AN INTERAGENCY AGREEMENT BETWEEN

THE CITY OF PORTLAND

AND

THE PORTLAND DEVELOPMENT COMMISION

This Interagency Agreement is entered into by and between the City of Portland, Bureau of Housing and Community Development (hereinafter referred to as BHCD) and the Portland Development Commission (hereinafter referred to as PDC) to administer City general fund dollars to coordinate and administer the Contaminated Property Rehabilitation Program.

1.  Effective Date and Duration

This contract shall become effective on July 1, 2006. This contract shall terminate on June 30, 2008.

2.  Contract Manager

Each party has designated a contract manager to be the formal representative for this project. All reports, notices, and other communications required under or relating to this subrecipient contract shall be directed to the appropriate individual identified below. The City contract manager is authorized to approve work and billings hereunder, to give notices referred to herein, to terminate the Contract as provided herein, approve all changes except those that increase the total contract amount.

3.  Scope of Services

The statement of work is contained in Section I.

4.  Compensation

The amount of compensation shall not exceed $200,000 General Fund. The compensation requirements are contained in Section III.

5.  Reporting

The Reporting requirements are contained in Section II.

6.  Funding

This subrecipient contract may be paid fully or in part with City of Portland General Fund dollars.

RECITALS

1.  In December 2005, the Portland City Council passed Resolution 36369, prioritizing the coordination and funding of the clean up and rehabilitation of properties contaminated from methamphetamine use and/or production.

2.  General fund dollars in the amount of $200,000 were allocated for the rehabilitation of properties on the Oregon Department of Human Services Unfit for Use list.

3.  The Portland Development Commission currently coordinates loan programs for the rehabilitation of both owner occupied and rental properties.

4.   The Bureau of Housing and Community Development desires to contract allocated City general fund dollars to the Portland Development Commission to coordinate the rehabilitation of drug contaminated properties through the creation of the Contaminated Property Rehabilitation Program

5.  The Council now desires to enter into a formal Agreement with PDC to administer the Contaminated Property Rehabilitation Program to rehabilitate houses contaminated with methamphetamines. The total amount of the Agreement shall not exceed $200,000.

AGREED

I.  Scope of Services

A.  PDC will provide the services described below for the duration of the IAA:

1.  Conduct quarterly outreach regarding the availability of program funds to property owners, of both owner occupied and rental properties that are on the Oregon Department of Human Services Unfit for Use list.

2.  Coordinate the administration of loans for the rehabilitation of properties where meth contamination has already been cleaned up by the Portland Neighborhood Inspections Program through the chronic nuisance process.

3.  Coordinate the administration of loans for the clean up of meth contamination and additional rehabilitation where necessary where eligible property owners would like to proactively clean up meth contamination prior to the initiation of the chronic nuisance process.

B.  Assistance shall be provided to households at the median family income specified in the program guidelines.

C.  The program shall be administered similarly in accordance with Attachment A of this Agreement.

D.  REPORTING: The PDC Contract Manager will submit annual reports on the progress and accomplishments of activities to the City Program Manager by June 30 of each fiscal year. Reports shall identify year to date spending, housing units receiving assistance, and additional information that indicates the status of the program as well as information on income level, ethnicity, and residency of each beneficiary.

II.  Compensation and Method of Payment

A.  The City will reimburse PDC for actual expenditures.

B.  Requests for payments may be submitted monthly.

D.  Any changes to the approved budget must be approved in writing by the City Program Manager before any expenditure of funds in new amounts or line items.

E.  Total compensation under this Agreement shall not exceed TWO HUNDRED THOUSAND DOLLARS ($200,000).

III.  General Agreement Provisions

A.  TERMINATION FOR CAUSE. If, through any cause, PDC shall fail to fulfill in timely and proper manner his/her obligations under this Agreement, or if PDC shall violate any of the covenants, agreements, or stipulations of this Agreement, the City shall have the right to terminate this Agreement by giving written notice to PDC of such termination and specifying the effective date thereof at least 30 days before the effective date of such termination. In such event, all finished or unfinished documents, data, studies, and reports prepared by PDC under this Agreement shall, at the option of the City, become the property of the City and PDC shall be entitled to receive just and equitable compensation for any satisfactory work completed on such documents.

Notwithstanding the above, PDC shall not be relieved of liability to the City for damages sustained by the City by virtue of any breach of the Agreement by PDC, and the City may withhold any payments to PDC for the purpose of setoff until such time as the exact amount of damages due the City from PDC is determined.

B.  TERMINATION FOR CONVENIENCE. The City or PDC may terminate this Agreement at any time on thirty (30) days written notice to the other party. If the Agreement is terminated by the City as provided herein, the PDC will be paid an amount which bears the same ratio to the total compensation as the services actually performed bear to the total services of PDC covered by this Agreement less payments of compensation previously made.

C.  REMEDIES. In the event of termination under Section A hereof by the City due to a breach by PDC, then the City may complete the work either itself or by Agreement with another entity, or by a combination thereof

The remedies provided to the City under sections A and C hereof for a breach by PDC shall not be exclusive. The City also shall be entitled to any other equitable and legal remedies that are available.

In the event of breach of this Agreement by the City, then PDC's remedy shall be limited to termination of the Agreement and receipt of payment as provided in section B hereof.

In the event of termination under Section A, the City shall provide PDC an opportunity for an administrative appeal to the Bureau Director.

D.  CHANGES. The City may, from time to time, request changes in the scope of the services or terms and conditions hereunder. Such changes, including any increase or decrease in the amount of PDC's compensation, shall be incorporated in written amendments to this Agreement to be approved by the Bureau Director. Any change that increases in total the amount of compensation payable to PDC to $100,000 or more must be approved by ordinance of the City Council. The Bureau Director may approve increases in compensation that result in total compensation of less than $100,000. Other changes, including changes to scope of work and budget line items, may be approved by the Project Manager.

E.  NON-DISCRIMINATION. In carrying out activities under this Agreement, PDC shall not discriminate against any employee or applicant for employment because of race, color, religion, sex, age, handicap, familial status or national origin. PDC shall take affirmative actions to insure that applicants for employment are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, age, handicap, familial status or national origin. Such action shall include but not be limited to, the following: employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. PDC shall post in conspicuous places, available to employees and applicants for employment, notices provided by the City setting for the provisions of this nondiscrimination clause. PDC shall state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, or national origin. PDC shall incorporate the foregoing requirements of this paragraph in all of its contracts for work funded under this Agreement, except contracts governed by Section 104 of Executive Order 11246. PDC will comply with the equal employment and non-discrimination requirements of Portland City Code Sections 3.100.005 (City Policies Relating to Equal Employment Opportunity, Affirmative Action and Civil Rights), 3.100.042 (Certification of Contractors), and Chapter 23 – Civil Rights.

F.  ACCESS TO RECORDS. The City, or their duly authorized representatives, shall have access to any books, general organizational and administrative information, documents, papers, and records of PDC which are directly pertinent to this Agreement, for the purpose of making audit examination, excerpts, and transcriptions. All required records must be maintained by PDC for three years after the City makes final payment and all other pending matters are closed.

G.  MAINTENANCE OF RECORDS. PDC shall maintain records on a current basis to support its billings to the City. The City or its authorized representative shall have the authority to inspect, audit, and copy on reasonable notice and from time to time any records of PDC regarding its billings or its work hereunder. PDC shall retain these records for inspection, audit, and copying for 3 years from the date of completion or termination of this Agreement.

H.  AUDIT OF PAYMENTS. The City, either directly or through a designated representative, may audit the records of PDC at any time during the 3 year period established by Section G above.

If an audit discloses that payments to PDC were in excess of the amount to which PDC was entitled, then PDC shall repay the amount of the excess to the City.

I.  INDEMNIFICATION: Within the limits of the Oregon Tort Claims Act, ORS 30.260 through ORS 30.300, and as allowed by Oregon law, each party agrees to indemnify and defend the other parties and its officers, employees, agents and representatives from and against all claims, demands, penalties, and causes of action of any kind or character relating to or arising out of this IAA, including the cost of defense, attorney fees arising in favor of any person on account of personal injury, death or damage to property and arising out of or resulting from the negligent or other legally culpable acts or omissions of its indemnitor, its employees, agents, subcontractors, or representatives.

J.  WORKERS' COMPENSATION INSURANCE.

(a)  PDC, its subcontractors, if any, and all employers working under this Agreement, are subject employers under the Oregon Worker's Compensation law and shall comply with ORS 656.017, which requires them to provide workers' compensation coverage for all their subject workers. PDC further agrees to maintain worker's compensation insurance coverage for the duration of this Agreement.

(b)  In the event PDC's worker’s compensation insurance coverage is due to expire during the term of this Agreement, PDC agrees to timely renew its insurance, either as a carrier-insured employer or a self-insured employer as provided by Chapter 656 of the Oregon Revised Statutes, before its expiration.

(c)  If PDC believes itself to be exempt from the worker's compensation insurance coverage requirement of (a) of this subsection, PDC agrees to accurately complete the City of Portland's Questionnaire for Workers' Compensation Insurance and Qualification as an Independent Contractor prior to commencing work under this Agreement. In this case, the Questionnaire shall be attached to this Agreement and shall be incorporated herein and made a term and part of this Agreement. Any misrepresentation of information on the Questionnaire by PDC shall constitute a breach of this Agreement. In the event of breach pursuant to this subsection, City may terminate the Agreement immediately and the notice requirement contained in Section (A), TERMINATION FOR CAUSE, hereof shall not apply.

K.  LIABILITY INSURANCE.

(a) PDC shall maintain general liability insurance that protects PDC and the City and its officers, agents, and employees from any and all claims, demands, actions, and suits for damage to property or personal injury, including death, arising from PDC's work under this Agreement. The insurance shall provide coverage for not less than $200,000 for personal injury to each person, $500,000 for each occurrence, and $500,000 for each occurrence involving property damages; or a single limit policy of not less than $500,000 covering all claims per occurrence. The limits of the insurance shall be subject to statutory changes as to maximum limits of liability imposed on municipalities of the state of Oregon during the term of the Agreement. The insurance shall be without prejudice to coverage otherwise existing and shall name as additional insureds the City and its officers, agents, and employees. Notwithstanding the naming of additional insureds, the insurance shall protect each insured in the same manner as though a separate policy had been issued to each, but nothing herein shall operate to increase the insurer's liability as set forth elsewhere in the policy beyond the amount or amounts for which the insurer would have been liable if only one person or interest had been named as insured. The coverage must apply as to claims between insureds on the policy. The insurance shall provide that it shall not terminate or be canceled without 30 days written notice first being given to the City Auditor. If the insurance is canceled or terminated prior to completion of the Agreement, PDC shall provide a new policy with the same terms. PDC agrees to maintain continuous, uninterrupted coverage for the duration of the Agreement.

(b) Failure to maintain liability insurance shall be cause for immediate termination of this Agreement by the City.

L.  SUBCONTRACTING AND ASSIGNMENT. PDC shall not subcontract its work under this Agreement, in whole or in part, without the written approval of the City. PDC shall require any approved subcontractor to agree, as to the portion subcontracted, to fulfill all obligations of the Agreement as specified in this Agreement. Notwithstanding City approval of a subcontractor, PDC shall remain obligated for full performance hereunder, and the City shall incur no obligation other than its obligations to PDC hereunder. PDC agrees that if subcontractors are employed in the performance of this Agreement, PDC and its subcontractors are subject to the requirements and sanctions of ORS Chapter 656, Workers' Compensation. PDC shall not assign this Agreement in whole or in part or any right or obligation hereunder, without prior written approval of the City. Subcontractors shall be responsible for adhering to all regulations cited within this Agreement.

M.  Taxes. PDC and will be responsible for any federal, state, or local taxes and fees applicable to payments hereunder.

N.  REPORTING REQUIREMENTS. PDC shall report on its activities in a format and by such times as prescribed by the City.

O.  CONFLICTS OF INTEREST. No City officer or employee, during his or her tenure or for one year thereafter, shall have any interest, direct or indirect, in this Agreement or the proceeds thereof.

No City officer or employees who participated in the award of this Agreement shall be employed by PDC during the period of the Agreement.

P.  OREGON LAWS AND FORUM. This Agreement shall be construed according to the laws of the State of Oregon.

Any litigation between the City and PDC arising under this Agreement or out of work performed under this Agreement shall occur, if in the state courts, in the Multnomah County court having jurisdiction thereof, and if in the federal courts, in the United States District Court for the State of Oregon.

Q.  COMPLIANCE WITH LAWS. In connection with its activities under this Agreement, PDC shall comply with all applicable federal, state, and local laws and regulations.

In the event that PDC provides goods or services to the City in the aggregate in excess of $2,500.00 per fiscal year, PDC agrees it has certified with the City's Equal Employment Opportunity certification process.

R.  SEVERABILITY. If any provision of this Agreement is found to be illegal or unenforceable, this Agreement nevertheless shall remain in full force and effect and the provision shall be stricken.

S.  INTEGRATION. This Agreement contains the entire Agreement between the City and PDC and supersedes all prior written or oral discussions or Contracts.

T.  PROGRAM AND FISCAL MONITORING. The City through the Bureau of Housing and Community Development shall monitor on a regular basis to assure Agreement compliance. Such monitoring may include, but are not limited to, on site visits, telephone interviews, and review of required reports and will cover both programmatic and fiscal aspects of the Agreement. The frequency and level of monitoring will be determined by the City Project Manager.

VI.  Period of Agreement

The term of this Agreement shall be effective as of July 1, 2006 and shall terminate June 30, 2008. The obligations and duties of this Agreement shall be binding on PDC during any period PDC has control of funds allocated to meth clean up or rehab or program income under this Contract, or during any period of affordability relative to any project funded under this Contract.

CITY OF PORTLAND      PORTLAND DEVELOPMENT COMMISSION

____________________________    _______________________________

Erik Sten          Bruce Warner

Commissioner of Public Works    Executive Director

APPROVED AS TO FORM:

_____________________________    ______________________________

Linda Meng, City Attorney      PDC Legal Counsel

Gary Blackmer, City Auditor

                 Attachment A

PDC CONTAMINATED HOME REHABILITATION LOAN

• 8.4.F CONTAMINATED HOME REHABILIATION LOAN

COMMISSION AUTHORIZATION

• Resolution No. ________, adopted ___________________ (PROPOSED)

AUTHORIZES PDC TO APPROVE THE CREATION OF THE CONTAMINATED HOME REHABILITATION LOAN PROGRAM TO ASSIST ELIGIBLE HOMEOWNER RENOVATE AND REPAIR HOMES CONTAMINATED FROM MANUFACTURING OF ILLEGAL DRUGS.

PURPOSE

The purpose of the Contaminated Home Rehabilitation Loan is to:

• Clean-up and rehabilitate properties on the Oregon Department of Human Services Unfit for Use list.

• To encourage existing home owners to rehabilitate their residence.

• To maintain safe, clean, livable housing in existing neighborhoods.

• Helps to achieve the following Portland Development Commission (PDC) and Housing Department Strategic Plan goals:

o 2.1 Develop and implement housing strategies that reflect community and neighborhood goals.

o 5.1 Provide incentives and/or financial assistance programs to achieve 20,000 housing unit/household production goals.

o 5.1 Repair 800 ownership units by 2011.

PROGRAM DESCRIPTION

Loans under The Contaminated Property Rehabilitation Loan are available as fully amortized or deferred payment loans offered at interest rates of 3-5% depending on income. The loans are recorded liens against the subject property. This loan provides financing specific to the clean-up process and/or rehabilitation of properties contaminated by the manufacturing of illegal drugs. Applications will be accepted and processed on a first come, first served basis as long as funds are available.

The following summary outlines the general program characteristics and more specific program guidelines for the Contaminated Home Rehabilitation Loan program in accordance to the Interagency Agreement between the Bureau of Housing and Community Development (BHCD) and the PDC.

CONTAMINATED HOME REHABILITATION LOAN PROGRAM GUIDELINES

Loan to Value:  combined loan to value up to 100% of county assessed value or appraisal

Amortized Loans:  Amortized loans are made to households with incomes over 50% and up to 80% Median Family Income (MFI)

Interest Rate:  based on income:

3%: 50.1% to 60% MFI

4%: 60.1% to 70% MFI

5%: 70.1% to 80% MFI

Term:  amortized up to 20 years, depending on ability to make monthly payments

Repayment:  fully amortized over term, until sale, trade, refinance, or no longer owner-occupied

Fees:  $200 plus all third party costs

Deferred Payment Loans:  Deferred payment loans are eligible only for households earning 50% MFI and below

Interest Rate:  3% simple interest accumulated

Term:  30 years

Repayment:  Payment deferred until sale, trade, refinance, or no longer owner-occupied

Fees:  $200 plus all third party costs

MINIMUM QUALIFICATIONS

• Income limitations apply

• Existing, single-family residences in Portland

• Owner-occupants only

Eligible Borrowers

• Total household gross income is at or below 80% MFI as established annually by HUD

• Own and occupy the property as their principal residence at application and throughout the term of the loan

• US citizen or permanent resident

• Combined assets can not exceed $50,000 (excluding the subject property and one car)

• Had no role in the contamination of the property.

Eligible Properties

• One to four unit family residences

• Properties listed on the Oregon Department of Human Services Unfit for Use list.

• Located in City of Portland.

• Detached structures are not eligible i.e. detached garage, shed, etc.

Eligible Renovations

• Loans can be used to clean-up the drug contamination should the borrower apply prior to the initiation of the chronic nuisance process.

• Property repairs must rehabilitate contaminated areas as well as any major and/or minor code violations and incipient conditions.

• Expenditures are limited to the renovation of the contaminated area(s) and other needed repairs to make the unit habitable such as code violations or health and safety conditions only.

• No general property improvements.

Maximum loan amount

• $20,000

Down Payment

• NA

Assets

• Not to exceed $50,000 (does not include subject property, one car, assets producing earning that represent a significant portion of annual income)

Security

• Promissory Note secured by Deed of Trust

• Rehabilitation Agreement

Property Value Determination

• Based on current County Tax Assessed Market Value or, if needed, based on an “as completed” appraisal performed by a state licensed appraiser based on value.

Recapture/Retention

• Borrower must maintain the property free of drug contamination for the duration of the loan. Should the property be contaminated again, the principal balance and all accrued and unpaid interest will be due and payable.

• If borrower refinances or upon sale/transfer of ownership, the entire principal plus accrued interest is due and payable.

Title

• Clear title evidencing ownership, monetary encumbrances, and mortgaged property address.

Property Taxes

• Property taxes must be current for amortized loans

• Property taxes can be up to the past two years delinquent, or on deferred status for approved deferred payment loans

Private Mortgage Insurance (PMI)

• NA

Insurance

• Homeowners insurance must be current

• Flood Hazard insurance required if in a 100-year flood plain

Other

• Not assumable

• Applicant must meet minimum credit standards for this program; unless approved/eligible for deferred loan then credit standards do not apply

• Must be able to document sufficient income to meet mortgage payment

• Existing mortgage(s) must be current

• Total debt to income ratio should not exceed 50% of total gross household income, unless approved for a deferred payment loan, than debt ratios do not apply

Homeowner Education

• NA

Applicable Federal Regulations

• Flood Hazard Determination

• Lead regulations if home is occupied by a child under 6 years old.

Construction Monitoring/Disbursements

• Funds utilized for the clean-up of drug contamination must follow Oregon Department of Human Services established guidelines and receive a Certificate of Fitness to be considered complete. PDC construction advisors will not be involved in this process.

• A PDC construction advisor will be assigned to provide assistance throughout the rehabilitation process after PDC has received copy of Certificate of Fitness from the Oregon Department of Human Services.

• Work must be completed within six months.

• Incremental disbursements made as work is completed and approved by both PDC and the homeowner.

PDC CONTAMINATED SMALL RENTAL REHABILITATION LOAN

8.4.G CONTAMINATED SMALL RENTAL REHABILIATION LOAN

COMMISSION AUTHORIZATION

• Resolution No. ________, adopted ___________________ (PROPOSED)

AUTHORIZES PDC TO ESTABLISH THE CONTAMINATED SMALL RENTAL REHABILITATION LOAN PROGRAM TO ASSIST ELIGIBLE LANDLORD(S) RENOVATE AND REPAIR SMALL RENTAL PROPERTIES CONTAMINATED FROM THE MANUFACTURING OF ILLEGAL DRUGS.

PURPOSE

• Rehabilitate properties on the Oregon Department of Human Services Unfit for Use list.

• Removal of blight through the clean-up and/or renovation of existing rental housing contaminated by manufacture of illegal drugs.

• To encourage existing landlords to maintain and improve their rental properties by providing financial incentives for maintaining affordable rental units for up to twelve years.

• To maintain safe, affordable and attractive rental housing options in existing neighborhoods.

• To facilitate homeownership for current eligible tenants if and when borrower chooses to sell the rental units.

• Helps to achieve the following Portland Development Commission (PDC) and Housing Department Strategic Plan goals:

o 2.1 Develop and implement housing strategies that reflect community and neighborhood goals

o 5.1 Provide incentives and/or financial assistance programs to achieve 20,000 housing unit/household production goals.

o 5.3 Produce units of rental rehab preservation housing units.

o 5.6 Increase homeownership by one percentage point by 2011

o Wealth Creation

PROGRAM DESCRIPTION

The Contaminated Small Rental Rehabilitation Loan provides financing specific to the clean-up and/or rehabilitation process of small rental properties with fewer than five units contaminated by the manufacturing of illegal drugs. This is an assumable, deferred-payment loan with below-market interest rates and other flexible terms in order to make contaminated housing stock habitable while retaining affordable rent levels. The loan is assumable if sold to a new owner who agrees to continue to rent to eligible tenants or if sold to an eligible tenant or an income eligible homebuyer.

The Contaminated Small Rental Rehabilitation Loan will be administered by the Neighborhood Housing Program (NHP) section of the Housing Department. It will have an open application process. Applications will be accepted and processed on a first come, first served basis as long as funds are available.

The following summary outlines the general program characteristics and more specific program guidelines for the Contaminated Small Rental Rehabilitation Loan in accordance to the Interagency Agreement between the Bureau of Housing and Community Development (BHCD) and the PDC.

SMALL RENTAL REHABILITATION LOAN PROGRAM GUIDELINES

Maximum Loan:  $20,000 single unit; $30,000 duplex; $40,000 triplex; $50,000 four-plex.

Loan-to-Value:  Combined amount of PDC loan and all senior debt cannot exceed 90% of the appraised value of the rental property after improvement.

Interest Rate:  3.00% simple interest

Term:  15 years

Monthly Payments: This is a deferred payment loan so long as borrower leases the unit(s) to an income-eligible tenant at an affordable rent level (see below.)

Repayment:  1.  Upon refinance or sale to an ineligible buyer the remaining principal plus accrued interest is due and payable.

2.  Upon leasing agreed upon unit(s) to an ineligible tenant or at an amount higher than the designated HUD rent level, the entire principal balance and all accrued and unpaid interest will be amortized over the remaining term of the loan and the note rate will increase to 14% fixed.

Fees:  $500.00 processing/closing fee, recording fees, and any other third party costs.

PROGRAM SPECIFIC GUIDELINES

Eligible Borrowers

• Title must be held in the name of the borrower(s) as an individual(s)

• Have owned the property for a minimum of two years

• Owner must live within 50 miles of the Portland Metropolitan Area or the property must be managed by an approved licensed property management company knowledgeable and experienced in the rental housing industry. If self-managed, owner must be a current member of an approved landlord association and attend an approved landlord education program.

• Have no more than $60,000 outstanding to PDC under other program

• US citizen or permanent resident.

• Must be current on any outstanding PDC debt.

• Borrowers must meet PDC credit standards including no outstanding liens, judgments, collections and no negative mortgage payment history.

• Had no role in the contamination of the property.

Eligible Properties: The property must be:

• An existing one to four unit residence or mixed-use project with residential units attached.

• Rented/Leased to an income eligible tenant at the HUD designated income and rent levels.

• Properties listed on the Oregon Department of Human Services Unfit for Use list.

• Located in City of Portland.

• Detached structures are not eligible i.e. detached garage, shed, etc.

Required Renovation

• Loans can be used to clean-up the drug contamination should the borrower apply prior to the initiation of the chronic nuisance process.

• Property repairs must rehabilitate contaminated areas as well as any major and/or minor code violations and incipient conditions

• Expenditures are limited to the renovation of the contaminated area(s) and other needed repairs to make the unit habitable such as code violations or health and safety conditions only. Repairs must conform to the habitability section of the Oregon Landlord/Tenant Law (see ORS Chapter 90).

• No general property improvements

Affordability Agreement

Applicants must agree to enter into an Affordability Agreement with PDC. The Affordability Agreement will outline the terms under which units must be leased to avoid triggering the recapture clause within the loan. At a minimum this Agreement will require:

• Articulate the number of units in the property that are affected by the agreement based upon the following schedule:

PDC Loan Amount Affordable Units Required

$0-20,000 1

$20,000 – 30,000 2

$30,001 – 40,000 3

$40,001 – 50,000 4

• Require that the unit(s) be leased at an amount no greater than the HUD designated rent level for a unit of comparable size for a 50% median family income (MFI) unit.

• That the total household income for the tenant (including income from all occupants of the unit) does not exceed 50% of the area MFI for the household size.

Annual Certification Requirement

• Each project will be monitored and evaluated by PDC’s Asset Management staff per the PDC’s Borrower’s Asset Management Guidelines Version II.

• Borrower shall submit by March 1 each year the following to demonstrate compliance:

o Electronic Tenant Survey (ETS) – compliance to Affordability Agreement

o Proof of property taxes paid

o Proof of property insurance coverage with appropriate endorsements

Owner Assets Limit Before/At Loan Closing

• Maximum of $50,000 in liquid assets (liquid assets exclude retirement accounts)

• Own no more than 8 small rental units.

Debt to Income Ratios

• 1.10% debt -to- income ratio

Security

• Promissory Note secured by Deed of Trust

Property Value Determination

Based on current County Tax Assessed Market Value or, if needed, based on an “as completed” appraisal performed by a state licensed appraiser based on value.

Recapture/Retention

• If borrower refinances or upon sale/transfer to an ineligible buyer, the entire principal plus accrued interest at the note rate of 3% is due and payable.

• Upon renting/leasing the unit to an ineligible tenant or at an amount higher than the designated HUD rent level, the principal balance and all accrued and unpaid interest will be amortized over the remaining term of the loan and the note rate will increase to14%.

• Borrower must maintain the property free of drug contamination for the duration of the loan. Should the property be contaminated again, the principal balance and all accrued and unpaid interest will be due and payable.

Title

• Title Insurance Policy, acceptable to NHP Underwriter, required in the amount of the PDC loan

Property Taxes

• Must be current at origination and during the term of the loan.

Private Mortgage Insurance

• Not required

Insurance

• Hazard and liability Insurance in the minimum amount of the tax assessed value with the full replacement cost of the rental unit PDC named as additional insured.

• Flood Hazard insurance required if in a 100-year flood plain.

Loan Assumability

• Loan may be assumable if the original borrower sells to a new owner who maintains the unit as affordable per the Affordability Agreement and meets all other program guidelines requirements.

• If the borrower sells to a current eligible* tenant or an income eligible homebuyer** the loan and accrued interest is forgiven.

• In addition PDC may have other homeownership tools that can assist the tenant or other home buyer to purchase the property so long as they meet current qualifying guidelines.

* tenant eligibility which was established at the original point of occupancy

** New homebuyers, other than an eligible tenant, must have a household income at or below 80% MFI.

Applicable Federal Regulations

• Flood Hazard Determination

• Lead Based Paint if home is occupied by a child under 6 years old.

Construction Process/Disbursements

• Funds utilized for the clean-up of drug contamination must follow Oregon Department of Human Services established clean-up guidelines and receive a Certificate of Fitness to be considered complete. PDC construction advisors will not be involved in this process.

• A PDC construction advisor will be assigned to provide assistance throughout the rehabilitation process after PDC has received copy of Certificate of Fitness from the Oregon Department of Human Services.

• Work must be completed within six months

• Copy of “Completion Notice” shall be provided to PDC Asset Management

• Incremental disbursements made as work is completed and approved by both PDC construction advisor and the owner.

Tenant Displacement and Relocation

Projects must comply with PDC’s Tenant Displacement (Relocation) policies. PDC does not intend to permanently displace any tenants as a result of this Program, though there may be instances where tenants are required to move temporarily as part of the rehabilitation. Tenants who are temporarily moved as a result of rehabilitation under this program will receive benefits, both advisory and financial, as compensation from the property owner.

Generally, PDC policy requires that:

1. Rehabilitation work be scheduled and conducted in a manner that minimizes displacement of current residents, and

2. If the structure is occupied at the time of application for a Small Rental Property Rehabilitation Loan, the owner must:

a. Inform each tenant, in writing, of the owner’s intent to apply for PDC financing to rehabilitate the tenant’s unit, and that the owner has no intention of permanently displacing the tenant or raise rents above HUD affordability guidelines such that the tenant can no longer afford the unit. This letter will also state that if the PDC loan is approved, the tenant has rights under the PDC Relocation Program.

b. Provide an “initial” tenant rent schedule.

c. Provide a plan and budget for temporary relocation (if necessary) during repairs.

Once the scope or work is determined and tenant relocation is deemed necessary the borrower will complete a SRRL Claim Request for Compensation form to be verified by PDC construction staff.