PROGRAM GUIDELINES

(CLEVELAND: Home Improvement Program)

 

Program Overview: The intent of the Cleveland Neighborhood Association NRP Home Improvement Program is to support homeowners in the Cleveland neighborhood to stabilize and improve the condition of the neighborhood’s existing housing stock for the next generation.

 

The Cleveland Home Improvement Program has two components;  

 

Low-interest home improvement revolving loan pool

Deferred loan pool

 

 

Terms of the Revolving Loan Program

 

 

  1. Income Limit:  None

 

  1. Interest Rate:  1% (Interest rates are subject to change.  Cleveland will notify CEE of any interest rate changes in writing)
  1. Loan Amount:  Minimum loan amount is $1,000.  Maximum loan amount is $10,000.

 

  1. Loan term:  Generally, one year per thousand dollars borrowed up to a maximum of ten (10) years.

 

  1. Eligible Properties:   Residential 1-4 unit owner occupied properties within the boundaries of the Cleveland neighborhood.  Owners of a condominium or townhome are also eligible to participate in this program for improvements to the portion of the property that they own or are responsible for.  Associations are not eligible under this program.

 

  1. Ineligible Properties:  Residential dwellings that are more than 4 units and non-owner occupied properties.

  

  1. Eligible Borrowers:  Owners of 1-4 unit owner-occupied properties within the Cleveland neighborhood who meet the program guideline criteria.   

 

  1. Ineligible Borrowers:   Include, but are not limited to: co-borrowers with no ownership interest in the subject property.

 

  1. Ownership / Occupancy:  Must be owner-occupied

 

  1. Loan – to – Value Ratio:  The ratio of all loans secured by the property must not exceed 110% of the property value.  

 

  1. Debt- to-Income Ratio:  Applicants must have the ability to repay the loan.  Applicants who have a debt to income ratio in excess of 50% will be denied loan financing.  
  2. Underwriting / Credit Requirements:  Applicants must have acceptable credit history.  Recipients generally may not have more than three “90 day lates” for all accounts in the past 12 months (without reasonable explanation), or have had a bankruptcy within the last eighteen (18) months (without reasonable explanation).  Borrowers must be current on housing payments and property tax payments. CEE will approve or deny loans based on a credit report, income verification and other criteria as outlined above.
  3. Multiple Loans per Property and Borrower:  Multiple loans per property and borrower are eligible as long as the total outstanding balance of any existing and new loan doesn’t exceed the maximum eligible loan amount and any existing loan(s) are current on payments.

 

  1. Eligible Improvements:   Loans may be used to finance interior and exterior improvements, including but not limited to, the correction of any outstanding violations of the City of Minneapolis Housing Codes and correction of other hazardous codes and health or safety-related conditions.  Energy efficiency related improvements such as heating and air conditioning, water heating, insulation, windows and doors and solar.

 

  1. Ineligible Improvements:   Work initiated prior to the loan being approved and closed (unless an emergency situation). No recreation or luxury projects (pools, lawn sprinkler systems, playground equipment, saunas, whirlpools, etc.), furniture, skylights, non-permanent appliances if not part of a kitchen renovation project. Funds for working capital, debt service or refinancing existing debts are NOT allowed.  CEE will refer to the Cleveland Neighborhood Associations whenever eligibility of an improvement project is questionable.

 

  1. Bidding:  Except when labor is provided by the borrower, the borrower must provide a minimum of 1 bid for each improvement project under $5,000 and 2 bids for each project more than $5,000. All contractors must be properly licensed. Permits must be obtained when required by City ordinance.

 

  1. Sweat Equity:  Work can be performed on a “sweat equity” basis.  Loan funds cannot be used to compensate for labor even if the owner is a licensed contractor, only for materials.  Loan funds cannot be used for the purchase or rental of tools or equipment, only for materials. Materials must be purchased and installed prior to the disbursement of the loan proceeds.  When applicable, a signed City Inspections Department permit must be obtained by the borrower. For projects not requiring a permit, a CEE representative will verify the project is complete. Only 1 material estimate is required for sweat equity projects.

 

  1. Property Inspection:  Not required

 

  1. Post Installation Inspection:  Properties are subject to a post installation inspection by CEE when a permit is not required. Where a permit is required, the work must be signed-off by a City inspector prior to release of funds.

 

  1. Work Completion:  Weather permitting; all work must be completed within 120 days of loan closing. Extensions may be granted by CEE.

 

  1. Loan Security:  All NRP loans will be secured with a mortgage in favor of the City of Minneapolis.  

 

 

Terms of the Deferred Loan Program

 

 

  1. Income Limit:  At or below 70% Area Median Income, as determined by the U.S. Department of Housing and Urban Development and adjusted for household size.  Income will be determined by the adjusted gross income by the most recent Federal Tax Return. If a tax return in not required or filed the income will be determined by current gross income.

 

  1. Interest Rate:  0%

 

  1. Loan Amount:  Minimum loan amount is $1,000. Maximum loan amount is $10,000.

 

  1. Loan term:  10 years.  If the borrower sells or transfers title of the property within 10 years of loan closing 100% of the loan is due.  If the borrower owns and occupies the property for 10 years the loan is 100% forgiven.

 

  1. Eligible Properties:   Residential 1-4 unit owner occupied properties within the boundaries of the Cleveland neighborhood.  Owners of a condominium or townhome are also eligible to participate in this program for improvements to the portion of the property that they own or are responsible for.  Associations are not eligible under this program.

 

  1. Ineligible Properties:   Residential dwellings that are more than 4 units and non-owner occupied properties.

 

  1. Eligible Borrowers:  Owners of 1-4 unit owner-occupied properties within the Cleveland neighborhood who meet the program guideline criteria.   

 

  1. Ineligible Borrowers:   Include, but are not limited to: co-borrowers with no ownership interest in the subject property, properties held in the name of a trust.

 

  1. Ownership / Occupancy:  Must be owner-occupied

 

  1. Loan- to-Value Ratio:  Not applicable

 

  1. Debt- to-Income Ratio:  Not applicable
  2. Multiple Loans per Property and Borrower:  Multiple loans per property and borrower are eligible as long as the total outstanding balance of any existing and new loan doesn’t exceed the maximum eligible loan amount and any existing loan(s) are current on payments as agreed.
  3. Eligible Improvements:  Loans may be used to finance interior and exterior improvements, including but not limited to, the correction of any outstanding violations of the City of Minneapolis Housing Codes and correction of other hazardous codes and health or safety-related conditions.  Energy efficiency related improvements such as heating and air conditioning, water heating, insulation, windows and doors and solar.

 

  1. Ineligible Improvements:   Work initiated prior to the loan being approved and closed (unless an emergency situation). No recreation or luxury projects (pools, lawn sprinkler systems, playground equipment, saunas, whirlpools, etc.), furniture, skylights, non-permanent appliances if not part of a kitchen renovation project. Funds for working capital, debt service or refinancing existing debts are NOT allowed.  CEE will refer to the Cleveland Neighborhood Associations whenever eligibility of an improvement project is questionable.

 

  1. Bidding:  Except when labor is provided by the borrower, the borrower must provide a minimum of 1 bid for each improvement project under $5,000 and 2 bids for each project more than $5,000. All contractors must be properly licensed. Permits must be obtained when required by City ordinance.

 

  1. Sweat Equity:  Work can be performed on a “sweat equity” basis.  Loan funds cannot be used to compensate for labor even if the owner is a licensed contractor, only for materials.  Loan funds cannot be used for the purchase or rental of tools or equipment, only for materials. Materials must be purchased and installed prior to the disbursement of the loan proceeds.  When applicable, a signed City Inspections Department permit must be obtained by the borrower. For projects not requiring a permit, a CEE representative will verify the project is complete. Only 1 material estimate is required for sweat equity projects.

 

  1. Property Inspection:  Not required.

 

  1. Post Installation Inspection:  Properties are subject to a post installation inspection by a CEE staff member when a permit is not required. Where a permit is required, the work must be signed-off by a City inspector prior to release of funds.

 

  1. Work Completion:  Weather permitting; all work must be completed within 120 days of loan closing. Extensions may be granted by CEE.

 

  1. Underwriting Decision:  Applicants must have acceptable credit history.  Recipients generally may not have more than three “90 day lates” for all accounts in the past 12 months (without reasonable explanation), or have had a bankruptcy within the last eighteen (18) months (without reasonable explanation).  Borrowers must be current on housing payments and property tax payments. CEE will approve or deny loans based on a credit report, income verification and other criteria as outlined above.

 

  1. Loan Security:  All NRP loans will be secured with a mortgage in favor of the City of Minneapolis.  

 

OTHER GENERAL CONDITIONS AND PROCEDURES

 

Rehabilitation Consulting:   A CEE representative will be available to borrowers to advise them about proposed projects and will review bids for reasonableness.  NRP funds will pay for this service to be provided.

 

Loan Costs:  Loan origination fees will be paid for with NRP funds.  The borrower is responsible for paying the following fees:  credit report, title work, flood certification and applicable mortgage filing fees.

 

Loan Servicing:   Loans are serviced by the Community Reinvestment Fund.  Borrowers will be assessed a 5% fee for submitting a late payment and/or a $20.00 fee if a payment is returned to the servicer for insufficient funds.  

 

Total Project Cost:   It is the borrower’s responsibility to obtain the amount of funds necessary to finance the entire cost of the work.  If the final cost exceeds the loan amount the borrower must obtain the additional funds. NRP funds will not be disbursed until all other funds have been paid into the project

 

Applications for Funding:   Applications will be accepted by CEE on an on- going basis and processed on a first-come, first-served basis, as funds are available until all program funds are committed. Borrowers may be required to submit:

 

  1. A completed application form
  2. A copy of current photo ID
  3. A copy of the most Federal Income Tax Returns, including W-2’s and all schedules
  4. A copy of two most recent payroll statements
  5. A copy of your current mortgage statement
  6. A signed Data Privacy Act Statement, USA Patriot Act and Authorization to Release disclosure.
  7. Other documentation as requested.

 

Custody of Funds:  Loan funds will remain in the custody of CEE until payment for completed work.

 

Disbursement Process:

 

  1. Payment to the contractor (or owner) will be made after completion of the work. An inspection will be performed by the City and/or the CEE construction manager to verify the completion of the work.

 

  1. The following items must be received before the funds can be released:
  1. Final Invoice from each contractor showing all amounts paid and due.
  2. Lien Waiver from each contractor.
  3. Material Receipts for sweat equity projects.
  4. Completion Certificate signed by each contractor and the borrower.
  5. Permits Closed. Have the inspector sign the permit card, or have the inspector leave a message at CEE, 612-335-5856 or the permit must be closed on the Minneapolis Inspections computer 612-673-5890.
  6. Final Inspection and approval by CEE, if applicable.  The above items must be provided to CEE to begin the preparation of the check(s). Lien waivers must be provided before the funds will be released.

 

  1. Payment checks may take up to 10 business days after the above items are received to prepare.  Payment checks to contractors must be countersigned by the borrower. A maximum of two draws will be allowed per loan.  Payments will only be made for work completed and approved.