., and authorizes the Oakland
County Executive to execute the Agreement.
Mr. Chairperson, on behalf of the Public Services Committee, I move the
adoption of the foregoing resolution.
PUBLIC SERVICE COMMITTEE
OAKLAND COUNTY COMMUNITY DEVELOPMENT
HOME REHABILITATION FUND AGREEMENT
PreaMble
WHEREAS, the United States Department of Housing and Urban Development
has enacted rules and regulations regarding the use of funds under the
Community Development Block Grant Program, and
WHEREAS, the County of Oakland is a recipient of funds under such a
program, and
WHEREAS, the United States Department of Housing and Urban Development
has through its rules and regulations established a procedure whereby a
Community Development Block Grant recipient may draw in one sum funds
designated in its Community Development application for the establishment of
a rehabilitation fund in a private financial institution, and
WHEREAS, the County of Oakland is desirious of establishing such a fund,
and
WHEREAS, the County of Oakland Community Development Division has
operated a Home Improvement Program since 1976 to provide rehabilitation
financing for privately owned, single family residential structures, and
'WHEREAS, 24 CFR 570.513(b), as amended, requires that a written
agreement be entered into between the Community Development Block Grant
recipient and the financial institution wherein the fund is to be
established.
NOW, THEREFORE, this Agreement is made as of this 28th day of May, 1989
by and between the County of Oakland, a Michigan Constitutional Corporation,
acting by and through its Community Development Division (herein referred to
as the "County"), and First of America Bank, Southeast Michigan, N.A., a
National Bank Association of Detroit, Michigan (herein referred to as the
"Bank") for a period of two (2) years. In consideration of the premises and
undertakings herein set forth, the parties do hereby agree as follows:
Purpose
The purpose of this Agreement between the County and the Bank is to permit
the County to draw funds from its Community Development Block Grant Letter of
Credit in a single lump sum to establish a Home Rehabilitation Fund with the
Bank for the purpose of financing the rehabilitation of privately owned,
single family residential properties, as a part of the County's Community
Development Block Grant (CDBG) Program. The Home Rehabilitation Fund may
also serve as a depository for funds to be transferred as required to any
additional rehabilitation accounts operated as part of the CDBG Program.
Article I
Definitions
1.01 "Home Improvement Program" shall mean the program wherein the County
provides low interest installment and deferred payment loans to
eligible low and moderate income households for single family home
rehabilitation.
1.02 "Home Improvement Loan" - A County loan, installment or deferred made
under terms specified by the County.
1.03 "County Note" shall mean a mortgage note payable to the order of the
County evidencing a borrower's obligation to the County on a Home
Improvement Loan.
1.04 'CMG Funds" shall mean funds received by the County from the United
States Department of Housing and Urban Development under its Community
Development Block Grant Program.
1.05 "Home Rehabilitation Fund" shall mean the deposits established from the
lump sum drawdown of CDBG funds budgeted for the County Home
Improvement Program.
Article II
Establishing the Home Rehabilitation Fund
2.01 The County agrees to deposit with the Bank from time to time certain
CDBG funds budgeted for the County Home Improvement Program and other
CDBG funded residential rehabilitation programs, and the Bank agrees to
accept these funds in an amount to be determined at the sole discretion
of the County.
2.02 The funds deposited by the County pursuant to Section 2.01 of this
Agreement shall be placed in one or more accounts which shall earn the
highest interest rate offered by the Bank to any of its customers on
similar deposit product as determined by the size and maturity of such
deposits as mutually agreed to by the Bank and the County. The
principal and interest will be made available for the County's
, participation with the Bank in the Home Improvement Program and for
CDBG funded residential rehabilitation programs as designated by the
County.
2.03 The parties hereto acknowledge that the deposit of funds by the County
pursuant to Section 2.01 of this Agreement is contingent upon the
receipt of CDBG funds and the County reserves the right to delay
deposit until the receipt of adequate funds from the United States
Department of Housing and Urban Development (HUD).
2.04 The Home Rehabilitation Fund will be used to finance the County's Home
Improvement and other residential rehabilitation programs pursuant to
the County's approved Community Development Block Grant Program.
Pursuant to 24 CFR 570.313 (c) (1) of the regulations governing
lump-sum drawdowns, interest income on the Rehabilitation Fund shall be
disbursed to Home Improvement Loan activities first.
2.05 Use of the deposited funds for residential property rehabilitation
financing shall commence within forty-five (45) days of deposit. In
the event that the use of deposited funds does not start within the
forty-five (45) day time limit, the County may be required by HUD to
return all or part of the deposited funds not previously pledged or
encumbered to the CDBG Letter of Credit. If that should occur, the
Bank will no longer be required to continue in participation of this
program other than those loans that have been made at the time of
withdrawal.
Article III
Terms of Program
3.01 The County shall make deferred and installment rehabilitation loans to
qualified low and moderate income owners of single-family,
owner -occupied homes. Applicants shall be qualified and processed by
the County pursuant to the County's Home Improvement Program guidelines
as approved by U.S. Department of Housing and Urban Development.
3.02 Pursuant to 24 CFR 570.313 (i) (1) (iii), the Bank shall provide
administrative services in support of the County's Home Improvement
Loans in accordance with the Servicing Agreement between the County and
the Bank, attached hereto as "Attachment A"..
Article IV
Duration of Agreement
4.01 This Agreement will apply to new loan activity for a period of two (2)
years from the date of this Agreement. The responsibilities of the
Bank and County with respect to loans made under this Agreement shall
remain in effect until those loans have matured or until such time as
the County's investment has been returned, whichever shall occur
sooner.
4.02 If for any cause the parties hereto shall violate any covenant,
agreement, term or condition in this contract, the other parties shall
thereupon have the right to terminate this Agreement by giving written
notice of such termination, specifying the effective date thereof, at
least thirty (30) days before the effective date of such termination
and this Agreement shall terminate in all respects as if such were the
date originally given for the expiration thereof.
4.03 In the event the County is required to terminate this Agreement
pursuant to a directive from the federal government or pursuant to
federal rules and regulations, the County shall be permitted to so
terminate by giving notice in accordance with the terms of Section
10.01 of this Agreement.
4.04 At the termination of the two (2) year Agreement, all unobligated
deposits of CDBG funds in the Home Rehabilitation Fund will be returned
at the County's responsibility to its Community Development Block Grant
Letter of Credit unless the County is authorized by the Department of
Housing and Urban Development to extend the Agreement for an additional
period.
Article V
Compliance With Laws
5.01 The parties hereto agree
ordinances, and codes of the
is understood that all loans
banking practices but under
discriminated against because
national origin.
to comply with all applicable laws,
federal, state and local governments. It
will be made pursuant to good and sound
no circumstances shall an applicant be
of race, color, creed, handicap, sex or
5.02 It is hereby understood and agreed that the terms and conditions of
this Agreement are subject to the provisions governing lump—sum
drawdowns for property rehabilitation pursuant to 570.513 of the
Department of Housing and Urban Development regulations on Community
Development Block Grants, being 24 CFR, Fart 570, attached as
"Attachment B".
Article VI
Insurance
6.01 The parties hereto shall maintain at their expense during the term of
this Agreement on behalf of all of their employees performing any of
the activities hereunder the following insurance where applicable:
a) Worker's Compensation Insurance for Employees which meets
Michigan's statutory requirements and Employer's Liability
Insurance with Minimum limits of $100,000 each accident:
b) Comprehensive general liability insurance with minimum limits of
$1,000,000 combined single limit, each occurrence, for bodily
injury and property damage.
Article VII
Indemnification
7.01 The Bank agrees to save harmless the County against and from any and
all liabilities, obligations, damages, penalties, claims, costs,
charges and expenses which may be imposed upon, incurred by or asserted
against the County by reason of any of the following occurring during
the terms of this Agreement:
a) Any negligent or tortious acts of the Bank or any of its personnel,
employees, consultants or subcontractors; or
b) Any failure of the Bank or any of its personnel, employees,
consultants or subcontractors to perform its obligations either
implied or expressed under this Agreement.
Article VIII
Fair Employment Practices
8.01 In accordance with the United States Constitution and all Federal
legislation and regulations governing fair employment practices and
equal employment opportunity, and including but not limited to the
Civil Rights Act of 1964 (P.L. 88-352, 78 Stat. 252) and in accordance
with the Michigan Constitution and all State laws and regulations
governing fair employment practices and equal employment opportunity,
including but not limited to the Michigan Civil Rights Act (P.A. 1976,
No. 453) and the Michigan Handicappers' Civil Rights Act (P.A. 1976,
No. 220) the Bank agrees that it will not discriminate against any
person, employee, consultant or applicant for employment with respect
to his or her hire, tenure, terms, conditions or privileges of
employment because of his or her religion, race, color, national
origin, age, sex, height, weiaht, marital status, handicap or sexual
orientation that is unrelated to the individual's ability to perform
the duties of a particular job or position.
8.02 The Bank further agrees to take affirmative action to achieve
reasonable representation of minority groups and women on their work
force. Such affirmative action shall include, but not be limited to,
the following areas: employment, promotion, demotion or transfer,
recruiting or recruitment, advertising, layoff or termination, rates of
pay or other forms of compensation, and selection for training or
education, including apprenticeships.
8.03 Breach of the terms of this Article may be regarded as a material
breach of the Agreement. The Bank hereby recognizes the right of the
United States, the State of Michigan and the County to seek judicial
enforcement of the foregoing covenants against discrimination against
themselves or their subcontractors connected directly or indirectly
with the performance of this Agreement. Notwithstanding anything
herein to the contrary, the provisions of this Article shall not be
waived without the express consent of the appropriate enforcement
agency.
Article IX
Amencinent
9.01 The parties hereto may from time to time consider it in their best
interest to change, modify or extend a term, condition or covenant of
this Agreement. Any such change, addition, deletions, extension or
modification shall be incorporated in written amendments to this
Agreement. Such amendments shall not invalidate this contract unless
e:4pressly stated therein.
9.02 No amendment to this Agreement shall be effective and binding upon the
parties, unless it expressly makes reference to this contract, is in
writing and is signed and acknowledged by duly authorized
representatives of all parties hereto.
Article X
Notice
10.01 A notice, demand or other communication under this Agreement by a
party to the other party hereto shall be sufficiently given or
delivered if it is dispatched by registered or certified mail, postage
prepaid, return receipt requested, except that the reports required by
Article VI hereof may be by regular mail or may be hand delivered at
the discretion of the Bank.
10.02 In the case of a notice, demand or communication to the Bank, such
shall be addressed to it at the following address:
David T. Harrison, President
First of America Bank, Southeast Michigan, N.A
645 Griswold
Detroit, MI 48226
In the case of a notice, demand or communication to the County, such
shall be addressed to it at the following address:
Kenneth R. Patterson, Manager
Oakland County Community Development Division
1200 N. Telegraph Road
Pontiac, Michigan 48053
All notices shall be deemed effective on the date of mailing. The
addresses to which notice is to be made may be changed at any time by
any party by informing the other party of such change in writing.
Article XI
Assigrznent
11.01 NO party hereto shall assign or encumber directly or indirectly any
interest whatsoever in this Agreement, and shall not transfer any
interest in the same without prior written appoval of the other party.
Article XII
Remedies
12.01 Each party to this Agreement shall have the right to protect and
enforce all rights available to it by suit in equity, action at law or
by any other appropriate proceedings, whether for specific performance
of any covenant contained in this Agreement, or damages, or other
relief, or proceed to take any action authorized or permitted under
applicable law or regulation.
12.02 Except as otherwise specifically set forth in this Agreement, all
rights and remedies of the parties under this Agreement shall be
cumulative.
12.03 The parties hereto agree to submit to the personal jurisdiction of any
competent court in Oakland County, Michigan for any action brought
against it arising out of this Agreement.
Article XIII
Miscellaneous
13.01 This Agreement constitutes the entire agreement between the parties
and supersedes any prior or contemporaneous oral or written
agreements, understandings or representatives.
13.02 This Agreement and all rights and obligations imposed hereunder shall
be interpreted and construed in accordance with the laws of the State
of Michigan.
13.03 If any provision of this Agreement or the application thereof to any
person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of
such provision to a person or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby,
and each provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.
13.04 The captions and headings of this Agreement are inserted for
convenience only, and shall not modify or affect the intent to
operative paragraphs of this Agreement, and shall be disregarded in
construction or interpretation thereof.
13.05 This agreement shall bind and shall inure to the benefit of the
parties hereto, their successors and assigns.
13.06 Each party to this Agreement hereby represents and warrants to the
other party that it has full right, power and authority to enter into
and perform this Agreement; that its execution and delivery of this
Agreement have been duly authorized by all necessary action; and that
this Agreement is valid, binding and enforceable upon approval by the
County and the Bank.
IN WITNESS THEREOF the Bank and County have executed this Agreement as
of the date first written above.
FIRST OF AMERICA BANK, COUNTY OF OAKLAND
SOUTHEAST MICHIGAN, N.A.
By: By:
Position: Position:
Date: Date:
Attest: Attest:
Date: Date:
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4/13/89
REHAB AGRE
SERVICING AGREEMENT
THIS AGREEMENT, made this 8th day of August , 1979,
by and between the COUNTY OF OAKLAND, a Michigan Constitutional Corporation,
having its principal place of business at 1200 North Telegraph Road, Pontiac,
Michigan, (hereinafter called "County") and COMMUNITY NATIONAL BANK OF PONTIAC,
a National Banking Association, having its principal place of business at
Pontiac, Michigan, (hereinafter called "Bank");
WITNESSETH:
WHEREAS County desires that Bank service certain loans granted by
the County under the authority of the Rouse and Community Development Act of
1974, being Public Law 93-383; and,
WHEREAS Bank agrees to provide its services to the County in the
management and collection of said loans;
NOW, THEREFORE, in consideration of the premises, and of the under-
takings of the parties, it is hereby agreed as follows:
1. The County will submit to the Bank all information and documents
necessary for the Bank to service each loan as hereafter required 1.7 .1\this
Agreement. Said information and documents shall include principal amount of
the loan, interest rate, term of the loan, name and address of borrowers
together with any other information or documents requested by the Bank to
service the loan.
2. The Bank will prepare its Cashiers' Checks, representing
individual loan proceeds, payable to the person(s) or corporation(s) designated
in writing by the County.
3. Prior to the preparation and release of any Cashier's Check by
the Bank, the County will deposit in a designated account at the Bank, an
mount equal to the sum of any Cashier's Check so issued. The Bank will furnish
he County a monthly statement of account balances.
4. The Bank, for each individual loan made by the County, shall
provide the borrower with a monthly loan payment coupon book. Said coupons
will show the total payment due, late charges if required by the County, and
the monthly due date. The Bank shall issue new or additioncl coupon books as
required during the term of the loan.
ALtactIment
— 2
5. The Bank will accept, during normal business hours or by mail,
current loan payments and record said payments against principal and interest
balances. The monies collected shall be deposited in a designated depository
account maintained by the Bank for the County. All funds in said account shall
become the sole property of the County, except that the amount of any check
received by the Bank representing a loan payment, which is subsequently returned
by the drawee bank for non-payment, or reported lost or misping in the collection
process, shall be debited by the Bank against said depository account.
6. The Bank will collect a late payment charge of $3.00 for loan
payments 16 days or more past due until such time that the loan is removed from
Bank service records. Such late payments shall be credited to the County and
--
deposited in the designated depository account described in Paragraph 5.
7. The Bank will prepare and mail appropriate delinquent notices at
such intervals as mutually agreed upon in writing by the Bank and the County.
8. The Bank shall not waive, modify, release or consent to postponement
-
on the part of the borrower of any term of the loan without the written consent
of the County. The Bank may accept additional principal payments and prepayment
of total loan outstanding, unless instructed otherwise in writing by the County,
at any time during the term of the loan.
9. The Bank shall provide the County a monthly listing of all outstanding
loans. Such listing shall reflect the status of each loan, including the date of
last payment, the principal amount outstanding, and the date the next payment is
due. The Bank shall also provide the County a monthly delinquency report of
all loans delinquent 30 days or more. The Bank shall not be responsible for
any collection effort of delinquent loans other than the preparation and mailing
of delinquent notices.
10. The Bank agrees to service each such loan for the County under this
Agreement continuously, beginning with the date of commencement of such duties,
until the interest and principal is paid in full, or the loan removed from the
Bank service records as may be ordered by the County.
11. It is understood that the Bank has no vested interest in any loan
serviced for the County under this Agreement and the Bank's sole responsibility
Is to service each loan in accordance within these terms and agreement.
3
Wallace F. tabler, Jr.
Chairperson, Oakland Coun
Board of Commissioners
Attachraent A-3
12. This Agreement shall remain in full force and effect until
terminated by one of the parties upon ninety (90) days written notice. In
the event of notice of termination, the Bank shall provide the County with
complete printed records detailing the status of each unpaid loan prior to
the expiration of ninety (90) days from date of notice of termination.
13. The County shall pay Bank the sum of Ten Dollars ($10.00) for
each and every loan submitted to Bank for servicing. In addition, the County
shall pay the sum of Three Dollars ($3.00) monthly for each loan account
reported to County on the monthly report provided to County pursuant to
Paragraph Nine. The County shall also reimburse Bank for the cost of any
special forms and supplies including but not limited to coupon books and
delinquent notices, needed by the Bank to service the loan accounts described
in this Agreement.
IN WITNESS WHEREOF each party has caused its corporate seal to be
affixed hereto and this instrument to be signed in its corporate name on its
behalf by its proper officials duly authorized.
COUNTY OF OAKLAND, a Michigan
Constitutional Corporation
COMMUNITY NATIONAL BANK OF PONTIAC,
a National Banking Association
Its: Vice Presirion
RESOLUTION # 89137 . May 25, 1989
Moved by Richard Kuhn supported by Pappageorge the resolution be adopted.
AYES: Hobart, Jensen, Johnson, R. Kuhn, S. Kuhn, Law, McConnell, McCulloch,
McPherson, Moffitt, Oaks, Olsen, Pappageorge, Pernick, Price, Rewold, Skarritt, Wolf,
Aaron, Bishop, Caddell, Chester, Crake, Ferrens, Gosling. (25)
NAYS: None. (0)
A sufficient majority having voted therefor, the resolution was adopted.
STATE OF MICHIGAN)
COUNTY OF OAKLAND)
I, Lynn D. Allen, Clerk of the County of Oakland and having a seal, do
hereby certify that I have compared the annexed copy of the attached resolution,
adopted by the Oakland County Board of Commissioners at their regular meeting
held on May 25 , ]989 with the original record thereof now remaining
on file in my office, and that it is a true and correct transcript therefrom,
and of the whole thereof.
In Testimony Whereof, I have hereunto set my hand and affixed the seal
of said County at Pontiac,Michigan this 25th day of May , 19819
D. ALLEN, County Clerk
R6gister of Deeds
Deputy Clerk
. B
DEPARTMENT OF DOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary
for
Community Planning and Development
24 CFR Part 570
CiVMUNITY DEVELOPMENT BLOCK GRANT PROGRAM
FINAL RULE
as published in the
FEDERAL REGISTER
3 FR 34437; September 6, 1988]
S 570.513 Lump sum drawdown for financing of property
rehabilitation activities.'
Subject to the conditions prescribed in this section,
recipients may draw funds from the letter of credit in a lump sum
to establish a rehabilitation fund in one or more private financial
institutions for the purpose of financing the rehabilitation of
privately owned properties. The fund may be used in conjunction
with various rehabilitation financing techniques including loans .,
interest subsidies, loan guarantees, loan reserves, or such other
uses as may be approved by HUD consistent with the objectives of
this section. The fund may also be used for making grants, but
only for the purpose of leveraging non-CDBG funds for the
rehabilitation of the same property.
(a) Limitation on drawdown of qrant funds.
(1) The funds that a block grant recipient deposits to a
rehabilitation fund shall not exceed the grant amount that
the recipient reasonably expects will be required,
together with anticipated program income from interest and
loan repayments, for the rehabilitation activities during
the period of the agreement, based on either:
(i) Prior level of rehabilitation activity; or
(ii) Rehabilitation staffing and management capacity during
the period of the agreement.
(2) No grant funds may be deposited under this section solely
for the purpose of investment, notwithstanding that the
interest or other income is to be used for the
rehabilitation activities.
(3) The recipient's rehabilitation program administrative
costs and the administrative costs of the financial
institution may not be funded through lump sum drawdown.
Such costs must be paid from periodic letter of credit
withdrawals in accordance with standard procedures or with
program income generated by the lump sum distribution.
(b) Standards to be met. The following standards shall apply to
all lump sum drawdowns of COM funds for rehabilitation:
(1) Eligible rehabilitation activities. The rehabilitation
fund shall be used to finance the rehabilitation of
privately owned properties eligible under the general
policies in S 570.200 and the specific provisions of
either s 570.202, including the acquisition of properties
for rehabilitation, or S 570.203.
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(2) Reqirement forseement. The recipient shall execute a
written agreement with • the private financial
-institution(s) for the operation of the rehabilitation
fund. The agreement shall specify the obligations and
responsibilities of the parties, the terms and conditions
on which block grant funds are to be deposited and used or
returned, the anticipated level of rehabilitation
activities by the financial institution, the rate of
interest and other benefits to be provided by the
financial institution in return for the lump sum deposit,
and such other terms as are necessary for compliance with
the provisions of this section. Upon execution of the
agreement, a copy must be provided to the BUD field office
for its record and use in monitoring. Any modifications
made during the term of the agreement must Also be
provided to HUD.
(3) Term of agreement._ The term of the agreement may be no
more than two years. The lump sum deposit shall be made
only after the agreement is fully executed. The
rehabilitation fund may only be used for authorized
activities during the term of agreement.
(4) Time limit on use of deoosited funds. Use of the
deposited funds for rehabilitation financing assistance
must start (e.g., first loan must be made, subsidized or
guaranteed) within 45 days of the deposit. In addition,
substantial disbursements from such fund must occur within
180 days of the receipt of such deposit. (Where CDBG
funds are used as a guarantee, the funds that must be
substantially disbursed are the guaranteed funds.) For a
recipient with a two year agreement, the disbursement of
25 percent of the fund (deposit plus any interest earned)
within 180 days, will be deemed as meeting this
requirement. If a recipient with a two year agreement
determines it has had substantial disbursement from such
fund within the 180 days although it had not met this 25
present threshold, the justification for this
determination shall be included in the program file.
Should use of deposited funds not start within 45 days, or
substantial disbursement from such fund not occur within
180 days, the recipient may be required by HUD to return
all or part of the deposited funds to the grantee's letter
of credit.
(5) Pr_p9ram activity., Recipients shall review the level of
program activity on a yearly basis. Where activity is
substantially below that anticipated, program funds shall
be returned to the recipient's letter of credit.
J-23 9/88
(6) Termination of a_are_ement. In the case of substantial
failure by the private financial institution(s) to comply
. with the terms of a lump sum drawdown agreement, the unit
of local government shall terminate its agreement,
providing written justification for the action, withdraw
all unobligated deposited funds from the private financial
institution(s), .and return the funds to the recipient's
letter of credit
(7) Return of unused deposits. At the termination of the
period of the agreement, all unobligated deposited funds
shall be returned to the appropriate letter of credit
unless the block grant recipient enters into a new
agreement conforming to the then current regulations for
an additional period not to exceed two years. In
addition, the block grant recipient shall reserve the
right to withdraw any unobligated deposited funds required
by HUD in the exercise of corrective or remedial actions
authorized under 53 570.910(b), 570.911, 570.912 or
570,913.
.(8) Rehabilitation loans made with non-CDBG funds. If the
deposited funds or program income derived therefrom are
used to subsidize or guarantee repayment of rehabilitation
loans made with non-CDBG funds, or are used to provide a
supplemental loan or grant to the borrower of the non-CDBG
funds, the rehabilitation activities are deemed to be CDBG
assisted activities subject to the requirements applicable
to such activities, except that repayments of non-CDBG
funds shall not be treated as program income.
(9) Provision of consideration. In consideration for the lump
sum deposit by the recipient in a private financial
institution, the deposit must result in appropriate
benefits in support of the recipient's local
rehabilitation program. Minimum requirements for such
benefits are
(i) Grantees shall require the financial institution to
pay interest on the lump sum deposit.
(A) The interest rate paid by the financial institution
shall be no more than three points below the rate on
one year Treasury obligations at constant maturity.
(B) When an agreement sets a single rate for the entire
term of the agreement, the rate should be based on
the rate at the time the agreement is executed.
(C) The agreement may provide for an interest rate that
would fluctuate periodically during the term of the
agreement but, at no time shall the rate be
J-24 9/88
established at more than three points below the rate
on one year Treasury obligations at constant
maturity.
(ii) In addition to the payment of interest, at least one
of the following benefits must be provided by the
financial institution(s):
(A) Leverage of the deposited funds so that the financial
institution(s) commit private funds for loans in the
rehabilitation program in an amount substantially in
excess of the amount of the lump sum deposit;
(B) Commitment of private funds by the financial
.institution for rehabilitation loans at below market
interest rates, at higher than normal risk, or with
longer than normal repayment periods; or
(C) Provision of administrative services in support of
the rehabilitation program by the participating
financial institutions at no cost or at lower than
actual cost.
(c) Prc,sram income. Interest earned on lump sum deposits and
payments on loans made from such deposits are program income
and, during the period of the agreement, shall be used for
rehabilitation activities under the provisions of this
section.
(d) Outstanding findings_ Notwithstanding any other provision of
this section, no recipient shall enter into a new agreement
during any period of time in which an audit or monitoring
finding on a previous lump sum drawdown agreement remains
unresolved.
(e) Prior notification. The recipient shall provide the HUD field
office with written notification of the amount of funds to be
, distributed to a private financial institution prior to such
distribution under the provisions of this section.
(f) Recordkeepingratr_e=ts. The recipient shall maintain in
its files a copy of the written agreement and related
documents establishing conformance with this section and
concerning performance by the financial institution(s)
pursuant to the agreement.
J-25 9/88