Let’s take a closer look at one of those home loans, the most expensive one in the program: The purchase price of a home at $1,790,000 in a fine neighborhood in Santa Barbara. The employee in the City Attorney’s office was awarded a 5-year pin for employment by the city this January (who presumably can now expect a 25% forgiveness of the points loan of $31,392, or approximately $7,800).
The monthly salary of this employee, in the most recent collective bargaining agreement is between $8,376.01-$10,181.04
It appears that the buyers had a down payment of approximately $730,000 when they purchased this house. Did they really need the additional $173,175 at very low interest—what is almost interest-free money—to find suitable housing in the City of Santa Barbara?
We will not disclose the name or address of the city employee, but here are the facts as documented on City and County files:
Document: Deed of Trust April 7 2006
Purchase price per tax assessor: $1,790,000.00
Second Mortgage: (provided by the City as part of the Employee Mortgage Loan Assistance Program): $147,150.00 Deed of Trust is recorded. The Promissory Note of the same date is not recorded. Current interest rate 0.56%
First Mortgage: (provided by Santa Barbara Bank and Trust) $882,850.00 dated April 4, 2006 Deed of Trust recorded.
Points Loan: $ 31,392.00 (Provided by the City of Santa Barbara as part of the Employee Mortgage Loan Program. Apparently this loan is not recorded. Is this loan also interest only for five years?) The chart provided by City Finance Director Robert Samario shows no payments on principal to date.
Among the questions that still need to be answered are the following:
- 1) What portion of this loan program covers the monthly administration costs to accept and record payments, determine the applicable interest rates and verifications necessary?
- 2) Does the City issue 1099 forms to the employees who have these loans? Does the City consider the below market loan rates “extra compensation?”
- 3) What are the written rules and terms for forgiveness of the points loans?