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r APR m 5 199� mox 9, 2 current Plan provides for the accrued interest to be forgiven if the housing unit is retained for more than twenty years. The intent is to provide an incentive for people to stay in their units and enhance community stability. To enhance that incentive and correspond more closely with the policy of many other local governments, staff and the Affordable Housing Advisory Committee propose that the twenty year provision be revised and replaced with the following: • to eliminate any recapture requirement after ten (10) years of loan closing or assumption; • to forgive the accrued interest after fifteen (15) years of loan closing or assumption; however, the interest applicable to rehabilitation loans on investor-owned rental units will not be forgiven; and • to forgive the loan principal amount after 20 years of loan closing or assumption. If a housing unit that utilized County Local Housing Assistance Program funds is sold before the twenty year affordability timeframe, the amount of the loan principal, accrued interest not yet forgiven, and any applicable recapture of the profit will be payable to the county. These funds would go back to the affordable housing trust fund and be used as revolving loan assistance for other eligible persons. 5. Maximum Loan amount for Downpayment/Closing Cost Assistance The current Local Housing Assistance Plan provides that the maximum loan amount for Downpayment/Closing Cost Assistance is $4,000 for eligible moderate income persons and $6,000 for eligible low or very low income persons. After processing loan applications for very low and low income persons for four months, program participants have determined that the amount of assistance should be raised for very low income and low income persons. Also, financial institutions have indicated that by raising the downpayment/closing cost loan amount limits, then it would be possible for financial institutions to provide first mortgages without incurring PMI (Private Mortgage Insurance) costs. In the revised plan, the maximum amount of downpayment/ closing cost assistance has been increased from $4,000 to $7,000 for moderate income persons -and from $6,000 to $10,000 for very low and low income persons. 6. Eligibility Another related concern is the issue of the -eligibility of moderate income persons. Current state requirements allow participating local governments to provide assistance to any qualifying moderate income person; however, state rules require that -not more than 40% of the recipients be from the moderate income group. 26