10.

c.

Final Inspection. Upon completion of the rehabilitation work, a
final inspection of the property shall be made jointly by the
Building Inspection Division and the Department of Housing and
Community Development to assure:

(1) that the property has been brought into compliance with
the requirements of the City of Madison Minimum Housing and
Property Maintenance Code and all other applicable codes
and ordinances; and

(2) that the rehabilitation work has been completed in
accordance with the Contract for Rehabilitation Work.

Inspections for Progress Payments and Final Payment.

a.

b.

Progress Payments. A compliance inspection of the rehabilitation
work shall be made and an inspection report prepared by the
Rehabilitation Division before a progress payment on a contractor's
invoice is made. If the inspection determines that the work
completed is satisfactory, the Rehabilitation Division staff
shall draw progress payment checks on the escrow account, payable
to the appropriate payee(s).

If the work completed is not satisfactory, and/or not in
accordance with the requirements for a progress payment, as
specified in the Contract for Rehabilitation Work, the Rehabilita-
tion Supervisor shall advise the borrower of any noncompliance in
the rehabilitation work, or of an incorrect invoice submitted
by the contractor. The borrower shall be requested to obtain,
with assistance from the Department of Housing and Community
Development, appropriate corrective action from the contractor.
No payment shall be made pursuant to a Contract for Rehabilitation
Work until the contractor has satisfactorily completed the necessary
corrective action.

Final Payment. Upon completion of the rehabilitation work and
receipt of the contractor's invoice containing his certificate
of satisfactory completion of all work in accordance with the
contract and his warranty, the Rehabilitation Division of the
Department of Housing and Community Development shall arrange
for the final joint inspection of the completed work. When the
final inspection determines that the rehabilitation work has
been satisfactorily completed in accordance with the contract,
and the property is in compliance with the requirements of the
City of Madison Minimum Housing and Property Maintenance Code
and all other applicable property rehabilitation standards, the
Rehabilitation Division staff shall obtain from the contractor
a release of all liens and a copy of each warranty due the
borrower for the work. After receipt of a release of all liens,
including releases from all subcontractors and suppliers, and a
copy of each warranty, the Department of Housing and Community
Development shall make final payment in accordance with Section
5 of Chapter 7 of this Handbook.

11.

12.

Certification of Final Inspection. After the Department of Housing and Community Development has obtained the final inspection report and has determined that the rehabilitation work has been fully and satisfactorily completed, the Rehabilitation Supervisor shall prepare a Certificate of Final Inspection (Form HRSP-6245). The Certificate of Final Inspection shall be distributed as follows:

a. signed original to the property owner;

b.

c.

signed copy to the loan servicing agent; and

signed copy to be retained by the Department of Housing
and Community Development.

Supplemental Inspections. In some cases defects and inadequacies in the rehabilitation work, not apparent at the time of final inspection, may show up after final payment for the work is made and the Certificate of Final Inspection is issued. Most of these are minor, such as doors and windows that stick after painting. However, others are serious, such as roof leaks not ascertainable until after a rain, defects in heating systems installed during the nonheating season that were not revealed in the limited tests after inspection, and plumbing leaks that did not show up in the final inspection. All work performed by the contractor is covered by a one-year guarantee; accordingly, the property owner may, for a period of one year, require the contractor to correct significant defects and inadequacies in the work performed under his contract.

Although a limited examination indicates that the incidence of serious defects and inadequacies in the rehabilitation work is not frequent, and contractors generally correct them promptly when requested, the Rehabilitation Supervisor, after the final inspection, shall make an additional call on the property owner to ascertain if there are any complaints about the work that had been done. This call shall be made not more than 60 days after the issuance of the Certificate of Final Inspection. The Rehabilitation Supervisor shall inspect the work to ascertain if the complaint is valid. If the complaint is valid, the Rehabilitation Division staff shall assist the property owner in obtaining prompt corrective action from the contractor.

86-085 77 pt. 2 25

CHAPTER 9

1.

2.

3.

TRUTH-IN-LENDING REQUIREMENTS FOR HOUSING REHABILITATION LOANS

Purpose. This chapter describes the Truth in Lending Act and its procedural and disclosure requirements which must be followed in the settlement of housing rehabilitation loans under the Housing Rehabilitation Services Program. Such requirements are in addition to those stated in Chapter 7 and other parts of this Handbook.

Effective Date. The requirements of the Truth in Lending Act were effective July 1, 1969.

Background

4.

a.

The Act. The Truth in Lending Act is Title I of the Consumer Credit
Protection Act (Public Law 90-321; title 15, U.S. Code 1601 et seq.),
enacted by Congress on May 29, 1968. The act requires that borrowers
in "consumer credit transactions" be vested with certain rights and
protections in connection with the transaction and receive specified
written information from their lenders. The disclosures must be made
before credit is extended and before the borrower becomes obligated
in connection with the transaction; i.e., before execution of a
note or mortgage. Among the required disclosures are:

(1) The amount of credit a borrower will have for his actual use (the AMOUNT FINANCED); and

(2) The FINANCE CHARGE (consisting primarily of interest
but also other fees and charges) expressed both as a
dollar amount and as an ANNUAL PERCENTAGE RATE.

b. Three-day Rescission Provision. In addition, the act enables a borrower, within 3 days following the loan transaction, to rescind the transaction, if the loan is secured by a lien on the borrower's residence.

C.

The Regulations. The Board of Governors of the Federal Reserve
System has promulgated regulations implementing and interpreting
the act. These are entitled: "Regulation Z (12 CFR 226)." The
text of Regulation Z and the act is presented in an informative
pamphlet entitled, "What You Ought to Know About Federal Reserve
Regulation Z; Truth in Lending; Consumer Credit Cost Disclosure."
It can be obtained from any Federal Reserve Bank or from the
Board of Governors of the Federal Reserve System, Washington, D.C.
20551. However, the applicability of those regulations to housing
rehabilitation loans is prescribed by this chapter.

Truth-in-Lending Disclosure Statement; Use in Housing Rehabilitation Loan
Settlements. The appropriate form of the Federal Truth-in-Lending and
Wisconsin Act Disclosure Statement is to be used at loan settlement in
meeting the requirements of the Truth in Lending Act.

a.

Applicability. A completed Disclosure Statement shall be given
to all borrowers of housing rehabilitation loans on residential

5.

6.

b.

c.

property containing one to four dwelling units, except those borrowers which are non-profit housing corporations or cooperatives under State law.

Time of Furnishing Disclosure Statement to Borrower. The Disclosure Statement shall be given the borrower at loan settlement but prior to the time he executes the mortgage (if applicable) and promissory note obligating his repayment of the loan.

Receipted Copy of Disclosure Statement Retained by Department of
Housing and Community Development. When the Disclosure Statement
is given to the borrower, he shall be requested to sign and date
an identically completed Disclosure Statement in the presence of
the Rehabilitation Loan Officer or other authorized representative
of the Department of Housing and Community Development who shall
also sign as witness. The signed and witnessed copy of the
Disclosure Statement shall be retained by the Department of Housing
and Community Development in the loan application file.

Borrower's Right of Rescission; Secured Loans. Under the law certain borrowers have the right, within a 3-day period, to rescind the entire loan transaction. This right of rescission applies to any housing rehabilitation loan secured by a mortgage on a residential property containing one to four dwelling units, owned by a borrower who is a natural person, and who occupies one of the dwelling units on the property.

Notice of Right of Rescission.

Borrowers entitled by the preceding Section 5 to rescind the loan transaction shall receive a properly completed Notice of Right of Rescission.

a.

b.

Furnishing Notice to Borrower at Loan Settlement. The Rehabilitation
Loan Officer shall give the borrower two copies of the notice at
loan settlement, and prior to his execution of mortgage and note.
The notice's nature and purpose shall be explained. One additional
or third, copy of the notice shall be signed by the borrower so as
to evidence his receipt of two copies of the notice. The receipted
copy shall be retained by the Department of Housing and Community
Development in its loan application file to document the fact that
Truth-in-Lending procedure has been followed.

The notice shall be fully completed so as to show the application number, loan settlement date, deadline for rescission (three business days following loan settlement date), and the name and address, including ZIP code, of the Department of Housing and Community Development.

Three-day Rescission Period. To compute the running of the 3-day
rescission period for entry on the notice, the date of loan settlement
on which the borrower receives the notice shall be treated as Day Zero
and the next business day thereafter as Day 1, etc. Three business
days must elapse following loan settlement date to complete
the rescission period. A business day is any calendar day except
Sunday and the following holidays on the dates established by

7.

8.

9.

Federal law:

New Year's Day, Washington's Birthday, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving, and Christmas.

(1)

No Disbursements. The Department of Housing and
Community Development shall make no disbursement from
the Rehabilitation Escrow Account with respect to the
borrower during the 3-day rescission period.

(2) Prompt Recordation. Instruments necessary to perfect
the loan security shall be recorded promptly after
expiration of the 3-day rescission period.

Cancellation of Loan Transaction by Borrower. The loan transaction shall be considered cancelled if the borrower's notice to that effect is given within the required period. Notification by mail shall be considered given at the time mailed as indicated by the postmark; notification by telegram shall be considered given at the time filed for transmission; and notification by any other writing shall be considered given at the time delivered to the Department of Housing and Community Development.

Accomplishment of Rescission.

It is expected in most cases that the borrower's 's rescission will be accomplished by his mailing or delivery of the notice, bearing his signature and date under the cancellation recital. However, rescission may be accomplished by any written communication signed by the borrower or a telegram sent by the borrower. Oral communications cannot accomplish rescission, but they shall be followed up by the Department of Housing and Community Development to obtain written rescission.

Action on Receipt of Written Request for Rescission. Upon receipt of any timely, written communication signed by the borrower, or of a telegram sent by the borrower, the Department of Housing and Community Development shall cancel the loan.

a.

b.

c.

Refund of Application Fee Within Ten-day Deadline Period. Within 10 days of receipt by the Department of Housing and Community Development of an appropriate written notice of rescission, the application fee shall be returned to the applicant. The Department of Housing and Community Development shall make the refund by check.

Refund of Other Funds. Any other funds deposited by the borrower with the Department of Housing and Community Development shall also be returned to the borrower at the time the application fee is refunded to the borrower.

Scope of Rescission Procedure. The foregoing rescission procedures
apply only to rescissions requested by the borrower within the
3-day rescission period as described in this chapter, and not
to other cancellations as described in Chapter 5, Section 11 of
this Handbook.