MEETING DATE:
JULY 28, 2026
SUBJECT:
Title
RESOLUTION NOS. 2026-9648 & 2026-9649 - AUTHORIZATION TO PROCEED WITH DEFAULT REMEDIES AND OPTION TO PURCHASE PROPERTY IN DEFAULT OR NON-CURABLE BREACH UNDER CALHOME AND/OR SAN MARCOS AFFORDABLE HOUSING PROGRAM AGREEMENTS
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Recommendation
Recommendation
1. ADOPT a resolution authorizing the City Manager or designee to initiate default proceedings, and all associated enforcement actions as provided in CalHOME and/or San Marcos Affordable Housing Program (SMAHP) regulatory agreements, including but not limited to acceleration of the loan, foreclosure, and the option for the City to purchase the property at or below the maximum sales price established in the applicable agreements.
2. ADOPT a resolution authorizing fund appropriation up to the maximum sales price, together with associated closing costs, as outlined in Affordable Housing Regulatory Agreements.
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Board or Commission Action
Resolution No. 2011-7582 authorized the submittal of an application for the CalHOME grant program and designated the City Manager as the authorized signatory on all grant materials.
Executive Summary
The City of San Marcos administers CalHOME and SMAHP homeownership programs designed to preserve long term affordability and maximize access to limited homeownership resources. These programs rely on strict compliance including but not limited to occupancy, resale, and affordability requirements to ensure funds are used as intended, protect State investment, and maintain the City’s ability to operate its programs effectively.
When borrowers fail to comply with program requirements, such as failing to occupy the property as their primary residence, renting the home illegally, or violating affordability covenants, the City is obligated under State law and the regulatory agreements to initiate default actions. These steps are essential to preserve the program, safeguard limited resources, and ensure assistance continues to benefit income qualified households.
To ensure required compliance and uphold program integrity, the City seeks Council authorization, via resolution, to proceed with the full spectrum of default actions outlined in the agreements-including foreclosure, the option to purchase at or below the maximum sales price, and authority to appropriate funds necessary to complete a negotiated purchase.
Discussion
The City of San Marcos administers affordable homeownership programs funded by the California Department of Housing and Community Development (CalHOME) and local regulatory agreements. The CalHOME Down Payment Assistance Program (DAP) provides deferred-payment loans to first-time homebuyers, while SMAHP enforces affordability restrictions and resale controls on designated units. Both programs require strict compliance with occupancy, resale, and maintenance standards.
The City executed a CalHOME Standard Agreement Number 11-CALHOME-8213 on August 16, 2012, (See Attachment 3) establishing program terms, compliance obligations, and enforcement responsibilities. This agreement requires the City to ensure borrowers comply with occupancy, resale, and affordability restrictions. When borrowers fail to comply, the City must initiate default actions as outlined in the loan documents and regulatory agreements. These actions may include accelerating sums owed, initiating foreclosure, or exercising the City’s purchase option at or below the maximum sales price established in the affordability covenant. Exercising these remedies preserves affordability and prevents the permanent loss of restricted housing units.
The City has identified a borrower with a Down Payment Assistance Loan (DAP2 007) and a San Marcos Affordable Housing Program loan (SMAHP-M-010) with a non-curable breach and default of agreements. Funding for DAP2 007 was allocated through CalHOME Agreement Number 11-CALHOME-8213.
The City is preparing to exercise the purchase option, which may require immediate access to funds beyond the City Manager’s signing authority. Authorizing Council-approved fund appropriation within this action will allow the City Manager or designee to negotiate and execute the purchase without delay, supporting timely enforcement of the City's affordability covenants
Consistent enforcement of the City’s affordable housing agreements protects program integrity, safeguards the City’s limited State and local housing resources, and ensures continued availability of affordable homeownership opportunities. Staff therefore requests authorization to undertake all necessary default and acquisition actions.
Environmental Review
The activities associated with this item involve program management and administrative actions and are not considered a “Project” under the California Environmental Quality Act (CEQA) pursuant to Section 15378 of the CEQA Guidelines.
Fiscal Impact
Default enforcement actions may require legal, administrative, and foreclosure related expenditures. Some costs may be recoverable under the loan documents. City Affordable Housing In Lieu funds (Fund 203) will be utilized to complete any property purchase made through the City’s exercise of its option to purchase. Use of these locally controlled funds ensures the City can efficiently preserve and maintain affordable housing units when a property is in default. Any property acquired by the City through its purchase option or foreclosure would be subject to resale or retention consistent with Affordable Regulatory agreements.
Attachment(s)
1. Resolution authorizing the City Manager or designee to initiate default proceedings, and all associated enforcement actions as provided in CalHOME and San Marcos Affordable Housing Program regulatory agreements, including but not limited to acceleration of the loan, foreclosure, and the option for the City to purchase the property at or below the maximum sales price established in the applicable agreements
2. Resolution authorizing fund appropriation up to the maximum sales price, together with associated closing costs, as outlined in Affordable Housing Regulatory Agreements
3. CalHOME Standard Agreement
Prepared and submitted by: Sylvia Solis Daniels, Housing and Neighborhood Services Director
Reviewed by: Helen Holmes Peak, City Attorney
Approved by: Michelle Bender, City Manager