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2	Best Practices for Financial Institutions The Road Home Program February 16, 2007
3	Agenda Road Home - Fundamentals Closings Subordination Disbursement Agreements Best Practices Overview Disbursement and Construction Process Paperwork MOU
4	Road Home - Fundamentals The Road Home program is designed to: Purchase homes if owner wants to sell Compensate a homeowner for losses The Road Home calculates benefits – up to $150,000 - based on pre-storm value and damages minus other compensation In exchange for certain benefits HO agrees to covenants
5	Road Home – Purchase of Home Homeowners may: Sell home to program and purchase another in LA as primary residence Sell home to State and move out of LA Purchases by State are “closed” like any other transaction: Title search Closing Payoff to lien holders Recorded title
6	Road Home - Compensation Homeowner keeps home in exchange for compensation and signing covenants In covenants homeowner agrees to: Comply with code, zoning, and FEMA advisory base flood elevations Remain in the home as primary residence for a minimum of 3 years (5 years if receiving an affordable loan) Maintain hazard and flood insurance (if in a flood zone) Assign future insurance or other public benefits to the Road Home Program
7	Road Home - Covenants For covenants to prevail: Lenders agree to subordinate Homeowner signs Disbursement Agreement and agrees to place Road Home award in disbursement account Disbursement account is managed by lender on behalf of HO Lenders help manage disbursement account to ensure reinvestment in property
8	Closing on Awards First American Title: closing agent for the Road Home Searches title Confirms ownership Requests subordination Insures title to State Prepares closing documents Conducts closing Disburses funds and documents to lender Disbursement Agreement (signed by owner at closing) W-9 “Right of Entry” for inspections - optional
9	Closing on Awards: Subordination Process First AM requests from 1st lien holder Disbursement information Passbook interest rate to be paid to customer Contact information Subordination Owner signs Disbursement Agreement and Covenant at closing Paperwork forwarded to lien holder
10	Best Practices – Lender/Road Home What? – guidelines for handling disbursement accounts and customer contact How? – lenders and Road Home developed in partnership Who? - MOU between lenders and Road Home Best efforts that are commercially reasonable
11	Best Practices - Overview Key features: Use of funds in disbursement account: repair or rebuild home – NOT REPAYMENT OF DEBT Timing: completed in 18 months or consult with Office of Community Development Interest: paid to the benefit of the homeowner at passbook rates Location of accounts: federally insured accounts; institution selected by servicer/lender
12	Best Practices – Overview Fees: Waived except for recordation Contractors: Licensed and insured, assuming home not yet repaired Inspections: Progress and final if home not yet repaired Completion: Records in file that substantially complete Certificate of Final Disbursement Excess funds: To Homeowner
13	Best Practices – Disbursements: Process Disbursement process depends on home’s status: Already repaired Repairs incomplete or not yet started
14	Best Practices – Disbursements: Homes Already Repaired Best Practice Immediately contact homeowner to: Explain disbursement process Establish condition of property If repaired, ok to release to HO $7,500 or up to 10% but not less than $2,500 If your institution managed or oversaw construction Review your records to determine if work on home substantially complete OR inspect if no records Obtain documentation of insurance from owner or from your files Obtain signatures on Certificate of Final Disbursement Disburse funds to owner If you did not manage or oversee construction Arrange for inspection to confirm substantial completion Obtain documentation of insurance from owner or from your files Obtain signatures on Certificate of Final Disbursement Disburse funds to owner
15	Best Practices – Disbursement: Home already repaired If home already repaired, do we need? Certificate of Occupancy NO Evidence of licensed contractor NO Receipts from repairs NO Documentation of substantial YES completion Evidence of insurance YES Signed Cert of Final Disbursement YES
16	Best Practice – Disbursement: Work not Completed Prior to Grant Best Practice Immediately contact homeowner to: Explain construction and disbursement process Establish condition of property Obtain copy of executed construction contract Review to ensure contractor is licensed in state of LA if work > than $7,500 Disburse up to $7,500 or 10% of grant amount, but not less than $2,500 NOTE: you may also reimburse for work already completed and not already paid for from insurance or other public funds Make progress inspections and payments After final inspection Obtain documentation of insurance Obtain documentation of substantial completion from your inspector Obtain signatures on Certificate of Final Disbursement Obtain Certificate of Occupancy - optional Disburse all remaining funds to owner
17	Best Practice – Disbursement Work not Completed Prior to Grant Do I need? Evidence of licensed contractor YES Interim and final inspections YES Receipts from repairs NO Certificate of Occupancy Optional Documentation of substantial YES completion Evidence of insurance YES Signed Cert of Final Disbursement YES
18	Best Practice – Disbursement: Elevation If homeowner received allowance for elevation they must elevate to comply with covenants Elevation allowance is an extra benefit It helps pay for elevation work Actual elevation work may cost more or less If HO received elevation allowance: make sure elevation is part of scope of work OR if repairs completed that home was elevated
19	Best Practices – Disbursement: Definitions What is: “Substantially complete” – home is sufficiently complete so owner can occupy or utilize it for its intended purpose: habitable, basic systems in place, elevated if elevation was required “Insured” – evidence of insurance for hazard and, if required because in flood zone, flood insurance
20	Best Practices – Disbursement Definitions, cont. “Licensed contractor” – Contractor with license from LA Contractor Licensing Board No license needed if work <$7,500 Home Improvement License: contract value > $7,500 - $50,000 General Contractors License: Contract value > $50,000 Servicers, at their discretion, may allow HOs to be their own contractor
21	Best Practices – Disbursements: Homes Needing Repair Typical Disbursement Schedule: 1st disbursement: 10% or $7,500, whichever is less, but not less than $2,500 when contract signed 2nd disbursement: up to 1/3 at 33% completion 3^rd disbursement: up to 2/3 of total at 66% completion Remaining funds at completion WORKS TO PREVENT FRAUD FLEXIBILITY TO VARY BASED ON BORROWER CIRCUMSTANCES
22	Best Practices – Disbursement: Construction Monitoring Monitor the progress and completion of work verify the percentage of work completed not a code or compliance inspection From inspection requests to payment: 14 days
23	Best Practices - Final Disbursements Certificate of Final Disbursement What: Confirms work complete Certifies by owner that covenant conditions met Occupancy as primary residence Insurance for hazard, and if required, flood Property elevated if required Why: Needed to initiate period of performance for covenants Actions: Confirm construction complete and insurance in place Obtain notarized signatures on Certificate Record Certificate
24	Best Practices: Limitation on Liability No liability: to the homeowner, the state of Louisiana or any other party for failing to comply with these Best Practices for any failure to build or repair, complete, protect or insure the homeowner’s home for any costs of rebuilding the homeowner’s home for any waste or fraud if owner uses any disbursed grant funds for purposes other than uses intended
25	Best Practices – Agreements and Legal Documents
26	Next Steps If you have not signed MOU: Email Tboyd@road2LA.org for copy Review documents Sign the MOU Forward point of contact to First American - TPRoberts@firstam.com
27	Next Steps Put management plan in place: Identify team to manage customers Create tracking system Prepare outreach and communication for customers Establish business process for inspections and approvals Prepare disbursement process
28	"The Road Home:" The Road Home: Together We Can Help Homeowners to Return Home