Submitted By
Jonathan Burch, Assistant Village Manager/ Neighborhood Services Director
Reviewed By
A.M. Zayyad, Deputy Village Manager
Agenda Item Title
Title
A Resolution to Approve a Community Development and Housing Loan Forgiveness Policy
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Overview
Overview
The Village has many outstanding housing and community development loans on its books. The Village has received sporadic requests for changes in loan terms, including forgiveness and maturity deferrals. Staff recommends the adoption of a community development and housing loan forgiveness policy to provide structure and clarify access to those seeking such changes.
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Recommendation
Recommendation
Staff recommends that the Board approve the policy, thereby allowing greater transparency and clarity around community development and housing loan forgiveness requests.
Background
Through the various housing programs the Village has operated over many years, Oak Park has an extensive list of outstanding loans. This amounts to $4,129,933.36 across 106 outstanding loans as of December 31, 2023. Most of these are smaller-value loans for homeowners to purchase or improve their properties. That includes $2,626,827 in 13 loans for the Oak Park Residence Corporation (OPRC) and Oak Park Housing Authority (OPHA).
The Village has received requests to defer or forgive loans with OPRC and OPHA. For example, via RES 22-134, the Village Board voted to approve the forgiveness and release of a loan with OPRC for $135,663 for the development of the 7 Van Buren Street project. Similarly, via RES 16-245, the Village Board approved to extend the maturity of the seven outstanding loans for OPRC as part of a larger refinancing and resubordination request.
The current process for considering these requests is ad hoc. The requester must have knowledge that they can seek the request. Once a request is submitted, staff works with the requester to evaluate the request on a case-by-case basis. The current process lacks clarity for all those who have housing and community development loans with the Village. It also lacks clarity in terms of the standards used to evaluate such requests. Moreover, as the Village explores new ways to use its CDBG funds, as well as operationalize the Housing Trust Fund, it is possible that new community development and housing loans could be issued, increasing the potential for such requests.
Staff has drafted a community development and housing loan forgiveness policy to provide more structure and clarity around these requests. The processes outlined in the policy have many benefits.
• It formalizes that both households and entities that have such loans with the Village can make loan term adjustment requests.
• It lays out a clear process for how staff should process those requests, including what information to seek from the applicant.
• It has a role for appropriate advisory committees of the Board to evaluate the request based on their topical expertise as appropriate for the loan.
• It lays out standards for those advisory committees to use when considering the benefits and drawbacks of any request.
• It maintains the Board’s ultimate decision-making authority on loan term adjustment requests.
Fiscal Impact
Adoption of the policy has no direct fiscal impact. The consideration by the Board of individual loan forgiveness requests could have a fiscal impact on the funding sources used for these loans. Most commonly that is the Community Development Loan Fund and the Affordable Housing Fund.
DEI Impact
The housing and community development loans covered by the policy will directly or indirectly benefit households with low and moderate incomes. The Village’s current approach privileges those who are aware of the ability to request changes in loan terms. Adoption of the policy will clarify the process for seeking changes in loan terms, including its availability to all who have received housing and community development loans.
Alternatives
• Alternative 1: Not approve the policy
o Advantages
§ Allows additional time for consideration of the
§ Allows alterative of the policy based on Board feedback.
o Disadvantages
§ Delays implementation of the policy and its application to loan forgiveness requests.
Previous Board Action
N/A
Citizen Advisory Commission Action
N/A
Anticipated Future Actions/Commitments
The Board will consider future loan forgiveness requests as the policy is implemented.
Intergovernmental Cooperation Opportunities
N/A