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THE CITY OF - , ... „~ ~L~E~S~4NTONo July 17, 2007 Finance Department Housing Division TITLE: APPROVE RESOLUTION INITIATING BANKING SERVICES WITH FREMONT BANK TO ADMINISTER THE HOUSING DIVISION SECOND MORTGAGE LOAN PROGRAM SUMMARY Since 2001, the City of Pleasanton has provided individual second mortgage loans to approximately 40 eligible borrowers who have purchased below-market priced homes through the Pleasanton Homeownership Assistance Program (PHAP). The loans have been funded through the City's Lower Income Housing Fund (LIRE). The City's Housing Division and Finance Department currently administer the loans. As more loans reach the end of the five-year deferral period for payments, staff has contracted with Fremont Bank to take over the monthly loan servicing and payment processing for an annual fee of $60 per loan. In order to facilitate the collection process, staff is required to open a bank account with Fremont Bank (Koll Center Parkway branch) for the deposit of monthly loan payments. RECOMMENDATION Staff recommends that the City Council approve the resolution initiating banking services with Fremont Bank to administer the City's second mortgage loan program. FINANCIAL STATEMENT The regular monthly housing loan payments will continue as before with Fremont Bank assuming responsibility for invoicing, collection and delinquency notices. The fee paid by the City to Fremont Bank to administer each loan ($60 annual fee per loan) is considerably less than the staff cost currently devoted to the process. The estimated total cost in fiscal year 2008 is $500 to $1,000 and includes the current loans and the loans scheduled to commence during the year. As the loan program continues to expand, a financial institution with loan administration expertise is better suited to provide the customer service necessary to maintain the program. 6 CITY COUNCIL AGENDA REPORT