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BACKGROUND The purpose of the DPA is to provide low and deferred interest mortgages that supplement bank financing to help low and moderate income households purchase existing homes in Pleasanton. (Maximum household income for a family of four at lower income level (80%) is 66,400; the moderate income level maximum is $99,600.) The program, which is directed to first time homebuyers, is seen as an important addition to the City's other main home ownership effort which includes providing below-market homes as part of new residential developments (e.g., the 56 duet homes on the Bernal property). Since its inception in 2003, the DPA has been funded through agrant/loan of $450,000 from the California Housing Finance Agency (CaIHFA) "Housing Enabled by Local Partnerships" (HELP) program and $150,000 from the LIHF to create a total program amount of $600,000. Based on the criteria established for the program (see Attachment 1), the City anticipated providing DPA loans to 10 to 15 low and moderate income home buyers. HELP funds are provided to the City in the form of a ten-year loan at 3% interest with funds drawn down from CaIHFA as each loan is funded. Qualified buyers are required to enter into separate mortgage loan agreements with both the City and CaIHFA. Technically, the CaIHFA provides the funding to the City and as such the City is exposed in the event of a default. The initial grant agreement with CaIHFA (executed in November 2003) assumed the City would issue loans required to utilize all funds by November 2005. At the time the DPA program was approved and introduced, market housing prices in Pleasanton were experiencing a period of significant increase. Since 2003, the average home price in Pleasanton has increased by more than 30%. The median sales price for a single family home in Pleasanton is presently $860,000 while the median price for a condominium is $505,000 (source: Bay East Association of Realtors). The combination of high market housing prices and the income eligibility requirements established by the City essentially created an impediment the issuance of loans and the DPA program. The following graph illustrates the divergence between market sales prices and the maximum affordable sales prices for low and moderate income households. The graph shows that the median sales price for even the lowest priced homes (typically condominiums, which used to be somewhat affordable for even low income households) has increased in 2006 beyond an amount considered affordable to a moderate income household (even with the assistance of a loan through the DPA program). Page 2 of 6