February 2007

 A total of 12 families residing in the 159 Mirasol single-family homes have recently voiced concerns about potential foundation or structural viability and the current conditions of some of the homes. This action plan describes the agency’s ongoing and planned activities to address all of the concerns.

Background
The homes were constructed in 2000 by Mirasol Joint Venture Team, which consisted of Rick Rodriguez and KB Home, as the responsive bidder to a HOPE VI Revitalization Grant RFP.   The 159 affordable homes were constructed to offer very low-income families an opportunity to work toward achieving Homeownership.

Current Status of Homes

*Includes five 5(h) renters

SAHA currently owns 79 homes in the four homeownership subdivisions, with 25 of those occupied by families remaining in the lease-to-purchase program. A total of 80 of the homes have been sold, and 12 presently have earnest money contracts for purchase.  The remaining 47 homes have recently been listed with two Board-approved local residential real estate brokers www.century21.com and Caballero & Associates) to sell to qualified low-income homebuyers. 

Action One: Identify, Verify and Address Any and All Concerns with the Homes
Foundations
In January 2006, while preparing a vacant home for sale, staff observed cracks in the foundation that caused concern.  As a result, the Authority began to extensively review and catalogue the documentation related to the construction of the homes.  That information was provided to a third-party structural engineer, Engineering Diagnostics, Inc. (EDI), which inspected a number of the homes, and in October 2006, reported that the houses  had no “systemic” foundation problems.  However, the process did ultimately lead to the identification of four (4) homes requiring foundation repair.  KB Home’s 10-year Limited Warranty, which runs through 2011, covers any foundation concerns, therefore, SAHA entered into specific discussions with KB Home in November 2006, to repair the four homes reported to be of concern.  After mutual agreement to repair the homes, work began in January 2007.  After adjacent neighbors observed the ongoing repair(s), several families began to voice concerns about the foundations of the homes they rent or own.
As a result of citizens’ concerns, , the Housing Authority hired another third-party professional structural engineer (AccuTech Consultants, LLC) to inspect the 25 homes that are occupied by public housing renters participating in the lease-to-purchase program.  The residents had mentioned observing cracks in porches and drywall, grass intrusion, and soil erosion as concerns; and the engineering firm was asked to inspect these homes and to visit with available residents to determine if any evidence suggests any structural failures. 

AccuTech’s February 12, 2007 report indicates that many of the concerns cited were cosmetic in nature and did not affect the structural integrity of the homes.  The one exception is a home on Precious St., for which the inspection report indicated a “uniform tilt.”  The Housing Authority  has referred this home  to KB Home as a warranty item, and will continue to coordinate any and all repairs through completion. 

Note: KB Home’s 10-year limited warranty transferred to the new homeowners at the closing of each of the 80 homes that have been sold.  To address any foundation or other concerns these families may have, KB Home has recently sent them each a packet of information including request-for-service contacts and warranty information.  Additionally, KB has assigned full-time staff to respond to any concerns. The Housing Authority and its Homeownership Program staff will continue to be available to each and every homeowner to assist in the coordination of service requests with KB Home. 

Interiors and Exteriors
As mentioned above, some residents mentioned observing cracks in porches and drywall, grass intrusion, and soil erosion. In response, SAHA has worked to expedite assessing the conditions of the interiors and exteriors, and to promptly schedule any and all repair work necessary.
To date, we have already installed new lawns on all SAHA-owned properties, to address soil erosion concerns identified in the AccuTech report.  The agency has begun and intends to complete assessments of all of the lease-to-purchase houses by March 2, 2007.  We anticipate all concerns discovered by the inspection or noted by the residents to be addressed by March 30, 2007.
All work at the homes is being fully documented, with “before” and “after” conditions photographed and preserved for files. The total cost of repairing all items is not yet known.  KB Home will cover all warranty-related items, and the cosmetic repairs (not covered by warranty) to SAHA-owned homes will be comprised of time and materials paid by SAHA

Mold
Shortly before the February 13, 2007, Urban Affairs Committee meeting, SAHA became aware that two homeowners had concerns about potential mold in their homes.  This matter was referred to KB Home.  KB has informed SAHA that an independent expert has inspected the homes and taken culture samples, and that the report of their findings is expected by March 12, 2007. 

Site Conditions
In response to citizens’ concerns regarding a potential landfill in the Villas de Fortuna subdivision, environmental engineering firm, Raba-Kistner Consultants, Inc.’s original Phase I Environmental Site Assessment reported:
There is no history of municipal waste generation on the SITE.  However there is evidence of promiscuous dumping.  The dumped material observed appears to be of the municipal variety, e.g., glass, paper and plastics.  There is no evidence of hazardous materials or toxic substances were noted in the dumped material.
In summary, there was no landfill at Villas de Fortuna.  In fact, Richard W. Kistner, P.E., of Raba-Kistner Consultants, Inc., has recently clarified that “promiscuous dumping,” as used in their report, refers to “an uncontrolled dump location used by locals to dump household trash”.  This means that the area may have once been an empty lot where neighbors threw occasional trash, but it was not a landfill.

Action Two: Continue to Improve Communication With Lease/Purchase Participants
Ongoing Communication With Participants
There are 25 lease-to-purchase families, who have not yet qualified for a mortgage.  Although the original lease purchase agreements with the families were for a five-year period, in order to further assist the families in their home buying efforts, SAHA began offering 2-year extensions to the families in October 2006.  At that time, SAHA began:

• Holding quarterly group meetings to discuss the home buying purchase process, to include topics, such as:

1. The importance of good credit
2. The credit restoration process
3.  Credit improvement resources
4. Property tax procedures and responsibilities
5. Loan resources
6.   Required home buying courses by third-party organizations

• Providing participants with quarterly updates of their “Capital Accumulation Account” balances. 
  

The Capital Accumulation Account can “only” be utilized as a purchase price discount. The Capital Accumulation Account is not an escrow account, not cash, and not a cash equivalent.  It can only be used to purchase a home in the Authority’s public housing inventory.
For lease purchase participants, any rent amount over $200 is calculated as a credit to the “Capital Accumulation Account.” (Note: According to HUD regulations, every public housing renter, including the lease purchase participants, is required to pay 30% of their adjusted monthly income for rent.  And in the case of the Homeownership program a minimum of $200). 

• Offering confidential one-on-one meetings to discuss any other questions or concerns they may have about their home, the homeownership program or the homebuying process.
  
• Offered remaining families other options, if, for whatever reason, they choose to not purchase their existing rental:
  
• If a program participant wishes to continue to work toward qualifying for the purchase of their present home, we will make sure any verified structural or maintenance concerns are addressed.
  
• We also realize there may be some lease-to-purchase participants who would rather buy a different public housing home. In those cases, we will transfer their Capital Accumulation Account towards the purchase of a different SAHA-owned public housing unit. 
  
• In the instance in which a lease/purchase participant chooses not to pursue homeownership or finds they are unable to qualify for a mortgage, SAHA will advise the participant of all of the options available to them to relocate including use of a Housing Choice Voucher, or to other public housing.  These families will not receive any monies from their Capital Accumulation Accounts, as this credit can only be used to purchase a home in the Authority’s Public Housing inventory as a purchase discount.

The Authority will continue to hold these quarterly meetings until the remaining lease purchase families successfully purchase a home, or the lease agreements expire.

Disclosure
There has been concern expressed about the disclosure, upon sale, of the condition of the homes.  On February 21, 2007 and February 23, 2007, SAHA signed listing agreements with two Realty firms, which will insure that all requirements are adhered to, including the provision of the Texas Real Estate Commission’s (TREC) Seller’s Disclosure of Property Condition form.  Throughout the sales process, the Housing Authority will be available to answer any and all questions about a property’s condition.

Action Three: Sell Vacant Homes

•   There are 79 homes currently for sale in the four subdivisions. 
• As mentioned earlier, SAHA recently executed board-approved contracts with two residential real estate brokers www.century21.com and Caballero & Associates) to list the homes, and manage the purchases through closing.
• All of the single-family homes will continue to be subject to “affordability deed restrictions,” requiring all purchasers of the homes to meet the guideline of having income no greater than 80% of “Area Median Income.”
• All homes now being sold, including those in the lease/purchase program, are receiving an inspection by a certified building inspector, chosen by the title company/buyer and paid by SAHA. 
• All homes are now being sold with a one-year, third-party residential service warranty, which is common in many home sales and covers many items, including appliances.
• All homes sales will include TREC’s Seller’s Disclosure form mentioned above.
  

Action Four: Seek Recommendations for Homeownership Program Improvements
Independent Review and Recommendations
The Housing Authority will hire a mutually agreeable independent expert to review the history of the 5(h) Homeownership program, and the current management and monitoring of the participants remaining in the program.  The final report should state any recommendations for improvements.