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Concur with the Housing Programs Advisory Committee and Approve the Resolution Authorizing a Single-Family Housing Rehabilitation Loan (SFR-104)
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Introduction
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The purpose of the Single-Family Housing Rehabilitation (SFR) Loan Program is to address and correct deteriorated homes throughout the Village. The eligible homeowner requests a deferred loan of $14,614 from the Village.
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Recommended Action
Staff is recommending that the Board approve the resolution.
Prior Board Action
There is no prior Board action associated with this item.
Background
Using Community Development Block Grant (CDBG) funding from the U.S. Department of Housing and Urban Development (HUD), the Single-Family Housing Rehabilitation (SFR) Program provides loans to low and very low-income owners/occupants of single-family properties to correct documented or potential code violations, address deficiencies, and make general property improvements. There are two loan products to support program goals: 1) no-interest loans of up to $25,000, deferred for repayment for 20 years; or 2) an emergency loan that provides no-interest loans of up to $5,000 per unit, deferred for repayment for 5 years. Emergency loans are for the correction of single emergencies, code violations of an emergency nature, or life-endangering circumstances. A minimum contingency of 10% is added to any loan principal to cover any unforeseen conditions and is removed from the loan if not used.
The primary eligibility criteria for all loans are as follows: 1) The household income must be within HUD income limits; 2) There must be adequate equity; 3) Rehabilitation work must be primarily code-related, basic repair work. For each eligible applicant, the Neighborhood Services Department determines financial eligibility, inspects the property, and prepares a detailed scope of work with a line-by-line item cost estimate. Using the scope of work, the homeowner invites contractors pre-qualified by the Village to bid on the project. The homeowner is responsible for selecting the contractor; however, the accepted bid cannot be more than 10% above the cost estimate or more than 15% below the cost estimate.
As of January 10, 2002, lead hazard reduction activities are required on any federally funded housing rehabilitation project. Three levels of lead hazard procedures exist. For projects under $5,000, the contractor must not create any hazards, including the creation of lead dust. For projects between $5,001 and $25,000, all deteriorated surfaces containing lead in the affected areas must be stabilized with no new hazards created. For projects over $25,001, lead hazards in the affected areas must be removed.
Since the Village's maximum loan amount is $25,000, only interim controls are required to alleviate deteriorated lead-based paint surfaces. The Village contracts with an independent lead inspector to perform a lead risk assessment for each property and identify all lead-based paint surfaces. The contracted lead inspector also provides the Village with a list of deteriorated surfaces that must be controlled. Using the Lead Inspection Report, staff develops specifications for the lead hazard reduction work that are incorporated into the scope of work. The successful contractor must either provide documentation that they have certified lead workers on staff or that they have a lead-certified subcontractor that can handle the specified work. Any subcontractors must meet all Village eligibility requirements. CDBG funds for lead work are given to the property owner as a grant.
SFR-104 is:
1) A $14,614 rehab loan to the low-income owner/occupant household of this property. The owner’s income qualifies for a deferred-payment loan. The $14,614 includes a $9,614 rehabilitation cost, as seen on the bid spreadsheet, plus a contingency of $5,000 to cover unforeseen problems during construction. The mortgage amount is $14,614. If the entire contingency is not used, an Amended Mortgage will be recorded on the title for the exact amount of the loan.
2) No lead paint hazard reduction grant as the premise was tested and determined to be lead-based paint free.
The funding for this request is the CDBG revolving loan fund, totaling $14,614. The CDBG Revolving Loan fund is comprised of repaid CDBG single-family loans that are paid back when the loan recipient sells their home or transfers the title to another entity. The $14,614 mortgage is deferred for repayment until a transfer of title or a date 20 years from the date of loan approval (July 1, 2025). The mortgage and note are written in the amount of $14,614, the $9,614 principal plus the contingency of $5,000.
The scope of work is detailed on the Loan Summary Form with additional detailed information about this project. The owner meets all program eligibility requirements, including the three major criteria for income, equity, and eligible scope of work.
The project was put out for bid. Four contractors attended the scheduled walkthrough and five contractors submitted bids. Three of the five bids were over the cost threshold allowed by HUD, but two were within the limits allowed by HUD. The homeowner selected Optima Construction as the contractor.
The post-rehab equity meets the program guideline requiring post-rehab equity of at least 10%. For purposes of determining equity, staff obtained the estimated market value of the property as posted on the Cook County Tax Assessor’s website. With a total debt of $103,081.76 that includes a $88,467.76 first mortgage and $14,614.00 Village Mortgage for this project, there will be 35.93% in post-rehab equity. The Village’s investment is protected.
Timing Considerations
There are no specific timing considerations associated with this item.
Budget Impact
Funding for the loan is from Fund 2020, the Community Development Revolving Loan Fund. This proposed loan will reduce the $173,270 fund balance by $14,614 to $158,656 (Account #2020.46206.101.585613).
Staffing Impact
There will be a need to regularly perform progress inspections to monitor the project; however, this item aligns with the department’s core service delivery. No new staff will be required.
DEI Impact
These programs are designed to assist low-to-moderate-income individuals who are within HUD income limits and meet the criteria of the program.
Community Input
On May 21, 2025, the Housing Programs Advisory Committee voted to recommend that the Village Board approve the rehabilitation loan.
Staff Recommendation
Staff is recommending the Board approve the resolution allowing the homeowner to secure a home rehabilitation loan to fix hazards and correct code violations.
Advantages:
• Approving the resolution furthers the Village Board goal of Community Affordability.
• Approving the resolution furthers the Village Board goal of Vibrant, Diverse, Connected Neighborhoods.
Disadvantages:
• There are no disadvantages to not approving the recommendation.
Alternatives
Alternative 1:
The board can choose not to approve the resolution.
Advantages:
• There are no advantages to not approving the resolution.
Disadvantages:
• The homeowner is not able to make the necessary repairs to their residence.
Anticipated Future Actions
There are no anticipated future actions in relation to this item.
Prepared By: Jeffrey J. Prior, Neighborhood Services Programs Manager
Reviewed By: Jonathan Burch, Assistant Village Manager/Neighborhood Services Director
Approved By: Kevin J. Jackson, Village Manager
Attachment(s):
1. Resolution Authorizing a Rehabilitation Loan SFR-104
2. Exhibit I Mortgage SFR-104
3. Exhibit II Note SFR-104
4. Exhibit III Agreement SFR-104