County of Kings First-Time Homebuyer

Program Guidelines

For:

Building Equity & Growth in Neighborhoods (BEGIN) Program

Serving the Unincorporated Areas of Kings County

BEGIN Approved 4/23/12

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COUNTY OF KINGS BEGIN PROGRAM

FIRST-TIME HOMEBUYER PROGRAM GUIDELINES

Table of Contents

1.0. GENERAL 1.1. Program Outreach and Marketing 1.2. Application Process and Selection 1.3. The Home Purchase Process 1.4. Homebuyer Costs 1.5. Homebuyer Counseling 1.6. Conflict of Interest Requirements 1.7. Non-discrimination Requirements

2.0. APPLICANT QUALIFICATION 2.1. Current Income Limits 2.2. Income Qualification Criteria 2.3. Definitions of an Eligible Homebuyer

3.0. HOUSING UNIT ELIGIBILITY 3.1. Location and Characteristics 3.2. Condition

4.0. PURCHASE PRICE LIMITS 5.0. THE PRIMARY LOAN

5.1. Qualifying Ratios 5.2. Interest Rate 5.3. Loan Term 5.4. Impound Account

6.0. THE PROGRAM LOAN 6.1. Maximum Amount of Program Assistance 6.2. Non-recurring Closing Costs 6.3. Affordability Parameters for Homebuyers 6.4. Rate and Terms for Program Loans 6.5. Loan to Value Ratio

7.0. PROGRAM LOAN REPAYMENT 7.1. Voluntary Payments 7.2. Receiving Loan Repayments 7.3. Due Upon Sale or Transfer 7.4. Loan Servicing Policies and Procedures 7.5. Loan Monitoring Procedures

8.0. PROGRAM LOAN PROCESSING AND APPROVAL 8.1. Completion of Underwriting and Approval of Program Loan 8.2. Primary and Program Loan Document Signing 8.3. Escrow Procedures

9.0. SUBORDINATE FINANCING 10.0. EXCEPTIONS AND SPECIAL CIRCUMSTANCES

10.1. Definition of Exception 10.2. Procedures for Exceptional Circumstances

11.0. DISPUTE RESOLUTION AND APPEALS PROCEDURE 12.0. REUSE ACCOUNT PLAN

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TABLE OF CONTENTS (Continued) EXHIBITS

EXHIBIT A: Income Limits/Maximum Purchase Price Limits EXHIBIT B: Gross Income Worksheet EXHIBIT C: Loan Application Form EXHIBIT D: Loan Servicing Plan EXHIBIT E: Instructions to Homebuyers EXHIBIT F: County Loan Documents EXHIBIT G: Borrower Appeal Format EXHIBIT H: Reuse Account Plan

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COUNTY OF KINGS FIRST TIME HOMEBUYER BEGIN MORTGAGE ASSISTANCE PROGRAM GUIDELINES

1.0. GENERAL The County of Kings (COUNTY) has entered into a contractual relationship with the California Department of Housing and Community Development (“HCD”) to administer a homebuyer program funded with State of California HCD funds under the Building Equity & Growth in Neighborhoods (BEGIN) Program established in Health and Safety Code section 50860, et seq. The BEGIN homebuyer program described herein (the “Program”) is designed to provide assistance to eligible first-time homebuyers in purchasing newly constructed homes, also referred to herein as “housing units”, located within the Program’s eligible area as described in the COUNTY’s BEGIN Application (the “Program’s eligible area”). The Program provides this assistance in the form of deferred payment “silent” second priority loan(s) as “Gap” financing toward the purchase price and closing costs of affordable housing units that will be occupied by the homebuyers as their primary residence. The Program will be administered by Self-Help Enterprises (SHE), a California Nonprofit Corporation and the COUNTY. 1.1. PROGRAM OUTREACH AND MARKETING

All outreach efforts will be done in accordance with state and federal fair lending regulations to assure nondiscriminatory treatment, outreach and access to the Program. No person shall, on the grounds of age, ancestry, color, creed, physical or mental disability or handicap, marital or familial status, medical condition, national origin, race, religion, gender or sexual orientation be excluded, denied benefits or subjected to discrimination under the Program. The COUNTY will work with Self Help Enterprises (SHE) to ensure that all persons, including those with handicaps have access to the Program. The Fair Housing Lender logo will be placed on all outreach materials for the BEGIN program. The COUNTY will work closely with the affordable housing developer (Developer) and SHE to explain the Program requirements for eligible homebuyers, and to review Program processes. BEGIN assisted units will be developed within the Program’s eligible area.

1.2. APPLICATION PROCESS AND SELECTION

Applicants will be referred to SHE by the Developer. Each interested applicant will be requested to complete an application form that asks for sufficient information concerning income, employment, and credit history to establish preliminary eligibility for Program participation. SHE will forward to the applicant the “Instructions to Homebuyer”, attached as Exhibit E. Assistance is provided to qualified applicants on a first-come-first-served basis according to the receipt date of a completed application. Applications are only deemed complete if all information is satisfactorily completed. If SHE or the COUNTY encounters material discrepancies and/or misrepresentations, and/or there are income, asset, household composition, or other important questions that can’t be resolved, the COUNTY reserves the right to deny assistance to the household. In this case, the applicant may re-apply after six months have elapsed from the time of written assistance denial.

1.3. THE HOME PURCHASE PROCESS

A. The purchase and sale agreement will be contingent on the household and housing unit meeting

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Program eligibility requirements and receiving Program loan approval. SHE will verify applicant qualification, loan eligibility, and estimated amount of assistance that may be provided consistent with these guidelines.

B. The following is a simplified example of how lenders (primary and secondary) would analyze a homebuyer’s finances to determine how much could be affordably borrowed towards homeownership.

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C. When loan requirements are met, BEGIN funds may be deposited into escrow, with required closing instructions and loan documents. For this to happen, SHE will obtain a copy of the Purchase Agreement with Applicant(s) signature(s), Note, Deed of Trust and Statutory Lending Statement, and forward to COUNTY, with an escrow deposit request, at least two (2) days prior to the tentative

SAMPLE DEBT SERVICE FOR A FAMILY OF FOUR EARNING ABOUT $2,112 PER MONTH

HOUSING PAYMENTS TOTAL OVERALL PAYMENTS Principal & Interest Payment $520 $697 Housing Insurance $57 $200 Other Debt Service Taxes $120 $897 Total Debt Service Total Housing Expense $697 (Total Housing Expense (i.e. Principal, Interest, Taxes and Insurance) is approximately 33% of $2,112 which is a qualifying front-end ratio described in Section 5.1; Total debt service per month is about 42% of $2,112 which is a qualifying back-end ratio described in Section 5.1.) OTHER HOUSEHOLD DEBT SERVICE Car Payment $135 Credit Card Payment $65 Total Other Debt $200 A $520 per month loan payment equates to borrowing approximately $123,500 at 3% for a 30-year term.

SAMPLE SUBSIDY CALCULATION FOR A FAMILY OF FOUR EARNING $2,112 PER MONTH

Purchase Price of Property $195,000 Less Subordinate Financing (3rd position or lower) $42,050 Less Primary loan amount $123,500 Less buyers’ down payment of 1% $1,950 Equals “GAP” $27,500 Plus estimated allowable settlement charges $2,500 Equals total BEGIN subsidy $30,000

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escrow closing date. As part of this escrow deposit request, a final review and confirmation of the applicant’s qualification and eligibility will be conducted by SHE and forwarded to COUNTY for concurrence before BEGIN funds are released to the escrow company.

D. Prior to the time of escrow closing, the COUNTY will conduct an inspection to ensure the property meets building code requirements, pursuant to Section 3.2A of these guidelines. The COUNTY shall be named as an additional loss payee on applicant’s insurance for the length of the loan and in an amount sufficient to cover all encumbrances.

1.4. HOMEBUYER COSTS A. Eligible households must document that they have the personal funds necessary for down

payment and closing costs as required by the Primary Lender and COUNTY. The Program’s minimum down payment requirement (below) must be in place even if the Primary Lender has a lower down payment requirement.

B. Homebuyer funds shall be used in the following order:

1) Down payment - Minimum Requirement: one percent (1%) of purchase price evidenced by cash.

2) To the extent possible after satisfying 1) above, remaining homebuyer funds can be

used for appraisal fee; cost of credit report; the loan origination fee; homebuyer’s customary portion of the escrow fees; title insurance; and, the establishment of impound accounts for property taxes and insurance.

3) After 1) and 2), above, are satisfied, any balance of homebuyer funds may be applied to

the purchase price. C. If the items in B.2), above cannot be satisfied with homebuyer funds, COUNTY will provide

Program assistance to cover the remaining balance of the non-recurring loan closing costs. D. COUNTY will also provide sufficient assistance to reduce the monthly payments for Principal,

Interest, Taxes and Insurance (PITI) to an affordable level of household income. The subsidy will write down the cost of the purchase price so that the payments of PITI are within approximately 30% to 35% of the gross household income. SHE will be responsible for initially analyzing and recommending the level of subsidy (i.e., gap) and affordability during underwriting of the Program’s loan to make sure that it conforms to the requirements of the BEGIN funding Program. The COUNTY will review and confirm the underwriting or if warranted, amend the subsidy amount (must be within the underwriting standards and maximum amount of assistance outlined in Sections 5.0 and 6.0).

1.5. HOMEBUYER COUNSELING

All Program participants will be required to attend and complete COUNTY approved homebuyer counseling prior to close of escrow. Homebuyer counseling will cover such topics as the following: preparing for homeownership; available financing; credit analysis; loan closing; housing construction; homeownership responsibilities; home maintenance; and loan servicing. Evidence of completion by the

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homebuyer must be provided to COUNTY prior to close of escrow. 1.6. CONFLICT OF INTEREST REQUIREMENTS

In accordance with title 24, Section 570.611 of the Code of Federal Regulations, no member of the governing body and no official, employee or agent of the local government, nor any other person who exercises policy or decision-making responsibilities (including members of the loan committee and officers, employees, and agents of the loan committee, the administrative agent, contractors and similar agencies) in connection with the planning and implementation of the Program shall directly or indirectly be eligible for this Program. Exceptions to this policy can be made only after public disclosure and formal approval by the governing body of the locality.

1.7. NON-DISCRIMINATION REQUIREMENTS

The Program will be implemented in ways consistent with the COUNTY’s commitment to non-discrimination. No person shall be excluded from participation in, denied the benefit of, or be subject to discrimination under any program or activity funded in whole or in part with State funds on the basis of his or her religion or religious affiliation, age, race, color, creed, gender, sexual orientation, marital status, familial (children) status, physical or mental disability, national origin, or ancestry, or other arbitrary cause.

2.0 APPLICANT QUALIFICATIONS 2.1. CURRENT INCOME LIMITS FOR THE AREA, BY HOUSEHOLD SIZE

All applicants must certify that they meet the household income eligibility requirements for the applicable HCD program(s) and have their household income documented. The HCD and COUNTY’s income limits in place at the time of loan approval will apply when determining applicant income eligibility. All applicants must have incomes within 120% of the area median income (AMI), adjusted for household size, as published by HCD each year (see Exhibit A).

COUNTY will update the income limits annually as HCD provides new information. The link to the official, HCD-maintained, income limits is: http://www.hcd.ca.gov/hpd/hrc/rep/state/incNote.html Terms defined:

Household: One or more persons occupying a housing unit.

Annual Income: Generally, the gross amount of income of all adult household members that is anticipated to be received during the coming 12-month period.

2.2. INCOME QUALIFICATION CRITERIA

Projected annual gross income of the applicant’s household will be used to determine whether the applicant is above or below the published HCD income limits. Income qualification criteria, as shown in the State HCD BEGIN Operations Handbook (see http://www.hcd.ca.gov/fa/begin/) , will be followed to independently determine and certify the household’s annual gross income. SHE will compare this annual gross income to the income the Primary Lender used when qualifying the household. Depending who the Primary Lender is, underwriting may follow FHA or conventional guidelines, and

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may not calculate the household income or assets in the same way as required by the Program. To be eligible for Program down payment assistance, income will need to be verified by reviewing and documenting tax returns (past two years), copies of wage receipts, subsidy checks, bank statements and third party verification of employment forms sent to employers. All documentation shall be updated within six months prior to loan closing and kept in the applicant’s file and held in strict confidence.

A. HOUSEHOLD INCOME DEFINITION:

Household income is the annual gross income of all adult household members that is projected to be received during the coming 12-month period, and will be used to determine program eligibility. For those types of income counted, gross amounts (before any deductions have been taken) are used. Two types of income that are not considered would be income of minors and live-in aides. Certain other household members living apart from the household also require special consideration. The household’s projected ability to pay must be used, rather than past earnings, when calculating income. All relevant facts underlying the income information collected will be assessed. A sample Income Worksheet is attached as Exhibit B and a COUNTY approved loan application is attached as Exhibit C. Additional information regarding household income can be found in the State HCD BEGIN Operations Handbook.

B. ASSETS:

There is no asset limitation for participation in the Program. Income from assets is, however, recognized as part of annual income. In the BEGIN Program, when a household has net household assets in excess of $5,000, annual gross income shall include the greater of: actual amount of income, if any, derived from all the net household assets, or current passbook rate as established by HCD of the value of all such assets. An asset is a cash or non-cash item that can be converted to cash. Examples include value of equity in real property, savings accounts, stocks, bonds and other forms of capital investments. The value of necessary items such as furniture and automobiles are not included. (Note: it is the income earned – e.g. interest on a savings account – not the asset value, unless the exception cited above applies, which is counted in annual income.) An asset’s cash value is the market value less reasonable expenses required to convert the asset to cash, including, for example, penalties or fees for converting financial holdings and costs for selling real property. The cash value (rather than the market value) of an item is counted as an asset. Additional information regarding treatment of assets can be found in the State HCD BEGIN Operations Handbook.

2.3. DEFINITIONS OF AN ELIGIBLE HOMEBUYER

A. An eligible homebuyer means an individual or individuals or an individual and his or her spouse who meets the income eligibility requirements and is/are not currently on title to real property. Documentation of homebuyer status will be required for all homebuyers.

B. “First-time homebuyer” means a borrower(s) who has not owned a home during the three-year

period before the purchase of a home with subsidy assistance, except that the following individual or individuals may not be excluded from consideration as a first-time homebuyer

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under this definition: 1) a displaced homemaker who, while a homemaker, owned a home with his or her spouse

or resided in a home owned by the spouse. A displaced homemaker is an adult who has not, within the preceding two years, worked on a full-time basis as a member of the labor force for a consecutive twelve-month period and who has been unemployed or underemployed, experienced difficulty in obtaining or upgrading employment and worked primarily without remuneration to care for his or her home and family;

2) a single parent who, while married, owned a home with his or her spouse or resided in a

home owned by the spouse. A single parent is an individual who is unmarried or legally separated from a spouse and has one or more minor children for whom the individual has custody or joint custody or is pregnant; or

3) an individual or individuals who owns or owned, as a principal residence during the

three-year period before the purchase of a home with assistance, a dwelling unit whose structure is:

a) not permanently affixed to a permanent foundation in accordance with local or

state regulations; or b) not in compliance with state, local, or model building codes and cannot be brought

into compliance with such codes for less than the cost of constructing a permanent structure.

3.0. HOUSING UNIT ELIGIBILITY 3.1. LOCATION AND CHARACTERISTICS

A. Housing units to be purchased must be located within the Program’s eligible area.

B. Housing unit types eligible for the Homebuyer Assistance Program are new single-family residences.

C. All housing units must be in compliance with State and local codes and ordinances.

D. Housing units located within a 100-year flood zone will be required to provide proof of flood insurance in order to close escrow.

3.2. CONDITION

A. Construction and Building Code Inspection

Once the first-time homebuyer has been accepted into the housing program, the following steps must be taken for the housing unit to be eligible for expenditures of down payment assistance under the Program:

1) In accordance with standard building code requirements, COUNTY will inspect the house to

determine if it is structurally sound, and identify any code related and health and safety

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deficiencies that need to be corrected. If needed, a list of code related repair items will be given to Developer for correction.

2) A clear pest or termite inspection report will be required for each housing unit and

delivered to COUNTY prior to close of escrow. Smoke/fire detectors will also be required.

3) Upon completion of all work required by the COUNTY, a final inspection will be conducted and a certificate of occupancy will be provided by COUNTY staff prior to close of escrow. Subsequent to a Notice of Completion and prior to occupancy, staff will review for sign-off on the final housing product concurring that each housing unit receiving Program assistance is in compliance with local codes and health and safety requirements at the time of purchase. Once this sign-off occurs, and per escrow instructions, COUNTY will inform the Escrow/Title company in writing that escrow can close and Program funds be disbursed.

4.0. PURCHASE PRICE LIMITS

The maximum purchase price shall not exceed the Federal Housing Administrations (FHA) Mortgage Limits established by 203(b)(2)(A) of the National Housing Act, 12 U.S.C. § 1709(b)(2)(A), nor the appraised value of the property. (See Exhibit A.) These limits are updated periodically by the Federal Department of Housing and Urban Development and can be found at: https://entp.hud.gov/idapp/html/hicostlook.cfm

5.0. THE PRIMARY LOAN

Prior to obtaining a loan from the COUNTY, the homebuyer working through SHE must provide evidence of approved financing for the maximum amount the Primary Lender is willing to loan (the “primary loan”).

5.1. QUALIFYING RATIOS

Primary loans underwritten by FHA, Fannie Mae, Freddie Mac, or CalHFA will be acceptable to establish creditworthiness, repayment ability, and dependability of income. (Note: The ratios below are calculated on the borrower’s fixed monthly expenses to the household’s expected gross monthly income.) The front-end housing (debt-to-income) ratio can be between 25% to 35% and is the percentage of a borrower’s gross monthly income (before deductions) that would cover the cost of the loan principal and interest payment, property taxes, property insurance, mortgage insurance, and HOA dues, if any. (Note: The borrower would qualify if the proposed monthly principal, interest, taxes and insurance payment were 35% or less than the borrower’s gross monthly income.) The back-end (total) debt-to-income ratio can be up to 42% and is the percentage of a borrower’s gross monthly income that would cover the cost of housing as described in the paragraph above, plus any other monthly debt payments like car or personal loans and credit card debt. In certain circumstances when the back-end ratios are higher for a prospective homebuyer, the underwriter may look for industry acceptable compensating factors to offset the risk.

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(Note: Qualifying ratio guidelines can be somewhat flexible depending on the loan-to-value (LTV) ratios. The higher the LTV, the more conservative the ratios should be. A qualifying ratio higher than the guidelines may be acceptable if there are strong compensating factors. Some examples of strong compensating factors are: 1) the prospective homebuyer has successfully demonstrated that over a minimum 12-month period the ability to pay housing costs equal to or greater than the proposed monthly housing costs for the home to be purchased; 2) the prospective homebuyer is a limited user of credit and shows a history of saving money; and 3) there will be no more than a 5% increase in the prospective homebuyer’s housing expense.)

5.2. INTEREST RATE The primary loan must have a fixed interest rate that does not exceed the current market rate, as established by an index identified in the most recent Notice of Funding Availability (NOFA) for the HOME Program. No temporary interest rate buy-downs are permitted.

5.3. LOAN TERM

The primary loan shall be fully amortized and have a term “all due and payable” in no fewer than 30 years. There shall not be a balloon payment due before the maturity date of the Program loan.

5.4. IMPOUND ACCOUNT

All households will be required to have impound accounts for the payment of taxes and insurance to ensure they remain current.

6.0. THE PROGRAM LOAN 6.1. MAXIMUM AMOUNT OF PROGRAM ASSISTANCE

The maximum amount of Program assistance to an eligible homebuyer toward purchase of a home in the Program’s eligible area shall not exceed 20 percent of the home sales price and shall never exceed more than 49% of the total indebtedness.

6.2. NON-RECURRING CLOSING COSTS

Non-recurring costs such as credit report, escrow, closing and recording fees, and title report and title insurance, title updates and/or related costs may be included in the Program loan.

6.3 AFFORDABILITY PARAMETERS FOR HOMEBUYERS

The actual amount of a buyer’s Program subsidy shall be computed according to the housing ratio parameters specified in Section 5.1. Each borrower shall receive only the subsidy needed to allow them to become homeowners (“the Gap”) while keeping their housing costs affordable. SHE will use the “front-end ratio” of housing-expense-to-income to determine if the amount of the proposed primary loan is acceptable and, ultimately, the Program subsidy amount required, bridging the gap between the acquisition cost (purchase price plus non-recurring closing costs) less down payment, and the amount of the primary loan.

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6.4. RATE AND TERMS FOR PROGRAM LOANS

All Program assistance to individual households shall be made in the form of deferred payment (interest and principal) loan. The deferred loan to the homebuyer (interest and principal) will not be forgiven. The Program loan’s term shall be for at least as long as the primary loan and never less than 30 years. The interest rate shall be 1% simple interest per annum accrued over the term of the loan. All Program loan payments shall be deferred because the borrowers normally will have their repayment ability fully utilized under the primary loan. If at the maturity date, it is determined by COUNTY that repayment of the BEGIN loan causes a hardship to the homebuyer, the debt that is the principal balance and accrued interest, may be converted to an amortized loan, repayable in 15 years at 0% additional interest.

6.5. LOAN-TO-VALUE RATIO The loan-to-value (LTV) ratio for a BEGIN Program loan, when combined with all other indebtedness

to be secured by the property (i.e. homebuyer mortgage assistance loans), shall not exceed 100 percent of the sales price plus a maximum of up to 5 percent of the sales price to cover actual closing costs.

7.0. PROGRAM LOAN REPAYMENT 7.1 VOLUNTARY PAYMENTS The homebuyer may make voluntary payments toward the deferred Program loan at any time, without

penalty. Payments will reduce all accrued interest first and then the principal on the outstanding promissory note.

7.2. RECEIVING LOAN PAYMENTS

A. The COUNTY will be the receiver of loan payments or recapture funds and will maintain a financial record-keeping system to record payments and file statements on payment status. Payments shall be deposited and accounted for in the COUNTY’s BEGIN Program Income Reuse Account, as required by all HCD programs. The COUNTY will accept loan payments from borrowers prepaying deferred loans, and from borrowers making payments in full upon sale or transfer of the property. All loan payments for the BEGIN assistance are payable to the COUNTY and can be made out to the “County of Kings”. The COUNTY may at its discretion, enter into an agreement with a third party in the future to collect and distribute payments and/or complete all loan servicing aspects of the Program.

B. Program loan payments will be made to COUNTY at:

County of Kings Community Development Agency 1400 W. Lacey Blvd. Hanford, CA 93230

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Questions regarding the BEGIN loan should be directed to the County of Kings at (559) 582-3211, ext. 2670.

7.3. DUE UPON SALE OR TRANSFER

A. Loans are due: 1) upon sale or transfer of title; or 2) when borrower no longer occupies the home as his/her principal residence for the first five years from the recordation of the deed of trust; 3) upon failure to comply with the terms of the executed promissory note or deed of trust; or 4) upon the loan maturity date. In addition, the Program loan will be in default (cause for loan acceleration) if the borrower fails to maintain required fire or flood insurance or fails to pay property taxes.

B. Program loans may be assumable by another income-qualifying homebuyer after five years

from the recordation of the deed of trust securing the BEGIN loan if 1) COUNTY agrees to the loan assumption; and 2) the assumption is not in conflict with Primary Lender and COUNTY requirements.

7.4. LOAN SERVICING POLICIES AND PROCEDURES

A. See Exhibit D, County of Kings Loan Servicing Plan, for local Loan Servicing Policies and Procedures. While the attached policy outlines a system that can accommodate a crisis that restricts borrower repayment ability, it should in no way be misunderstood: The loan must be repaid. All legal means to ensure the repayment of a delinquent loan as outlined in the COUNTY’s Loan Servicing Policies and Procedures will be pursued.

7.5. LOAN MONITORING PROCEDURES

COUNTY will monitor Borrowers and their housing units to ensure adherence to Program requirements including, but not limited to, the following:

A. Owner-occupancy B. Property tax payment C. Hazard insurance coverage D. Good standing on Primary loans E. General upkeep of housing units

8.0. PROGRAM LOAN PROCESSING AND APPROVAL

A. Loan Processing

All interested prospective homebuyers or their representatives will be sent out an eligibility packet with all the necessary forms, disclosures, information, and application. They will be asked to submit a complete application packet with all the COUNTY’s Program loan documents executed as well as all the information from the Primary Lender. The Primary Lender should submit prior to request for COUNTY disbursement: 1) HUD-1 with proper seller notification; 2) mortgage application for assistance with good faith estimates and applicable mortgage disclosures; 3) full mortgage credit report and rent verification; 4) current third party income

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verifications and verifications of assets; and 5) evidence of homeownership education completion. Exhibit E is an example of the instructions to homebuyers that will be provided to prospective borrowers. SHE will work with the designated lender(s) to ensure qualified participants receive only the benefit from the BEGIN Program needed to purchase the housing unit and that leveraged funds will be used when possible, for example in many cases the Primary Lender will not require mortgage insurance with the COUNTY’s second in place which will save on the homebuyer’s monthly payment.

B. Credit Worthiness Qualifying back-end and front-end ratios are only a rough guideline in determining a potential

borrower’s credit-worthiness. Many factors such as excellent or poor credit history, amount of down payment, and size of loan will influence the decision to approve or disapprove a particular loan. The borrower’s credit history will initially be reviewed by SHE and submitted to COUNTY with documentation for insertion into the loan file. The COUNTY may elect to obtain its own credit report or rely on a current copy obtained by the Primary Lender.

C. Documents from Primary Lender

After initial review of the qualified homebuyer's application packet, SHE will request any additional documents needed. Documents may be faxed but originals shall be received through the mail before Program funds are committed to escrow. Based on receipt and review of the final documents, SHE will do an income certification (using most recent HCD program’s guidance on income calculation and determination), and homebuyer certification (review of credit report and income taxes). Documentation of affordability will then be verified and subsidy requirement estimated.

D. Disclosure of Program and Loan Information to Homebuyers

The Program’s application and disclosure forms will contain a summary of the loan qualifications of the borrower with and without Program assistance. Housing ratios with and without Program assistance are also outlined in these guidelines. Information on the Program’s application will be documented with third party verifications in the file. For example, the sales contact will provide the final purchase price and outline how much of the closing costs are to be paid by the seller, etc. The appraisal, termite and title report will provide information to substantiate the information in the sales contract and guide the construction inspection. The Program loan application will provide current debt and housing information and will be documented by the credit report and income/asset verifications. The Primary Lender’s approval letter and estimated closing cost statement should reflect all the information in the loan package and show any contingencies of loan funding. Reviewing the Primary Lender’s loan underwriting documentation will provide basic information about the qualification of the applicant and substantiate the affordability provided by the Program loan. By reviewing and crosschecking all the Primary Lender information, the final Program loan amount approved will fall within the affordability parameters of the Program.

E. Client Project File Administration

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For each individual loan (copies or originals as appropriate) the following items will be acquired and inserted into each approved client file:

Applicant(s) application for downpayment assistance

Confirmation of first-time homebuyer status and household size

Income and asset verification documentation

Credit Report or other documentation required to show a good credit history

Property sales contract, appraisal, preliminary title report

For a newly constructed unit: the final inspection report and certificate of occupancy

BEGIN disbursement forms including Borrower Summary Sheets

BEGIN loan escrow instructions

Executed Promissory Note, recorded Deed of Trust, Executed Borrower’s Agreement, Title Insurance Policy for the BEGIN loan naming the COUNTY as the insured, Hazard Insurance, including flood insurance when applicable, naming the COUNTY as Additional Loss Payee, recorded Notice(s) of Default or Sale, and certified copy of the Settlement Statement.

Pertinent correspondence (including relevant e-mails) or notes of meetings or phone calls between the COUNTY and the homebuyer and/or SHE, title or escrow companies, contacted in relation to the homebuyer’s loan.

8.1. COMPLETION OF UNDERWRITING AND APPROVAL OF PROGRAM LOAN

Once the loan approval package has been completed, SHE will submit it to the COUNTY for approval. COUNTY will review the request and may approve it with or without conditions. Upon approval by COUNTY, a final closing date for escrow is set and Program funds are accessed for the homebuyer.

8.2. PRIMARY AND PROGRAM LOAN DOCUMENT SIGNING

Homebuyers will be required to sign loan agreements, promissory notes, deeds of trust, and statutory lending notices. The deeds of trust are recorded with the Kings County Recorder’s Office at the same time, and the request(s) for copy of Notice of Default are also recorded with the Kings County Recorder’s Office. Examples of the Program loan documents the COUNTY will be using for the deferred payment “silent” second priority loan can be found in Exhibit F.

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8.3. ESCROW PROCEDURES

The escrow/title company shall review the escrow instructions provided by the Program lender and COUNTY, and shall, at the minimum, issue an American Land Title Association (ALTA) policy after closing. The ALTA policy is issued to each lender providing additional coverage for the physical aspects of the property as well as the homebuyer’s title failure. These aspects include anything which can be determined only by physical inspection, such as correct survey lines; encroachments; mechanics liens; mining claims and water rights. The COUNTY will review and provide draft escrow instructions as to what may show on the ALTA policy; the amount of insurance on the policy (all liens should be covered) and the loss payee (each lender should be listed as a loss payee and receive an original ALTA policy). The COUNTY will be party to escrow instructions for each single family residential property and written approval by COUNTY will be needed before an escrow can close.

9.0. SUBORDINATE FINANCING

With today’s high costs, in order for a low-income household to obtain a home, several funding sources might be required. Subordinate loans may be used to cover mortgage subsidy costs that exceed the Program maximum loan amount. All subordinate liens to the Program loan must have the payments, which includes principal and interest, deferred and the term must be for at least as long as the term of the Program loan.

10.0. EXCEPTIONS AND SPECIAL CIRCUMSTANCES 10.1. DEFINITION OF EXCEPTION

Any case to which a standard policy or procedure, as stated in the guidelines, does not apply or an applicant treated differently from others of the same class would be an exception.

10.2. PROCEDURES FOR EXCEPTIONAL CIRCUMSTANCES

A. The COUNTY or its agent may initiate consideration of an exception and prepare a report. This report shall contain a narrative, including the COUNTY's recommended course of action and any written or verbal information supplied by the applicant.

B. The COUNTY can make a determination of the exception based on the suggestions of the

Program Operator. If needed and warranted, the request can be presented to the County’s Community Development Agency Director or HCD for review and recommendation.

11.0. DISPUTE RESOLUTION AND APPEALS PROCEDURE Any applicant involved in requesting assistance from the Program has the right to appeal to the COUNTY. The appeal must be made in writing to the COUNTY by applicant within one-hundred eighty (180) days from the date of application for mortgage assistance, and follow the format identified in Exhibit G. Within sixty (60) days of receiving a written appeal, COUNTY will review the appeal, and respond in writing to the applicant.

12.0 REUSE ACCOUNT PLAN

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The COUNTY has prepared and approved a Reuse Account Plan in order to properly account for reuse of BEGIN repayments that will insure: 1) no co-mingling of funds; 2) periodic account reporting; 3) timely processing of repayments and disbursements; and 4) accounting for any interest earned on BEGIN funds. The Reuse Account Plan is included in Exhibit H.

17

EXHIBIT A

CURRENT INCOME LIMITS FOR THE AREA Median Family Income for Kings County* as of February 1, 2012

Number of Persons in Household

1 2 3 4 5 6 7 8 120% of

AMI $48,650 $55,600 $62,550 $69,500 $75,050 $80,600 $86,200 $91,750

*COUNTY will insert the limits for the county in which the Program is located, and will update the income limits annually as HCD provides new information. The link to the official, HCD-maintained, income limits is: http://www.hcd.ca.gov/hpd/hrc/rep/state/incNote.html

MAXIMUM PURCHASE PRICE LIMITS FHA MORTGAGE LIMITS

Mortgage maximums as of Wednesday December 7, 2011

County Name One-Family Two-Family Three-Family Median Sales Price

KINGS $325,000 $416,050 $502,900 $147,000

https://entp.hud.gov/idapp/html/hicostlook.cfm

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EXHIBIT B BEGIN GROSS INCOME WORKSHEET

ASSETS

Household Member

Assets Description

Current Cash Value

Actual Income from

Assets

1. Net Cash Value of Assets

1.

2. Total Actual Income from Assets

2.

3. If line 1 is greater than $5,000, multiply line by 2.5: and enter results here; if less than $5,000 enter 0

3.

ANTICIPATED ANNUAL INCOME

Household Member

a. Wages/

Salaries

b. Benefits/

Pensions

c. Other Income

d. Asset Income

Enter the greater of lines 2

or 3 from above in d.

4. Totals

a.

b.

c.

d.

5. Enter total of items from 4a. through 4d. 5.

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EXHIBIT C APPLICATION FOR HOMEBUYER

Loan

Processor Date Project File #

NOTE: PLEASE READ “CERTIFICATION,” PAGE 2, BEFORE FILLING OUT THIS APPLICATION

NON-ENGLISH SPEAKING HOUSEHOLD? YES NO

Applicant’s Name Social Security #:

Co-Applicant’s Name Social Security #:

Street Address

City ZIP

Mailing Address

County

Phone ( ) Work or other contact: ( )

For statistical/government monitoring purposes only

Enter code from list below Applicant Race Co-Applicant Race Race of Household Code 09-Vacant Unit 10-Managers Unit 11-White 12-Black/African American 13-Asian 14-American Indian/Alaskan Native 15-Native Hawaiian/Other Pacific Islander 16-American Indian/Alaskan Native & White 17-Asian & White 18-Black/African American & White 19-American Indian/Alaskan Native & Black/African American 20-Other Multi-Racial

Hispanic Origin: Yes No Are any residents or owners employed by the County, County or SHE? Yes No Are any residents or owners a member of the governing body or agent of government who exercised policy? Yes No If Yes to either, explain: INCOME: Check applicable sources of income currently and during the prior calendar year for any residents: Wages AFDC (TANF) Interest Other (explain) SSA Disability Rentals SSI Unemployment Pension

STAFF USE ONLY BELOW THIS LINE Total persons who live at address Total seniors in household Annual Family Income Limit Previous Projected Year’s Income Income $ $ HCD Definition (Circle) LI VLI XLI

In Target Area? YES NO Conflict of Interest? YES NO Handicapped? YES NO Female Head of Household? YES NO Farmworker? YES NO

Page 1 of 3

Have you had ownership interest in a property in the last three years? Yes No If yes, explain?

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FAMILY AND INCOME DETAILS

NAME ___________________________ ADDRESS _____________________________ FILE #: ________

LIST ALL PERSONS LIVING AT THIS ADDRESS. IF AN INDIVIDUAL HAS NO INCOME CURRENTLY OR DURING

THE PRIOR CALENDAR YEAR, WRITE "NONE" UNDER "INCOME SOURCE"

OFFICE USE

ACTUAL

NAME RELATIONSHIP AGE SEX INCOME SOURCE

ANNUAL INCOME

ACTUAL INCOME LS

Family Member Asset Description Cash Value Income from Assets

1. Total Net Family Assets

2. Total Actual Asset Income

3. If Line 1 is Greater than $5,000, multiply line 1 by current passbook rate

and enter result here: otherwise, leave blank

EXPLANATION OF INCOME SOURCE, ANNUAL AMOUNT OR OTHER COMMENTS

CERTIFICATION -- READ BEFORE SIGNING

I certify that this will be my primary residence of occupancy. I certify that the information given on this form is true and accurate to the best of my knowledge. I certify that I have no additional income or assets and that there are no persons living in or contributing to my household other than those described here. I am aware that there are penalties for willfully and knowingly giving false information on an application for Federal or State funds. I understand that the information on this form is subject to verification. Penalties for falsifying information may include immediate repayment of all State and Federal funds received and/or prosecution under law.

CERTIFICACION - LEA ANTES DE FIRMAR

Yo certifico que aqui sera mi residencia principal de vivir. Yo certifico de que la informaciòn suministrada en este formulario es cierta y precisa a mi mayor conocimiento. Yo certifico de que no cuento con ingresos adicionales y bienes en activo y que no existen personas que se encuentren viviendo o contribuyendo a mi hogar aparte de aquellas descritas aqui. Yo estroy enterado de que esisten penalidades por suministrat informaciòn falsa intensionalmente y a sabiendas en usa solicitud para fondos Ferales o Estatales. Yo entiendo de qu la infomaciòn en este fomulario queda sujeta a verificacion. Las Penalidades por falsificar infomraciòn puede incluir la devolucion de inmendiato de todos los fondos Ferales o Estatales recibidos y/o procesamiento bajo la ley.

____/_____/_____ APPLICANT ______________________________ APPLICANT______________________________ Page 2 of 3

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SELF-HELP ENTERPRISES 8445 W. ELOWIN COURT VISALIA, CA 93291

HOMEBUYER ASSISTANCE PROGRAM

PART I BORROWER(S) AUTHORIZATION I/We, hereby authorize Self-Help Enterprises to verify my past and present employment earnings records,

bank accounts, stock holdings and any other asset balances that are needed to process my mortgage loan

application. I further authorize the Homebuyer Assistance Program Lender and Self-Help Enterprises, on the

Lender’s behalf, to order a consumer credit report and verify other credit information, including past and present

mortgage and landlord references

PART II AUTHORIZATION FOR RELEASE OF INFORMATION I/We, the undersigned, hereby give permission to Self-Help Enterprises to release the information on the

"Application for Homebuyers Assistance," SHE F-10301.1, and any other information gathered by Self-Help

Enterprises, to the Homebuyers Assistance Program Lender which includes, but is not limited to, the County of

Kings and the California Department of Housing and Community Development. It is my/our understanding that

this information is to be used solely for the purpose of my/our application for participation in the Program.

It is understood that a copy of this form will also serve as authorization. Date Applicant Applicant

Page 3 of 3

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EXHIBIT D

COUNTY OF KINGS LOAN SERVICING PLAN

The County of Kings (COUNTY) has adopted these policies and procedures in order to preserve its financial interest in properties whose “Borrowers” have been assisted with public funds. The COUNTY will, to the greatest extent possible, follow these policies and procedures, but each loan will be evaluated and handled on a case-by-case basis. The COUNTY has formulated this document to comply with state and federal regulations regarding the use of public funds such as Building Equity & Growth in Neighborhoods (BEGIN) Program and any property restrictions that are associated with them. Loan servicing duties will be executed by the County of Kings. The COUNTY may, at its discretion, enter into an agreement with a third party to collect and distribute payments and/or complete all loan servicing aspects of the Program. For CalHome, the COUNTY must obtain prior approval from HCD and must provide HCD a copy of the contract. The policies and procedures are broken down into the following areas: 1) making required monthly payments or voluntary payments on a loan’s principal and interest; 2) required payment of property taxes and insurance; 3) required Request for Notice of Default on all second mortgages; 4) loans with annual occupancy restrictions and certifications 5) required noticing and limitations on any changes in title or use of property; 6) required noticing and process for requesting a subordination during a refinance; 7) processing of foreclosure in case of default on the loan; and processing demands and payoffs.

1. Loan Repayments: The COUNTY will collect monthly payments from those Borrowers who are obligated to do so under Notes, which are amortized promissory notes . Late fees will be charged for payments received after the assigned monthly due date. For Notes, which are deferred payment loans; the COUNTY must accept voluntary payments on the loan. Loan payments will be credited to the interest first and then to principal. The Borrower may repay the loan balance at any time with no penalty. At time of completion, the funds expended on a housing unit will be compared to the Note amount. Any funds not expended at completion will be considered a “principal reduction” and will be applied to the principal loan balance thereby lowering the amount owed by the Borrower. Borrowers will receive a closeout letter after the 30-day retention period indicating the amount of their Note, the credit, and the ending balance on their loan. A copy of this credit along with the final cost break-down will be retained in the Borrower’s file.

2. Payment of Property Taxes and Insurance: As part of keeping the loan from going into default, Borrower must maintain property insurance coverage naming the COUNTY as loss payee in first position or additional insured if the loan is a junior lien. If Borrower fails to maintain the necessary insurance, the COUNTY may take out forced place insurance to cover the

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property while the Borrower puts a new insurance policy in place. All costs for installing the necessary insurance will be added to the loan balance at time of installation of Borrower’s new insurance. When a property is located in a 100 year flood plain, the Borrower will be required to carry the necessary flood insurance. A certificate of insurance for flood and for standard property insurance will be required at close of escrow. The COUNTY must verify the insurance on an annual basis. Property taxes must be kept current during the term of the loan. If the Borrower fails to maintain payment of property taxes, the COUNTY may pay the taxes current and add the balance of the tax payment plus any penalties to the balance of the loan. Wherever possible, the COUNTY encourages Borrower to have impound accounts set up with their first mortgagee wherein they pay their taxes and insurance as part of their monthly mortgage payment.

3. Required Request for Notice of Default: When the Borrower’s loan is in second position behind an existing first mortgage, it is the COUNTY's policy to prepare and record a "Request for Notice of Default" for each senior lien in front of COUNTY’s loan. This document requires any senior lien holder listed in the notice to notify the COUNTY of initiation of a foreclosure action. The COUNTY will then have time to contact the Borrower and assist them in bringing the first loan current, if possible. The COUNTY can also monitor the foreclosure process and go through the necessary analysis to determine if the loan can be made whole or preserved. When the COUNTY is in third position and receives notification of foreclosure from only one senior lien holder, it is in their best interest to contact any other senior lien holders regarding the status of their loans.

4. Annual Occupancy Restrictions and Certifications: The COUNTY will require that Borrowers submit utility bills and/or other documentation annually to prove occupancy during the term of the loan. Some loans may have income and housing cost evaluations, which require households to document that they are not able to make amortized loan payments, typically every five years. . These loan terms are incorporated in the original Note and Deed of Trust. Continued residency is monitored annually for the term of the loan. Occupancy will be verified, reviewed and certified by the submission of the following:

Proof of occupancy in the form of a copy of a current utility bill;

Statement of unit’s continued use as primary residence of the owner;

Declaration that other title holders do not reside on the premises;

Verification that property taxes are current; and

Verification of current required insurance policies.

5. Required Noticing and Restrictions on Any Changes of Title or Occupancy:

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In all cases where there is a change in title or occupancy or use, the Borrower must notify the COUNTY in writing of any change. COUNTY, or its designated Loan Servicing Agent, and Borrower will work together to ensure the property is kept in compliance with the original Program terms and conditions such that it remains available as an affordable home for low-income families. These types of changes are typical when Borrowers do estate planning (adding a relative to title) or if a Borrower dies and property is transferred to heirs or when the property is sold or transferred as part of a business transaction. In some cases the Borrower may move and turn the property into a rental unit without notifying the COUNTY. Changes in title or occupancy must be in keeping with the objective of benefit to low-income households (below 80 percent of AMI). Note – CalHome loans are not assumable. Change from owner-occupant to owner-occupant occurs at a sale. When a new owner-occupant is not low-income, the loan is not assumable and the loan balance is immediately due and payable. If the new owner-occupant qualifies as low-income, the purchaser may either pay the loan in full or assume all loan repayment obligations of the original owner-occupant, subject to the approval of the COUNTY’s Loan Committee. Note – CalHome loans are not assumable. If a transfer of the property occurs through inheritance, the heir (as owner-occupant) may be provided the opportunity to assume the loan at an interest rate based on household size and household income, provide the heir is income eligible. If the heir intends to occupy the property and is not low-income, the balance of the loan is due and payable. If the heir intends to act as an owner-investor, and the loan was funded with CDBG funds, the balance of the loan may be converted to an owner/investor interest rate and loan term and a rent limitation agreement is signed and recorded on title. All such changes are subject to the review and approval of the COUNTY. Note – CalHome loans are not assumable.

Change from owner-occupant to owner-investor occurs when an owner-occupant decides to move out and rent the assisted property, or if the property is sold to an investor. If the owner converts any assisted unit from owner occupied to rental, the loan is due in full. Conversion to use other than residential use is not allowable where the full use of the property is changed from residential to commercial or other. In some cases, Borrowers may request that the COUNTY allow for a partial conversion where some of the residence is used for a business but the household still resides n the property. Partial conversions can be allowed if it is reviewed and approved by any and all agencies required by local statute. If the use of the property is converted to a fully non-residential use, the loan balance is due and payable. The following transfers of interest shall not require the repayment of the BEGIN Program loan: 1) transfer to a surviving joint tenant by devise, descent, or operation of law on the death of a joint tenant;

2) a transfer, in which the transferee is a person who occupies or will occupy the property, which is:

(i) a transfer where the spouse becomes an owner of the property;

(ii) a transfer resulting from a decree of dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement by which the spouse becomes an owner of the property; or

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(iii) a transfer into an inter vivos trust in which the borrower is and remains the beneficiary and occupant of the property.

6. Requests for Subordinations and Payoffs:

When a Borrower wishes to refinance the property, they must submit a subordination request to the COUNTY. The COUNTY will subordinate their loan only when there is no “cash out” as part of the refinance. No cash out means that there are no additional charges on the transaction above loan and escrow closing fees. There can be no third-party debt pay offs or additional encumbrance on the property above traditional refinance transaction costs. Furthermore, the refinance should lower the housing cost of the household with a lower interest rate and the total indebtedness on the property should not exceed the current market value. In addition, the loan must: 1) be fully amortized and have a fixed interest rate that does not exceed the current market rate, as

established by an index identified in the most recent NOFA;

2) not have a temporary interest rate buy-down;

3) have a term “all due and payable” in no fewer than 30 years; and

4) not have a balloon payment due before the maturity date of the Program loan. Upon receiving the proper documentation from the refinance lender, the request will be considered by the Loan Committee for review and approval. Upon approval, the escrow company will provide the proper subordination document for execution and recordation by the COUNTY.

7. Process for Loan Foreclosure:

Upon any condition of loan default: 1) non payment; 2) lack of insurance or property tax payment; 3) change in title or use without approval; 4) default on senior loans, the COUNTY, or its designated Loan Servicing Agent, will send out a letter to the Borrower notifying them of the default situation. If the default situation continues then the COUNTY may start a formal process of foreclosure. When a senior lien holder starts a foreclosure process and the COUNTY is notified via a Request for Notice of Default, the COUNTY, who is the junior lien holder, may cancel the foreclosure proceedings by "reinstating" the senior lien holder. The reinstatement amount or payoff amount must be obtained by contacting the senior lien holder. This amount will include all delinquent payments, late charges and fees to date. COUNTY must confer with Borrower to determine if, upon paying the senior lien holder current, the Borrower can provide future payments. If this is the case then the COUNTY may cure the foreclosure and add the costs to the balance of the loan with a Notice of Additional Advance on the existing note. If the COUNTY determines, based on information on the reinstatement amount and status of borrower, that bringing the loan current will not preserve the loan, then the COUNTY must determine if it is cost effective to protect their position by paying off the senior lien holder in total and restructure the debt such that the unit is made affordable to the Borrower. If the COUNTY does not have sufficient funds to pay the senior lien holder

26

in full, then they may choose to cure the senior lien holder and foreclose on the property themselves. As long as there is sufficient value in the property, the COUNTY can afford to pay for the foreclosure process and pay off the senior lien holder and retain some or all of their investment. If the COUNTY decides to reinstate, the senior lien holder will accept the amount to reinstate the loan up until five (5) days prior to the set "foreclosure sale date." This "foreclosure sale date" usually occurs about four (4) to six (6) months from the date of recording of the "Notice of Default." If the COUNTY fails to reinstate the senior lien holder before five (5) days prior to the foreclosure sale date, the senior lien holder would then require a full pay off of the balance, plus costs, to cancel foreclosure. If the COUNTY determines the reinstatement and maintenance of the property not to be cost effective and allows the senior lien holder to complete foreclosure, the COUNTY's lien may be eliminated due to insufficient sales proceeds.

8. Sponsor as Senior Lien Holder

When the Sponsor is first position as a senior lien holder, active collection efforts will begin on any loan that is 31 or more days in arrears. Attempts will be made to assist the homeowner in bringing and keeping the loan current. These attempts will be conveyed in an increasingly urgent manner until loan payments have reached 90 days in arrears, at which time the COUNTY may consider foreclosure. The COUNTY will consider the following factors before initiating foreclosure:

1) Can the loan be cured and can the rates and terms be adjusted to allow for affordable payments such that foreclosure is not necessary?

2) Can the Borrower refinance with a private lender and pay off the COUNTY?

3) Can the Borrower sell the property and pay off the COUNTY?

4) Does the balance warrant foreclosure? (If the balance is under $5,000, the expense to foreclose may not be worth pursuing.)

5) Will the sales price of home "as is" cover the principal balance owing, necessary advances, (maintain fire insurance, maintain or bring current delinquent property taxes, monthly yard maintenance, periodic inspections of property to prevent vandalism, etc.) foreclosure, and marketing costs?

If the balance is substantial and all of the above factors have been considered, the COUNTY may opt to initiate foreclosure. The Borrower must receive, by certified mail, a thirty-day notification of foreclosure initiation. This notification must include the exact amount of funds to be remitted to the Sponsor to prevent foreclosure (such as, funds to bring a delinquent BMIR current or pay off a DPL). At the end of thirty days, the COUNTY should contact a reputable foreclosure service or local title company to prepare and record foreclosure documents and make all necessary notifications to the owner and junior lien holders. The service will advise the COUNTY of all required documentation to initiate foreclosure (Note and Deed of Trust usually) and funds required from the owner to cancel foreclosure proceedings. The service will keep the COUNTY informed of the progress of the foreclosure proceedings. When the process is completed, and the property has "reverted to the beneficiary" at the foreclosure sale, the COUNTY could sell the home themselves under a homebuyer Program or use it for an affordable rental property managed by a local housing authority or use it for transitional housing facility or other eligible use.

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The COUNTY could contract with a local real estate broker to list and sell the home and use those funds for Program income eligible uses.

1. Process Demands and Payoffs:

Requests for demands and payoffs will be processed within the time frame allowed by law. COUNTY or its designated Loan Servicing Agent is proficient in performing the related calculations. Reconveyance and lien releases would be prepared for processing by a qualified Title Company

EXHIBIT E COUNTY OF KINGS

IMPLEMENTATION STEPS - INSTRUCTIONS TO HOMEBUYER A. Application requesting assistance with BEGIN funds is submitted to SHE (Program Operator) for review by the

homebuyer’s (Participant) Private Lending Agency. Application shall include Lenders 1003 Application, Copy of Participant’s credit report, two-years taxes and W-2’s, current pay stub and/or verification of employment, Good Faith Estimate and Truth-in-Lending.

B. Program Operator reviews paper work to determine program eligibility and financing affordability for participant

etc. First-time homebuyer interest is confirmed. Pre-qualification is issued. C. Program disclosures are reviewed with Participant. Additional items are request from Primary Lender.

Final signed 1003

Final signed Good Faith and Truth-in-Lending

Signed Purchase Contract

Signed Escrow Instructions

Six-months’ bank statements

Appraisal

Certificate of Occupancy

Final Copy of Building Permit Card

Termite Treatment D. Program Operator staff meets with qualified applicant to provide counseling relative to the program requirements,

the lending process, home ownership responsibilities, and budgeting and credit. E. Prior to completion of the homeownership unit and In conjunction with Program Operator, COUNTY has home

inspected to meet building code compliance. Notice of any deficiencies or needed corrections are given to Developer with recommended course of action.

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G. Program Operator requests loan approval from COUNTY or designee. Following loan approval, and two (2) days prior to close of escrow, Program Operator in conjunction with COUNTY prepares Truth-In-Lending Notice, Deed of Trust, Promissory Note, Notice of Default, Purchaser’s Agreement, and requests checks and deposits same into escrow.

H. Escrow company furnishes Program Operator and COUNTY with proof of documents to be recorded, and any

escrow close out information. After receipt of recorded loan documents, HUD I, Insurance Loss Payee Certification and Final Title Insurance Policy (Program Operator) closes out the loan file. Escrow closes and Participant occupies the new homeownership unit.

I. As long as Participant complies with the Program assistance requirements, the deferred loan amount for

downpayment assistance at 1% simple interest per annum is due within 30 years from the date of escrow closing for repayment to the County of Kings.

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EXHIBIT F COUNTY LOAN DOCUMENTS

ESCROW INSTRUCTIONS

Attn: Escrow #;

Funds amounting to $__ from _______BEGIN Mortgage Assistance Program will be delivered to Title.

Checklist of items attached and required from Title upon close of Escrow: 1. Buyers are required to contribute a minimum of 1% ($) of the purchase price, towards the purchase of the property, not including any other personal debts to be paid through escrow. 2. Fax estimated HUD-1 for prior approval to Leon Romanazzi (leonr@selfhelpenterprises.org) fax #(559) 651-3634. All refunds must be approved prior to disbursement and closing Escrow. 3. Final HUD-1 after Escrow closes, needs to list or name the as 2nd Mortgagee 4. Certified Copies to be recorded; 1. Deed of Trust- 2. Request for Notice of Default- 3. Copy of Note and Deed of Trust- 5. Hazard/Flood Insurance Policy-listing, , loan #» as second mortgagee.

6. Title Insurance Policy (ALTA)- In the City’s loan amount as Beneficiary, mailed to Self-Help Enterprises (to

follow after escrow closes).

Funds will not be released until all fully executed items are received.

Please forward all items listed above to Self-Help Enterprises, 8445 W. Elowin Court (P.O. Box 6520), Visalia CA 93291. All refund approvals and any questions should be directed to Leon Romanazzi, Self-Help Enterprises at 559-802-1656. We appreciate your timely and accurate attention. Sincerely,

Title Company

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MORTGAGE ASSISTANCE PROGRAM LOAN AGREEMENT

This Agreement is entered into this day of ,2010 by and between the County of Kings, hereinafter referred to as Lender and , hereinafter referred to as Borrower(s) who is/are the buyer(s) of the residential dwelling located at , California, hereinafter referred to as Dwelling. This Agreement is made for the purpose of assisting Borrower(s) to purchase Dwelling with funds provided by the Lender under its BEGIN Mortgage Assistance Program. This Agreement is made for the benefit of and shall be binding upon the Lender and Borrower, their heirs, successors, survivors and assigns. THEREFORE, the Lender and Borrower(s) agree as follows: PURPOSE OF LOAN The Loan shall be used as mortgage subsidy, to reduce the monthly payment of the primary loan

and to assist with closing costs and prepaid expenses. LOAN CONDITIONS The Lender agrees to loan to the Borrower the amount of ****AND NO/100****Dollars ($****) to

be used solely for the Purpose of the Loan. The total Loan amount of **** AND NO/100****Dollars ($****) shall be a Deferred Payment Loan

subject to the following conditions: The loan shall bear one percent (1%) simple interest per annum. Repayment of the Deferred Payment Loan principal and interest shall be deferred

for thirty (30) years from the date of this Agreement. If at the maturity date, it is determined by , that repayment of

the BEGIN loan causes a hardship to the homebuyer, the debt, that is the principal balance and accrued interest, may be converted to an amortized loan, repayable in 15 years at 0% additional interest. Beginning with the first month of the thirty-first year, the deferred Payment Loan principal and interest shall be repayable at no additional interest at the rate of **** per month for 179 months, with a final payment of **** in the 180th month.

The Deferred Payment Loan principal and interest shall become immediately due

and payable at such time as either: (1) the loan matures; (2) the Borrower or approved immediate family member ceases to maintain continuous residence on the property; (3) title to the property is transferred; (4) the Borrow fails to maintain

31

the required fire or flood or property taxes or other cause for loan acceleration occurs.

For the purpose of this paragraph, the term "immediate family" includes only the

Borrower's spouse, parents, parents-in-law and children. The Borrower may, with permission of the Lender, make payments to the Lender

for the purpose of diminishing the Deferred Payment Loan principal and interest. Without the written consent of the Lender, this Agreement is not assignable by the Borrower either in whole or in part. Time is the essence of this Agreement. No alteration or variation of the terms of this Agreement shall be valid unless made in writing and signed by the parties hereto, and no oral understanding or agreement not incorporated herein, shall be binding on any of the parties hereto. SECURITY At the time of loan closing, the Borrower shall deliver to the Lender or its agent the following documents: A duly executed and legally binding Promissory Note for the loan amount stated. Such Promissory

Note shall be payable to, and in a form approved by, the Lender. A duly executed, legally binding and recordable security over the property. Such security shall give

the Lender the best available lien over the property to protect the Lender's interests under this Agreement, shall be in a form approved by the Lender and shall require the Borrower to maintain the property in a good state of repair, to insure the property, and to pay all taxes levied on the property.

LOAN CLOSING The date of loan closing shall be the date upon which the lien is recorded. TERMINATION FOR DEFAULT If the borrower fails to perform the covenants herein contained and in the manner herein

provided, the Lender may terminate this Agreement by written notice to the Borrower. If this Agreement is terminated by the Lender before the loan closing date, the Lender shall be

relieved of any obligation which it may have hereunder. If this Agreement is terminated by the Lender after the loan closing date, the Borrower shall

immediately become liable for repayment to the Lender of its designee the outstanding principal at the date of termination.

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TERMINATION BY EITHER PARTY FOR CONVENIENCE Prior to incurring any expenditures, either party may terminate this Agreement by giving 15 days

prior written notice to the other. If this Agreement is terminated by either party before the loan closing date, both parties shall be

relieved of all their obligations hereunder. If this Agreement is terminated by either party after the loan closing date, the Borrower shall

immediately repay to the Lender, or its designee, any funds expended as of the date of termination.

DISALLOWED EXPENDITURES Any expenditure which is not authorized by this Agreement or which cannot be adequately

documented shall be disallowed and must be reimbursed to the Lender or its designee by the Borrower

Absent fraud, mistake or arbitrariness, the determination by the Lender or its designee of the

allowability of any expenditures shall be final. RECONVEYANCE When the loan is paid in full, a Reconveyance will be executed by the Lender. The Reconveyance

will be recorded on behalf of the Borrower at the Lender's expense. INSURANCE The Borrower shall maintain for the term of the loan fire insurance adequate to cover all

encumbrances on the property. The Lender shall be designated as loss payee for the amount of the loan. A statement of loss payee shall be forwarded to the Lender and included in the Borrower's file.

If the Borrower cannot provide proof of satisfactory insurance as required, the loan will become

due and payable or the Lender may upon notice to the Borrower purchase said insurance and lien the property to collect the cost of the premium(s) as part of the Homebuyer Assistance loan

In areas designated by HUD as flood prone, the owner is required to maintain flood insurance in an

amount adequate to secure the loan. This policy must designate the Lender as loss payee. MAINTENANCE AGREEMENT OWNER-OCCUPANT

Borrower shall maintain the property in the condition and level to which it was purchased, free of any nuisances or demolition of any improvements on the property, for the life of the loan. Should the property not be maintained accordingly, Lender shall provide Borrower with a list of deficiencies to be corrected within 30 calendar days from receipt of deficiencies within the

33

prescribed time, the loan will become due and payable, and if necessary, foreclosure proceeding will be instituted.

PROOF OF OCCUPANCY

Borrower shall be required to submit proof of occupancy and statement of use to the Lender annually for five years , beginning in 20--. A letter will be sent to the Borrower requesting the information.

Consistent with the Beneficiary’s commitment to Fair Housing, applicants will not be discriminated against because of race, color, religion, sex, handicap, familial status, or national origin. ____________________________________ by: Lender

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County of Kings BEGIN PROGRAM

FIRST-TIME HOMEBUYER

PROMISSORY NOTE

NOTICE TO BORROWER

THIS DOCUMENT CONTAINS PROVISIONS RESTRICTING ASSUMPTIONS AND IS SECURED BY

A SECOND DEED OF TRUST ON RESIDENTIAL PROPERTY

Loan No.

$____________________________ ________________, 20________________ FOR VALUE RECEIVED, the undersigned, (the “Borrower”) hereby promises to pay to the order of (“Lender”) at the following address or at such other place as the holder may from time to time designate by written notice to Borrower, in lawful money of the United States, the sum of Dollars ($ ) with simple interest at the rate of one percent (1%) per annum on the unpaid principal balance from the date of this Note, until paid. The obligation of the Borrower with respect to this Note is secured by that certain BEGIN Program First-Time Homebuyer Deed of Trust Loan No. (the “Deed of Trust”), and executed by the Borrower concurrently herewith. 1. Borrower’s Obligation. This Note evidences the obligation of the Borrower to the Lender for the

repayment of funds loaned (the “BEGIN Program Loan”) to finance the purchase of that certain real property (the “Property”), which has the address of ,

(Street) (City) California, , more fully described in Exhibit A of the Deed of Trust.

(Zip Code) 2. Borrower(s) Acknowledge(s) and Agrees: that the BEGIN Program Loan is subject to the terms,

conditions, and restrictions of the State of California BEGIN Program as set forth in Health and Safety Code section 50860 et seq. and implementing guidelines adopted by the California Department of Housing and Community Development, all of which are hereby incorporated by reference.

3. Repayment of Loan Principal and Interest. No periodic payments are required hereunder. Borrower

agrees to pay the unpaid principal balance, unpaid accrued interest, and any other amounts due under this Note upon the earlier of:

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(a) 30 years from the date of this Note; or (b) Upon sale, transfer, lease, or encumbrance of all or any interest in the Property without

Lender’s prior written consent, except for a transfer permitted in Paragraph 4; or (c) Upon the maturity date, or full repayment, of any debt that is secured by a lien on the Property

that is senior to the Deed of Trust; or (d) Upon Borrower’s failure to occupy the Property as Borrower’s principal place of residence

during the first five (5) years after the date of recordation of the deed of trust securing the BEGIN Program loan.

4. Permitted Transfers.

The BEGIN Program Loan is assumable, if approved in writing by the Lender, under the following limited circumstances: (a) The loans are assumable if the home is re-sold to another income-qualifying household after five

years from the recordation of the deed of trust securing the BEGIN Program loan.

(b) The transfer of the Property to the surviving joint tenant by devise, descent or operation of the law, on the death of a joint tenant.

(c) A transfer of the Property where the spouse becomes an owner of the Property;

(d) A transfer of the Property resulting from a decree of dissolution of marriage, legal separation or from an incidental property settlement agreement by which the spouse becomes an owner of the Property.

(e) A transfer to an inter vivo trust in which the Borrower is and remains the beneficiary and

occupant of the Property. 5. Acceleration of Payment. The principal amount of this loan, together with any then outstanding

accrued interest thereon shall become immediately due and payable, at the option of the holder and without demand or notice, upon the occurrence of any of the following events:

(a) In the event of a default under the terms of this Note or the Deed of Trust;

(b) In the event that the Borrower shall cease to occupy the Property as Borrower’s principal place

of residence during the first five years; or

(c) In the event of any sale, transfer, lease, or encumbrance of the Property without Lender’s prior written consent in violation of Paragraph 4 of this Note.

6. Effect of Due-on Sale Clause. Failure of the holder to exercise the option to accelerate payment as

provided in Paragraph 5 of this Note will not constitute waiver of the right to exercise this option in the

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event of subsequent cause for acceleration. Failure by Borrower to occupy the Property as Borrower’s principal place of residence shall be considered an on-going event of default under this Note.

7. Place and Manner of Payment. All amounts due and payable under this Note are payable at the principal office of the Lender set forth above, or at such other place or places as the Lender may designate to the Borrower in writing from time-to-time.

8. Application of Payments. All payments received on account of this Note shall be first applied to

accrued interest, if any, and the remainder shall be applied to the reduction of principal. 9. Attorney’s Fees. The Borrower hereby agrees to pay all costs and expenses, including reasonable

attorney’s fees, which may be incurred by the Lender in the enforcement of this Note. 10. Default and Acceleration. All covenants, conditions and agreements contained in the Deed of Trust

are hereby made a part of this Note. The Borrower agrees that the unpaid balance of the then principal amount of this Note, together with all accrued interest thereon and charges owing, shall, at the option of the Lender or, if so provided in this Note and Deed of Trust executed by the Borrower, shall automatically, become immediately due and payable, and thereafter until paid bear interest at the rate of one percent (1%) per annum, upon the failure of the Borrower to make any payment hereunder as and when due; upon the failure of the Borrower to perform or observe any other term or provision of this Note, or upon the occurrence of any event (whether termed default, event of default or similar term) which under the terms of the Deed of Trust, shall entitle the Lender to exercise rights or remedies thereunder.

11. Notices. Except as may be otherwise specified herein, any approval, notice, direction, consent, request

or other action by the Lender shall be in writing and must be communicated to the Borrower at the address of the Property, or at such other place or places as the Borrower shall designate to the Lender in writing, from time to time, for the receipt of communications from the Lender. Mailed notices shall be deemed delivered and received five (5) working days after deposit in the United States mail in accordance with this provision

12. Prepayment Policy: Borrower may prepay this Note at any time without penalty. 13. Governing Law. This Note shall be construed in accordance with and be governed by the laws of the

State of California. 14. Severability. If any provision of this Note is held by a court of competent jurisdiction to be invalid,

illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby.

15. No Waiver by the Lender. No waiver of any breach, default or failure of condition under the terms of

the Note or Deed of Trust shall thereby be implied from any failure of the Lender to take, or any delay by the Lender in taking action with respect to such breach, default or failure or from any previous waiver of any similar or unrelated breach, default or failure; and a waiver of any term of the Note, Deed of Trust, or any of the obligations secured thereby must be made in writing and shall be limited to the express written terms of such waiver.

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16. Successors and Assigns. The promises and agreements herein contained shall bind and inure to the

benefit of, as applicable, the respective heirs, executors, administrators, successors and assigns of the parties.

Executed as of the date set forth above at , California.

City

Borrower

Borrower

Mailing Address for Notices:

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RECORDING REQUESTED BY: AND WHEN RECORDED MAIL TO: SELF-HELP ENTERPRISES ATTN: HOMEBUYER PROGRAM P.O. BOX 6520 VISALIA CA 93290

SPACE ABOVE THIS LINE FOR RECORDER USE

THIS DOCUMENT IS RECORDED SOLELY FOR THE PURPOSE OF THE WITHOUT FEE PURSUANT TO SECTION 6103 OF THE GOVERNMENTAL CODE.

REQUEST FOR NOTICE In accordance with section 2924b, Civil Code, request is hereby made that a copy of any notice of Default and a copy of any notice of sale under the deed of trust (or mortgage) recorded 20 , in Book Page (or filed for record with recorder's serial number of official records of , California, executed by as trustor (or mortgagor) in which is named as beneficiary (or mortgagee) and Title Company as trustee to be mailed to: NOTICE: A copy of any notice of default and of any notice of sale will be sent only to the address contained in this recorded request. If your address changes, a new request must be recorded. by: Date ============================================ STATE OF CALIFORNIA COUNTY OF KINGS On , 20 before me, , a Notary Public, personally appeared, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the forgoing paragraph is true and correct. WITNESS my hand and official seal. FOR NOTARY STAMP OR SEAL Notary Public

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] ] ] Recording requested by and ] When recorded return to: ] ] ] ] ] ] ] ] ] _____________________________________________________________________________________________

COUNTY OF KINGS BEGIN PROGRAM

FIRST-TIME HOMEBUYER

DEED OF TRUST

NOTICE TO BORROWER THIS DEED OF TRUST CONTAINS PROVISIONS

RESTRICTING ASSUMPTIONS LOAN NO._________________ This Deed of Trust is made on , 20 , by (the “Borrower”) and (the “Trustee”), whose business address is in favor of (“Lender”) or Assignee, whose address is 1. BORROWER, IN CONSIDERATION OF THE INDEBTEDNESS HEREIN RECITED AND THE TRUST HEREIN CREATED, HEREBY IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS to Trustee in trust, with power of sale and right of entry and possession, all of Borrower’s right, title and interest now held or hereafter acquired in and to the following: (a) all of that certain real property (the “Property”) located at (Street) (City and Zip Code) in the County of Kings, and the State of California, which is more particularly described in Exhibit A (attached) which is incorporated herein by this reference; and (b) all buildings, improvements and fixtures now or hereafter erected thereon, and all appurtenances, easements, and articles of property now or hereafter affixed to, placed upon or used in connection with the Property, together with all additions to, substitutions for, changes in or replacements of the whole or any part of said articles of property; all of which are hereby pledged and assigned, transferred, and set over onto Trustee, and for purposes of this Deed of Trust declared to be part of

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the realty; provided, however, that furniture and other personal property of Borrower now or hereafter situated on said real property are not intended to be included as part of the Property. 2. FOR THE PURPOSE OF SECURING:

2.1. Repayment of the indebtedness evidenced by that certain Promissory Note of the Borrower dated , 20 , and entitled County of Kings BEGIN Program First-time Homebuyer Promissory Note “Loan No. (the “Note”) of the Borrower in the principal amount of Dollars ($ ), together with simple interest on such indebtedness according to the terms of the Note, and any and all amendments, modifications, extensions or renewals of the Note. The Note and this Deed of Trust are subject to the terms, conditions, and restrictions of the State of California BEGIN Program as set for the in the Health and Safety Code section 50860 et seq. and implementing guidelines adopted by the California Department of Housing and Community Development, all of which are hereby incorporated by reference.

2.2. Payment of such additional sums, with interest thereon:

(a) As may hereafter be borrowed from Lender by the then-record owner of the Property and evidenced by a promissory note or notes reciting that it or they are so secured and all modifications, extensions, or renewals of the Note; and

(b) As may be incurred, paid, or advanced by Lender, or as may otherwise be due to Trustee or Lender, under any provision of this Deed of Trust and any modification, extension, or renewal of this Deed of Trust; and

(c) As may otherwise be paid or advanced by Lender to protect the security or priority of this Deed of Trust.

2.3. Performance of each obligation, covenant, and agreement of Borrower contained in this Deed of Trust, the Note,

or any other document executed by Borrower in connection with the loan(s) secured by this Deed of Trust, and all amendments to these documents whether set forth in this Deed of Trust or incorporated in this Deed of Trust by reference.

3. BORROWER COVENANTS:

Borrower hereby covenants to maintain and protect the security of this Deed of Trust, to secure the full and timely performance by Borrower of each and every obligation, covenant, and agreement of Borrower under the Note and this Deed of Trust, and as additional consideration for the obligation(s) evidenced by the Note, Borrower covenants as follows: 3.1. Title. That Borrower is lawfully seized of the estate hereby conveyed and has the right to grant and convey the Property, and that Borrower will warrant and defend generally the title of the Property against all claims and demands subject to any declarations, easements, or restrictions listed in the schedule of exemptions to coverage in any title insurance policy insuring Lender’s interest in the Property. 3.2. Payment of Principal and Interest. That Borrower shall promptly pay, when due, the principal and interest on the Note, and such other charges as are provided in the Note, and such other amounts as are provided under this Deed of Trust.

3.3. Maintenance of the Property.

(a) Keep the Property in a decent, safe, sanitary, tenantable condition and repair and permit no waste thereof; (b) Not to commit or suffer to be done or exist on or about the Property any condition causing the Property to become less valuable; (c) Not to remove, demolish or structurally alter any buildings and improvements now or hereinafter located on the Property; (d) To repair, restore or rebuild promptly any buildings or improvements on the Property that may become damaged or be destroyed while subject to the lien of this Deed of Trust;

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(e) To comply with all applicable laws, ordinances and governmental regulations affecting the Property or requiring any alteration or improvement thereof, and not to suffer or permit any violations of any such law, ordinance or governmental regulation, nor of any covenant, condition or restriction affecting the Property; (f) Not to initiate or acquiesce in any change in any zoning or other land use or legal classification which affects any of the Property without the Lender’s written consent; and (g) Not to alter the use of all or any part of the Property without the prior written consent of the Lender.

3.4. Appear and Defend. Borrower shall appear in and defend any action or proceeding purporting to affect the

security hereof or the rights or powers of the Lender or Trustee; and to pay all costs and expenses, including cost of evidence of title and attorney’s fees in a reasonable sum, in any such action or proceeding in which the Lender or Trustee may appear, and in any suit brought by the Lender to foreclose this deed.

3.5. Payment of Taxes and Utility Charges. Borrower shall pay, at least ten (10) days before delinquency all taxes and

assessments affecting the Property, including assessments on appurtenant water stock; when due, all encumbrances, charges and liens, fines and impositions attributable to the Property, leasehold payments or ground rents, if any, and any interest on the Property or any part thereof; all costs, fees and expenses of this trust. Borrower shall make such payments when due, directly to the payee thereof. Borrower shall promptly furnish to Lender all notices of amounts due under this paragraph, and Borrower shall promptly furnish to Lender receipts evidencing all such payments made.

3.6. Insurance. Borrower shall keep the Property insured with loss payable to the Lender, against loss or damage by fire and such other hazards, casualties and contingencies and by such companies on such forms and in the amount of the replacement cost of the Property, and shall deliver the original of all such policies to the Lender, together with receipts satisfactory to the Lender evidencing payment of the premiums. All such policies shall provide that the Lender shall be given thirty (30) days advance written notice of the cancellation, expiration or termination of any such policy or any material change in the coverage afforded by it. Renewal policies and any replacement policies, together with premium receipts satisfactory to the Lender, shall be delivered to the Lender at least thirty (30) days prior to the expiration of existing policies. Neither Trustee nor the Lender shall by reason of accepting, rejecting, approving or obtaining insurance incur any liability for the existence, nonexistence, form or legal sufficiency of such insurance, or solvency of any insurer for payment of losses. All insurance proceeds for such losses must be utilized for the repair or restoration of the insured property.

3.7. Payments and Discharge of Liens. Borrower will pay, when due, all claims of every kind and nature which might or could become a lien on the Property or any part thereof; provided, however, that the following are excepted from this prohibition: (a) liens for taxes and assessments which are not delinquent although by law are given the status of a lien, and (b) such of the above claims as are, and only during the time they are, being contested by Borrower in good faith and by appropriate legal proceedings, and Borrower shall post security for the payment of these contested claims as may be requested by the Lender. Borrower shall not default in the payment or performance of any obligation secured by a lien, mortgage or deed of trust which is superior to this Deed of Trust. 4. IT IS MUTUALLY AGREED THAT: 4.1. Application of Payments. Unless applicable law provides otherwise, all payments received by Lender under the Note and Section 2.1 shall be applied by Lender first to interest payable on the Note and then to the principal due on the Note. 4.2. Future Advances. Upon request by Borrower, Lender, at Lender’s option, may make future advances to Borrower. All such future advances, with interest thereon, shall be added to and become a part of the indebtedness secured by this Deed of Trust when evidenced by promissory note(s) reciting that such note(s) are secured by this Deed of Trust. 4.3. Disbursements to Protect Lender’s Security. All sums disbursed by Lender to protect and preserve the Property, this Deed of Trust, or Lender’s security for the performance of Borrower’s obligations under the Note shall be and be deemed to be an indebtedness of Borrower secured by this Deed of Trust.

4.4. Protection of Lender’s Security. If Borrower fails to perform the covenants and agreements contained in this Deed

of Trust, or if any action or proceeding is commenced which materially affects Lender’s interest in the Property, including, but not limited to, eminent domain, insolvency, code enforcement, arrangements or proceedings involving a bankrupt or decedent,

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foreclosure of any mortgage secured by the Property or sale of the Property under a power of sale of any instrument secured by the Property, then Lender, at Lender’s option, upon notice to Borrower, may make such appearance, disburse such sums and take such action as is necessary to protect Lender’s interest, including, but not limited to, disbursement of reasonable attorney’s fees and entry upon the Property to make repairs.

Any amounts disbursed by Lender pursuant to this Section 4.4, with interest thereon, shall become additional indebtedness

of Borrower secured by this Deed of Trust. Unless Borrower and Lender agree to other terms of payment, such amounts shall be payable upon notice from Lender to Borrower requesting payment thereof, and shall bear interest from the date of disbursement at the highest rate permissible under applicable law. Nothing contained in this Section 4.4 shall require Lender to incur any expense or take any action hereunder.

4.5. Inspection. Lender or its agent may make or cause to be made reasonable entries upon and inspections of the

Property. Lender shall give Borrower notice at the time of or prior to any such inspection specifying reasonable cause for the inspection

4.6. Awards and Damages. All judgments, awards of damages, settlements and compensation made in connection

with or in lieu of (a) taking of all or any part of or any interest in the Property by or under assertion of the power of eminent domain, (b) any damage to or destruction of the Property or any part thereof by insured casualty, and (c) any other injury or damage to all or any part of the Property, are hereby assigned to and shall be paid to the Lender. The Lender is authorized and empowered (but not required) to collect and receive any such sums and is authorized to apply them in whole or in part upon any indebtedness or obligation secured hereby, in such order and manner as the Lender shall determine at its option. The Lender shall be entitled to settle and adjust all claims under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all expenses incurred by it in connection with any such settlement or adjustment. All or any part of the amounts so collected and recovered by the Lender may be released to Borrower upon such conditions as the Lender may impose for its disposition. Application of all or any part of the amounts collected and received by the Lender or the release thereof shall not cure or waive any default under this Deed of Trust. If the Property is abandoned by Borrower, or if, after notice by Lender to Borrower that the condemnor offers to make an award or settle a claim for damages, Borrower fails to respond to Lender within thirty (30) days after the date such notice is mailed, Lender is authorized to collect and apply the proceeds, at Lender’s option, either to restoration or repair of the Property or to the sum secured by this Deed of Trust.

4.7. Prohibition on Transfers of Interest. With the exception of the transfers permitted in Section 4.11 below, if all or

any part of the Property or an interest therein is sold or transferred by Borrower without Lender’s prior written consent, Lender may, at Lender’s option, declare all the sums secured by this Security Instrument to be immediately due and payable. If Lender exercises such option to accelerate, Lender shall mail Borrower notice of acceleration in accordance with Section 6.9 hereof. Such notices shall provide a period of not less than 30 days from the date the notice is mailed within which Borrower may pay the sums declared due. If Borrower fails to pay such sums prior to the expiration of such period, Lender may, without further notice or demand on Borrower, invoke any remedies permitted by Section 5.2(a) hereof.

4.8. Sale or Forbearance. No sale of the Property, forbearances on the part of the Lender or extension of the time for payment of the indebtedness hereby secured shall operate to release, discharge, waive, modify, change or affect the liability of Borrower either in whole or in part.

4.9. The Lender’s Rights to Release. Without affecting the liability of any person for payment of any indebtedness hereby secured (other than any person released pursuant hereto), including without limitation any one or more endorsers or guarantors, and without affecting the lien hereof upon any of the Property not released pursuant hereto, at any time and from time to time without notice: (a) The Lender may, at its sole discretion, (I) release any person now or hereafter liable for payment of any or all such indebtedness, (II) extend the time for or agree to alter the terms of payment of any or all of such indebtedness, and (III) release or accept additional security for such indebtedness, or subordinate the lien or charge hereof; and (b) Trustee, acting pursuant to the written request of the Lender, may reconvey all or any part of the Property, consent to the making of any map or plot thereof, join in granting any assessment thereon, or join in any such agreement of extension or subordination.

4.10. Reconveyance. Upon payment of all sums secured by this Security Instrument, Lender shall request Trustee to reconvey the Property and shall surrender this Security Instrument and all notes evidencing indebtedness secured by this Security Instrument to Trustee. Trustee shall reconvey the Property without warranty and without charge to the person or persons legally entitled thereto. Such person or persons shall pay all costs of recordation, if any. The recitals in the reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof.

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4.11. Requirement of Owner-occupancy and Permitted Transfers. Borrower shall occupy the Property as Borrower’s

principal place of residence during the term as described in the Note. Notwithstanding any other provision of the Note or this Deed of Trust, the following transfers shall not be deemed to be a default under the Note or this Deed of Trust:

(a) The loans are assumable if the home is re-sold to another pre-approved income-qualifying household after five years from the recordation of the deed of trust securing the BEGIN loan. (b) The transfer of the Property to the surviving joint tenant by devise, descent or operation of the law, on the death of a joint tenant. (c) A transfer of the Property where the spouse becomes an owner of the property. (d) A transfer of the Property resulting from a decree of dissolution of marriage, legal separation or from an incidental property settlement agreement by which the spouse becomes an owner of the Property. (e) A transfer to an inter vivos trust in which the Borrower is and remains the beneficiary and occupant of the property.

5. EVENTS OF DEFAULT

5.1. Events of Default. Any one or more of the following events shall constitute a default under this Deed of Trust (a) failure of the Borrower to pay the indebtedness secured hereby or any installment thereof, whether principal, interest or otherwise, when and as the same become due and payable, whether at maturity or by acceleration or otherwise; or (b) failure of Borrower to observe or to perform any covenant condition or agreement to be observed or performed by Borrower pursuant to the Note or this Deed of Trust including but not limited to the occupancy of property by Borrower provision; or (c) the occurrence of any event which, under the terms of the Note, shall entitle the Lender to exercise the rights or remedies thereunder; or (d) the occurrence of any event which, under the terms of the First Note and First Deed of Trust shall entitle the Lender to exercise the rights or remedies thereunder.

5.2. Acceleration and Sale.

(a) Acceleration. Except as provided in Section 4.7, upon Borrower’s breach of any covenant or agreement of Borrower in this Deed of Trust, including the covenants to pay when due any sums secured by this Deed of Trust, upon Borrower’s failure to make any payment or to perform any of its obligations, covenants and agreements pursuant to the Note, Lender shall mail notice to Borrower as provided in Section 6.9 hereof specifying: (1) the breach; (2) the action required to cure such breach; (3) a date, no less than 30 days from the date the notice is mailed to Borrower, by which such breach must be cured; and (4) that failure to cure such breach on or before the date specified in the notice may result in acceleration of the sums secured by this Deed of Trust and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of a default or any other defense of Borrower to acceleration and sale. If the breach is not cured on or before the date specified in the notice, Lender at Lender’s option may declare all of the sums secured by this Deed of Trust to be immediately due and payable without further demand and may invoke the power of sale and any other remedies permitted by applicable law. Lender shall be entitled to collect from the Borrower, or sale proceeds, if any, all reasonable costs and expenses incurred in pursuing the remedies provided in this paragraph, including, but not limited to, reasonable attorneys’ fees.

(b) Borrower’s Right to Reinstate. Notwithstanding Lender’s acceleration of the sums secured by this Deed

of Trust, Borrower will have the right to have any proceedings begun by Lender to enforce this Deed of Trust discontinued at any time prior to five (5) days before sale of the Property pursuant to the power of sale contained in this Deed of Trust or at any time prior to entry of the judgment enforcing this Deed of Trust if: (1) Borrower pays Lender all sums which would be then due under this Deed of Trust and the Note, had no acceleration occurred; (2) Borrower pays all reasonable expenses incurred by Lender and Trustee in enforcing the covenants and agreements of Borrower contained in this Deed of Trust, remedies including, but not limited to, reasonable attorneys’ fees; and (3) Borrower takes such action as Lender may reasonably require to assure that the lien of this Deed of Trust, Lender’s interest in the Property and Borrower’s obligation to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon such payment and cure by Borrower, this Deed of Trust and the obligations secured hereby will remain in full force and effect as if no acceleration had occurred.

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(c) Sale. After delivery to Trustee of a Notice of Default and Demand for Sale and after the expiration of

such time and the giving of such notice of default and sale as may then be required by law, and without demand on Borrower Trustee shall sell the Property at the time and place of sale fixed by it in said notice of sale, at public auction to the highest bidder for cash in lawful money of the United States of America, payable at time of sale. Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale and from time to time thereafter may postpone such sale by public announcement at the time and place fixed by the preceding postponement. Any person, including Borrower, Trustee or the Lender, may purchase the Property at such sale. Upon such sale by Trustee it shall deliver to such purchaser its deed conveying the Property so sold, but without any covenant or warranty expressed or implied. The recitals in such deed of any matters or facts shall be conclusive proof of their truthfulness. Upon sale by Trustee and after deducting all costs, expenses and fees of Trustee and of this Deed of Trust, Trustee shall apply the proceeds of sale to the payment of the principal indebtedness hereby secured, whether evidenced by the Note or otherwise, or representing advances made or costs or expenses paid or incurred by the Lender under this Deed of Trust, or the secured obligations or any other instrument evidencing or securing any indebtedness hereby secured and to the payment of all other sums then secured thereby, including interest as provided in this Deed of Trust, the secured obligations or any other such instrument, in such order as the Lender shall direct; and then the remainder, if any, shall be paid to the person or persons legally entitled thereto.

(d) Assignment of Rents; Appointment of Receiver; Lender in Possession. Upon acceleration under

paragraph (a) of Section 5.2 hereof or abandonment of the Property, Lender (in person, by agent or by judicially appointed receiver) shall be entitled to enter upon, take possession of and manage the Property and to collect the rents of the Property (if any) including those past due. All rents collected by Lender or the Receiver shall be applied first to payment of the costs of management of the Property and collection of rents including, but not limited to, Receiver’s fees, premiums on Receiver’s bonds and reasonable attorneys’ fees, and then to the sums secured by this Security Instrument. Lender and the Receiver shall be liable to account only for those rents actually received. The provisions of this paragraph and paragraph (a) of Section 5.2 shall operate subject to the claims of prior lien holders.

5.3. Exercise of Remedies; Delay. No exercise of any right or remedy by the Lender or Trustee hereunder shall constitute a waiver of any other right or remedy herein contained or provided by law, and no delay by the Lender or Trustee in exercising any such right or remedy hereunder shall operate as a waiver thereof or preclude the exercise thereof during the continuance of any default hereunder.

5.4. Trustee Substitution. The irrevocable power to appoint a substitute trustee or trustees hereunder is hereby expressly granted to the Lender, to be exercised at any time hereafter, without specifying any reason therefore by filing for record in the office where this Deed of Trust is recorded a deed of appointment, and said power of appointment of successor trustee or trustees may be exercised as often as and whenever the Lender deems advisable. The exercise of said power of appointment, no matter how often, shall not be deemed an exhaustion thereof, and upon recording of such deed or deeds of appointment, the trustee or trustees so appointed shall thereupon, without further act or deed of conveyance, succeed to and become fully vested with identically the same title and estate in and to the Property hereby conveyed and with all the rights, powers, trusts and duties of the predecessor in the trust hereunder, with the like effect as if originally names as trustee or as one of the trustees.

5.5. Remedies Cumulative. No remedy herein contained or conferred upon the Lender or Trustee is intended to be exclusive of any other remedy or remedies afforded by law or by the terms hereof to the Lender or Trustee but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity. 6. MISCELLANEOUS PROVISIONS

6.1. Successors, Assigns, Gender, Number. The covenants and agreements contained in this Deed of Trust shall bind, and the benefit and advantages under it shall inure to, the respective heirs, executors, administrators, successors and assigns of the parties. Wherever used, the singular number shall include the plural, and the plural the singular, and the use of any gender shall be applicable to all genders.

6.2. Headings. The headings are inserted only for convenience of reference and in no way define, limit, or describe the scope or intent of this Deed of Trust, or of any particular provision thereof, or the proper construction thereof.

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6.3. Actions on Behalf of the Lender. Except as otherwise specifically provided herein, whenever any approval, notice,

direction, consent, request or other action by the Lender is required or permitted under this Deed of Trust, such action shall be in writing.

6.4. Terms. The words “the Lender” means the present Lender, or any future owner or holder, including pledgee of the indebtedness secured hereby.

6.5. Obligations of Borrower. If more than one person has executed this Deed of Trust as “Borrower,” the obligations of all such persons hereunder shall be joint and several.

6.6. Incorporation by References. The provisions of the BEGIN Program security instruments and the documents relating to that program are incorporated by reference as though set out verbatim.

6.7. Severability. If any provision of this Deed of Trust shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.

6.8. Indemnification. Borrower will indemnify and hold the Lender, its officers and agents harmless against any and all losses, claims, demands, penalties and liabilities which the Lender, its officers or agents may sustain or suffer by reason of anything done or omitted in good faith pursuant to or in connection with this Deed of Trust and not assert any claim against the Lender, its officers or agents by reason of any action so taken or omitted. Borrower shall, at Borrower’s expense, defend, indemnify, save and hold the Lender, its officers and agents harmless from any and all claims, demands, losses, expenses, damages (general, punitive or otherwise), causes of action (whether legal or equitable in nature) asserted by any person, firm, corporation or other entity arising out of this Deed of Trust and Borrower shall pay the Lender upon demand all claims, judgments, damages, losses or expenses (including reasonable legal expense) incurred by the Lender as a result of any legal action arising out of this Deed of Trust.

6.9. Notice. Except for any notice required under applicable law to be given in another manner (a) any notice to

Borrower provided for in this Deed of Trust shall be given by mailing such notice by certified mail directed to the Property Address or any other address Borrower designates by notice to Lender as provided herein; and, (b) any notice to Lender shall be given by certified mail, return receipt requested, to Lender’s mailing address stated herein or to such other address as Lender may designate by notice to Borrower as provided herein. Any notice provided for in this Deed of Trust shall deem to have been given to Borrower or Lender when given in the manner designated herein.

6.10. Beneficiary Statement. Lender may collect a fee for furnishing the beneficiary statement in an amount not to

exceed the amount as provided by Section 2943 of the Civil Code of California. 6.11. Use of Property. Borrower shall not permit or suffer the use of any of the Property for any purpose other than as

a single family residential dwelling. IN WITNESS WHEREOF, Borrower has executed this Deed of Trust on the day and year set forth above. By signing below,

Borrower agrees to the terms and conditions as set forth above. MAILING ADDRESS FOR NOTICES: SIGNATURE OF BORROWER(s): (Street)

(City) (State) (Zip)

Acknowledgements

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EXHIBIT G

BORROWER APPEAL FORMAT

Name of Applicant Current Address Phone Number Contact Person (if different from Applicant) Name of person/agency denying applicant participation in program Date of Denial Date of Appeal submission (must within 60 days of date of denial) Narrative (please describe your reasons for appealing denial to program) (add additional pages if necessary) Signature of Applicant (person appealing decision) Mail this form or your typed version of this form to: BEGIN Program Coordinator, County of Kings, Attn: Community Development Agency, 1400 W. Lacey Blvd., Hanford, CA 93230 or FAX to 559/584-8989.

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EXHIBIT H COUNTY OF KINGS REUSE ACCOUNT PLAN FOR BEGIN PROGRAM

The County of Kings, here after called “COUNTY” has prepared and approved this Reuse Account Plan in order to properly account for reuse of the Building Equity & Growth in Neighborhoods (BEGIN) repayments that will insure: 1) no co-mingling of funds; 2) periodic account reporting; 3) timely processing of repayments and disbursements; and 4) accounting for any interest earned on BEGIN funds. The COUNTY has formulated this document to comply with the California Department of Housing and Community Development (HCD) program regulations in conjunction with the COUNTY’S 20-year Monitoring Agreement with HCD, and the use of public funds for the BEGIN Program and any funding restrictions, which are associated with them. Initial BEGIN funding will be one-time fixed expenditures in the form of down payment assistance to low income first-time homebuyers which is provided through repayable loans at a low interest rate (deferred loans up to 20 percent of the purchase price at 1% simple interest per annum) over a thirty year period. Once loans have been repaid, the revolving loan fund will serve other eligible borrowers and participants. Because of program restrictions and fund limitations, re-loaning of funds will only be used to support affordable housing projects that meet HCD regulations of the BEGIN Program. The County of Kings or its designee will administer this program. The revolving loan fund program procedures comprise four components explained below: 1) financial administration (tracking and accounting for repayments and future disbursements); 2) program administration (eligible uses or expenditures of reuse account funds); 3) geographical area (jurisdictional limits for projects); and 4) program reporting and reuse account access. 1. Financial Administration

A. All repayments of BEGIN loan principal and interest shall be received by COUNTY and deposited into a

separate reuse account maintained by COUNTY’s Finance Department. B. The reuse account shall be an interest bearing account into which all earned interest shall be

deposited.

C. All funds deposited into the reuse account shall be the property of the COUNTY.

D. A line item for reuse of BEGIN funds will be inserted into COUNTY’s fiscal year budget allocating and approving use of BEGIN funds for BEGIN eligible activities.

E. All financial transactions dealing with reuse account funds that are satisfactory and in compliance with

COUNTY and BEGIN regulations will be generally processed within a thirty day period.

2. Program Administration A. All BEGIN reuse funds shall be expended in accordance with BEGIN regulations. Reuse funds may be

used as loans to eligible borrowers for any BEGIN eligible activity including:

1) First time homebuyer mortgage assistance;

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2) Costs of homebuyer education/counseling for each first time homebuyer receiving mortgage assistance from the reuse account;

3) Owner-occupied rehabilitation; 4) Single family dwelling acquisition and rehabilitation; and 5) Self-help mortgage assistance

B. A portion of the funds deposited in the BEGIN reuse account may be used to pay for the actual delivery

of BEGIN activities funded from the reuse account. The amount is dependent upon the activity funded (i.e. escrow actually closed), and is calculated as a percentage of the loan made, or on a per-unit basis, i.e.: 1) $350 for homebuyer education for each closed mortgage assistance loan where homebuyer

education was provided. 2) Up to 5% of funds deposited may be used towards the costs of loan servicing by the COUNTY or the

cost of third-party loan servicing contracted by the COUNTY.

C. For new loans to individual homebuyers, the individual file documentation will be the same as that listed under the HCD pre-approved County of Kings First – Time Homebuyer BEGIN Mortgage Assistance Program Guidelines, except there will be no draw requests forms submitted to HCD. The file management and documentation will be in accordance with BEGIN requirements in effect at time of funding of new loans.

3. Geographical Area

A. All BEGIN reuse funds under this section shall only be expended within the jurisdictional limits of the

COUNTY. 4. Program Reporting and Reuse Account Access

A. COUNTY shall allow HCD full access to the reuse account records for the purpose of determining

COUNTY’s compliance with BEGIN regulations. B. As required, COUNTY will provide HCD an annual report regarding fiscal year (twelve month) activity for

the reuse account. C. Evidence that accounting records demonstrate that a separate accounting is being maintained of

deposit and disbursement of repaid BEGIN loans will be provided to HCD as required.

D. COUNTY reuse account files shall document that the amount of disbursements for loan processing or activity fees, homebuyer education or program administration do not exceed the amounts per BEGIN program regulations in effect at time of such disbursements.