On March 5, 2002, a Status Report on the ongoing Audit of the BMR Purchase Program was presented to the City Council (RTC 02-076). This report provided Council with information on a City audit certifying the occupancy of 133 out of 180 housing units in the BMR Purchase program. On June 11, 2002 a report which included a Budget Modification was presented to the City Council (RTC 02-234). The budget modification provided sufficient funds to accommodate two purchase transactions and approved the purchase of one property. On October 8, 2002 a report to approve the purchase of another property was presented to the City Council (RTC 02-391). One of the deed restrictions under the BMR Program requires that each owner continuously occupy the unit as their principal residence. Through this audit, several occurrences of breaches in occupancy restrictions were discovered. In addition, some of the owners obtained loans that exceed the amount allowable per the valuation formula. Staff will negotiate the amount of the loan payoff in these instances and prevent the foreclosure of the properties. The actions taken to resolve these cases have been the forced sale of each unit. To date, ten forced sales have closed escrow and $122,944 in fines has been collected. All of the units have been resold to qualified BMR purchasers.

GOAL A: Foster the expansion of the housing supply to provide greater opportunities for current and future residents given environmental, social, fiscal, and land use constraints.

GOAL D: Maintain diversity in tenure, type, size, location and cost-of-housing to permit a range of individual choice for all current residents and those expected to become city residents.

Staff is recommending the purchase of seven (condominiums/townhouses) forced sale units by the City. The cost per unit is an average anticipated cost, based on a reduced BMR value and less anticipated penalties. Staff will initiate the process to sell the properties to qualified buyers. Staff will take actions to purchase units by the City to prevent the misuse and loss of units from the program and to ensure the completion of successful transfers to new buyers. Staff is requiring the sale of these units as a result of findings determined from the audit, which indicated that the current owners have breached the terms and conditions of the BMR Program. Additionally, some of the owners have borrowed funds on the properties above the BMR valuation. Staff will negotiate reduced payoffs with the lenders of these overfinanced properties. Due to the involuntary nature of these transactions each property purchase may take considerable time and effort to accomplish, thereby making it infeasible to transfer directly to a new homeowner. Upon completion of each purchase by the City of Sunnyvale, the resale process to a new BMR owner will begin and will be completed within 30-45 days. The following table contains a description of each unit with the estimated purchase price:

BMR Unit Address Unit Size Estimated Purchase Price

514-A Porpoise Bay Terrace Three Bedroom $165,000

437-D Costa Mesa Terrace Three Bedroom $140,000

929 E. El Camino Real Two Bedroom $125,000

705-1 W. Fremont Two Bedroom $160,000

466-A Costa Mesa Terrace Two Bedroom $130,000

614-7 San Conrado Terrace Two Bedroom $125,000

903-12 Sunrose Terrace Two Bedroom $ 90,000

Project 814700 -

1. Approve Budget Modification No. 45 to appropriate funds from Housing Mitigation Sub-Fund for the purchase of the BMR units and approve the purchase of the following seven BMR housing units: 514-A Porpoise Bay Terrace, 437-D Costa Mesa Terrace, 929 E. El Camino Real, 705-1 W. Fremont, 466-A Costa Mesa Terrace, 614-7 San Conrado Terrace, 903-12 Sunrose Terrace.

2. Do not approve the purchase of seven BMR housing units and Budget Modification No. 45.