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DISCUSSION The DPA program benefits buyers in several key ways: The DPA loan bridges the gap between a minimum down payment (usually 3%) and the amount of the primary mortgage a buyer can afford. The funds loaned through the DPA program are at a favorable interest rate of 3.5%. Each loan is "partially deferred," i.e., split into two separate loans, one of which runs for the first ten years and one the second ten years. This reduces the payment that is included in the buyer's initial qualifying ratio, thereby reducing the housing cost and/or providing greater "buying power." An example of the positive impact of the DPA program is shown below (the figures used in the example represent a typical moderate income household of four persons at 120% of the Area Median Income, or AMI): Without With DPA Loan DPA Loan Annual household income exam le $99,000 $99,000 Max. monthly income available for housing costs $3,300 $3,600 PITT + debt,' based on 45% debt-to-income ratio) Maximum house sales price $400,000 $435,000 assumes 3% down a ment; 30 ear fixed rate loan at 6.5% The example shown above is very simplified and is based on a specific set of assumptions (e.g., a DPA loan in the amount of $60,000 split into two loans of $30,000 each, one of which is deferred for 10 years). However, the example illustrates the approximate increase in buying power (roughly $35,000) if a borrower benefits from a DPA loan. Alternatively, the buyer may choose to keep the price of the home at an affordable level (e.g., $400,000) and enjoy a lower monthly housing payment that would be reduced by approximately $300. Since funding was returned to the program by CaIHFA in September, there has been increased interest in this program. This is thought to be due to increased success in market and outreach, favorable conditions for buyers in the for-sale housing market and interest in the Birch Terrace affordable units. The following bullet points illustrate the current status of the DPA program: • Four (4) actual loans were issued with the initial funding allocation since the program was begun in 2004. • Seven (7) pre-approvals were issued in calendar year 2006. However, no follow-ups were received and these applications have all been rendered inactive. • Twelve (12) new applications have been received since January 2007 (the majority since July when interest in the program appeared to spike). Two (2) of these were either ineligible or incomplete and are currently inactive. • Of the ten (10) currently active applications: Page 2 of 10