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1. Increase the maximum loan amount from $20,000 to $100,000. An increase in the maximum loan amount increases a homebuyer's purchasing power, and consequently, staff is recommending a new maximum loan amount of $100,000 for eligible households earning no more than 120% AMI, the maximum income limit restriction for affordable housing-related programs funded with the City's Lower Income Housing Fund (LIHF), which is currently the funding source for the DPA Program. Staff is projecting that there would be a noticeable increase in the number of households applying for and actually benefitting from the higher maximum DPA loan amount. 2. Restructure the DPA loan to a "Deferred Payment Loan". The DPA loan terms would be restructured from a 20-year/3.5% interest rate loan with required monthly repayments to a 30-year/0% interest loan with no required monthly payment so long as the buyer occupies the home. The restructured DPA loan defers repayment until the end of the 30-year term or when the home is sold, whichever occurs first. Though the DPA loan is restructured to have 0% interest, there is a mechanism for not only recapturing the loan, but also gaining additional repayments based on the proportionate share of the increase in the home value. This is further discussed in the "Shared Appreciation Loan" described in section 3 below. The main benefit of deferred payment is it increases a homebuyer's purchasing power. A homebuyer can qualify for a larger loan and a larger inventory of homes because the DPA loan does not require monthly payments. As illustrated in the table below, amortizing loans diminish the purchasing power quite significantly. A homebuyer with a Deferred DPA loan has $613,639 in purchasing power compared to $538,716 (see Amortized DPA loan column) in purchasing power (or $75,000 less) when the DPA loan requires the borrower to make $449 in monthly payment on principal and interest over 30 years. This monthly payment is reduced to $277 when the DPA loan is amortized with 0% interest rate, but the purchasing power is still reduced by nearly $46,000 down to $567,250 (see DPA Loan with No Interest column). Additionally, any monthly payment for a DPA loan is added to a homebuyer's debt service calculations with his/her lender. This is another factor that affects a borrower's ability to secure a first mortgage to be able to purchase a home. A deferred DPA loan is not calculated in the debt service; and this not only increases a borrower's purchasing power, but also allows the borrower to more readily secure a first mortgage lender. The table below compares purchasing power under different loan scenarios. Page 3 of 9