HomeMy WebLinkAbout1984/07/26 - Agenda Packet - Adj.Gl'G.NO
QTY OF
RAN0i0 CUCAMO CA
s c CITY COUNCIL
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1- Z AGENDA
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1977
Lions Park Community Center
9161 Base Line Road
Rancho Cucamonga, California
Adjourned Meeting
July 26, 1984 - 7:00 P.M.
1. CALL TO ORDER
A. Roil Call: Wright Buquet Mikels
Dahl , and King
B. Approval of Minutes: None submitted for approval.
2. CONSENT CALENDAR
The following Consent Calendar items are expected to be
routine and non - controversial. They will be acted upon by
the Council at one time without discussion.
No Items submitted for consideration.
3. STAFF REPORTS
A. CONSIDERATION OF AN ORDINANCE ESTABLISHING AN AB -1355
REVENUE MORTGAGE BOND PROGRAM FOR SINGLE FAMILY HOMES
IN RANCHO CUCAMONGA
ORDINANCE N0. 229
AN ORDINANCE OF THE CITY OF RANCHO CUCAMONGA,
CALIFORNIA, RELATING TO THE ESTABLISHMENT OF
A HOME MORTGAGE FINANCING PROGRAM FOR
MODERATE AND LOW- INCOME FAMILIES FOR THE CITY
OF RANCHO CUCAMONGA
B. CONSIDERATION OF A RESOLUTION AUTHORIZING THE SALE OF
$27,875,000 SINGLE FAMILY MORTGAGE BONDS
City Council Agenda -2- July 26, 1984
RESOLUTION N0. 84 -211
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF RANCHO CUCAMONGA, CALIFORNIA, AUTHORIZING
THE ISSUANCE OF $27,875,000 PRINCIPAL AMOUNT
OF HOME MORTGAGE REVENUE BONDS 1984 SERIES A,
SUCH BOND TO BE ISSUED PURSUANT TO A TRUST
INDENTURE DATES AS TO THE DATE OF THE BONDS,
APPROVING OFFICIAL STATEMENT RELATING TO SUCH
BONDS, AUTHORIZING THE EXECUTION OF AND
APPROVING IMPLEMENTING AGREEMENT, DOCUMENTS
AND ACTIONS AND PROVIDING OTHER MATTERS
PROPERLY RELATING THERETO.
7. CONSIDERATION OF CABLE T.V. MATTERS: DEVELOPING
PARAMETERS FOR REQUEST FOR PROPOSAL TO PROVIDE CABLE
T.V. SERVICE TO THE CITY OF RANCHO CUCAMONGA
4. ADJOURNMENT
'
CITY OF RANCHO CUCAMONGA
STAFF REPORT
DATE: July 26, 1984
TO: Members of the City Council and City Manager
CCCAAigy
C9
n
— 1977 I
FROM: Jack Lam, AICP, Director of Community Development
SUBJECT: APPROVAL OF ORDINANCE AND RESOLUTION AUTHORIZING THE
ISSUANCE OF REVENUE MORTGAGE BONDS AB -1355
The City has received a State allocation of revenue mortgage bonds
totaling $49,200,000. This allocation is being split between the
Redevelopment Agency and the City, $27,875,000 for the City issue
(AB -1355) and the balance for the Agency's issue (SB -99). This split
is being accomplished to take full advantage of the more favorable
income provisions of the SB -99 program. The participating developers
have consented to this split and those in the City program have asked
us to proceed immediately to issuance while those in the Redevelopment
Agency program have elected to wait (but go to market within 90 days).
Therefore, the City issue of $27,875,000 is proposed to move ahead.
(The amount of the issue is at this time approximate and will be firmed
up by the night of the meeting.)
The City has completed a draft purchase contract with the bond under-
writer for purchase of the housing mortgage revenue bonds (see attached
draft purchase contract). The bond issue agreement contains the under-
writer's agreement to purchase the bonds at a certain price and provide
certain interest rates (since bonds are priced just before approval,
the specifics will not be available until the night of the City Council
meeting). The bond purchase agreement also contains all the conditions
necessary for delivery of the bonds and has been reviewed by the City's
financial adviser. He notes that the discount rate to the underwriter
is 3.0 percent which will be competive with the prevailing rates. He
has recommended that the City consider favorable action on this purchase
agreement.
The City must consider two separate actions: first, an ordinance es-
tablishing the bond program. Unlike other ordinances this one will
become effective immediately upon approval. And second, a resolution
authorizing the specific issuance of $27,875,000 of revenue mortgage
bonds. This resolution acts to authorize execution of all the other
documents such as the trust indentures, the commitment contracts, the
purchase agreement, the servicing agreement, official statement, and
purchase contract.
July 26, 1984
Approval of Ordinance and Resolution - Revenue Mortgage Bonds
Page Two
The compliance agreement and investment agreement will be executed
at the time of bond closing. With the exception of the ordinance,
the document and procedures duplicate that of last year's mortgage
revenue bond program.
RECOMMENDATION:
Staff recommends approval of the ordinance and resolution establishing
the revenue mortgage bond program (AB -1355) and authorizing the sale
of $27,875,000 of revenue mortgage bonds.
I.
RespectfulV,y+submitted,
Community Development Director
JL:jk
Attachments: Ordinance
Resolution
Official Statement
Purchase Contract
15 July 1984
City Council,
Rancho Cucamonga
I believe the council should determine whether the Request for Proposals
for a Cable TV Franchise for Rancho Cucamonga could be improved in
the following areas or for the following reasons, generated after a
study of the RFP before the council for consideration at its June 6
meeting.
1 -I do not see where the RFP requires applicants to meet with all the
provisions of the CAW ordinance adopted by the city oi21 March 1984.
This is more than a technicality since the RFP (B 2, par &. 3 states
"Applicants are required to state their P�li2yy for providing inter-
connection to educational in_a ut ons ouUs -de the City limits" whereas
Ordinance states specifically that "The Grantee shall interconnect
public usage channels ... with any or all other c-a=e systems in
adjacent areas..." (Sec. '7.05.120, pare A)."
2 -The requirement that City, state, county and federal facilities are
to have access to all CATV services is not clear or precise. Does
this mean a single drop for each agency? To each site? To each
building? Is there a charge for the drop? Is there a fee for the
service? Could a gradual improvement of minimums be negotiated?
3 -If we stick to the RFP minimum of a system with 50 downstream
channels and 4 upstream channels the minimum requirement for
dedication of public - benefit channels would mean 4 downstream and
only one upstream channel for use by 6 public school districts and
all the state, city, county or federal agencies that might desire
access.(If today's conditions are any indication, 30 channels are
sufficient for homeowners' entertainment, leaving 20 channels for
public benefit or other use.)
4 -The RFP states that an "Institutional Network" is desired(not required)
" The RFP seems to be going out of the way by that specific
statement to keep minimum channel requirements to the very mini-
mum rather than getting closer to the maximum or establishing a
procedure for increasing channel capacity when the need becomes
evident.
5-There could be established a requirement that channels not in use
be made available on a regular basis either for part of the day or
for the whole dsy, on a yearly basis until franchisee serves notice
that he wishes to retrieve them.
6 -There is no provision that the franchisee as$ure that a studio is
conveniently located. The draft RFP allows 'It to be located in
an adjacent city which means that those operating in the far north-
east reaches of the City might have to travel to Brooke Street in
Ontario to make use of studio facilities.
7-Nothing in the RFP makes mention of use of Cha£fey Community
College facilities to the benefit of both the College and the
franchises.
8- Nothing in the RFP relates to epcific use of the Studio facilities
when there is no conflict with regular programming. (Mention is
made in the ordinance -- 7:03.030, pars, 1 and 70.03 -G90, pars. D but
there are no spcifics.)
9 -There are no minimum technical standards stated in the RFP although
the ordinance (7.05.110, para B)requiree franchisee to meet
standards contained in the franchise agreement. This may be
merely a procedural item although it would eebm thet some interested
citizens ought to be apprised of what is being negotiated for in
the franchise agreement.
10- Prewiring of homes or institutions is not covered.
11 -There is no provision for community input on programming, especially
in the first tier. Although there is a recent ruling giving CATV
companies complete authority to remove programs from the first
tier at their will, a provision to negotiate a minimum number of
channels in which the communit�v would be involved could lesson the
chances of "take it or leave it' attitude on part of franchisee.
12 -The RFP is not sufficiently specific in use of the company in
training programs. (The Educators' Committee tbet made proposals
for the RFP had recommended one trainee per employee as part of
the Regional Occupational Program in the secondary schools of the
West End.)
I am requesting that city staff forward a copy of this letter to
Telecommunications hanagement Corp. so it can be prepared to respond
if there is need at the July 26 meeting. It is requested that I be granted
time to speak to these items at that meeting although my intent is
merely to make a few general remarks and answer questions or amplify
if requests are made.
Sincer ly,
U.E. BAUERS
8357 Bella Vista,
Alta Loma.
STONE 6 YOUNGBERG
One California Street
San Francisco, California 94111
'NirlT�f•7, �,`CaIItZ- K....1'waLl4`L'�7
$27,875,000 >L
HOME-MORTGAGE REVENUE BONDS
1994 SERIES A
PURCHASE CONTRACT Jg00
City of Rancho Cucamonga
9320 Baseline Road
Rancho Cucamonga, California 91730
Dear Sirs:
O�
July _, 1984
Stone S Youngberg (the "Purchaser ") acting not as a fiduciary or agent for
you, but on behalf of itself offers to enter into this Agreement on or before
11 p.m., Pacific time, on the date hereof.
1. Introductory. The City of Rancho Cucamonga (the "City ") proposes to
issue and sell $27,875,000 principal amount of its Hone Mortgage Revenue Bonds
1984 Series A. dated July 1, 1984, pursuant to Chapters 1 -5 of Part 5 of
Division 31 of the California Health and Safety Code (the "Act "). The Bonds
will be secured under a trust indenture dated as of July 1, 1984 (the
"Indenture "1 of the City under which Seattle -First National Bank, Seattle,
Washington, will act as trustee (the "Trustee "). As set forth in the
Preliminary Official Statement dated July 23, 1984 (the "Preliminary Official
Statement "), prepared for use in making an offering of the Bonds, the proceeds
from the issue and sale of the Bonds will be used to provide funds for the
purchase of Home Mortgages to be secured by single family residences to be
constructed within the City.
2. Purchase, Sale and Delivery of Bonds. On the basis of the
representations and agreements contained herein, but subject to the terns and
conditions herein set forth, the Purchaser hereby agrees to purchase from the
City, and the City agrees to sell to the Purchaser, the Bonds at a purchase
price equal to % of the principal amount of the Bonds plus accrued interest
thereon to the Closing Date specified below. The City will deliver the Bonds
to the Purchaser for the account of the Purchaser in good deliverable form
with CUSIP numbers imprinted thereon against payment of the purchase price
therefor by certified or official bank check in clearinghouse funds at the
offices of Jones, Hall, Hill 6 White, Four Embarcadero Center, San Francisco,
California, or at such other place as may be mutually agreed upon at 10 a.m.,
local time, on August , 1984, or at such other time not more than 7 days
thereafter as may be specified by the Purchaser, such time being hereinafter
referred to as the "Closing Date." The Bonds so to be delivered are to be
delivered in definitive fully registered form in such denominations as the
Purchaser requires and will be made available for checking and packaging at
least 24 hours prior to the Closing Date. The Bonds will mature on the date
and in the amount and will bear interest at the rate shown on Schedule I.
The Purchaser herewith delivers to the City a check payable to its order,
in an amount equal to $75,000 as security for the performance of the
obligation to accept and pay for the Bonds at the Closing in accordance with
the provisions of this Agreement. If the City does not accept this offer, the
amount of such security shall be immediately returned to the Purchaser. The
check shall be held uncashed by the City. Concurrently with the delivery of
and payment for the Bonds at the Closing Date, the check shall be returned to
the Purchaser. Upon the failure of the City to deliver the Bonds at the
Closing Date, or if the City shall be unable to satisfy the conditions in this
Agreement, or if such obligations shall be terminated for any reason permitted
by this Agreement, the check shall be immediately returned to the Purchaser,
and such return shall constitute a full release and discharge of all claims
and rights hereunder of the Purchaser against the City. If the Purchaser
fails (other than for a reason permitted under this Agreement) to accept and
pay for the Bonds at the Closing Date, the check may be cashed and the
proceeds thereof shall be retained by the City as and for full liquidated
damages for such failure and for any and all defaults hereunder on the part of
the Purchaser, and such proceeds shall constitute a full release and discharge
of all claims and damages for such failure and for any and all such defaults,
and the City shall have no further action for damages, specific performance or
any other legal or equitable relief against the Purchaser.
3. Offering, Security and Authorization. The Purchaser proposes
initially to offer and sell the Bonds as set forth in the Official Statement.
The City authorizes the Indenture, the Preliminary Official Statement and
the Official Statement, including any supplements or amendments thereto, to be
used by the Purchaser in connection with the offer and sale of the Bonds.
4. Program Participant Documents. Prior to or simultaneously with the
execution of this Purchase Contract, or prior to the Closing Date, the
Purchaser shall have received the following:
(a) Commitment Contracts (the "Commitment Contracts ") in form and
substance satisfactory to the Purchaser executed by the City and by each
of the developers (the "Developers ") described in the Official Statement;
(b) Home Mortgage Purchase Agreements (the "Hone Mortgage Purchase
Agreement ") in form and substance satisfactory to the Purchaser executed
by the Wells Fargo Mortgage Company, City Bond and Mortgage Corporation,
Directors Mortgage Loan Corporation, Sko -Fed Mortgage Corporation, and
Investor's Mortgage Service Company (the "Lenders ") described in the
Official Statement; and
(c) Servicing Agreements Ithe "Servicing Agreement ") in form and
substance satisfactory to the Purchaser executed by the Lenders described
in the Official Statement.
-2-
5. City Documents. At the time of the City's acceptance hereof, or at
such other time prior to the Closing Date as shall be agreeable to the
Purchaser, the City shall deliver to the Purchaser:
(a) The Official Statement, duly executed on behalf of the City by
its Mayor or other authorized officer.
(b) The Indenture, duly executed by the City and the Trustee.
The City agrees to provide us with 500 copies of the Official Statement
and 20 copies of the Indenture and a reasonable number of additional copies of
the other documents described above as we shall request and the City
authorizes the use thereof in connection with the offer, sale, and
distribution of the Bonds.
6. Representations and Warranties. The City represents and warrants to
the Purchaser that:
(a) The City is a political subdivision of the State of California
(the "State ") organized and existing under the laws of the State and has
full legal right, power and authority (i) to enter into this Purchase
Contract, (ii) to issue, sell and deliver the Bonds as provided herein,
(iii) to purchase Home Mortgages (as defined in the Indenture) and pledge
them to secure the Bonds and (iv) to carry out the transactions
contemplated by this Purchase Contract, the Indenture, the Official
Statement, the hone mortgage financing program described in the Official
Statement (the "Program "), the Commitment Contracts, the Home Mortgage
Purchase Agreements and the Servicing Agreements, as they may be amended
or supplemented from time to time by the City.
(b) The information in the Preliminary Official Statement (including
the statistical and other financial data included therein) relating to the
City and the Program does not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements contained therein, in the light of the circumstances under
which they were made, not misleading.
(c) The City has no reason to believe that any of the information in
the Preliminary Official Statement contains an untrue statement of a
material fact or units to state a material fact necessary in order to make
the statements contained therein, in the light of the circumstances under
which they are made, not misleading. The City believes that all required
building permits and zoning required for the construction of the
residential developments described in the Official Statement have been
issued or will be issued within the time required therefor.
(d) By official action of the City prior to or concurrently with the
acceptance hereof, the City has duly authorized and approved the
Preliminary Official Statement and the Official Statement, has duly
authorized and approved the execution and delivery of, and the performance
by the City of the obligations on its part contained in, the Indenture,
the Bonds, this Purchase Contract, the Commitment Contracts, the Home
Mortgage Purchase Agreements and the Servicing Agreements, and has duly
authorized and approved the consummation of all other transactions
contemplated by this Purchase Contract.
nil
(e) The City is not in breach of or default under any applicable
law or administrative regulation of the State or the United States or any
applicable judgment or decree or any loan agreement, note, resolution,
agreement or other instrument to which the City is a party or is otherwise
subject; and the execution and delivery of the Bonds, the Indenture, this
Purchase Contract, the Commitment Contracts, the Home Mortgage Purchase
Agreements and the Servicing Agreements, and compliance with the
provisions of each thereof, will not conflict with or constitute a breach
of or default under any law, administrative regulation, judgment, decree,
loan agreement, note, resolution, agreement or other instrument to which
the City is a party or is otherwise subject.
(f) All approvals, consents and orders of any governmental
authority, board, agency or commission having jurisdiction which would
constitute a condition precedent to the performance by the City of its
obligations hereunder and under the Indenture, the Bonds, the Commitment
Contracts, the Home Mortgage Purchase Agreements and the Servicing
Agreements have been obtained.
(g) There is no action, suit, proceeding, inquiry or investigation,
at law or in equity, before or by any court, public board or body, pending
or, to the knowledge of the City, threatened against the City affecting
the corporate existence of the City or the titles of its officials to
their respective offices or the pledge or revenues or assets of the City
pledged or to be pledged to pay the principal of and interest on the
Bonds, or in any way contesting or affecting the validity or
enforceability of the Program, the Bonds, the Indenture, this Purchase
Contract, the Commitment Contracts, the Home Mortgage Purchase Agreements
or the Servicing Agreements or contesting in any way the completeness or
accuracy of the Preliminary Official Statement or the Official Statement,
or contesting the powers of the City or any authority for the issuance of
the Bonds, or the execution and delivery of this Purchase Contract, the
Commitment Contracts, the Indenture, the Home Mortgage Purchase Agreements
or the Servicing Agreements or, to the knowledge of the City, seeking to
prohibit, restrain or enjoin the residential developments described in the
Official Statement or the sale, issuance or delivery of the Bonds, nor, to
the knowledge of the City, is there any basis therefor, wherein an
unfavorable decision, ruling or finding would materially adversely affect
the validity or enforceability of the Program, the Bonds, the Indenture,
the Commitment Contracts, the Home Mortgage Purchase Agreements, the
Servicing Agreements or this Purchase Contract.
(h) The issuance and sale of the Bonds is not subject to any
transfer or other documentary stamp taxes of the State or any political
subdivision thereof.
(i) The Bonds, the Indenture, the Program, the Commitment
Contracts, the Home Mortgage Purchase Agreements and the Servicing
Agreements conform to the descriptions thereof contained in the Official
Statement, and the Bonds, when issued, authenticated and delivered in
accordance with the Indenture and sold as provided herein, will be validly
issued and outstanding limited obligations of the City entitled to the
benefits of the Indenture.
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(j) The City has not been notified of any listing or proposed
listing by the Internal Revenue Service to the effect that the City is a
bond issuer whose arbitrage certifications nay not be relied upon.
Any certificate signed by an authorized officer of the City and delivered
to the Purchaser shall be deemed a representation and warranty by the City to
each of the Purchaser as to the statements made therein.
7. Covenants. The City covenants with the Purchaser that'
(a) If between the date of this Purchase Contract and the date 90
days following the Closing Date an event occurs affecting the City or the
Program which would cause the Official Statement or the Preliminary
Official Statement to contain an untrue statement of a material fact or to
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, the City shall notify the Purchaser and, if in the opinion of
the City or in the Purchaser's opinion such event requires an amendment or
supplement to the Official Statement or the Preliminary Official
Statement, the City will, at its expense, amend or supplement the Official
Statement in a form and in a manner jointly approved by the City and us;
provided, however, if such event shall occur at or prior to the Closing
Date, the Purchaser in its sole discretion shall have the right to
terminate its obligations hereunder by written notice to the City, and the
Purchaser shall be under no obligation to purchase and pay for the Bonds.
(b) The City will furnish such information, execute such instruments
and take such other action in cooperation with the Purchaser as we may
reasonably request to qualify the Bonds for offer and sale under the Blue
Sky or other securities laws and regulations of such states and other
jurisdictions of the United States as the Purchaser may designate;
provided, however, the City shall not be required to register as a dealer
or broker in any such state or jurisdiction.
(c) The City will not, without prior written consent of the
Purchaser, issue any bonds or other obligations for borrowed money in
connection with the Residences described in the official Statement if the
interest rate on home mortgages to be acquired with the proceeds thereof
would be less than the interest rate on the Home Mortgages.
S. Conditions to the Purchaser's Obligation. The obligation of the
Purchaser to purchase and pay for the Bonds will be subject to the accuracy of
the representations and warranties of the City herein, to the accuracy of the
representations and warranties made by the Developers and the Lenders pursuant
to provisions herein, to the accuracy of statements to be made on behalf of
the City, the Developers, the Lenders and the Trustee hereunder, to the
performance by the City, the Developers, the Lenders and the Trustee of their
obligations hereunder and to the following additional conditions precedent:
(a) At the Closing Date, the Program, the Indenture, the Commitnant
Contracts, the Home Mortgage Purchase Agreements and the Servicing
Agreements, and all official action of the City relating thereto shall be
in full force and effect and shall not have been amended, modified or
supplemented, and the Official Statement shall not have been amended or
supplemented except as may have been agreed to by the Purchaser.
-5-
(b) At the Closing Date, a commitment to provide private mortgage
guaranty insurance for the Home Mortgages on the terms and conditions
described in the Official Statement shall have been issued by United
Guaranty Residential Insurance Company of Iowa and insurance companies
reasonably acceptable to the Purchaser shall have indicated their
willingness to provide special hazard insurance, standard hazard
insurance, and earthquake insurance on the terms and conditions described
in the Official Statement.
(c) The City shall have received approving opinions of Jones Hall
Hill 6 White, A Professional Law Corporation, Bond Counsel, and the
Purchaser shall have received a letter from said firm, dated the Closing
Date and addressed to the Purchaser, to the effect that the Purchaser say
rely upon such firm's opinion as if it were addressed to the Purchaser,
and a supplemental opinion of Bond Counsel dated the Closing Date and
addressed to the Purchaser, in substantially the form attached hereto as
Exhibit A.
(d) The City shall have received an opinion of Haynes 6 Miller,
Special Tax Counsel, to the effect that the Bonds are not "arbitrage
bonds" within the meaning of Section 103(c) of the Code and the
regulations thereunder, and that the requirements of subsection (i) of
Section 103A of the Code and Section 6a,103A -21il of the temporary
regulations, as amended (and as modified by the Tax Equity and Fiscal
Responsibility Act of 1982 (P.L. 97 -298 (September 3, 198Z)), promulgated
thereunder (the "Temporary Regulations ") have been met assuming compliance
with the provisions of the Indenture, the Home Mortgage Purchase
Agreements, the Servicing Agreements and the Commitment Contracts.
(e) The Purchaser shall have received opinions, dated the Closing
Date and addressed to the Purchaser, of:
(i) counsel to each Developer in substantially the form
attached to the Commitment Contracts;
(ii) counsel to each Letter of Credit Bank in substantially the
form attached to the Commitment Contracts;
(iii) counsel to each Lender in substantially the form attached
to the Home Mortgage Purchase Agreements;
(iv) counsel to the Trustee in substantially the form attached
hereto as Exhibit B; and
(v) counsel to the City in substantially the form attached
hereto as Exhibit C.
(f) The Purchaser shall have received a certificate, dated the
Closing Date and signed by an authorized officer of the Trustee, to the
effect that: li) he is an authorized officer of the Trustee; (ii) the
duties and obligations of the Trustee under the Indenture have been duly
accepted by the Trustee; (iii) the Trustee has all necessary corporate
and trust powers required to carry out the trust intended under the
Indenture; and (iv) to the best of his knowledge, the acceptance by the
Trustee of the duties and obligations of the Trustee under the Indenture
-6-
and compliance with the provisions thereof will not conflict with or
constitute a breach of or default under any law, administrative
regulation, consent decree or any agreement or other instrument to which
the Trustee is subject.
(g) The Purchaser shall have received a certificate, dated the
Closing Date and signed by the Mayor, or other authorized officer of the
City to the effect that:
(i) except as disclosed in the Official Statement, no
litigation or other proceedings are pending or, to his
knowledge, threatened in any court or other tribunal of
competent jurisdiction, State or Federal, in any way (A)
restraining or enjoining the issuance, sale or delivery of the
Bonds, (B) questioning or affecting the validity of this
Purchase Contract, the Bonds, the Indenture, the pledge to the
Bondholders of any moneys or other security provided under the
Indenture, the Program, the Commitment Contracts, the Home
Mortgage Purchase Agreements, the Servicing Agreements or any
other transaction referred to in the Official Statement, (C)
questioning or affecting the validity of any of the proceedings
for the authorization, sale, execution, issuance or delivery of
the Bonds, (D) questioning or affecting the organization or
existence of the City or the title to office of the officers
thereof or (E) questioning or affecting the power and authority
of the City to issue the Bonds, to adopt the Program, or to
execute this Purchase Contract, the Indenture, the Commitment
Contracts, the Home Mortgage Purchase Agreements and the
Servicing Agreements;
(ii) to his best knowledge and belief, the Official Statement
does not contain any untrue statement of a material fact or it
to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances
under which they were made, not misleading; and
(iii) the City has complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date and the
representations and warranties of the City contained herein are
true, complete and correct as of the Closing Date.
(h) The Purchaser shall have received written evidence that either,
Standard 6 Poor's Corporation has issued a rating of "A-" or better on the
Bonds or that Moody's Investors Service has issued a rating of "A" or
better on the Bonds, or, in the sole discretion of the Purchaser both
rating agencies have issued such ratings and the documents delivered at
the Closing Date shall satisfy the conditions to the continuance of such
rating.
(i) The Purchaser shall have received certificates and letters on or
prior to the Closing Date letters, dated the Closing Date, from each of
the Developers and the Lenders in substantially the forms provided
therefor in the Commitment Contracts and Home Mortgage Purchase
Agreements, respectively,
-7-
(j) The Purchaser shall have received an opinion of Haynes 6 Miller,
dated the Closing Date and addressed to the Purchaser, as to such matters
the Purchaser shall reasonably request. In rendering such opinion, Haynes
b Miller say rely as to all natters of California law upon the opinion of
Bond Counsel.
(k) The Purchaser shall have received a letter, dated the Closing
Date and addressed to the Purchaser, from Empire Economics confirming that
it is an independent firm specializing in the preparation of housing
demand studies with respect to real estate development of the types
described in the Official Statement and other related matters and stating
that, on the basis of specified procedures, nothing has come to their
attention which would cause it to believe that any amendment of or
supplement to its report referred to in the Official Statement (or the
summary thereof appearing as an appendix to the Official Statement) is
required in order for said reports or summaries not to contain any untrue
statement of a material fact nor to omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading in any material respect.
(1) The Purchaser shall have received an opinion of counsel to
United Guaranty Residential Insurance Company of Iowa dated the Closing
Date and addressed to the Purchaser, covering such matters as the
Purchaser may reasonably request with respect to the private mortgage
insurance.
(m) The Purchaser shall have received an opinion of counsel to each
financial institution providing an investment agreement as identified in
the Official Statement, dated the Closing Date and addressed to the
Purchaser covering such matters as the Purchaser may request with respect
to the investment agreements provided by each such institution.
(o) At the Closing Date the investment agreements regarding the
investment of Program funds as identified in the Official Statement shall
have been executed and delivered to the Trustee, and shall be in full
force and effect.
(p) The City shall have received a Letter of Credit from each
Developer substantially in the form attached to the Commitment Contracts
and in an amount required by the Commitment Contracts.
(q) The Purchaser shall have received from Haynes 6 Miller a Blue
Sky Memorandum and a Memorandum as to Legality of Investments, dated the
Closing Date, and addressed to the Purchaser.
All the opinions, letters, certificates, instruments and other documents
mentioned above or elsewhere in this Purchase Contract shall be deemed to be
in compliance with the provisions hereof if, but only if, they are in form and
substance satisfactory to the Purchaser.
9. Termination. The Purchaser may terminate its obligations hereunder by
written notice to the City if, at any time subsequent to the date hereof and
on or prior to the Closing Date:
(a) W Legislation shall have been enacted by the Congress, or
recommended to the Congress for passage by the President of the United
-8-
States or the U.S. Department of the Treasury or the Internal Revenue
Service or any member of the United States Congress, or favorably reported
for passage to either House of the Congress by any Committee of such House
to which such legislation has been referred for consideration, or (ii) a
decision shall have been rendered by a court established under Article III
of the Constitution of the United States, or the United States Tax Court,
or (iii) an order, ruling, regulation or communication (including a press
release) shall have been issued by the Treasury Department of the United
States or the Internal Revenue Service, in each case referred to in
clauses (i), (ii) and (iii), with the purpose or effect, directly or
indirectly, of imposing Federal income taxation upon interest to be
received by any holders of the Bonds.
(b) Legislation shall have been enacted or any action taken by the
Securities and Exchange Commission which, in the opinion of counsel to the
Purchaser, has the effect of requiring the offer or sale of the Bonds to
be registered under the Securities Act of 1933 or the Indenture to be
qualified as an indenture under the Trust Indenture Act of 1939 or any
event shall have occurred which, in their judgment, makes untrue or
incorrect in any material respect any statement or information contained
in the Official Statement or which, in their judgment, should be reflected
therein in order to make the statements contained therein not misleading
in any material respect.
Cc) M In the Purchaser's reasonable judgment, the market price of
the Bonds is adversely affected because: (a) additional material
restrictions not in force as of the effective date hereof shall have been
imposed upon trading in securities generally by any governmental authority
or by any national securities exchange; (b) the New York Stock Exchange or
other national securities exchange, or any governmental authority, shall
impose, as to the Bonds or similar obligations, any material restrictions
not now in force, or increase materially those now in force, with respect
to the extension of credit by, or the charge to the net capital
requirements of, underwriters; (c) a general banking moratorium shall have
been established by Federal, New York or California authorities; or (d) a
war involving the United States of America shall have been declared, or
any other national or international calamity shall have occurred, or any
conflict involving the armed forces of the United Staten of America shall
have escalated to such a magnitude as to materially affect our ability to
market the Bonds; (ii) there shall have occurred any change, or any
development involving a prospective change in, or affecting the mortgage
market in the general area of the City which materially impairs the
investment quality of the Bonds or the ability of the Purchaser to market
the Bonds; or (iii) any litigation shall be instituted, pending or
threatened to restrain or enjoin the issuance or sale of the Bonds or in
any way contesting or affecting any authority for or the validity of the
Bonds, or the existence or powers of the City.
10. Expenses. (a) whether or not a Closing shall take place hereunder,
the Purchaser shall be under no obligation to pay, and the City shall pay or
cause to be paid out of Bond proceeds or out of amounts deposited with the
City by the Developers any expenses incident to the performance of the City's
obligations hereunder, including, but not limited to, the cost of printing the
Eonds, the Preliminary official Statement, the Official Statement, and
furnishing copies thereof to the purchasers, the fees and expenses, if any, of
GD
Bond Counsel and Special Tax Counsel, the fees and expenses, if any, of Empire
Economics in connection with its housing market studies, the fees and
expenses, if any, of the Trustee, the fees and expenses, if any, of Standard 6
Poor's Corporation and Moody's Investors Service relating to rating the Bonds,
the fees and expenses, if any, for computer and cash flow calculations and the
fees and expenses, if any, of any other counsel, consultants, accountants or
other experts retained by the City in connection with the issuance and sale of
the Bonds. The estimated expenses of the City incident to the performance of
the City's obligations hereunder are set forth on Schedule II hereto.
(b) The Developers and the Lenders shall pay their own expenses,
including the fees and expenses of their counsel.
(c) The Purchaser shall pay its own expenses, including all
advertising expenses incurred in connection with the public offering of
the Bonds.
11. Notices. Any notice or other communication to be given to the City
under this Purchase Contract may be given by delivering the same in writing to
the City at its address set forth above, and any notice or other communication
to be given to the Purchaser under this Purchase Contract may be given by
delivering the same in writing to Stone 6 Youngberg at its address set forth
above, Attention: Scott Sollers.
12. Survival of Covenants and Representations. The respective
agreements, covenants, representations, warranties and other statements of the
City set forth in or made in writing pursuant to this Agreement will remain in
full force and effect, notwithstanding any investigation made by or on behalf
of the Purchaser, and will survive the delivery and payment for the Bonds.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and no other
person will have any rights hereunder. No purchaser of any Bond from any
Purchaser shall be deemed to be a successor by reason of such purchase.
14. Governing Law. This Purchase Contract shall be governed by the laws
of the State of California.
15. Effectiveness. This Purchase Contract shall become effective upon
the execution of the acceptance hereof by the City.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed copy of this Bond
Purchase Contract, whereupon it will became a binding agreement among us and
the City in accordance with its terms.
Very truly yours,
STONE b YOUNGBERG
Accepted by resolution adopted on July _, 1984
CITY OF RANCHO CUCAMONGA
-10-
M INS
MATURITY, PRINCIPAL AMOUNT AND INTEREST RATE
Maturity Principal Interest
Date Amount Rate
July 1, 2017 $27,875,000
M Ix�
ESTIMATED ISSUANCE EXPENSES OF AGENCY
Purpose
Bond Counsel - Jones Hall Hill 6 White
Standard S Poor's Corporation Rating Fees
Moody's Investor Service Rating Fee
Initial Trustee Fee - Seattle -First National Bank
Bond printing �p
Official Statement Printing and Mailing -TOCa (,771 an(Aad-
First Year Special Hazard Insurance Premium
Program Administration - (UGI)
Special Tax Counsel - Haynes 6 Miller
City /Counsel and Staff Expenses -�-��, ,1
Financial Consultant -�%tld t1WV11 �FVkk
Contingencies
Total
Amount
$72,500
10,000
10,000
15,000
12,000
7,500
6,000
1,000
35,000
22,000
1,500
`S7 50 y0
EXHIBIT A
Letterhead of
BOND COUNSEL
(Closing Date)
Stone 6 Youngberg
One California Street
San Francisco, California 94111
$27,975,000
City of Rancho Cucamonga
Hone Mortgage Revenue Bonds
1984 Series A
Dear Sirs:
On the date hereof we rendered to the City of Rancho Cucamonga (the
"City ") an opinion approving the validity of $27,875,000 principal amount of
the above mentioned Bonds (the "Bonds "), issued pursuant to Chapters 1 -5, Part
5 of Division 31 of the Health and Safety Code of the State of California (the
"Act "), and a Trust Indenture dated as of July 1, 1984 (the "Indenture "),
between the City and Seattle -First National Bank, as Trustee. You are
authorized to rely upon said opinion as if addressed to you.
In that connection, we have examined (to be completed)
Based on the foregoing, in our opinion:
(i) The City is a political subdivision of the State of California
established and existing under the laws of said State.
(ii) The City has full legal right, power and authority to execute
and deliver the Indenture, to authorize and issue the Bonds and to carry
out the transactions contemplated by the Indenture and the Bonds; the
Indenture has been duly executed and delivered by the City, is in full
force and effect and constitutes the valid, legal and binding agreement of
the City enforceable in accordance with its terms.
(iii) The City has duly performed all obligations to be performed by
it pursuant to the Indenture on or prior to the date hereof.
(iv) The Bonds are not subject to the registration requirements of
the Securities Act of 1933, as amended, and the Indenture is exempt from
qualification pursuant to the Trust Indenture Act of 1939, as amended.
(v) The statements contained in the Official Statement under the
captions "INTRODUCTION ", "THE BONDS ", "SECURITY FOR THE BONDS AND FLOW OF
FUNDS ", "HOME MORTGAGE FINANCING PROGRAM ", "THE INDENTURE" and "LEGALITY
AND TAX EXEMPTION" insofar as such statements purport to summarize, the
Indenture, the Bonds, the City's mortgage financing program and the
documents described therein, and exemption from Federal income taxes of
interest on the Bonds, present a fair and accurate statement with respect
to the information contained therein.
(vi) The City has the power and the authority to purchase the Home
Mortgages on the terms and conditions contemplated by the Official
Statement and the Indenture, and the making of Home Mortgages by the
Lender and the purchase thereof by the City will not violate any interest
rate limitations now contained in the Constitution of the State of
California or any law or regulation of such state applicable thereto;
provided, however, that no opinion is expressed with respect thereto at
any time when the am of (a) the "discount rate" charged by the Federal
Reserve Bank of San Francisco to member banks (or as such rate is
established by other applicable counterpart or designee) and (b) 5% shall
be less than the effective interest rate on Home Mortgages.
(vii) The City has duly authorized and approved the Commitment
Contracts, the Home Mortgage Purchase Agreements and the Servicing
Agreements, and such agreements constitute valid, legal and binding
agreements of the City.
Based on our participation in the preparation of the Official Statement as
Bond Counsel and without having undertaken to determine independently the
accuracy, completeness or fairness of the statements contained in the Official
Statement, we have no reason to believe that the Official Statement, an of its
date, contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they were made, not misleading
(except for the statistical and other financial data included therein, as to
which we express no view).
Very truly yours,
EXHIBIT B
Letterhead of
COUNSEL TO THE TRUSTEE
(Closing Date)
Stone 6 Youngberg
One California Street
San Francisco, California 94111
$27,875,000
City of Rancho Cucamonga
Home Mortgage Revenue Bonds
1984 Series A
Ladies and Gentlemen:
We have acted as counsel for Seattle -First National Bank, in connection
with the Bank's serving as Trustee under an Indenture dated as of July 1, 1984
between the City and the Bank (the "Indenture ") relating to the above
referenced Bonds (the "Bonds ").
In that connection we have examined originals or copies certified or
otherwise identified to our satisfaction of: (i) the Indenture, (ii) the
Corporate Charter and By -Laws of the Bank and (iii) (To be completed)
Based on the foregoing we are of the opinion that:
(il The Bank is a duly created and lawfully existing national
banking association under the laws of the United States of America;
(ii) The Bank has taken all corporate action necessary to assume the
duties and obligations of Trustee under the Indenture and to authorise in
such capacity the execution and delivery of the Home Mortgage Purchasing
Agreements and Servicing Agreements each among the City, the Bank, and
each lending institution described in the Official Statement relating to
the Bonds, the Commitment Contracts among the City, the Bank, each lending
institution described in the Official Statement and the developers
described in the Official Statement (collectively the "Agreements "). and
the Investment Agreement among the Bank and (the
"Investment Agreement ");
(iii) The Bank has qualified under the Indenture to act thereunder;
(iv) The Bank has duly authorised, executed and delivered the
Indenture, the Agreements and the Investment Agreement, and the Indenture,
the Agreements and the Investment Agreement, are valid, legal and binding
obligations of the Bank in its capacity as Trustee under the Indenture
enforceable in accordance with their terms;
(v) The Bank has all necessary trust powers required to carry out
the trust intended under the Indenture;
(vi) All approvals, consents and orders of any governmental authority
or agency having jurisdiction in the matter which would constitute a
condition precedent to the performance by the Bank of its duties and
obligations under the Indenture, the Agreements and the Investment
Agreement, as Trustee, have been obtained and are in full force and
effect; and
(vii) No litigation is pending or, to the best of our knowledge,
threatened in any way contesting or affecting the existence of powers
(including trust powers) of the Bank or the Bank's ability to fulfill its
duties and obligations under the Indenture, the Agreements and the
Investment Agreement,
Very truly yours,
EXHIBIT C
Letterhead of
COUNSEL TO THE CITY
(Closing Date)
Standard S Poor's Corporation
25 Broadway
New York, New York 10004
$27,875,000
City of Rancho Cucamonga
Home Mortgage Revenue Bonds
1984 Series A
Dear Sirs:
I have acted as counsel to the City of Rancho Cucamonga in connection with
the issuance by the City of Rancho Cucamonga of the above - referenced Bonds.
In that connection, I have examined originals or copies certified or otherwise
identified to my satisfaction, of the Commitment Contracts of July 1, 1984,
between the City of Rancho Cucamonga and Alta Loma Woods Associates, II, The
Anden Group, Archibald Associates, M. J. Brock S Sons, Inc., Lewis Homes, The
William Lyon Company, Marlborough Development Corp., TAC Development
Corporation and USA Properties Fund, Ltd. (the "Developers ") and such other
documents as I have deemed necessary or appropriate for the purpose of this
opinion.
On the date hereof, Seattle -First National Bank as trustee for the Bonds
(the "Trustee ") on behalf of the City of Rancho Cucamonga received cash
payments from each of the Developers (collectively the "Commitment Fee ") in
accordance with the Commitment Contracts. The Commitment Fee represents a
non - refundable payment by the Developers to reserve Bond proceeds to make home
mortgages to finance the purchase of single family residences constructed or
to be constructed by each Developer (the "Developer's Reservation "). The
Commitment Contracts provide that if a Developer transfers all or a portion of
its Developer's Reservation to another developer, the Commitment Fee is
non - refundable by the City of Rancho Cucamonga. The Developer may be
reimbursed only by the transferee developer.
Based on the foregoing, I am of the opinion that a bankruptcy court
presented with the question would properly hold that none of the Developers
have any residual interest in the Commitment Fee and accordingly the
Commitment Fee would not be subject to the automatic stay provisions of
Section 362 of the Bankruptcy Code of 1979 (the "Code ") if a petition under
the Code is filed with respect to a Developer.
Very truly yours,
PRELIMINARY OFFICIAL. STATE
7IBNT DATED JULY 26, 1984
NEW ISSUE Rating: Standard & Poor's:
(See "Bond Rating" herein)
In the opinion of Bond Counsel, under existing laws, regulations, rulings andjudicial decisions, interest
N on the Bonds is exempt from income taxation by the United States of America and from personal income
taxation imposed by the State of California, and by municipalities and other political subdivisions of said
State. Such opinion will state that the exemption from income taxation by the United States o /America may
'^o become inapplicable upon failure to meet the 9557 requirement or the correction requirement of Section 103A
os of the Internal Revenue Code of 1954, as amended, but u illfurtherstate that, in the opinion ofBond Counsel,
r the Cui has established and covenanted to observe procedures which meet those requirements. (See
E 2 "Leeahty and Tax Exemption "herein).
c�
$27,5 ,00
CIT CUCAMONGA
Home M evenue Bonds
19 Series A
Interest payable from: July 1, 1984
Due: As shown below
The Bonds are issuable as fully registe bonds only in denominations of$5,p00orany integral multiple
thereof. Interest is payable on January 1, 5, and semi - annually thereafter on July 1 and January 1 in each
year. Principal of and interest on the ds will be payable at the corporate trust office of Seattle -First
National Bank. Seattle. Washington,
A `o gt steer provided that interest may be paid by check mailed to the
person entitled thereto.
The Bonds are being issued to pr ide funds for the purchase of Home Mortgages to be secured by sing le-
familyresidenceslocatedwithinthe dy of Rancho Cucamonga. The Home Mortgages will be insured tot
he
_ extent described herein.
The Ronde are subject to red ption on or after January 1. 1985, as set forth herein.
The Bonds are legal imestm is for all banks. both commercial and savings, and various other financial
inst iwt ions as well as for trust nds. The Bonds are authorized security for various public deposits under
California law.
v_ _ The Bonds are limit bllgations of the City payable solely from payments made on and
° secured by a pledge of me Mortgages (and any insurance payments made with respect
thereto) and amounts (i luding certain interest earnings thereon) held by the Trustee. The
Bonds will not be payab from any of the City's other revenues, moneys or assets. Neither the
faith and credit nor t taxing power of the Stele of California or any political subdivision
thereof have been pie ed to the payment of the Bonds.
s°. a `o $27,525,000* _% Term Bonds due July 1, 2017
_ o Price of all Bonds:
- (Accrued interest to be added)
vqa
ThkBfmd�arffercda
eredu hen. asand if issued and received by the Underwri ter, subjectto theapprovalof
legHall
Hill& White, A Professional Lou Corporation, San Trancsro, California, Bond
m`,
°
Cunselther
condition.s.Certainlegal and tax matters will bepassed upon by Haynes &Miller,
5
Washincial
Tax Counsel and Counsel to the Underu riter. It is expected that the Bonds in
o @ °
de(inithavailable
fort delivery in Los An eles, Cali ornia, on or about A g / ugust _, 7984.
STONE & YOUNGBERG
�oV
h0
9
' Yreliminery; subject to change.
No dealer, broker, salesman or other person Chas been authorized by the
City or the Underwriter to give any information or to make any representations
with respect to the Bonds other than those contained in this Official
Statement and, if given or made, such information or representations must not
be relied upon as having been authorized by any of the foregoing. This
Official Statement does not constitute an offer to sell nor the solicitation
of an offer to buy, nor shall there be any sale of the Bonds by any person in
any jurisdiction in which it is unlawful for such person to make such offer,
solicitation or sale. The information set forth herein has been obtained from
the City and other sources which are believed to be reliable, but is not
guaranteed as to accuracy or completeness by, and is not to be construed as a
representation of, the Underwriter. The information and expressions of
opinion stated herein are subject to change without notice. The delivery of
this Official Statement shall not, under any circumstances, create any
implication that there has been no change in the information or opinions set
forth herein or in the affairs of the City since the date hereof.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
TABLE OF CONTENTS
Lm
Summary Statement .................... .............................ii
City of Rancho Cucamonga .............. .............................iv
Introduction ....................... ...............................
1
TheBonds ......................... ...............................
1
Disposition of Bond Proceeds ......... ...............................
3
Security for the Bonds and Flow of Funds ..............................
3
Assumptions Regarding Revenues and Debt Service Requirements .........
5
Home Mortgage Financing Program .... ...............................
7
Lenders............................. .............................19
The Indenture ........................ .............................22
No Litigation ......................... .............................27
Legality and Tax Exemption ............ .............................27
Underwriting ......................... .............................28
BondRating .......................... .............................28
Additional Information ................. .............................29
Appendix A — Summary of Housing Demand Study ....................A
-1
Appendix B — The Developers .................... ..................
B -1
SUMMARY STATEMENT
The following summary is subject in all respects to the more complete
information contained in this Official Statement.
Purpose: The Bonds are being issued to provide funds to make home
mortgages (the "Home Mortgages ") secured by residences (the "Homes ") located
in the City of Rancho Cucamonga. The fonds have been reserved by nine
developers to provide for the purchase of Home Mortgages to be made to finance
approximately 345 new single - family Homes anticipated to be constructed by
them over a 35 -month period.
Use of Proceeds: Proceeds from the sale of the Bonds, together with
developer fees, will be used to (i) make approximately $25,430,0006 principal
amount of Home Mortgages; (ii) provide a Debt Service Reserve Fund of
approximately $ and (iii) provide for issuance expenses
(approximately $ ) and Underwriter's discount,
Home Mortgage Financing Program: The Home Mortgages will be (i) made to
eligible Mortgagors to finance the purchase of eligible Homes; (ii) originated
and serviced by Wells Fargo Mortgage Company, City Bond and Mortgage
Corporation, Directors Mortgage Loan Corporation, Sko-Fed Mortgage Corporation
or Investor's Mortgage Service Co. (the "Lenders "). The Home Mortgages will
be (i) secured by first mortgage liens (subject to certain permitted
encumbrances) on Homes and (ii) covered by full coverage private mortgage
insurance. Hazard (including earthquake coverage if commercially available)
and special hazard insurance will be required to be maintained to the extent
described herein. Each Home Mortgage will have a maturity of approximately 30
years and a stated interest rate of and may provide either for level
amortization or for graduated payments which increase either (i) 3% annually
for the ten years beginning with the second year of the Home Mortgage or (ii)
7.5% annually for five years beginning with the second year of the Home
Mortgage.
Eligible Mortgagors: Each mortgagor is required to be a "first time
homebuyer" (except that 10% of the Home Mortgages may be made to persons who
are not "first time homebuyers ") who intends to occupy the Home as his
principal Home. With respect to approximately $5.077.000* principal amount of
Home Mortgages for new Homes, the Household Income of a mortgagor may not
exceed 150% of California statewide median income and with respect to the
remaining principal amount of Homes Mortgages for new Homes the Household
income of a .mortgagor may not exceed 120% of : alifornia statewide median
income for families. The City has determined that the soplicabie California
statewide median income := aorrenc '!.v S"7 -43.
`Urcnasc P-.ze .. :mitations: -he purchase trite of Horns may not ?: "Geed
110', of the applicable average area purchase price. Such average area
purchase oraee as of nhe date hereof has been determined by the City to be
$90,201 for new domes and $84.991 for existing Homes.
Sourcas of Payment a_nd_Security for the Bonds: The Bonds are limited
obligations of the City and are payable solely from payments made on and
secured by a pledge of the Home Mortgages (and any insurance payments made
"Pre l.mina ry; s, :n+ect to change.
with respect thereto) and all amounts (including interest thereon subject to
the limitations of Section 103A of the Internal Revenue Code of 1954, as
amended) held for the benefit of the Bondholders pursuant to the Indenture.
Tax Exemption: See "Legality and Tax Exemption ".
M
CITY OF RANCHO CUCAMONGA
City Council
Jon D. Mikels, Mayor
Richard M. Dahl, Mayor Pro Tem
Charles J. Buquet, II, Councilman
Jeffrey King, Councilman
Pamela J. Wright, Councilperson
City Staff
Lauren M. Wasserman, City Manager
Jack Lam, Community Development Director {
Harry Empey, Treasurer R
Tim J. Needle, Senior Planner
Financial Consultant
£ieldman, Rolapp 6 Associates
Irvine, California
Feasibility Consultant
Empire Economics
Redlands, California
Mo[taaae Lenders
City Bond and Mortgage Corporation
Directors Mortgage Loan Corporation
Sko -Fed Mortgage Corporation
Wells Fargo Mortgage Company
Investor's Mortgage Service Company
Developers
Alta Loma Woods Associates II
The Arden Group
Archibald Associates
M. J. Brock S Sons, Inc.
Levis Homes
.he William Lyon Company
Marlborouch Development Corp.
TAC Javelopment Corporation
GSA P:ooerties F.md, Ltd.
Bond Counsel
Jones Hall Hill S White
A Professional Lau Corporation
San Francisco, California
ustee
Seattle -First "Iational Back
Seattle. '•as cington
A.
$27,575,000*
CITY OF RANCHO CUCAMONGA
Home Mortgage Revenue Bonds, 1984 Series A
INTRODUCTION
This Official Statement of the City of Rancho Cucamonga (the "City ") sets
forth information in connection with the sale of $27,575,000• principal amount
of the City's Home Mortgage Revenue Bonds, 1984 Series A (the "Bonds "). The
Bonds are to be issued pursuant to Chapters 1 -5 of Part 5 of Division 31 of
the Health and Safety Code of the State of California. as amended (the
"Act "). The purpose of the Act is to provide long -term, low interest mortgage
loans (the "Home Mortgages ") to persons who are unable, because of their
income to afford conventional home mortgages. Bonds issued under the Act are
limited obligations of the issuer.
The Bonds are being issued pursuant to a trust indenture dated as of
July 1, 1984 (the "Indenture "), between the City and Seattle -First National
Bank, Seattle, Washington (the "Trustee ").
Brief descriptions of the City. the Bonds, the security for the Bonds, the
Commitment Contracts, the Home Mortgage Purchase Agreements, the Servicing
Agreements and the Indenture are included in this Official Statement. A
summary of the housing demand study is included in Appendix A which includes a
description of the developments. Appendix B provides a description of the
developers. All references to documents, agreements and insurance policies
are qualified in their entirety by reference thereto, copies of which are
available for inspection at the administrative offices of the City.
THE BONDS
General
The Bonds will be issued as fully registered bonds only in denominations
of $5,000 each or any integral multiple thereof and their transfer may be
registered, without payment of any charge other than taxes or other
governmental charges. The Bonds will bear interest from July 1, 1984. payable
on January 1, 1985, and semiannually thereafter on July 1 and January 1 of
each year at the rates and will mature on the dates and in the amounts set
forth on the cover page of this Official Statement. Interest will be payable
to the person in whose name the Bond (or any predecessor Bond) is registered
at the close of business on the fifteenth day of the month preceding each
interest payment date. Principal and interest are to be payable at the
corporate trust office of the Trustee; provided that interest may be paid by
check mailed to the address of the person entitled thereto.
Bonds may be exchanged, and the transfer of Bonds may be registered, at
the corporate trust office of the Trustee, Seattle, Washington.
*Preliminary; subject to change.
If any Bond is mutilated, lost, stolen or destroyed, the Indenture
provides that the City shall execute and the Trustee shall authenticate a
new Bond. In the case of a lost, stolen or destroyed Bond, the City and the
Trustee may require satisfactory indemnification prior to authenticating a new
Bond. The City and the Trustee may charge reasonable fees and expenses in
connection with replacing Bonds mutilated, lost, stolen or destroyed.
The Bonds are limited obligations of the City payable solely from the
sources described herein. The Bonds are not payable from any other revenues
or assets of the City. Neither the faith and credit nor the taxing power of
the State of California or any political subdivision thereof or the City have
been pledged to the payment of the Bonds.
Redemption Provisions
Sinking Fund Redemption: The Bonds due July 1, 2017, are subject to
mandatory sinking fund redemption in order of maturity at a redemption price
equal to 100% of their principal amount plus accrued interest in part by lot
commencing and on each 1 and 1 thereafter without
premium from sinking fund installments as follows:
Date Principal Amount Date Principal Amount
In any case in which Bonds are retired from moneys in the Prior Redemption
Fund, the principal amount of such Bonds shall be credited against remaining
mandatory sinking fund installments as nearly as practicable in such a manner
as will leave each mandatory sinking fund installment after such redemption in
the same proportion to the total amount of mandatory sinking fund installments
then remaining (after such credits) as the proportion of each mandatory
sinking fund installment then remaining as originally provided for bore to the
total amount of mandator', sinking -'and installments then remaining as
originally scheduled (before any such credits).
Special Mandatory Redempt :on: :he Bonds are subject to special mandatory
redemption at a redemption price equal to 1101 of their principal amount plus
accrued interest in whole or in part on January 1, 1995, or any interest
payment date thereafter from amounts in the Prior Redemption Fund, into which
Revenues are deposited after making all prior deposits. Amounts calculated to
be available in the Prior Redemption Fund on any interest payment date may be
applied to the purchase of Bonds. See "Security for the Bonds and Flow of
Funds'. Amounts transferred from the Home Mortgage Purchase Account to the
Prior Redemption Fund on June 1, 1987, are to be used to redeem Bonds on July
1, 1987 selected on a pro rata basis by maturity. Any other amounts in the
Prior Redemption Fund are to be used to redeem Bonds on a pro rata basis by
maturity.
Notice of Redemption: Notice of redemption is to be given not less than
10 nor more than 60 days prior to the redemption date by mail to the owners of
registered Bonds whose Bonds are to be redeemed.
Additional Bonds
The Indenture does not permit the issuance of additional bonds payable or
secured on a parity with the Bonds.
Legality for Investment in California
The Act provides that bonds authorized and issued in the manner and for
the purpose of the Bonds are legal investments in California for all banks,
both commercial and savings, insurance companies and various other financial
institutions, as well as for trust funds. The Bonds are also authorized
security for various public deposits under California law.
DISPOSITION OF BOND PROCEEDS
The following table sets forth the anticipated use of Bond proceeds-:
Home Mortgage Purchase Account-' $
Debt Service Reserve Fund
Underwriter's Discount
Issuance Expenses*
$27.525.000 ++
Accrued interest on the Bonds will be deposited in the Revenue
Fund.
The City will have $25,430,000 ++ (of which $ will be
derived from Bond proceeds and $ from the proceeds of the
developer fees (of which $ plus interest thereon is
to be funded from letters of credit be furnished by the
developers) available to make Home Mortgages.
Issuance Expenses include Bond Counsel and Special Tax Counsel
fees. the City fee, the Compliance Agent fee, printing and rating
agency costs, initial trustee fees and other miscellaneous issuance
expenses.
SECURITY FOR THE BONDS AND FLOW OF FUNDS
The Bonds are limited obligations of the City payable from "Pledged
Revenues ". Under the Indenture, all Revenues are deposited in the Revenue
Fund. "Pledged Revenues" mean all payments. proceeds, charges, rents and all
�. Prelim irary, sub)ect to ^nange.
interest and other income derived in cash by the Trustee or a Lender by or for
the account of the City from or related to the Home Mortgage Financing
Program, including, without limiting the generality of the foregoing,
scheduled amortization Payments of principal of and interest on the Hone
Mortgages, prepayments, the proceeds of sale of Home Mortgages, the proceeds
of sale of Homes on foreclosure or other recovery proceedings with respect to
defaulted Home Mortgages (net of amounts required to be paid to mortgagors or
other owners of Homes), the proceeds of resale of foreclosed Homes, the
proceeds of hazard insurance and special hazard insurance (net of amounts
required to be applied to the restoration of Homes), mortgage insurance
proceeds and interest earned or income derived from the investment or deposit
of moneys held by the Trustee but not including escrow payments, servicer's
and financing fees, and any interest earned which constitute "Excess
Investment Earnings ". The Home Mortgages will be secured by first mortgage
liens (subject to certain permitted encumbrances) on Homes in the City.
Hazard, special hazard, earthquake (if commercially available) and mortgage
insurance will be required to be maintained at specified levels. The Debt
Service Reserve Fund has been established under the Indenture as a reserve to
assist in payment of principal of and interest on the Bonds in the event
payments on Home Mortgages prove to be temporarily insufficient and to cover
interest on the Bonds during the period when part of the interest on graduated
payment Homes Mortgages is being added to the principal amount of such Home
Mortgages.
The Bonds will not be payable from any of the City's moneys or assets
other than the Pledged Revenues. Neither the faith and credit nor the taxing
power of the State of California or any political subdivision thereof is
pledged to the payment of the Bonds or the Home Mortgages.
Amounts in the Revenue Fund are to be allocated semiannually for deposit
by the Trustee in the following amounts and order of priority:
1. Estimated Excess Investment Earnings Account: An amount, if any,
which is estimated to be not less than "Excess Investment Earnings" for
the period.
2. Operating Fund: An amount to pay current operating expenses of the
City associated with the Program (special hazard insurance premiums,
accountant's fees, Program Administrator fees, and Trustee fees).
3. Interest Fund: An amount equal to the interest installment then
payable on the Bonds.
4. Principai Fund: An amount equal to the principal payment then due or.
the Bonds or the s!nkinq fund payment required to be used to redeem Bonds.
5. Debt Service _Reserve Fund: An amount, if any, required to cause the
amount on deposit in the Debt Service Reserve Fund to be equal to the Debt
Service Reserve Requirement Wl' of the principal amount of the Home
Mortgages).
6. Prior Redemption Fund: Any remaining amount to be applied to the
special mandatory redemption of Bonds.
Any amount in the Revenue Fund required to be deposited in the Principal
Fund or calculated to be available for deposit in the Prior Redemption Fund on
any interest payment date may be applied to the purchase of Bonds.
The amount initially deposited in the Debt Service Reserve Fund is greater
than the Debt Service Reserve Requirement and includes a provision for
capitalized interest on the Bonds. Amounts in the Debt Service Reserve Fund
may be used to make up any deficiency in the Interest or Principal Fund; on
and after July 1, 1992, amounts in the Debt Service Reserve Fund in excess of
the Debt Service Reserve Fund Requirement are to be deposited in the Prior
Redemption Fund. Whenever the amount in the Debt Service Reserve Fund,
together with other moneys available for the purpose of paying debt service on
the Bonds, is sufficient to provide for the payment of all outstanding Bonds,
the amount in the Debt Service Reserve Fund shall be deposited in the Prior
Redemption Fund.
On or before June 1 and December 1 of each year the Trustee is required to
estimate the maximum investment earnings on non - mortgage investments held
under the Indenture which may constitute Pledged Revenues ( "Estimated Maximum
Investment Earnings ") for the six months ending on the succeeding June 30 and
for the year ending on the succeeding December 31, respectively. Estimated
Maximum Investment Earnings means the product of an interest rate equal to the
yield (as defined by Section 103A of the Internal Revenue Code of 1954, as
amended, and the regulations thereunder) on the Bonds multiplied by the
average daily balance of amounts held (and estimated to be held) under the
Indenture for the appropriate period. On or before August 1 of each year the
Trustee will make a final calculation as to the Excess Investment Earnings for
the year ended June 30. Excess Investment Earnings means earnings on
non - mortgage investments held under the Indenture (including unrealized gains
and losses upon the retirement of the last outstanding Bond) in excess of the
sum of (i) Maximum Investment Earnings (calculated on the basis of semi - annual
compounding), (ii) actual losses on Home Mortgages and (iii) the amount, if
any, determined as specified by the City upon delivery of the Bonds (to the
extent not theretofore taken into account in determining Excess Investment
Earnings). Excess Investment Earnings, together with interest thereon from
June 30, will be deposited in the Excess Investment Fund free and clear of the
lien of the Indenture and will be remitted to the United States Treasury.
Amounts, if any, thereafter remaining in the Estimated Excess Investment
Earnings Account will become available for the purposes of the Revenue Fund.
ASSUMPTIONS REGARDING REVENUES AND DEBT SERVICE REQUIREMENTS
Payments on the Home Mortgages, together with amounts held under the
Indenture (including developer commitment fees and earnings on amounts held
under the Indenture other than Excess Investment Earnings), are estimated to
generate sufficient Pledged Revenues to pay on a timely basis the principal of
and interest on the Bonds, special hazard insurance premiums and the
Trustee's fees and certain other costs (including issuance expenses and
Underwriter's discount), on the basis of the following assumptions:
1. Home Mortgages bearing interest at % will be purchased on or
prior to June 1, 1987, at a purchase price equal to 100% of their
principal amount less the deferred portion of the developer's
participation fee.
2. Payments on the Home Mortgages will be made substantially on a
timely basis. In the case of defaults and foreclosures on the Home
Mortgages, any settlement of claims on the mortgage insurance will be made
at such time as, and in an amount and in a form of payment which, together
with moneys available in the Debt Service Reserve Fund, will allow the
City to make scheduled payments of debt service on the Bonds,
notwithstanding certain aspects of the mortgage insurance program
described under "Home Mortgage Financing Program -- Mortgage Insurance ".
3. Amounts on deposit under the Indenture will be invested as
follows:
Fund
Revenue Fund
Home Mortgage Purchase Account
Debt Service Reserve Fund
Average Annual Interest Rate
The Revenue Fund is to be invested under an investment agreement
with : the Home Mortgage Purchase Account is to be invested
under an investment agreement with ; and the Debt Service
Reserve Fund is to be invested under an investment agreement
with
4. The Home Mortgages will have terms of not more than 30 years and
may provide for level monthly payments of principal and interest, for
graduated payments with annual increases, beginning in the second year of
the Home Mortgage, of 3% for 10 years, or for graduated payments with
annual increases, beginning in the second year of the Home Mortgage, of
7.5% for 5 years.
5, The average life of all Home Mortgages will not be less than 5
years.
The assumptions set forth above are based on current market conditions and
practices, and subsequent events may not c orrespond to such assumptions. For
example, defaults on, and foreclosure proceedings with respect to, a
substantial number of the Home Mortgages could disrupt the flow of Pledged
Revenues available for the payment of scheduled debt service on the Bonds
because of delays involved in enforcing creditors' rights under California law
and in collecting mortgage insurance benefits. The ability to collect on
defaulted Home Mortgages is described under "Home Mortgage Financing Program -
Foreclosure ".
If interest rates on conventional mortgage loans were to decline
substantially and become competitive with the Home Mortgages, or the Homes are
not constructed as currently anticipated, the City may not make Home Mortgages
6
in the anticipated principal amount. (See "Home Mortgage Financing Program -
Commitment Contracts ").
The scheduled maturities of the Bonds assume no prepayment of Home
Mortgages. If prepayments of Home Mortgages occur, an appropriate portion of
Bonds will be redeemed (see "Home Mortgage Financing Program - Home Mortgage
Prepayments ") .
The remedies available to the City, including rights to mortgage insurance
benefits, are in many respects dependent upon judicial actions which are often
subject to discretion and delay. Legal opinions to be delivered concurrently
with the delivery of the Bonds will be qualified as to the enforceability of
remedies by limitations imposed by bankruptcy, reorganization, insolvency or
other similar laws affecting the rights of creditors generally.
See "Legality and Tax Exemption" for a discussion of the conditions under
which interest on the Bonds is exempt from income taxation by the United
States of America.
The Home Mortgages will be secured by Homes located solely within the City.
The City does not make any representation with respect to the ability of
any insurer of the Home Mortgages or the property secured thereby to pay a
claim under those insurance policies.
HONE MORTGAGE FINANCING PROGRAM
The City's Home Mortgage Financing Program (the "Program ") is intended to
provide permanent financing to "first time homebuyers" who intend to occupy a
Home as a principal Home (except that 10% of the Home Mortgages may be made to
persons who do not qualify as "first time homebuyers"). First time homebuyers
are defined as persons who have not had a present ownership interest (as
defined in the Home Mortgage Purchase Agreements) in any principal Home during
the three years prior to the execution of the Home Mortgage. With respect to
approximately $5,077,000• principal amount of the Home Mortgages for new
Homes, the Household Income of the mortgagor may not exceed 150% of the
California statewide median income for families and with respect to the
remaining principal amount of Home Mortgages for new Homes, the Household
Income of the mortgagor may not exceed 120% of the California statewide median
income. The City has determined that such California statewide median income
is currently $27.143.
Under -he Program, the City will reserve funds derived from the sale of
he Bonds for developers to provide permanent financing for Homes within the
City.
Each Home Mortgage will bear interest at a stated interest rate as
indicated in "Assumptions Regarding Revenues and Debt Service Requirements ",
will have a term of approximately 30 years and will provide for (i) level
monthly payments of principal and interest based on a thirty year amortization
or (ii) monthly payments which increase either (a) at an annual rate of 3% for
*Preliminary: 3ab)ect to charge.
the first ten years or (b) at an annual rate of 7.5% for the first five years
and, in both cases remain level thereafter ( "Graduated Payment Home
Mortgages "). The difference between the interest actually paid on a Graduated
Payment Home Mortgage and the interest accruing thereon during the initial
period will be added to principal.
Each Home Mortgage is to provide that at the time that all Bonds are paid
pursuant to the Indenture the mortgagor's obligation will cease and be
forgiven. Except as expressly otherwise provided, Lenders are required to
underwrite Home Mortgages pursuant to FNMA or FHLMC and the private mortgage
insurer's underwriting criteria and practice.
Under certain circumstances, mortgagors with Home Mortgages providing for
level amortization may have their monthly loan payments reduced pursuant to a
supplement provided by a developer, provided that an amount sufficient to make
all monthly payments under the "buydown" is deposited in an escrow account
with the Lender upon orgination of the Home Mortgages to which the "buydown"
deposit relates.
Certain Definitions
The following definitions are used herein in describing the Program and
summarizing the Commitment Contracts (and Reservation of Funds) and the Home
Mortgage Purchase Agreements:
"Acquisition Cost" means the cost of acquiring a Hone from the developers
or other sellers as a completed residential unit. Such cost includes (i) all
amounts paid, either in cash or in kind, by the mortgagor (or a related party
or for the benefit of the mortgagor) to the developer or other seller (or a
related party or for the benefit of the developer or other seller) as
consideration for the Hone; and (ii) if a Home is incomplete, the reasonable
cost of completing the Home whether or not the cost of completing construction
is to be financed with Bond proceeds; but does not include (i) the usual and
reasonable settlement costs (titling and transfer costs, title insurance,
survey fees, or other similar costs) or (ii) financing costs (credit reference
fees, legal fees, appraisal expenses, "points" which are paid by the buyer but
not the seller, even though borne by the buyer through a higher purchase
price), or other costs of financing the Home), to the extent that the amounts
do not exceed the usual and reasonable costs which would be paid by the buyer
where financing is not provided through the Bonds.
"Average Area Purchase Price" means the higher of; (i) the average area
purchase price as most recently published by the United States Treasury
Department or (ii) such amount as shall be determined by the City as the
average purchase price of all residences in the appropriate
statistical area for the most recent 12 month period for which sufficient
statistical information is available (based upon (i) a comprehensive survey
(which survey shall be based upon data in the relevant county clerk's office)
of residential housing sales in the appropriate statistical area and (ii) an
opinion of nationally recognized bond or tax counsel that such amount so
determined by the City will not cause interest on the Bonds to be subject to
Federal income taxation). The determination with respect to Average Area
Purchase Price is made separately with respect to (i) Hanes which have not
been previously occupied ( "New Homes ") and (ii) Hones which have been
previously occupied ( "Existing Homes "). As of the date hereof the City has
determined based on the study prepared by Empire Economics that the Average
Area Purchase Price for New Homes is $90,201 and the Average Area Purchase
Price for Existing Homes is $84,891.
"Home" means real property improved with a residential structure and
located in one of the Projects, or, with respect to Homes which have been
previously occupied, located within the incorporated area of the City, the
financing of which is or may hereafter be permitted under the Act and the
Indenture. Home includes single - family attached or detached residential
units, townhouse residential units and condominium residential units.
"Household Income" means the current gross aggregate income as calculated
by the Lender for purposes of qualifying a mortgagor for a Home Mortgage,
together with the gross aggregate intone of all persons who intend to reside
permanently with such person in one dwelling unit, regardless of whether such
persons resided with such person at any time in the past.
"Intone Qualified Persons or Families" means persons or families, as
determined from time to time by the City in accordance with the Act and as
specified in the Commitment Contracts and, from time to time, in the Rules and
Regulations of the City, as follows:
With respect to not less than $22,448,000• principal amount of Home
Mortgages purchased by the Trustee from a developer's reservation, Income
Qualified Persons or Families:
(a) means persons or families which are the first occupants of the
Home (new Homes in the Project) and which have a Household Income which does
not exceed 120% of the California statewide median household income (120%
currently equals $32,572); or
(Pursuant to the Act, a developer may apply not more than forty
percent (40 %) of the reservation to mortgagors who are not the first occupants
of the Home (existing Hanes. not in the Project) to Intone Qualified Persons
or Families described in (b) and (c) below.)
(b) With respect to not less than 50% of the principal amount of
Home Mortgages permitted by the Resolution for use by mortgagors which are not
the first occupants (existing homes, not in the Project), means persons and
families which have a household income which does not exceed 90% of the
California statewide median household income (90% currently equals $24,428);
and
(c) With respect to the remaining principal amount of Home Mortgages
permitted by the Resolution for use by mortgagors which are not the first
occupants (existing homes, not in the Project); means persons and families
which have a Household Income which does not exceed 100% of the California
statewide median household income (100% currently equals $27,143).
*Preliminary: subject to chance.
9
Pursuant to the foregoing, the Trustee may purchase a Home Mortgage
secured by a previously occupied Home and payable by a mortgagor whose income
exceeds 90% (but not 100%) of the California statewide median household income
provided that not less than 50% of the aggregate principal amount of Home
Mortgages theretofore purchased and similarly secured shall, as of the time of
purchase, be payable by mortgagors whose incomes do not exceed 90% of
California statewide median household income.
With respect to approximately $5,077,000* principal amount of Home
Mortgages purchased by the Trustee, Income Qualified Persons or Families:
(a) means persons or families which are the first occupants of the
Home (new Homes in the Project) and which have a Household Intone which does
not exceed 150% of the California statewide median household income (150%
currently equals $40,714); or
(b) With respect to not less than 20% of the principal amount of
Home Mortgages permitted by the Resolution for use by mortgagors which are not
the first occupants (existing Homes, not in the Project) means persons and
families which have a Household Income which does not exceed 110% of the
California statewide median household income (110% currently equals $29,857);
and
(c) With respect to the remaining principal amount of Home Mortgages
permitted by the Resolution for use by mortgagors which are not the first
occupants (existing Homes, not in the Project), means persons and families
which have a Household Income which does not exceed 120% of the California
statewide median household income (120% currently equals $32,571).
Pursuant to the foregoing, the Trustee may purchase a Home Mortgage
secured by a previously occupied Home and payable by a mortgagor whose income
exceeds 110% (but not 120%) of the California statewide median household
income provided that not less than 20% of the aggregate principal amount of
Home Mortgages theretofore purchased and similarly secured shall, as of the
time of purchase, be payable by mortgagors whose incomes do not exceed 110% of
California statewide median household income.
"Section 103A" means Section 103A of the Internal Revenue Code of 1954, as
amended, and the regulations thereunder.
Commitment Contracts
Under each Commitment :Contract, the City agrees to reserve for each
developer the amount specified below to make Home Mortgages to finance the
purchase of Homes located in the Cicv.
10
Developer Amount
Alta Loma Woods Associates II $976,000*
The Anden Group 895,000*
Archibald Associates 3,755,900*
M. J. Brock 6 Sons, Inc. 1,502,200*
Lewis Homes 6,821,800*
The William Lyon Company 3,411,100*
Marlborough Development Corp. 3,411,100*
TAC Development Corporation 3,154,700*
USA Properties Fund, Ltd. 1,502,200*
The developers have constructed or are planning to construct approximately
345 Homes the purchase of which is to be financed from amounts in the Home
Mortgage Purchase Account. A housing demand study was completed by Empire
Economics, a summary of which is attached as Appendix A. It includes a
description of the developers and the developments. Appendix B provides a
description of the developers. Each developer agrees to use its best efforts
to market Homes to enable the Lenders to originate Home Mortgages in the
specified amount by June 1, 1987.
A developer may transfer his reservation to any other developer which has,
prior to the delivery of the Bonds. entered into a Commitment Contract with
the City for use exclusively with respect to the project described in such
Commitment Contract. In addition, upon written approval of the City, the
Underwriter, the private mortgage insurer and any rating service which has
assigned a rating to the Bonds, the Developer may, subject to the same
conditions, transfer its reservation to a developer which has not previously
entered into a Commitment Contract.
Under the Commitment Contract each developer is required to represent with
respect to each of its newly- constructed Homes the purchase of which is
financed under the Program that among other things; (1) the Home is a
single - family Home the construction of which is complete; (2) all the land
being sold with the Home reasonably maintains the basic livability of the Home
and the land is not subject to further subdivision; (3) the Acquisition Cost
of the Home does not exceed 1100 of the Average Area Purchase Price: (4) the
settlement and financing costs do not exceed the usual and reasonable costs
that would he paid by the mortgagor where financing was not provided through
the Bonds; (5) the Developer has not entered into any agreement with the
mortgagor pursuant to which the mortgagor has agreed to pay monies in excess
of the .Acquisition Zost of the Home (other than rentals, in an amount not to
e;:ceed the fair rental value of the Home as determined by the Lender, pursuant
to a tamporar7 rental agreement with the proposed mortgagor pending purchase
by the Trustee on behalf of the City of the Home Mortgage secured by the Home)
or pursuant to which any portion of the dome has been left unfinished or any
fixtures or other architectural appointments have been omitted or removed from
the Home in order to reduce the Acquisition Cost; (6) the Home is not located
*Preliminary; subject to change.
11
on leased land or, if the Home is purchased subject to any ground lease, the
capitalized value of such ground lease has been included in the Acquisition
Cost; (7) the Home is located within the City; (8) no portion of the proceeds
of the Home Mortgage will be used to acquire or replace an existing mortgage
or deed of trust, except for construction or other temporary financing; and
(9) the Home has not been previously occupied, except pursuant to a temporary
rental arrangement with the proposed mortgagor pending purchase by the Trustee
on behalf of the City of the Home Mortgage secured by the Home.
Home Mortgage Purchase Agreements
The Trustee on behalf of the City is to purchase Home Mortgages originated
by the Lenders in the amounts set forth below.
Lender
City Bond and Mortgage Corporation
Directors Mortgage Loan Corporation
Sko -Fed Mortgage Corporation
Wells Fargo Mortgage Company
Investor's Mortgage Service Co.
Originating on Behalf of Amount
Lewis Homes; Marlborough $10,232,900•
Development Corp.
Archibald Associates 3,755,900 -
The William Lyon Company 3,411,100•
Alta Loma Woods Associates II;
The Anden Group; M. S. Brock
5 Sons, Inc.; TAC Development
Corporation 6,527,900*
USA Properties Fund, Ltd. 1,502,200*
Total Home Mortgages $25.430.000•
Each Lender agrees to use its best efforts to originate Home Mortgages in
an aggregate principal amount equal to the amount set forth above after its
name on or before Tune 1, 1987.
Each Lender will represent with respect to each Home Mortgage originated
by it for the Trustee that, among other things, no facts have come to the
attention of the Lender which would cause the Lender to disbelieve or doubt
the truth of the following facts with respect to such Home Mortgage: (a) the
related Home is located within the City; (b) the Home will be occupied by the
mortgagor as the mortgagor's principal place of Home within 60 days following
execution of the Home Mortgage and the mortgagor intends to occupy the Home so
long as the Home Mortgage is outstanding; (c) the mortgagor does not expect to
use the Home in trade or business or as an investment property or as a
recreational home or for the land appurtenant to the Home to provide, other
than incidentally, a source of income: (d) the mortgagor has not had a present
ownership interest (as defined) in a principal Home at any time during the
3 -pear period prior ;o the date on vnich the Mortgage is executed (except that
10% of the Home Mortgages may oe made to mortgagors who have -ad ?resent
ownership interests); (a) the :Acquisition Cost of the Home does not exceed
110% of the Average Area Purchase Price at the time the Home Mortgage is
executed; (f) the mortgagor has not entered into any agreement with the
•prel t urinary; subject to change.
IN
developer of the Home, the contractor, or any other person pursuant to which
the mortgagor has agreed to pay monies in excess of the Acquisition Cost of
the Hone (other than rentals, in an amount not to exceed the fair rental value
of the Hone as determined by the Lender, pursuant to a temporary rental
agreement with the seller pending purchase by the Trustee on behalf of the
City of the Home Mortgage secured by the Home) or pursuant to which any
portion of the Hone has been left unfinished or any fixtures or other
architectural appointments have been omitted or removed from the Home in order
to reduce the Acquisition Cost; (g) the Home is not located on leased land or,
if the Home is purchased subject to any ground lease, then the capitalized
value of such ground lease has been included in the Acquisition Cost; (h) the
mortgagor has not been a party to any form of owner - financing (whether or not
paid off) on the Home at any time prior to execution of the Home Mortgage; (i)
the mortgagor will not use any portion of the proceeds of the Home Mortgage to
replace an existing mortgage or deed of trust; (j) the Hone, if newly
constructed, has not been previously occupied, except on an interim rental
basis at rents not to exceed fair rental value as determined by the Lender,
pursuant to a temporary rental agreement with the seller pending purchase by
the Trustee on behalf of the City of the Home Mortgage secured by the Home;
(k) the mortgagor and seller have read the mortgagor's affidavit and seller's
affidavit required by the Agreement; (1) authorized representatives of the
Lender have conducted investigations to assure the truth of the certifications
contained in the mortgagor's affidavit and seller's affidavit at the time of
execution of the Home Mortgage and the mortgagor and seller have provided such
information or access to such information, as deemed appropriate by the Lender
in connection with its investigation; (m) the Hone is a single- family Home,
the construction of which is complete; (n) all the land being sold or leased
with the Home reasonably maintains the basic livability of the Home and is not
subject to further subdivision; (o) the settlement and financing costs do not
exceed the usual and reasonable costs that would be paid by the mortgagor
where financing was not provided through the Bonds; and (p) the Lender has no
knowledge of any circumstances or conditions with respect to the Home Mortgage
or the mortgagor that could reasonably expect it to cause private investors to
regard the Home Mortgage as an unacceptable investment, cause the Home
Mortgage to become delinquent, or adversely affect the value or marketability
of the Home Mortgage, except that the annual interest rate on the Home
Mortgage may be a below - market interest rate.
In connection with the submission of each Home Mortgage for purchase, the
Trustee is to receive a Home Mortgage Application Package including, among
other things. an appraisal of the Home, a credit report on the mortgagor. a
mortgagor's affidavit and a seller's affidavit and a commitment to insure the
Home Mortgage. The Lender may charge an origination fee of 1/2 of 1% of the
principal amount of the Home Mortgage. The City is charging an origination
fee of 1/4 of 1% of the principal amount of the Home Mortgage. Upon approval
for purchase, the escrow company will be instructed to close the escrow when
it receives: (i) the mortgagor's down payment; (ii) the original mortgage
note; (iii) the mortgage fully executed in recordable form assigned to the
Trustee and either recorded or accompanied by irrevocable instructions to
record upon closing of the escrow; (iv) a current American Land Title
Association Mortgage title insurance policy endorsed to the Trustee (or a
preliminary title report and irrevocable instructions to close the escrow when
13
the policy can be issued); (v) a hazard insurance policy and an earthquake
insurance policy (if commercially available); (vi) a certificate as to
coverage under the special hazard insurance policy; (vii) a private mortgage
insurance certificate; and (viii) a final subdivision report and certificate
of occupancy.
If any document required 'by the Agreement is defective in any material
respect, the Lender is required to cure the defect within 60 days from the
time the Trustee notifies the Lender of the existence of the defect and if
such defect cannot be cured within such period, the Lender is required not
later than 90 days after the Trustee's notice to it respecting such defect, to
repurchase such Home Mortgage from the Trustee at a price equal to 100% of the
principal remaining unpaid on such Home Mortgage plus accrued and unpaid
interest thereon to the date of repurchase.
Servicing Agreements
Pursuant to a separate Servicing Agreement, each Lender is to service the
Home Mortgages it originates for a monthly servicing fee equal to 1/12 of 1/5
of 1% of the outstanding principal balance of each Home Mortgage.
The Lender is to exercise all reasonable efforts to collect payments due
from mortgagors with respect to Home Mortgages and on the 10th and on the
earlier of the last day of each month or the 30th day of each month remit all
Hone Mortgage receipts (net of servicing fees and impound payments) received
through the 10th day and 30th day respectively provided that prepayments and
net insurance or foreclosure proceeds are to be remitted on the next business
day, Home Mortgage receipts are to be deposited on a daily basis with the
Trustee or into a custodial account insured by the Federal Deposit Insurance
Corporation or the Federal Savings and Loan Insurance Corporation.
If the aggregate amount of monthly installment payments on Home Mortgages
due on the first day of any month have not been received by the Lender by the
15th day of such month, the Lender is obligated to notify the Trustee, and
United Guaranty making a claim under the Advance Payments Amendatory
Endorsement (see "Private Mortgage Guaranty Insurance" below), The Trustee is
obligated to make a claim under the Advance Payments Amendatory Endorsement on
the 30th of such month if it has not received additional notice from the
Lender that the delinquent amounts have been paid to the Lender by United
Guaranty as of the 30th day of such month.
If the Lender discovers, or is notified by the City or the Trustee, that
(i) all or any portion of the mortgagor's affidavit contains any materially
incorrect statement of fact or (ii) the Home Mortgage has been assumed in
violation of the crovis:ons thereof, the Lender .s to provide notice of
default to the mortgagor, to declare the entire unpaid balance of the Tome
Mortgage due and payable and, if the mortgagor does not pay in full the
remaining balance of the Home Mortgage, together with accrued interest, to
pursue foreclosure remedies on behalf of the City and, to the extent required,
collect private mortgage insurance benefits.
14
Upon the sale of a Home subject to a Home Mortgage, the Lender may approve
an assumption of the Home Mortgage if, among other things, the requirements
with respect to principal Hone, absence of present ownership interest and
Acquisition Cost are satisfied.
Private Mortgage Guaranty Insurance
To qualify for purchase by the Trustee on behalf of the City, a Home
Mortgage is required to be covered by a full coverage private mortgage
insurance policy, which is to be issued by United Guaranty Residential
Insurance Company of Iowa, an Iowa corporation ( "United Guaranty ").
United Guaranty will provide, subject to insurance underwriting, mortgage
guaranty insurance for the Home Mortgages under, and in accordance with the
terms and conditions of, its Full Coverage Master Policy, an Amendatory
Endorsement waiving the due -on -sale exclusion and the Default, Advance
Payments and Advances Amendatory Endorsements thereto (all of which are
collectively referred to as the "Master Policy") and the Commitments and
Certificates issued pursuant thereto (the "Master Policy and each Commitment
and Certificate being collectively referred to as a "Policy "). The following
description of a Policy and the coverage thereunder is only a brief outline
and does not purport to be comprehensive or definitive and such outline is
qualified in its entirety by reference to a Policy.
The City, the Trustee and the Lenders will be named insureds
(collectively, the "Insured "), as their interests may appear, under each
Policy.
Any default (including mortgagor related non - monetary default such as
defaults resulting from a failure to comply with the requirements of the
Program) under a Home Mortgage which is the basis for a foreclosure action is
covered under each Policy. No claim (other than a claim under the Advance
Claim Amendatory Endorsement) may be filed under a Policy with respect to the
Home Mortgage insured thereunder until the Insured has acquired title to the
mortgaged property which secured such Home Mortgage. Unless otherwise agreed
to by United Guaranty, a claim under a Policy must be filed within 60 days
after the Insured acquires title to such mortgaged property.
The failure by the insured to file a claim for a particular Home Mortgage
within such 60 day period shall be deemed an election by the Insured to waive
all rights under the Policy with respect to that particular Home Mortgage and
shall release United Guaranty from all obligations thereunder with respect to
the Home Mortgage.
As conditions precedent to the filing and /or Payment of a claim under a
Policy, the Insured must (i) nave accomplished ail constriction, additions and
improvements necessary to comolete the mortgaged property as contemplated by
the Policy, (ii) in the event of any physical loss or damage to the mortgaged
property, have restored and repaired the mortgaged property to at least as
good a condition as existed at the effective date of and as contemplated by
the Policy, ordinary wear and tear excepted, and (iii) pending the filing and
settlement of a claim, advance (a) hazard insurance premiums and real estate
is
property taxes and (b) as necessary and approved in advance by United
Guaranty, (1) expenses to preserve, repair and prevent waste to the mortgaged
property and to maintain it in at least as good a condition as existed at the
effective date of and as contemplated by the Policy, ordinary wear and tear
excepted, (2) foreclosure costs including court costs and reasonable
attorneys' fees and (3) sales expenses.
Other provisions and conditions of each Policy provide that (i) the Hone
Mortgage must be secured by a first lien on the mortgaged property; (ii) no
change shall be made in the terms of a Home Mortgage without the consent of
United Guaranty, (iii) written notice is to be given to United Guaranty within
10 days after the Insured becomes aware that a mortgagor is delinquent in two
monthly payments due under the Home Mortgage or that any proceedings affecting
the mortgagor's interest in the mortgaged property have been commenced, and
the Insured report monthly to United Guaranty the status of any such Home
Mortgage until the Home Mortgage is brought current, such proceedings are
terminated or a claim is filed, (iv) the Insured shall commence and diligently
pursue foreclosure or appropriate proceedings to acquire title to and
possession of the mortgaged property when the mortgagor becomes four months
delinquent in a sum equal to four or more monthly payments on the Home
Mortgage, shall notify United Guaranty of the institution of such proceedings
and provide United Guaranty with copies of documents relating thereto, shall
notify United Guaranty of the unpaid principal balance of the Home Mortgage
and accrued and unpaid interest thereon at least 15 days prior to the sale of
the mortgaged property by foreclosure and shall bid such amount unless United
Guaranty specifies a lower or higher amount and (v) the Insured may accept a
deed in lieu of foreclosure only if the ability of the Insured to assign
specified rights to United Guaranty is not thereby impaired.
The amount of a claim for benefits consists of (i) the unpaid principal
amount of the Home Mortgage and accrued and unpaid interest thereon (exclusive
of delinquency charges and penalty rates and not compounded) and (ii) the
amount of advances made by the Insured in accordance with a Policy less (a)
all rents or other payments collected or received by the Insured (other than
the proceeds of hazard insurance) which are derived from the mortgaged
property, the mortgagor, an insurance company or any other person, (b) hazard
insurance proceeds in excess of the amount required to restore the mortgaged
property, (c) amounts expended by the Insured due to the fault of the Insured,
(d) any claim payment previously made by United Guaranty under the Policy with
respect to the Home Mortgage and (e) unpaid premiums.
Within 30 days after a claim for benefits is properly submitted, United
Guaranty, at its option. shall cay to the Insured either (i) the amount of the
claim
for benefits calculated in accordance with the immediately preceding
paragraph or (ii) the delinquent regular monthly payments specified in the
Home Mortgage plus advances required of the Insured and described above and
thereafter the regular monthiv payments specified in the Home Mortgage , intil
(a) the total of such payments equals the claim for benefits or (b) a sale of
the mortgaged property approved by United Guaranty, at which time United
Guaranty pays the balance of the claim for benefits less the net proceeds of
such sale. If United Guaranty elects to pay under option (i) or (ii)(a), the
Insured must convey title to the mortgaged property to United Guaranty upon
16
payment of the claim for benefits, among other conditions. If United Guaranty
elects to pay under option (ii), it may direct the Insured to rent and /or sell
the mortgaged property and to apply all some so received to and in reduction
of payments due from United Guaranty,
The Advance Payments Amendatory Endorsement provides for an advance
payment procedure pursuant to which United Guaranty, upon receipt of ten days'
advance notice from the Insured, is required, with respect to a Home Mortgage
on which a mortgagor is delinquent in one or more monthly payments of
Principal and interest but subject to the coverage limitations of the Policy,
to advance to the Insured on, or before, the later of the date requested by
the Insured or the 30th day of the month an amount equal to all delinquent
payments of principal and interest (except payments due solely as a result of
acceleration of the Home Mortgage) and is required to continue to make such
delinquent payments until the Insured files (or should have filed) a claim for
benefits with respect to the Home Mortgage for which such payments have been
made. The Insured is required to reimburse United Guaranty for such advance
payments either from payments received by the Insured on account of the Home
Mortgage from the mortgagor, an insurer of the mortgaged property or the
proceeds of the foreclosure sale or conveyance of the mortgaged property. Any
unreimbursed advance payments will be offset against any claim payment to the
Insured.
United Guaranty is a wholly -owned subsidiary, directly and indirectly, of
United Guaranty Corporation, a North Carolina corporation, which is a wholly
owned subsidiary, directly and indirectly, of American International Group,
Incorporated. United Guaranty is engaged in the business of insuring lenders
against loss upon default by a mortgagor in the payment of insured mortgage
loans on one to four family residential properties and is approved as a
private mortgage insurer by FHLMC and FNMA.
An .Annual Statement for United Guaranty, on the Fire and Casualty Form
promulgated by the National Association of Insured Commissioners, for the year
ending December 31. 1983, is available from the Trustee.
Jnited Guaranty is also serving as the Program Administrator and
Compliance Agent on behalf of the City.
Hazard insurance and Earthquake Insurance
For a Homo Mortgage to qualify the Home must be covered a Dwelling
Building Special Form a:l risk policy issued by an insurer qualified to issue
such insurance in ;aiifcrnia .nsurine against loss in an amount at .al9t equal
`o of _ire ..._,;raw:' =e vaiue cased 'cpon reotacement cosy. of ;nc'n :iom.e. .n
the ...�_. �. :or. :omen :am :na; oo_icy may ro ^e:' a slnc :e .ondom :Wn .n:c
or ,:gay antic_ c:olect, and the preml::ms are :o .,.: ^a.a _ _
homeowners .saociatlou eescahiizhed for the = ordomtr.ium pro ^ect.• '.he
association must nave fidelity cove. -age as cell as comprehensive public
liabsilty insurance with a severability of interest endorsement and other
commonly required coverage.
In addition, each Hone will be insured at the time a Home Mortgage is
purchased by the Trustee against risk of loss due to earthquake and such
insurance (if commercially available) is required to be maintained in an
amount equal to 100% of the outstanding principal balance of the Hone
Mortgage, subject to a 5% deductible per occurrence. The premiums are to be
paid by the mortgagor. If the Home is located in a designated flood area,
flood insurance is required. -
Special Hazard Insurance
The City will obtain special hazard insurance to insure against losses
resulting from mudslides and building collapse (which are not covered by
hazard insurance) and losses resulting from the application of a coinsurance
clause in the hazard insurance policy.
In the event a mortgagor has defaulted and foreclosure procedures have
commenced, the special hazard policy will cover the uninsured risk in the
event of a loss resulting from such an insured risk occurring before or after
default. The insurer will have the option of paying (1) the cost of repair,
less the net proceeds received from the hazard insurance policy, or (2) the
sum of (i) the unpaid principal balance of the Home Mortgage at the time the
property is sold, (ii) advances made by the Lender and (iii) accumulated
interest on the total of the unpaid principal balance of the Home Mortgage and
on advances made, less the net proceeds received from the hazard insurance
policy. A claim under the special hazard policy may be made as soon as
practicable from the date of discovery of such loss, damage or occurrence.
The maximum amount payable under the special hazard policy will be 1% of
the original principal balance of all Home Mortgages. The residual coverage
under such policy will reduce as claims are paid and, if aggregate claims
exceed the policy limit, no further payments will be made by the insurer, and
any losses resulting thereafter may be borne by the Bondholders.
The Trustee will pay the annual premiums on the special hazard policy with
moneys in the Operating Fund. except that the first annual premium will be
paid from proceeds of the Bonds.
Home Mortgage_ prepayments
At origination, each Home Mortgage will provide for an amortization term
of 30 years. The maturity schedule for the Bonds is based on the scheduled
amortization payments on the Home Mortgages assuming that all Home Mortgages
are Graduated payment Home Mortgages .a ith graduated payments which increase 3%
annually for the ten years beginn:oc w a: ^. the second year of the Home Mortgage.
Federal Hous:nq Admianstrac:or. !a ta, now ?ver. ir.d:cate :hat 'rased on
extrapolations from data as of December 3.. 1383, single - family mortgage loans
insured by FHA since 1970 under Secticn L113 of the National housing Act, at
various interest rates with orrainai maturities of 30 years, have an average
life of 14.62 years as a result of prepayments. Statistics previoL3ly
produced by FHA indicated that experience with such single- family mortgage
loans in California had a shorter average life than the national averages.
13
Other statistics suggest that, until recently, Home Mortgage payment
experience was higher than indicated by the FHA data and the provisions of
Section 103A of the Internal Revenue Code of 1954, as amended, may limit
substantially the extent to which Home Mortgages may be assumed. On the other
hand, the reduced interest rate on the Home Mortgages compared to current
market interest rates and the implementation of Article XIIIA of the
California Constitution (con my referred to as "Proposition 13 ") may tend to
create a slower prepayment experience for the Home Mortgages. The City has
not included an estimate of prepayments in the maturity schedule for the Bonds.
Payment of Insurance Claims
The City makes no representation as to the ability of any insurer issuing
mortgage, standard hazard, special hazard, earthquake, flood or errors and
omissions insurance to make payments under their policies at the times and in
the amounts specified in such policies.
Foreclosure
Upon the default of a Home Mortgage, the Lender servicing the Home
Mortgage is to exercise the City's rights under the deed of trust's power of
sale, subject to the constraints imposed by California law. During the
three -month period beginning with the filing of a formal notice of default,
the mortgagor will be entitled to reinstate the Home ;!ortgage by making
overdue payments. The power of sale is exercised by posting and publishing a
notice of sale for at least 20 days. Therefore, the effective period for
foreclosing upon a Home Mortgage could be in excess of six months after the
initial default. Such time delays in collections could disrupt the flow of
revenues available for the payment of debt service on the Bonds if such
defaults occur with respect to a substantial number of Home Mortgages. Under
California antideficiency legislation, there is no personal recourse against a
mortgagor where the trustee exercises the power of sale. Each Mortgage Loan,
however, is required to be covered by a full coverage private mortgage
insurance policy and an Advance Payments Amendatory Endorsement (see "Private
Mortgage Guaranty Insurance" above). If the Home is damaged, repair of such
damage is required prior to conveyance to a private mortgage insurer in order
to collect insurance benefits.
[.ENDERS
Wells Faroo Mo rrr�age Company
Wells Fargo Mortgage "onpany ir a »holly -owned subsidiary of 'cells Fargo S
Companv, the bank- neidinc company for ' ^'ells Fargo. N.A. it is an approved 114A
and VA mortgagee. as weil as an approved F11LMC se iieriservicer and FNMA
seller /servicer.
19
The following table lists the mortgage loan activity of Wells Fargo
Mortgage Company for the year ended December 31, 1983.
Number of single - family mortgage loans
originated and closed 4,217
Principal amount of single - family mortgage loans
originated and closed - $349,740,000
Nisnber of single - family loans being serviced 69,496
Principal amount of single - family loans being
serviced $2,617,835,000
31 -60 days delinquent 3A8%
61 -90 days delinquent .65%
Over 90 days delinquent .38%
City Bond and Mortgage Corporation
City Bond and Mortgage Corporation was established in 1980 and has six
offices in northern and southern California. City Bond is an FHA and VA
approved mortgagee and is a FNMA approved seller and servicer.
The following table lists the mortgage loan activity of City Bond and
Mortgage Corporation for the fiscal quarter ended March 31, 1984
Number of single- family mortgage loans
originated and
closed
645*
Principal amount
of single - family mortgage loans
568,381,000*
originated and
closed
5,153,000
**
Number of single
- family loans being serviced
788*
54 **
Principal amount
of single- family loans being
$63,000,000*
serviced
$5,133,000
**
31 -60 days delinquent 3.1 % * **
61 -90 days delinquent .56 % * **
Over 90 days delinquent .47 % * **
` Loans held in City Bond and Mortgage Corporation /investor's Mortgage
Service Co. joint venture.
Cit? Bond and Mortgage Corporation owned :pans.
For fiscal year ended December 31, 1984, more recent statistics cot
av a: l all: e.
Di rro c.c ors ':o c-.gaye Loan lorporation
Ji rc o•,;o rs ;tortgage Loan Corporation is a southern .:aliforn_a based
mortgage banking firm founded in 1964, it is an approved FHA /VA mortgagee and
an approved FNMA /FHLMC seller /servicer. The following table lists the
mortgage .oan activity of Directors Mortgage Loan Corporation for the fatal
quarter ended January 31. 1984.
Number of single - family mortgage loans
originated and closed 3,773
Principal amount of single - family mortgage loans
originated and closed $ 267,996,645
Number of single - family loans being serviced 8,235
Principal amount of single- family loans being serviced 512,794.579
31 -60 days delinquent 3.09:
61 -90 days delinquent 1.02%
Over 90 days delinquent 2.39%
Sko -Fed Mortgage Corporation
Sko -Fed Mortgage Corporation ( "Sko- Fed "), an Illinois corporation, was
incorporated in February, 1974. Sko -Fed's principal office in California is
located in Newport Beach. Sko -Fed is an approved FHA and VA mortgagee, as
well as an approved FHIMC and FNMA seller /servicer.
The following table lists Sko -Fed's mortgage activity for the fiscal year
ended March 31, 1984.
Number of single - family loans originated and closed 3,522
Principal amount of single - family
loans originated and closed 5346,340,365
Number of single - family
loans being serviced 8,499
Principal amount of single - family
loans being serviced $770,524,597
31 -60 days delinquent 2.38%
61 -90 days delinquent .01%
over 90 days delinquent .015%
Investor's Mortgage Service Co.
Investor's Mortgage Service Co., a California corporation was incorporated
in 1951. Its principal place of business is in Burbank, California.
Investors is an approved FHA /VA mortgagee and an approved FNMA /FH MC
seller / servicer.
The following table lists Investor's Mortgage Service Co.'s mortgage
activity for the fiscal year ended April 30. 1984.
Number of single - family loans
originated and closed 2.i12
Principal amount of single - family loans
originated and closed 3162.604,217
Number of single - family loans teing serviced 20,432
Principal amount of single - family loans
being serviced $819,999,739
21
31 to 60 days delinquent
61 to 90 days delinquent
over 90 days delinquent
THE INDENTURE
5.75%
1.50%
2.10%
The following statements are a brief summary of certain provisions of the
Indenture (copies of which say be obtained from the City and at the corporate
trust office of the Trustee). The summary does not purport to be complete and
reference is made to the Indenture for a full and complete statement of such
provisions. Certain capitalized words or terms used in this summary and not
defined herein are defined in the Indenture and have the same meaning herein
as therein defined unless the context requires some other meaning.
Establishment of Funds and Accounts and Application of Bond Proceeds
The Indenture establishes the funds and accounts described, and provides
for the transfer and disbursement of Revenues in the manner set forth, under
"Security for the Bonds and Flow of Funds ". Bond proceeds are proposed to be
used as described under "Disposition of Bond Proceeds ".
Security for De2osits and Investment of Funds
All amounts held by the Trustee are to be held in trust and applied only
in accordance with the Indenture. The Indenture further provides that all
such amounts held by the Trustee under the Indenture (except amounts in the
Excess Investment Earnings Fund) are not to be subject to any lien or
attachment by any creditor of the City other than the lien of the holders of
the Bonds and the Trustee.
All funds and accounts held by the Trustee must be invested in "Permitted
Investments" which mean any of the following investments which at the time are
legal investments for the City under the laws of the State of California: (1)
direct obligations of the United States of America (including obligations
issued or held in book -entry form on the books of the Department of the
Treasury of the United States of America) or obligations the principal of and
interest on which are guaranteed by the United States of America; (2)
interest - bearing demand or time deposits (including certificates of deposit)
in banks (including the Trustee) and savings and loan associations provided
that such deposits are insured by Federal Deposit Insurance Corporation or
Federal Savings and Loan Insurance Corporation; (3) obligations of
institutions the unsecured debt obligations of which (or of the parent holding
company of which) are rated "A" or better ov Standard i Poor a Corporation; or
(4) investments pursuant to an investment agreement with
The—Trustee
Seattle -First National Bank, Seattle, Washington, has been appointed as
Trustee. The Trustee and any successor must have aggregate capital and
surplus of at least $75.000,000 or 3500,000,000 of assets under trust.
The Trustee is required to carry out the duties assigned in the Indenture,
subject to indemnification, and is entitled to compensation and expenses as
agreed upon. The Trustee may buy, own, hold and sell any bonds of the City
(including the Bonds) and engage in other transactions with the City.
The Trustee may resign or be removed, effective upon appointment of a
successor. Appointment may be made by a court upon application by the Trustee
or any Bondholder if no appointment has been made within 45 days after the
Trustee's notice of resignation.
Provision is made for transfer of rights and property to a successor
Trustee; any company into which the Trustee merges, converts or consolidates
becomes the successor.
Covenants of the City
The City warrants and covenants, among other things;
1. To pay all Pledged Revenues received by it to the Trustee for
payment of the Bonds;
2. Not to extend or consent to extension of time for payment or
maturity of Bonds;
3. To provide further assurances of rights under the Indenture, as
required;
4. To keep proper books for all the Program transactions described
in the Indenture and to file a copy of its annual report pertaining to
such transactions (certified by an independent accountant) with the
Trustee and provide such report to each Bondholder who has filed his name
and address for such purpose;
5. To pay promptly the annual premiums on special hazard insurance
with moneys from the Operating Fond;
6. To employ or retain competent personnel, to establish and
enforce reasonable rules and regulations to administer the Program;
7. To the extent permitted by law, not to claim the advantage of
any laws which may adversely affect the covenants and agreements of the
Indenture;
3. To do nothing which will cause =he Bonds :o become arbitrage
bonds within the meaning of the internal Revenue Code of 1954, as amended,
and the regulations promulgated thereunder or cause the Bonds to be
.mortgage subsidy bonds within the meaning of Section 133A(a); and
9. To supply semiannually or annually, as required, certain
specifications, financial statements and other documents requested by
Standard 6 Poor's Corporation.
Supplemental indentures
Supplemental indentures may be adopted at any time to:
1. Add covenants and agreements to further secure the Bonds;
2. Prescribe further limitations and restrictions upon the
incurring of indebtedness by the City;
3. Surrender any right or privilege of the City reserved or
conferred under the Indenture;
4. Confirm as further assurance any pledges and liens created by
the Indenture;
5. Modify the Indenture subject to consent of Bondholders as
described below; and
6. With the Trustee's consent, cure ambiguities and defects or
inconsistent provisions of and add clarifying provisions to the Indenture.
Supplemental indentures must be filed with the Trustee and be accompanied
by a counsel's opinion certifying their proper adoption and validity. No
change in the rights and obligations of the Trustee may be made without its
written consent.
Amendment of the Indenture
With the exception of amendments outlined above which may be made without
the consent of the Bondholders, amendments to the Indenture may be
accomplished by supplemental indenture with the consent of the holders of at
least two- thirds of the principal amount of Bonds outstanding, such consent to
be obtained in writing, and to be accompanied by a counsel's opinion that the
consent proceedings are valid and binding. No such amendment may change the
redemption or maturity of any outstanding Bonds, or any interest date or
reduce the principal amount or redemption price or rate of interest, nor may
the percentage required for consent be reduced without the consent of all of
the Bondholders affected. Any amendment may be made with unanimous Bondholder
consent.
Default and Remedies
Events of default are defined as:
1. failure to pay principal (whether at ma c•.:n cv or upon redemption)
or to make sinking fund installments when due;
Failure for 30 days after the due date to pay interest;
3. City failure or refusal to comply with the Act or default in the
observance of any other covenants and agreements in the Indenture or in an
applicable supplemental indenture continuing for 90 days; or
14
4. City filing a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable law
of the United States of America, or if a court of competent jurisdiction
shall approve a petition, filed with or without the consent of the City,
seeking reorganization under the federal bankruptcy laws or any other
applicable law, or if, under the provisions of any other law for the
relief or aid of debtors, any court of competent jurisdiction shall assume
custody or control of the City or of the whole or any substantial part of
its property,
Upon the happening of an event of default, the Trustee may, and shall upon
written request of the holders of at least 25 percent in principal amount of
outstanding Bonds, proceed to enforce one or more of the following remedies:
1, Bring an action to enforce the Bondholders' rights, including
requiring collection of payments on Home Mortgages and performance by the
City of its duties under the Act;
2. Bring suit upon the Bonds;
3. Bring an action to require the City to account as if it were
trustee of an express trust for the Bondholders:
4. Bring an action to enjoin any unlawful acts or acts violative of
Bondholders' rights, or compel the City or any Lender to perform its
duties; or
5. Declare all Bonds due and payable and proceed to sell, liquidate
or otherwise realize the value of the assets pledged under the Indenture.
In the event of an insufficiency of funds to pay principal and sinking
fund installments, redemption prices or interest then due (after payment of
expenses, charges and liabilities of the Trustee and other required expenses)
the balance of funds then available (other than funds held for the payment or
redemption of particular Bonds which have theretofore become due at maturity
or by call for redemption) shall be applied as follows if less than all Bonds
are due and payable:
First, to payment of interest in the order of maturity of installments,
or, if funds are insufficient to pay any installment in full, ratably, by
amounts due, without discrimination or preference.
Second. to payment of unpaid orincina, or sinking :and installments or
: edemption price of Bonds which are due tr. :he order of Sue dates, and, if
.nsuffic:ent :o ;ay in full al: Bor.ds .due on ar.•/ one late,
Amount due, without aisrrlm :narlon or preference.
:f all the Bonds are due and payable, and a like insufficiency exists,
available funds shall be applied to payment of principal and interest,
ratably, without preference or priority, according to total amounts due.
W
The timing of such payments on default is in the discretion of the
Trustee. The method of conducting remedial proceedings by the Trustee may be
directed in writing by Bondholders holding a majority in principal amount of
the Bonds; provided, however, the Trustee may decline to follow any such
direction which, in the opinion of the Trustee, would be unjustly prejudicial
to other Bondholders.
No holder of any Bond has any right to institute any suit, action or other
proceedings under the Indenture or for the protection or enforcement of any
right therein granted or any right granted under the law, unless such holder
has given to the Trustee written notice of the event of default or breach of
duty on account of which suit, action or proceeding is to be taken, and unless
the holders of not less than 25 percent in principal amount of the Bonds then
outstanding, have made written request to the Trustee after the right to
exercise such powers or right of action, as the case may be, shall have
accrued, and shall have afforded the Trustee a reasonable opportunity either
to proceed to exercise the powers granted in the Indenture or granted under
law or to institute such action, suit or proceeding in its name and unless,
also, there shall have been offered to the Trustee reasonable security and
indemnity against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee shall have refused or neglected to comply with
such request within a reasonable time; and such notification, request, and
offer of indemnity are declared in every such case, at the option of the
Trustee, to be conditions precedent to the execution of the powers under the
Indenture or for any other remedy under law. The Indenture prohibits actions
which may adversely affect rights and interests of Bondholders.
The Trustee may bring all actions authorized without possession of the
Bonds. Express remedies are not exclusive, and no delay or omission
constitutes a waiver of rights. The Trustee must give Bondholders notice of
any default within 90 days of knowledge thereof, unless cured before notice or
unless the Trustee's board of directors, executive or trust committee in good
faith determines that withholding notice is in the interest of the Bondholders.
Defeasance
Full payment of principal, interest and redemption price of all
outstanding Bonds terminates all rights and obligations under the Indenture.
The lien of the Indenture and the pledge of the Pledged Revenues are also
fully discharged if (i) the City gives the Trustee irrevocable instructions to
redeem all callable Bonds outstanding, (ii) there shall have been deposited
with the Trustee and set aside in a special trust fund either moneys or
Federal Securities, the orincrpal and interest on which when due, will be
sufficient to pay all principal or redemption orice and interest due, or to
become due on or prior to maturity or redemption date of the Bonds. and (iii)
if the Bonds are not callable within 60 days, the City shall have irrevocably
instructed the Trustee to gave notice to the Bondholders of the deposit
described in (ii) above. "Federal Securities" means direct and general
obligations of the United States of America.
26
Miscellaneous
All documents held by the Trustee may be inspected by the City, the
Trustee, and by Bondholders (upon written request of the holders of 5 percent
of the principal amount of Bonds outstanding).
All covenants and agreements in the Indenture are enforceable against the
City and not against any member, officer, or employee of the City in his or
her individual capacity, and no recourse for payment of principal, sinking
fund installments, interest, or redemption price of the Bonds is available
against such persons in such capacities.
NO LITIGATION
There is no controversy or litigation of any nature now pending to
restrain or enjoin the issuance, sale, execution or delivery of the Bonds or
the purchase of Home Mortgages with proceeds of the Bonds, or in any way
contesting or affecting the validity of the Bonds, the proceedings of the City
taken with respect to the issuance or sale thereof, the pledge or application
of any moneys or securities provided for the payment of the Bonds, the
existence or powers of the City or the title of any officers of the City to
their respective positions.
LEGALITY AND TAX EXEMPTION
All legal matters in connection with the issuance of the Bonds are subject
to the approval of Jones Hall Hill 6 White, A Professional Law Corporation,
San Francisco, California, Bond Counsel. Certain legal matters will be passed
upon by Haynes 6 Miller, Washington, D.C., Special Tax Counsel and Counsel to
the Underwriter. Fees payable to Bond Counsel, Special Tax Counsel and
Counsel to the Underwriter are contingent upon the sale and delivery of the
Bonds.
Section 103A of the Internal Revenue Code of 1954, as amended, provides
that interest on bonds. such as the Bonds, is exempt from Federal income
taxation under certain conditions. In the opinion of Bond Counsel all such
conditions which are based on currently ascertainable :natters have been
satisfied. The following conditions imposed by Section 103A relate to future
events: (1) all Home Mortgages are required be made with respect to Homes
which can reasonably be expected by the Clty to become the principal Home of
the mortgagor within a reasonable .ire and Yihich are :orated within the
lurisdictton of the City: (:.) the mortgagor may not have had a present
c "er -hip intereat (as hef.ned) :n - _::ncioai Home at any time during the
3 -;:ear period pr -or to execution of t.= Home Mortgage (except that 104 of the
Home Mortgages may be made to Persons 'rho 'nave had such an ownership
interest): (3) the Acquisition Cost of Homes financed with Home Mortgages may
not exceed 1104 of the Average Area Purchase Price; (4) none of the Bond
proceeds may be used to acquire or replace an existing mortgage; and (5) any
person permitted to assume a Home Mortgage is required to meet the conditions
set forth above in (1), (2) and (3).
7
In connection with the execution or assumption of Home Mortgages, the
temporary regulations authorize the City to rely on affidavits of mortgagors
as to (1) intention to use a Home as a principal Home; and (2) no present
ownership interest within the 3 prior years (accompanied by Federal income tax
returns); and affidavits of the mortgagor and the seller that the Acquisition
Cost does not exceed 110% of the Average Area Purchase Price. In the case of
Home Mortgages on existing Homes, title records will demonstrate that such
Home Mortgages will not replace existing mortgages, and, in the case of Home
Mortgages on newly constructed Hanes, such Home Mortgages will not replace
existing mortgages. Section I03A(c)(2)(B)(ii) and (iii) and the temporary
regulations thereunder provide that, if the conditions summarized above are
met at the time the Mortgages are executed with respect to 95% of the Bond
proceeds available for making Home Mortgages and corrective measures are taken
with respect to those Home Mortgages which did not meet those conditions,
interest on the Bonds will remain exempt from Federal income taxation.
In the opinion of Bond Counsel, under existing laws, regulations, rulings
and judicial decisions, interest on the Bonds is exempt from income taxation
by the United States of America and from personal income taxation imposed by
the State of California. Such opinion will state that the exemption from
taxation by the United States of America may become inapplicable upon failure
to meet the 95% test or the correction requirement of Section 103A of the
Internal Revenue Code of 1954, as amended, but will further state that, in the
opinion of Bond Counsel, the City has established and covenanted to observe
procedures which meet those requirements.
UNDERWRITING
Stone 6 Youngberg has agreed, subject to certain conditions, to purchase
the Bonds from the City at an aggregate discount of 8 from the
initial public offering prices set forth on the cover page. Its obligation is
subject to certain conditions precedent, and it will be obligated to purchase
all the Bonds if any such Bonds are purchased. The public offering prices may
be changed from time to time. The Bonds may be offered and sold to certain
dealers, banks and others at prices lower than the initial offering prices,
and such initial offering prices may be changed, from time to time.
BOND RATING
Standard S Poor's Corporation has given the 3onds :.._ :at_ng of .
The double dacger indicates that = ontinuance o' one :ac:na Standard i
Poor 's - orporat :on is subject to _uch rating agency . :., z -using
doc:unectat.on ronfirmina ir.vestmer.ts and casn ':o••+ .:..a iu;es? nas
furnished the sating agency information and ,a -nria. rhi_h I:ave not teen
included in this J£flcia: Statement. .ererail:•,the ratica eaency bases its
rating on information and material so furnished on invests gat ions. studies and
assumptions made by the rating agency. Such rating reflects only the view of
such organization and an explanation of the significance of such rating may be
obtained from the rating agency. There is no assurance that such rating will
be maintained for any given period of time or that it may not be revised
downward or withdrawn entirely by the rating agency, if in its judgment,
circumstances warrant. Any such downward change in or withdrawal of such
rating may have an adverse effect on the market price of the Bonds, The
Underwriter and the City have not undertaken any responsibility after issuance
of the Bonds to oppose any such revision or withdrawal.
ADDITIONAL INFORMATION
Any statements in this Official Statement involving mattars of opinion,
whether or not expressly so stated. are intended as such and not as
representations of fact. This Official Statement is not to be construed as a
contract or agreement between the City and the purchasers, holders or owners
of any of the Bonds.
Copies in reasonable quantity of the Indenture and other documents
referred to herein may be obtained at the office of the City.
The execution and delivery of this Official Statement have been duly
authorized by the City.
CITY OF RANCHO CUCAMONGA
By
29
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APPENDIX A
CITY OF RANCHO CUCAMONGA
MORTGAGE REVENUE BOND ISSUE
(ASSEMBLY BILL 41355)
MARKEWFEASIBILITY STUDY
1984
SUMMARY AND CONCLUSIONS
Prepared
for
Mr. Jon Mikels, Mayor
Mr. Jack Lam, Community Development Department
by
Empire Economics
Joseph T. Janczyk, Ph.D.
Renee Evans, M.A.
June 4, 1984
A -1
SUMMARY AND CONCLUSIONS
PREFACE
The "Summary and Conclusions" has a dual purpose:
First, to provide you with a synthesis of the compre-
hensive market /feasibility study, including its
methodology as well as the primary findings on the
demographic/ economic trends, housing market demand/.
supply conditions, competitiveness /absorption of the
candidate projects, and the feasibility of the mortgage
revenue bond program.
Secondly, to provide you with timely information on the
impacts of changes in the candidate projects and /or
market demand /financial conditions that have occurred
since the original market /feasibility study.
While the "Summary and Conclusions" should provide you with a
timely synthesis on the characteristics and feasibility of the
mortgage revenue bond program, it is meant to be only a summary
and so we strongly recommend that you review the comprehensive
market /feasibility study.
q.i
SUMMARY AND CONCLUSIONS
INTRODUCTION
Description of Rancho Cucamonga
Rancho Cucamonga, incorporated in 1977, is a general law city
that operates under a council- manager form of government. The
city has a prime location in the western portion of San
Bernardino County, one of the fastest growing counties in
California. Rancho Cucamonga experienced a strong rate of
population growth during the 1970 -80 decade: from 16,043 in 1970
to 54,000 in 1980; this is equivalent to a population growth of
some 3,796 per year. Furthermore, Rancho Cucamonga has continued
to experience strong population growth since 1980; its population
attained a level of 59,800 in 1983; this reflects an average
growth of 1,933 people per year since 1980. Rancho Cucamonga's
population growth is reflected by the recent construction
activity in its residential, commercial and industrial sectors.
Specifically, Rancho Cucamonga had an average of 992 new
residential units per year during the 1970 -83 period, while the
total valuation of new commercial and industrial structures
amounts to $63 million and $39 million, respectively, during the
1978 -83 period. Rancho Cucamonga's housing stock consists of
23,295 units: 18,852 single - family units and 3,930 multiple -
family units and their vacancy rates are 1.0% and 0.6%
respectively. For information on the location of Rancho
Cucamonga, refer to Map A.
Rancho Cucamonga's recent demographic and economic growth can be
attributed to its economic bases: local industry and commuters.
The primary economic base, local industry, consists of major
employers in the Rancho Cucamonga area: General Dynamics, Frito
Lay and Inspiron Corporation. The secondary economic base,
commuters, is a result of the Rancho Cucamonga's relatively
"affordable" housing that has attracted many households who are
employed in the Los Angeles Metropolitan Core but cannot find
affordable housing there. Such households, given their strong
preference for homeownership, establish their residences in
Rancho Cucamonga and commute to their employment positions in the
Los Angeles Metropolitan Core. Rancho Cucamonga is poised to
capitalize upon the future growth of these economic bases through
its comprehensive land -use policies which have resulted in
several major Master Planned industrial, commercial and
residential areas, such as Terra Vista and Victoria Village.
Therefore, considering its prime location in western San
Bernardino County, along with the general growth prospects for
its economic bases, Rancho Cucamonga is expected to continue its
strong population growth during the remainder of the 1980'x.
Characteristics of the Bond Issue
The California Mortgage Bond Allocation Committe provided Rancho
A-3
Cucamonga with a mortgage allocation of some $49 million: this
consists of $20 million in entitlement funds and $29 million in
supplemental funds. The amounts of entitlement and supplemental
funds are significant because the state of California places
income limits on the purchasers of the housing units in the bond
program. Specifically, for the entitlement funds, there is no
maximum income for projects located in redevelopment areas
(Senate Bill #99) while the maximum income for projects located
in nonredevelopment areas is $40,715 (Assembly Bill #1355). For
supplemental funds, the maximum income limit of $32,572 applies
to projects in both redevelopment and nonredevelopment areas.
Since some of the projects in Rancho Cucamonga's Mortgage Revenue
Bond Program are located in redevelopment areas, the city has
decided to use its allocation for two separate bond issues:
First, the bond issue under Senate Bill #99 will include only
those projects in redevelopment areas; this issue will amount to
some $22 million: ($15 million of entitlement and $7 million of
supplemental funds). Secondly, the bond issue under Assembly
Bill #1355 will include all of the projects; this issue will
amount to some $29 million: ($5 million of entitlement and $22
million of supplemental funds). The primary difference between
the single (Assembly Bill #1355) and dual issues (Senate Bill 099
and Assembly Bill #1355) is that the projects in the
redevelopment areas will not have income limits on the purchasers
with respect to their entitlement funds. For information on the
allocation of entitlement and supplemental funds amongst the
various projects, refer to Chart A.
Description of Candidate Projects: Assembly Bill #1355
For each of the candidate projects in the Rancho Cucamonga
Mortgage Revenue Bond Program, information was compiled on the
following factors:
Project Name
Project Developer
Location
Development Status
Product Type
Density (Units /Acre)
Total Units, including Units Built, Sold and
Planned for Future Phases
Units in Bond Program and Mortgage Request
Product Mix: For each of the Housing Product
Plans, Information is Provided on the Number of
Units, Bedrooms, Baths, Prices and Sizes of Living
Areas
Features and Amenities
In summary, the housing units in the candidate projects are
expected to be in the $76,000 - $92,000 price range with 1,000-
1,400 square feet, on the average. For a summary of the primary
characteristics of the candidate projects, refer to Table 1,
A -4
Components of the Economic Model
Empire Economics utilizes a forecasting - simulation housing model
to estimate the marketability and economic feasibility of the
candidate projects for the most probable as well as alternative
economic /financial scenarios that may emerge in the future.
Specifically, the housing model represents the integration of the
economic /financial concepts and principles underlying real estate
development, in general, with the actual demographic, employment
and residential trends and patterns in San Bernardino County and
Rancho Cucamonga, in particular. Thus, the market demand
analysis systematically proceeds from the general demographic,
economic, and financial market conditions to the absorption
schedules for the candidate projects and the feasibility of the
Rancho Cucamonga Mortgage Revenue Bond Program. For a
description of the methodology underlying the market demand
study, refer to Exhibit A.
Market Areas
Based upon a consideration of the demographic, economic, and
housing market factors that will influence the success of the
candidate projects in the Rancho Cucamonga Mortgage Revenue Bond
Program, the following market areas have been delineated:
Los Angeles Metropolitan Area: The Los Angeles Metropolitan Area
economy includes Los Angeles, Orange, San Diego, San Bernardino,
Riverside and Ventura counties. While most of the demographic,
economic, and construction activity was originally concentrated
in Los Angeles County, there has been a substantial spillover of
such activity to the other counties during the past several
decades.
San Bernardino County: San Bernardino County includes all of the
various cities /communities within the geographical boundaries of
the county.
San Bernardino Regional Markets: San Bernardino County is
partitioned into three Fegions, according to their particular
demographic and economic characteristics, as follows:
West Region: Rancho Cucamonga, Ontario, Chino and
Upland, among others
Central Region: Colton, Fontana, Rialto, San Bernardino
Grand Terrace, Loma Linda, Redlands, and
Yucaipa, among others
East Region: Hesperia, Victorville, Adelanto and
Barstow, among others
For additional information on the boundaries of the various
market areas, refer to Map A,
A -5
SPECIFICATION OF THE ECONOMIC /FINANCIAL ASSUMPTIONS
AND PARAMETERS UNDERLYING THE MARKET /FEASIBILITY STUDY
Empire Economic's forecasting - simulation housing model requires
the specification of the particular assumptions (the values of
which may be varied in a sensitivity analysis) and the parameters
(the values of which are relatively stable) for the economic and
financial market conditions underlying the market /feasibility
study; accordingly, these are now presented.
The assumptions underlying the housing forecasting -
simulation model deal with the potential growth paths
for the economic bases, financial market conditions
such as mortgage interest rates, the relationship of
housing price appreciation to inflation, and the
relationship of housing price appreciation to cost
inflation. The basic market /feasibility study for the
Rancho Cucamonga's Mortgage Revenue Bond Program
utilizes the most probable scenarios for these factors;
in a sensitivity analysis, the impacts of the
alternative values for these factors may be assessed.
The parameters underlying the forecasting - simulation
housing model deal with various economic and financial
inter - relationships that are relatively stable and are
hence not subject to significant modification; the
analysis utilizes the most probable values of the
parameters.
Therefore, the specification of the economic /financial
assumptions and parameters will ensure that all of the factors
that will influence the marketability and feasibility the
candidate projects in Rancho Cucamonga's Mortgage Revenue Bond
Program are taken into consideration explicitely. Furthermore,
the sensitivity of the results to alternative economic /financial
conditions may also be assessed.
THE POTENTIAL HOUSING DEMAND SCHEDULE
FOR THE CANDIDATE PROJECTS
The demand schedules for housing in the West Region of San
Bernardino County, as a whole, and the candidate projects, in
particular, are determined through a systematic analysis of the
following factors: First, the demographic, employment and
construction activity inter - relationships among the Los Angeles
Metropolitan Area, San Bernardino County and the West Region are
analyzed. Secondly, employment, population and housing demand
are forecasted for San Bernardino County's West Region over the
next decade; the composition of demand according to various
market segments is also presented, including local industry,
commuters, retirees and resorters as well as households in the
A -6
support sector. Third, the distribution of housing demand by
some twenty -five price ranges is derived, based upon the income
distribution of households in the various market segments along
with their desire to use the assets that they may have
accumulated. Fourth, the housing demand for the candidate
projects is adjusted according to the criteria that the projects
and purchasers must fulfill, namely the maximum prices of the
housing units and the income limits for purchasers, among others.
Thus, the result of the analysis is the potential housing demand
by qualified purchasers for the candidate projects during the
time period that they will be marketed. The primary findings are
as follows:
The comparative analysis of the demographic, employment
and construction activity in the Los Angeles
Metropolitan Area has revealed that the amount of
residential, commercial and industrial activity in San
Bernardino County, as a whole, and the West Region, in
particular, increased dramatically during the 1975 -83
period. The West Region of San Bernardino County has
increased its market share of the county's industrial
activity, as a result of the urbanization that it has
experienced, while its share of residential activity
has moderated somewhat due to the higher land costs
associated with urbanization.
The forecasts for population and employment growth as
well as their resulting demand for housing are based
upon the assumptions regarding the growth paths of the
economic bases in the West Region along with the
parameters underlying the economic base analysis.
Accordingly, the demand for housing amounts to 3,986
units annually during the 1984 -86 period, on the
average. The accuracy and reliability of the forecasts
of housing demand can be evaluated by comparing them
with their recent trends: the forecasts are in close
conformance to their recent trends. For additional
information, refer to Graph A.
The demand for housing in the West Region according to
various price ranges is as follows:
Price Range Annual
(Approximate) Demand
$ 0- 50,000 1,725
$ 50- 85,000 1,093
$ 85- 100,000 627
$100- 150,000 425
$150- 250,000 96
$250,000+ 19
A -7
The composition of the annual housing demand by product
type in the West Region is as follows:
The federal and state legislation governing the issuance of
Mortgage Revenue Bonds requires that purchasers of housing in the
program fulfill certain criteria in order to ensure that these
funds are used according to the objectives of the program.
The maximum price for the housing units may not exceed
110% of the average sales price for housing in the
designated area, i.e., the San Bernardino - Riverside
Primary Metropolitan Statistical Area (PMSA). Based
upon a special study by Empire Economics, the estimated
average sales price for new housing units in the San
Bernardino - Riverside PMSA during 1983 is $90,201: 110%
of this amounts to $99,221. For existing housing
units, the estimated average sales price is $84,891:
110% of this is $93,380.
The "new" homeowner requirement means that 90% of the
purchasers in the mortgage revenue bond program may not
have been homeowners at any time within the prior three
years. In general, most of the purchasers would
fulfill this requirement, since the housing products
will be for entry -level households given the maximum of
$99,221.
The housing demand forecast is now modified for the
criteria that purchasers must fulfill, by applying the
proportion of purchasers that qualify to the prior
forecasts of housing demand, The modified annual
average demand forecasts for the 1984 -86 period amounts
to 1,524 units annually in the West Region,
There are maximum income limits for purchasers who use
either entitlement or supplemental funds. The median
income for California Households Income of $27,143 is
the highest of the alternatives, so it is selected as
the measure of median income for the Rancho Cucamonga's
A•8
Product
Housing
Market Segment
Type
Demand
Local Industry
Attached
2,577
Support Sector
Local Industry
Detached
898
Support Sector
Commuters
Detached
447
Retirees
Attached/
62
Detached
The federal and state legislation governing the issuance of
Mortgage Revenue Bonds requires that purchasers of housing in the
program fulfill certain criteria in order to ensure that these
funds are used according to the objectives of the program.
The maximum price for the housing units may not exceed
110% of the average sales price for housing in the
designated area, i.e., the San Bernardino - Riverside
Primary Metropolitan Statistical Area (PMSA). Based
upon a special study by Empire Economics, the estimated
average sales price for new housing units in the San
Bernardino - Riverside PMSA during 1983 is $90,201: 110%
of this amounts to $99,221. For existing housing
units, the estimated average sales price is $84,891:
110% of this is $93,380.
The "new" homeowner requirement means that 90% of the
purchasers in the mortgage revenue bond program may not
have been homeowners at any time within the prior three
years. In general, most of the purchasers would
fulfill this requirement, since the housing products
will be for entry -level households given the maximum of
$99,221.
The housing demand forecast is now modified for the
criteria that purchasers must fulfill, by applying the
proportion of purchasers that qualify to the prior
forecasts of housing demand, The modified annual
average demand forecasts for the 1984 -86 period amounts
to 1,524 units annually in the West Region,
There are maximum income limits for purchasers who use
either entitlement or supplemental funds. The median
income for California Households Income of $27,143 is
the highest of the alternatives, so it is selected as
the measure of median income for the Rancho Cucamonga's
A•8
Mortgage Revenue Bond Program. Accordingly, the
maximum income limits for purchasers in the program are
based upon the designated median income as well as
whether they use entitlement or supplemental funds:
these represent 150% and 120% of the median income,
respectively. So, the maximum income limits for
purchasers who use entitlement funds is $40,715 while
the maximum incomes for purchasers with supplemental
funds is $32,572.
The income "windows" for the candidate projects can be
guaged by comparing the minimum income required for
households to qualify for the project's housing
products with maximum allowable income for households
in the mortgage revenue bond program. The income
windows are computed based upon two types of loans: a
30 -year fixed rate of 12% and a 3 -2 -1 buydown of this
rate; additionally, the maximum income of households
for entitlement and supplemental funds are also
considered. The analysis assumes that households use
30% of their incomes for mortgage payments and their
downpayment is 5% of the sales price. The results of
this analysis reveal the following: For a fixed
mortgage rate of 12%, the projects presently in the
program have income windows of $5,000 to $12,000 for
entitlement funds and ($3,000) to $4,000 for
supplemental funds. For a 3 -2 -1 buy down, the projects
have windows of $14,000 to $19,000 and $6,000 to
$11,000 for entitlement and supplemental funds,
respectively,
COMPETITIVENESS OF THE CANDIDATE PROJECTS
AND THEIR CAPTURE RATES
Having established the magnitude and composition of the potential
housing demand for the candidate projects in the Rancho Cucamonga
Mortgage Revenue Bond Program, the study now turns to an analysis
of the competitiveness of the housing products in the candidate
projects as compared to the other projects that are on the market
presently, so that their capture rates can be estimated.
Specifically, the determination of the capture rates for the
projects requires a consideration of first, the number of
comparable projects that are on the market presently, and,
secondly, the competitiveness of the candidate projects with the
comparable projects, considering their product types, price
ranges and market segments.
Empire Economics conducted market surveys of the residential
developments in the West Region of San Bernardino County to
identify the projects that are on the market presently and obtain
information on their characteristics, so the projects that are
comparable to the candidate projects could be identified.
A -9
There are some 105 residential developments in the West
Region of San Bernardino County that are on the market
presently. The projects which are comparable to the
candidate projects are those that fulfill the following
criteria: projects with prices of up to $99,221 and
projects with housing products oriented towards all of
the market segments except resort households; there are
33 projects that fulfill these criteria. A summary of
the characteristics of these comparable projects was
compiled according to the attached and detached housing
products types, using the following indices: totals,
minimums /maximums, averages, standard deviations, and
most probable ranges. Specifically, the most probable
range includes some 34% of the observations: those
within plus or minus one -half of a standard deviation.
Of the remaining 66 %, there are 33% above and 33% below
the most probable range,
For information on the summary of the characteristics
of the housing projects that are comparable to the
candidate projects refer to Table 2.
The estimation of the most probable capture rates for the
candidate projects involves an analysis of their competitiveness
relative to the comparable projects that are on the market
presently.
The candidate projects' pro -rata shares of housing
demand are based upon the number of comparable projects
in the project market area, considering their price
ranges and market segments. Specifically, since there
are 20 attached and 13 detached comparable projects,
the pro -rata capture rates for projects with attached
and detached housing products amounts to some 5% and
8 %, respectively.
The pro -rata capture rates are now modified according
to the competitiveness of the candidate projects
relative to the other projects, based upon the
following: First, the real annual payment of the
candidate projects are computed: this represents the
annualized mortgage payments of the project divided by
the size of its living area. Secondly, their housing
prices are adjusted for the distance that the projects
are from the Los Angeles Metropolitan Area: for each
mile from the metropolitan area, the price of a
comparable housing product declines by $750. This
adjustment is made by comparing the distance of the
candidate projects to the other comparable projects in
the West Region. Third, the housing prices are
adjusted for special features that enhance a projects
marketability: special amenities, i.e., common areas
in a project offering detached housing products or
locational features, i.e., in close proximity to a
A -10
freeway.
The pro -rata capture rates for the candidate projects
are adjusted in the following manner: if the adjusted
real annual payment for the candidate project is below
the average real annual payment for the comparable
projects, then its capture rates increases. On the
other hand, if real annual payment for the candidate
project is above the average real annual payment level
for the comparable projects, then its capture rate
decreases. The specific amount of the adjustment is
based upon the differential in the real annual payment
between the candidate project and the comparable
projects relative to the standard deviation of the real
annual payment for the comparable projects.
The real annual payments for the comparable projects
are $9.94 and $9.18 for attached and detached housing
products, while their standard deviations are $1.39 and
$1.09, respectively. The adjusted capture rates for
the candidate projects are derived by modifying their
pro -rata capture rates, based upon a consideration of
their real annual payments relative to the real annual
payments of the comparable projects. The results of
this analysis reveal that the candidate projects have
an adjusted Capture rate of some 12 %, on the average.
Although the mortgage rate offered by projects in the Rancho
Cucamonga Mortgage Revenue Bond Program has not yet been
established, the mortgage rate is presumed to be some 12$ for the
purpose of the following analysis. By comparison, the market
FHA /VA or conventional rates may be either above or below this
level during the 1984 -86 period. Consequently, it is worthwhile
to assess how this may affect the absorption of projects
participating in Rancho Cucamonga's Mortgage Revenue Bond
Program. Accordingly, the inter - relationships between housing
prices and absorption rates under various financial scenarios
were analyzed.
The analysis reveals that the potential impact of
higher prevailing market mortgage rates will have on
the absorption of residential projects in the mortgage
revenue bond program depends upon the differential
between the market FHA /VA and conventional mortgage
rates as compared to the expected mortgage revenue bond
rate of some 12%. If the prevailing market mortgage
rates should rise above 12%, then the absorption rates
of those projects in the Rancho Cucamonga's Mortgage
Revenue Bond Program would increase commensurately.
Specifically, the competitiveness of the non-
participating projects would decline substantially
since their monthly payment levels would increase,
i.e., the projects presently on the market would not be
able to lower their prices sufficiently while the
4.11
projects to be developed in the future would have to
offer more economical product types.
The Mortgage Bond Allocation Committee of the State of California
allocates the state's mortgage revenue bond funds among various
cities and counties in California. So, it is possible to
determine the particular - cities /counties that have recently
offered mortgage revenue bond issues as well as those that may
offer issues during 1984.
Specifically, mortgage revenue bonds were recently
issued by San Bernardino County, Riverside County,
Rancho Cucamonga, Ontario, Montclair, Adelanto,
Grand Terrace, Corona and Colton. The projects in
these programs that are located in the West Region of
San Bernardino County are considered to be competitive
with those in the Rancho Cucamonga's 1984 issue, due to
their financing of some 9.8 %. Consequently, these
include projects in the San Bernardino County, Rancho
Cucamonga, Ontario, and Montclair Mortgage Revenue Bond
Programs. These mortgage revenue bond programs have a
total of 1,083 units among them. The proposed mortgage
revenue bond programs for 1984 are as follows: San
Bernardino County, Ontario, Corona and Colton; the
former two have projects in the West Region of the
county, and have some 287 units in their proposed
programs.
CONCLUSIONS ON THE FEASIBILITY OF THE
RANCHO CUCAMONGA'S MORTGAGE REVENUE BOND PROGRAM
The above findings on the expected population- employment growth
and market demand - supply conditions in San Bernardino County's
West Region as well as the competitiveness of the candidate
projects are now all utilized to determine the feasibility of the
Rancho Cucamonga's Mortgage Revenue Bond Program. Specifically,
the feasibility of the Rancho Cucamonga Mortgage Revenue Bond
Program is derived through a comparison of the expected time for
the candidate projects to be marketed with the maximum time
period of three years for the program.
The total demand for the candidate projects was
estimated through a consideration of the expected
population - employment growth of the San Bernardino
County's West Region: this will result in a demand for
11,959 units during the 1984 -86 period or 3,986 units
per year, on the average. The adjusted housing demand,
after modifications for the maximum purchase price and
income limits, amounts to 4,572 units during the 1984-
86 period, or 1,524 units per year, on the average.
Consequently, since the candidate projects have a total
of 579 units, they would need to achieve an overall
A -12
capture rate of some 2.9% of the gross demand or 10.8%
of the adjusted demand, to be absorbed within the three
year period.
The projects in prior mortgage revenue bond programs
that are located in West Region of San Bernardino
County are considered to be strongly competitive with
the candidate projects in the Rancho Cucamonga Mortgage
Revenue Bond Program since they have 30 year fixed rate
financing at some 9.85 %. Specifically, in the West
Region, there are 1,083 units in these programs.
Additionally, the proposed San Bernardino County and
Ontario Mortgage Revenue Bond Programs have another 287
units. Accordingly, to arrive at a conservative
estimate of the demand for the candidate projects, the
adjusted demand is reduced by the number of units in
the prior and proposed mortgage revenue bond programs:
this results in a net demand for 3,205 units per year
during the 1984 -86 period. Consequently, the candidate
projects would have to achieve a capture rate of some
10.8% of the net housing demand to be absorbed within
the designated time period.
The competitive market analysis of the active
comparable projects that are on the market presently
resulted in estimates of capture rates for the
candidate projects. Specifically, the expected capture
rates of the candidate projects amount to 13 %, on the
average.
Considering the net demand for housing by qualified
purchasers and the capture rates for the candidate
projects, their expected annualized absorption rates
for each of the projects can be derived: these amount
to 68 units per year, on the average.
The time required for the candidate projects to be
marketed can now be determined by comparing the number
of units that each of the projects has in the mortgage
revenue bond program with their expected annual demand.
Additionally, the time that the projects are expected
to enter the market is also taken into consideration,
since their estimated annual sales rate will not
commence until the projects are actually on the market.
The results reveal that the time period required for
absorption of the candidate projects amounts to 0.9
years, on the average, and the maximum time period of
three years is met by all the projects.
For a summary of the primary conclusions of the market/ -
feasibility study as well as the absorption schedule for the
candidate projects, refer to Tables 3 and 4.
A -13
Conclusions
Therefore, based upon the expected demographic - economic trends
and housing market demand- supply conditions as well as the
competitiveness of the candidate projects, we conclude that the
housing units in the Rancho Cucamonga Mortgage Revenue Bond
Program can be absorbed within a three year period. In fact, the
housing units in the candidate projects are expected to be
absorbed within two years; this includes all of the housing units
in both of the 1984 Rancho Cucamonga Mortgage Revenue Bond
Programs. Consequently, the projects have a high degree of
marketability.
i
T. Janczyk, Ph.D.
Empire Economics
A -14
MAP A
LOCATION OF RANCHO CUCA'1014GA
AND HARKET AREAS
•'• 8ast RegioD
)Al n n A "^ ^ n A
n A A n ^^ n n n A n „ SAN BERNARDINO COUNTY
A A , n n ,p A "^ n A LOS ANGELES COUNTY n ^ A A , ^ ^ p.. AA AA
A n n" A ^^ A^ ^ n n A n n ent Region_ .r A^ n w.,..,.. w n q n
A
s M n _
5 1. / • w n -.
San h• u n•d. ro n
•Onl n en 0.Owef n n
Anp.Ns A ^ g2
SUS so tl 'cn",• .o
\ .wpa•• Centra Re• i on
^ n
.a..,.....r n n
t 57 s.nnrnm 6n ru ^ A A n ^ n n
All A
�91 n n n
/An >n.r d
• >pei[n: ss " • n . P..... 's... L.n� n q III _., n....a -_�
�S o An: a ORANGE A "" .... A A
COUNTY "^ A A A A n
A RIVERSIDE COUNTY A
" 7 ^ ^
'.PS A n n n. c' n
""^' n 4
A A A A n
s
p i1 k5 _1 in._ .. __ A An
Y
P
TABLE I
CHARACTERISTICS OF THE
CANDIDATE PRO'wc.IS
IN
NC
d"RV1:AC 4.
I'IG411UF:
NOMP PROPJiAM
RANCHO CUCAMONGA
PROJECT
- - -- HOUSING UNITS - - - - --
- -BOND PROGRAM --
•••• UO4SING
PH[C
F.: •••
•HOUSING
SIZES-
(DEVELOPER)
TOTAL
BUILT SOLD
UNITS•
MORTGAGE
MINIMUM
AVERAGE
MAXIMUM
MINIMUM
MAXIMUM
_________________________________________________________________________________________
ALLOCATION
_______________________________
Terra Vista
1,305
0
0
87
$6.868
$73,375
$83,301
$93,000
950
1,585
Levis Homes
Victoria Village
737
0
D
44
$3.434
$69,400
$82,280
$101,000
865
1,400
Ylllia 1)m Lyon Company
Marlborough Villa,
383
206
173
43
$3.434
$77,950
$85,027
$91,991)
935
1,450
Marlborough Dev. Corp.
,
Orchar4 MeadoWS
116
62
30
53
13.610
$62,900
$72,107
$86,900
766
1,312
TAC Development Corp.
Discovery Tov.homes
128
79
60
25
$1.719
$66,900
$72,806
$79,900
1,034
1,344
USA Properties
Brock Homes Cucamonga
117
57
41)
19
$1.719
$811,950
$97,027
$102,950
1, 04
1,527
M. J. Brock A Sons, Inc.
Alta Lnms Woods Tov.h
59
20
0
15
$1.117
YIfi, 000
$80,041
$82,000
1,260
1,360
Alto Loma Woods
Cimarron Oaks
3Pn
U
n
10
$0.901
196,300
$92,862
$98,400
1,140
1,465 D
The Anne. Group
<
Countryside
102
0
0
51
$II.
?98
$79,000
$89,538
$97,000
959
1,1106 -
Archibald Assoc.
�.
C
Tntals .............
3.275
424
303
345
$21.100
Average............
364
47
311
38
$3.011
$75,6112
$83,803
$92,571
999
1,428 i
9
-
• THE NUMBER OF UNITS
TO BE FINANCED WITH
BOND
PROCEEDS WAS
ESTIMATED BY USING
A 95$
LOAN TO PRICE,
(AVERAGE) RATIO.
L
D
J
CHART A
DISTRIBUTION OF THE MORTGAGE BONG FUNDS AMONGST PROJECTS IN THE BONI) PROGRAM a
CITY OF RANCHO CUCAMONGA
COMPARISON OF A SINGLE. VERSUS DUAL BOND ISSUES
Presumed Mortgage Rate: 12.00}
DUAL BOND ISSUF.
_______________
ORIGINAL SINGLE BOND ISSUE SENATE RILL ASSEMBLY BILL
PROJECT MORTGAGE ------------------------
(DEVELOPER) REQUEST ENTIT. SUP ?. TOTAL ENTIT. SUPP. TOTAL ENTIT. SHIP, TOTAL
_________________________________________________________________________________________ _______________________________
$20.00 129.10 $49.10 $7.077 $22.000
LOCATED IN RDA AREA
Terra Vista $40.000 $7.002 $10.188 $17.190 $7.002 $3.320 $10.323 $6.868 $6.868
(Le.ia Homes)
Victoria Village $20.000 $3.501 $5.094 $8.595 $3.501 $1.660 $5.161 $3.434 $3.434
(Willians Lyon )
Marlborough Villas $20.000 $3.501 $5.094 $8.595 $3.501 $1.660 $5.161 $3.434 $3,434
(Marlborough Der.)
Cimarron Oaks $5.250 $0.919 $1.337 $2.256 $0.919 $0.436 $1.355 $0.901 $0.901
(The Anden Group)
LOCATED IN NON -RDA AREA
Orchard Meadovs $8.400 $1.470 $2.140 $3.610 $1.470 $2.140 $3.610
(TAC Derelopnent )
Discovery Tornhomes $4.000 $C.700 $1.019 $1.719 $0.700 $1.019 $1.719
(USA Properties)
Brock Homes Cucamonga $4.000 $0.700 $1.019 $1.719 $0.700 $1.019 $1.719
(M. J. Brock )
Alta Loma Woods $2.600 $0.455 $0.662 $1.117 $0.455 $0.662 $1.117
(Alta La® Woods)
Countryside $10.000 $1.751 $2.547 $4.298 $1.751 $2.547 $4.298
(Archibald Assec.)
Totals ............. 1114.250 $20.000 $29.100 $49.100 $14.923 $7.077 $22.000 $5.077 $22.023 $27.100
amo.ma.. ........4444 4nuuaa o.uuaa
--- ----- -----
---- - _______ ---- _---------
-----------------------------------------------------
• The mortgage allocatl ons alll be reduced due to bond reserves;
this reduction vill be determined vhen the bonds are Issued.
EMPIRE ECONOMICS
EXHIBIT A
METHODOLOGY UNDERLYING THE MARKET /FEAS:BtL:TY STUDY
BY EMPIRE ECONOMICS
u..uuo.......ou°.' ^°.a INTRODUCTION ...uuu.................au......uu.
DESCRI?TION OF THE CITY /COUNTY DESCRIPTION IF THE CANDIDATE PHCJECTS
•
Recent Demographic v oath Pr.!act and to'!Inper
• Bemnt C n Activity • Bevelop vent St s tus: E Eatruc t.!Marketing
• Housing StOekul- Vacancy Rates • Preduc[ Rik: ? a a La v Areas
Types of Econom e
ic Bass vnq Features A Amew[ es
V... a..un...............uuu..... uu..uu. ......uu..uu..uu.......uu....00.
.unoo....... ECONOMIC ASSUMPTIONS /PARAMETERS UNDERLYING FOPECAETG .uuu.....uu
BASIC ASSUMPTIONS FUNDAMENTAL PARAMETERS
ov[M1 Pa [na for E mnomle Bases Composition oP the Ecpnom is Do"
Moat Probable Mortgage Race • (Industry, Ceamuter$. 9etireesA Tourism)
• Sate o! Hous log ADDr'cietion - employment /Population /Homing Multipliers sff
• Pate of Inflat :.n • Market Shared of Detadbed /Attaa!:ed Homes
e u a uaa. ua a oaa uaa a aua..AU. aauuau ouuuaua auto a ua......uaa aan.aauu.nau....... e
................................. .................. ..................
♦uu.uo.ua.. u.uanaun...ua...auaue ua. enu......lu......u................uu
iOUSING DEMAND BY OJALIFIED PURCHASERS HOUSING SUPPLY AND OAPTUPE PATES
FOR THE CANDIDATE PROJECTS FCR THE CANDIDATE PROJECTS
• Recent Demographic, Employment and • Survey Of the Active PesldenttaL Projects .
Construction Activity Trends in the Market Region
- recast, for Emp :.y ... t. Population cmparabla Projects i the Market Region:
and Homing Demand: '98k -67 a Market Segments, Prices s Product Types
o.... isen of Pcrmedats +1 th Recent Pro-Rata Capture gates for Projects with
Housing Trends raph 691 a Detached and Attached Housing Pfeducta
ampmltion Of Houplo' Demand ty P ompe[itiveneas of Comparable Projecte
• Ranges, Market Segments and Houavngc• , Aec9rni, to their Real Actual Payments:
Product Types :.Annual Mortgage Payments /Liv"a Areas)
a Modifica Clon of H n using Demand for Bond • Adjusted Capture Rates of the Candidate
Program C'iteria: Projects :
40a1m0. ?rice - ,Real Annual Payments for the :and ;date
rst -time Buyer Relative to the 'c mDarab :e ? o
Omer Occupancy - ?ro Almity of the Project. to a Free.ay
stoma l'indows for Candidate Proje N.a - Master Planned :ommanity Amen'^ ea
:uallfying :neeme :Prine /MO Rgage Pale
"aria um ^t
- ome for Purchasers • ompetitiveness of Candidate Projects due
Supplemental 1204 of Medain to their Special Financing Rates
Entitlement 150% or 4edaan 6 : a
ompetitivenss of Project& in Prior
co
Inme Zodovs: Mass... vs Ov alifyvng Mortgage Revenue Bon: PrORPdaa
.............................................. ....♦... ........................oa......ouu u
........................................................... %
..............I....... FEASI9IL.FY IF THE BOND ?P.CORAM .......4a..............
Estimated Annum: Ab90rn :inn Rated 'or :he ;and,J.te . "-roj•rt9
and for 'domvnq by Ouslirled Puretasera
Expected Capture Bates for -he Iand'.dst' PrOjeit3
:Andldate vro...t'3 4oual n4 'Jnit9 in .Crd a^ngrirt
•• %me B <4m red fo :n' ;a ndldat• Pro 1! ^t or AbicItn9
.0 t Note: If therm ximum time nericd of ? yarn i not
fulfilled, than the ^.eeree of project's Pafticllctl,
In bond Program may be reduced a lam•nsurately,l
. aa..... a.................................a............. a... F........................ a.. A
A -18
N C..
D
.o
RECENT TPENDS AND FO ECA STS
CANISICfATE PROJECTS INUbLYET AREA
r�
A
M
Q V
3
.7
pq z
n
n
c
C
1 C,
1970 1975 1980 1965 1990 3
TIME PERIOD
o AiTUAL + FORECAST TREND
GRAPH A
Y
0
IS RLE 2
CHARACTERISITICS
OF COMPARABLE
RESIDENTIAL
PROJECTS
CONVENTIONAL FINANCING ONLY
RANCHO CUCAMONGA
COMPARABLE PROJECTS.....
33
TOTAL
SQUARE
REAL
MONTHLY
STATISTICS
PROJECT
TOTAL
DENSITY
PRICE
FOOTAGE
FINANCING
ANNUAL
SALES
DISTANCE
SIZE
SALES
PAYMENT
RATE
ON FREEWAY
ATTACHED HOUSING
UNITS
_____________________
Total....
20
2,241
992
Range:
Minimum.........
13
0
10.20
$53,990
543
10.75%
$7.66
.00
8.00
Neximum.........
383
211
21.60
$89,695
1,359
13.50%
$13.89
10.00
13.00
Average...........
112
50
15.27
$75,365
1,083
12.44$
$9.94
2.65
10.60
Variance..........
91
53
3.20
$9,254
211
0.67%
$1.39
2.37
1.43
Most Probable
Range:
Minimum.........
66
23
13-67
$70,737
978
12.10%
$9.25
1.46
9.89
Maximum.........
150
76
16.87
$79,992
1,189
12.77%
$10.64
3.83
11.31
DETACHED HOUSING
UNITS
___ _- ____
Total....
13
1,251
642
T
Range:
Minimum .........
30
0
4.00
$62,900
1,137
11.00E
10.64
.00
. Z
xaxlmum.........
223
223
8.20
197.740
1,503
13.75%
$10.91
4.60
133.00 00 -
S
Average...........
96
65
5.75
$92,248
1,321
12.25$
$9.18
2.54
10.69 IT
R
Variance..........
47
56
1.66
$4,917
107
0.78%
$1.09
1.61
1.98 C
C
Most Probable
Range:
2
Minimum.........
73
37
4.92
$69,790
1,268
11.86$
$8.63
1.73
9.70 G`
Maximum.........
120
93
6.58
$94,707
1,374
12.64%
$9.72
3.35
11.68 3
C
U.
A -21
TABLE
3
MORTGAGE REVENUE BOND
MANRET DEMAND STUDY:
SUMMARY OF CONCLUSIONS AND
FEASIBILITY
CITY OF RANCHO
CUCAMONGA
Presumed Mortgage Rate: 12.00%
• • . . . . . . . .. . . . . . .
. . . . . INTRODUCTION• . . . . . . . . . . .
. . . . . e
Perent Grcuth Trends for Pa,ho
Cucamonga
Rancho Cucamonga Housing
Stock
______________ ___ _________________
__ ___ __ ____
----------------------------------
Product Units
Vacan77
Yopulatton Growth /Y ..............
3.366
Rate
Resid -otia: PermitelYr...........
992
Single...... 16,652
Ccmmerciel Coostr /Yr..mill.......
$4.85
Multiple.... 3,930
0.504
inlustrinl rons- r /vr..mill.......
$0.67
Total....... 211295
I.'rt
e • . . • • . . . • . ECONOMIC
ASSUMPTIONS UNDERLYING FORECASTS . • • • s .
• s . . . .
Mortgage Rate......
12.00%
Neuslng Appro.;iytion.
6.D01
Inflation Ratc.....
6.00%
Cost Inflation........
6.00%
. . • . • . DEMAND FOR HOUSING
0 •
• • HOUSING SUPPLY CONDITIONS
Market Region Forecasts
Comparable Projects
______________ ____________ ___ ________
__ ___ _ __
------------------------------------
Attached Projects..
20
E ^on om:r Recent
Detached Projects..
13
Indiaatrra Trends
Forecasts
______________ __ ___ ___ __ _ _ _ __
____ ______
Real Annual Fa Yments
Housing Onits /Yr... 1,452
3,986
Attached Projects..
$9.94
Employment /Yr..... 3,192
6,239
Detached Projects..
$9. in
Population /Yr..... 11.723
12,976
(Annual Mortgage Payment
/LivioR Area)
Prngram criteria
Capture Rates for Candidate
------------------------------------
Projects
___________ ______________ ___ ____
Maximum Housing Price.a
______ _ ___
Pro -Rata Capture Rates
New H ........... ..........
$99,221
Attached Produrts..
5.00%
Existing Homes............
$93.360
Detached Produr ts..
7.69%
Maximum Purchaser Inc omen
Real Annual Payments
$B.11
Average ...................
$27,143
Entitlement ...............
$40,715
Capture Hate for the
Supplemental ..............
$32,572
Projects -An nuallY
12.74%
. . . . . . . . . . .. . . . . .
FEASIBILITY OF THE
BOND PROGRAM • • ' . ' •
' • a a A A
Units.,
345
Capture Date
Required
Category or Housing Demand
1984 -86 Period
Annually
-------------
51984 -86)
____________
____ ___ ____ __________ __________
Gross Demand for Housing.........
______________
11,959
3,986
2.88%
Demand Adjusted for Housing Price
A
Purchaser Requircmentn........
4,572
1,524
7.41%
Demand Adjusted for Projects In
Prior A Proposed Hood Programs..
______________________________________________________________
31205
1,06R
_______ __ __ ____________________
10.76%
A -21
N
N
TABLE 4
MORTGAGE REVENUE BOND MARKET DEMAND STUDY: SUMMARY OF CONCLUSIONS AND FEASIBILITY
CITY OF RANCHO CUCAMONGA
ASSEMBLY HILL 11355
Presumed Mortgage Rate: 12.00%
a a• a a•• a a a.. a a
. a a
CHARRCTERSITICS OF THE PROJECTS IN
THE BOND PROGRAM • a a
a
PROJECT
(DEVELOPER)
-- BOND
UNITS ALLOCATION
PROGRAM --ENTITLEMENT
SUPPLEMENTAL
PRICES
SALES SALES
TIME
____________________ _____
FUNDS
___
FUNDS
(AVG)
PER YEAR (YEARS)
(million.)
__________
__________ __________
Terre Vista
(Caul. M...)
87
$6.868
$6.868
$83,301
120
0.89
Victoria Village
44
$3.434
$3.434
$82.280
(Wlllbnm Lyon )
78
0.64
Marlborough Villas
43
$3.434
$3.434
$85,027
(Marlborough Dev.)
55
1.03
Cimarron Oaks
10
$0.901
$0.901
$92,862
(The Anden Group)
32
0.82
Orchard Meadoua
(TIC Daaelopaant )
53
$3.610 $1.470
$2.140
$72,107
68
1.02
Discovery Tounhomes
25
$1.719 $0.700
$1.397
$72,806
77
(USA Properties)
0.82
Brock Homes Cucamonga
19
$1.719 $0.700
$1.019
$97,027
(M. J. Brock )
53
0.65
Alta Loma Woods
15
$1.117 $0.455
$0.662
$80,041
(Alta Loma Woods)
77
0.69
Countryside
51
$4.298 $1.751
$2.547
$89.588
51
1.57
(Archibald Asada.)
Totala .............
345
$27.100 $5.076
$22.402
612
Average............
38
$3.011
--------
$83,893
68
0.93
• Th1a re Dres encs Ea__pl re
Hconomlon'
____ --- _------- _------ ____
estimate of the maximum amount of
-------- _-----
mortgage
_---- _--- _--------
funds that the candidate
projects could utilize
during
the three year mortgae
loan origination
period.
Consequently, if
some
of the Projects do not
Perform
according to their designated construction
/marketing
acdedules,
then
the mortgage funds may
be re- allocated
amongst the remaining projects,
so that
the probability
of
utilizing the program's mortgae
funds is maximized.
ASSUMPTIONS•AND QUALIFICATIONS
The methodology underlying this study has been designed to take
into account all of the various demographic, economic, and
housing market factors that will influence the success of the
various projects in Rancho Cucamonga's Mortgage Revenue Bond
Program. Specifically, the data used in the analysis have been
gathered from sources that are regarded as being reliable.
Furthermore, the forecasts of housing demand are based upon the
most probable assumptions regarding the economic and housing
market conditions that are likely to prevail in the future.
While a high degree of conscientiousness has been exercised with
respect to the above factors, we nevertheless take special care
to state the assumptions and qualifications underlying the study.
Specifically, data presented in the study are not guaranteed in
terms of their accuracy or reliability. The forecasts of housing
demand are also not guaranteed, since there are numerous
economic, physical and political factors that appear to be
inconsequential at the present time but may ultimately have a
substantial effect on the success of the program,
Furthermore, the success of the mortgage revenue bond program
depends upon some events which are completely beyond our control.
First, the competitiveness of the various projects in the
program, as compared to other projects that may come on the
market, depends upon their interest rate differential. Should
mortgage rates decline significantly after the issuance of the
bonds, so that the market rates are below the bond rates, then
the financing competitiveness of the projects in the program
would diminish, and so more time may be required for their
absorption, Secondly, the success of a particular project also
depends upon the quality of the housing products as well as the
effectiveness of its marketing program; this is also beyond our
control.
A -23
(THIS PAGE INTENTIONALLY LEFT BLANK)
APPENDIX B
The Developers
The City intends to use the majority of the Bond proceeds to purchase Home
Mortgages made to finance newly constructed single family residential units
located in the City. Based on current estimates provided by the Developers,
Home Mortgages to finance approximately 345 single family residential units
are to be purchased. The following discussion describes the Developers. The
Developers provided the following information and are solely responsible for
the accuracy and completeness of such information. Neither the City nor the
Underwriter has independently verified the accuracy of the following
information.
Alta Lose Woods Associates ::I - Alta Loma Woods Townhomes
Alta Loma Woods AseoCi.utes II is a California limited partnership formed
in October of 1983 specifically for the Rancho Cucamonga development. Charles
M. Roy and N.L. Roy are the general partners. Its principal office is .:n
Orange, CAlifornia. Since 1963 the general partners have built 650 homes in
Southern California.
The Anden Group - Cimarron Oaks
The Anden Group is a California general partnership formed in 1976. The
general partners are Eugene Rosenfield and Jim Klingbell and its principal
office is in Covina, Cal,fornia. The Arden Group has been in continuous
operation since its formation and has constructed over 5,000 condominiums and
detached single family homes.
Archibald Associates - Countryside
Archibald Associates is a California limited partnership formed in 1984
specifically for the Rancho Cucamonga development. Pacer Hones Inc., the
general partner was formed in 1976 and has constructed over 150 single - family
units. Weyerhaeuser Venture Company, the limited partner, has constructed
over 3,000 units in the la:st year. It has its principal office in Santa Ana,
California.
M.S. Brock 6 Sons. Inc. - Brock Homes Cucamonga
M.J. Brock 6 Sons, Inc. is a Delaware corporation formed in 1969 when _he
company merged with INA Corp. 1NA subsequently merged with Zonnectic.it
General to form CIGNA Corp, which is now the parent company of M.J. Brock i
Sons, :nc. M.J. Brock h Sons. Inc. has been in the construction industry
since 1922, built its first residential development in the late 1940's and has
built over 20.000 homes orimarily in Southern California. Brock Homes
Cucamonga is the second subdivision built by Brock in Cucamonga in the last 8
years. Brock has its principal office in Los Angeles, California.
B -1
Lewis Homes - Terra Vista
Lewis Homes is a California general partnership formed in 1973. Ralph M,
Lewis and Goldy Lewis are the general partners. Lewis Homes has its principal
office in Upland, California. Since 1955 Lewis Hanes has constructed over
18,074 single family homes in the Western United States.
The William Lyon Company - Victoria Village
The William Lyon Company is a California corporation formed in 1972. The
principal shareholder is William Lyon. The William Lyon Company typically
constructs between 1200 to 2000 units per year. Its principal office is in
Rancho Cucamonga, California.
Marlborough Development Corp. - Marlborough Villas
The Marlborough Development Corp, is a California corporation formed in
1956. It is wholly owned by Midland Housing Industries Corporation which is
owned by Midland Holding Company. Since :.ts formation, Marlborough
Development Corporation has constructed over 12,000 single family homes. It
has its principal office in Los Angeles, California.
TAC Development Corporation - Orchard Meadows II
TAC Development Corporation is a California corporation formed in August
of 1982. Terry Christensen is the principal shareholder. Mr. Christensen has
been involved in the construction of over 800 townhomes, condominiums and
detached single family units. TAC Development Corporation has its principal
office in Rancho Cucamonga, California.
USA Properties Fund, Ltd. - Discovery Village Townhomes
USA Properties Fund is a limited partnership organized under the laws of
California in February of 1981. The general partners are Champion Equity
Corporation, and USA Properties Fund, Inc. Since 1969 the general partners
have been responsible for more than $300 million in residential property
development. USA Properties Fund, Ltd. has its principal office in Santa
Monica, California.
B -2