ZERO INTEREST PROGRAM (ZIP LOAN)

The ZIP Loan would provide a deed of trust secured loan with the following parameters:  

• Interest Rate: Zero percent interest 
• Payment: No monthly payment  
• Loan Term: The loan term will be approximately 11 years depending on the funding date. 
• Maximum Loan Amount: Up to $150,000 (verify amount in Offer Letter)
• Minimum Loan Amount: $10,000 
• Lien Position: 2nd or 3rd position 
  • Can be subordinate to an outside loan, subject to the Program and primary lender’s guidelines. 
  • If the campus is offering a combination of 3 Program loans, ZIP should be in third position. 
• Transaction Type: Purchase 

• Ten percent (10%) of the original principal of the ZIP loan may be forgiven each year with the annual written endorsement of the Department Chair or equivalent designee, provided that the participant:  
  1. continues to be employed by the nominating University campus as an eligible participant, as defined in the Program guidelines;  
  2. is in good standing; and 
  3. is not in default on any term or condition of a Program loan.  
• Any loan forgiveness will be reported as taxable income in the year forgiven on a W-2 form and is subject to standard withholding requirements.
• Since the annual forgiveness process begins in July, loans that fund from July to December will be reviewed for forgiveness during the forgiveness processing period the year after funding. As such, loan terms will vary approximately between 10-11 years depending on the funding date. For example, the first forgiveness review period for a loan that funded in July 2022 would begin in July 2023.

The loan will be due at the end of the loan term, the “Due Date”.   

Upon the Due Date, the outstanding principal balance (original principal balance, less any forgiven amounts) is absolutely due and payable and payment is not contingent upon the sale price or fair market value of the house or any other factor.  This is considered a ‘balloon payment’. 

Loan Acceleration:  All Program loans are condition of employment loans. The Loan can be declared due and payable before the Due Date for a number of reasons, including, for example, if the designated ZIP Loan Participant (the "Primary Borrower") is no longer employed by the University or becomes ineligible under the Program guidelines or if the Property securing the Loan is sold or transferred. 

The Program loan participant must meet the eligibility criteria defined by the Program.  In addition to being eligible, the Participant must be nominated by the location (campus) to participate in the Program loan as well as meet the underwriting guidelines for the requested mortgage product. Nomination to participate in a Program loan is generally stated in the final and approved appointment letter at the time of recruitment.  

ZIP Loan Participant: Only one ZIP loan and one ZIP participant is allowed per purchase transaction. The campus will specify the one ZIP Participant in the ZIP Loan Authorization Form. The ZIP Participant will be designated as the Primary Borrower for the Program loan(s). The Primary Borrower will assume all tax reporting and forgiveness parameters tied to the Program loan(s). In a dual faculty household, only one ZIP loan is allowed per household, ZIP offers can not be combined - a dual faculty household would be able to utilize only one of their ZIP offers. A dual faculty household may utilize MOP/ZIP/FRAP or MOP/FRAP/FRAP.

The Office of Loan Programs will send an annual report and ZIP eligibility certification forms for active ZIP loans to each campus by July 15, with all forms due back by August 25. The campus will coordinate with Academic Personnel (or other designated campus office) and the department to have the forms completed.  

A program participant's departmental chair or equivalent shall annually determine whether the participant is in Good Standing, as defined below for this program. The participant's campus will provide the chair or equivalent relevant information to assist them in this annual determination. 

A faculty member is normally to be considered in Good Standing if 

• they are carrying out their faculty duties as commonly understood; 
• there has been no substantiated finding of misconduct as defined by Section 015 of the Academic Personnel Manual (APM 015) in the period since they were last reviewed to see if they were in good standing; 
• they are not currently under a severe disciplinary sanction imposed by a formal disciplinary process or an informal agreement with the University in lieu of formal disciplinary action; 
• they are up to date on their mandatory trainings; and 
• they are in compliance with all University policies.  

If the department chair or equivalent deems a participant is not in Good Standing, they should consult with the Dean and provide a written statement to the participant in a timely manner explaining why. The participant will have 30 calendar days to respond in writing, either accepting or challenging the Chair’s assessment. If no response is received in this time period, that will be the same as the participant accepting the chair or equivalent’s conclusion. 

• Campus provides the funding source account information to OLP in the ZIP Loan Accounting Form. 
• Once the loan is ready to fund, the campus funding source account is debited by OLP to fund the ZIP Loan. 
• ZIP loan funds are wired to escrow for the home purchase transaction.  
• The participant would owe the ZIP principal balance to the Corporation as the lender.  
• If 1/10th of the loan is forgiven at the end of any year during the term, the principal balance would go down by that amount during the year of forgiveness. 
• Any remaining principal balance on the Due Date or the Acceleration Date, as applicable, would be fully due and payable to the Corporation, which would then remit any such payment to the campus. 

The ZIP Loan's balloon repayment feature makes it a non-Qualified Mortgage.   

A Qualified Mortgage (QM loan), as defined by the CFPB, is a loan having certain features that are thought to make it more likely for a borrower to be able to repay it. Loans with nonstandard features such as balloon payments and loan terms greater than 30 years do not qualify as QM loans.  

The Chancellor or other designated official will be required to acknowledge and accept any risk of litigation associated with making non-Qualified Mortgages. A similar process is currently in place for campuses that offer loans with terms greater than 30 years.  

The ZIP loan is considered to be a below market-rate loan. A below market-rate loan is subject to imputed interest, which will be reported as taxable income each year on a W-2 form, and is subject to standard withholding requirements.  

Any loan forgiveness will be reported as taxable income in the year forgiven on a W-2 form and is subject to standard withholding requirements.  

Participants should consult with their tax advisor if they have any questions concerning their particular tax situation.   

1. Faculty to meet with Home Loan Coordinator (HLC) to discuss ZIP details and timeline - 2-3 days
2. Faculty members will need to provide the nomination letter (Offer Letter & Start-Up Letter) where the ZIP nomination is mentioned - 1 day
3. Faculty signs ZIP agreement and returns to HLC with signature - 2 days
4. HLC sends ZIP authorization form to Executive Vice Chancellor for signature - Estimated 2 weeks to receive approval
5. HLC sends ZIP forms to the Office of Loans at UCOP. ZIP application link is sent to Faculty via email from a UCOP email - 2 Days
6. Once Faculty submits ZIP application through the secure UCOP portal you will be assigned a loan officer within four days and provided with an approval letter - 15-20 business days