17 - Laserfiche WebLink

recommend retaining the existing language for persons purchasing PHAP homes but increasing the flexibility for persons using the DPA program to purchase homes on the open market. In the latter case, the assistance of a co-signer (without including the co-signer's income in determining program eligibility) may be necessary and desirable in order to afford the cost of a typical market-rate home. 2) Extend Loan Term The program guidelines currently establish a 20-year loan term for DPA loans. As discussed earlier, the actual structure consists of two loans (One CaIHFA and one City) split into two 10-year terms, the second of which is deferred for the first 10 years. Amortized payments on the first 10-year loan begin as soon as the loan is closed. Keeping the first loan to a 10-year term is significant because the HELP funds that have been allocated to the City from CaIHFA are actually in the form of a 10-year loan at 3.5% (hence, the City is actually loaning the CaIHFA funds to DPA borrowers based on the same terms for which CaIHFA is loaning the funds to the City). If the loan term is extended beyond 10 years, then the City will be required to absorb the loan costs after the original CaIHFA funds are required to be paid back to CaIHFA (i.e., at the end of the 10-year period from which the funds were first allocated by CaIHFA). The second 10-year loan is funded through the City's "matching fund" (i.e., the Lower Income Housing Fund); therefore, there is no concern for paying back funds to CaIHFA. In order to make the program more desirable and beneficial for borrowers, staff and the Housing Commission recommend deferring all payments with no accrued interest for the first three years of the initial 10-year loan. This is similar to the second mortgage loans that the City funded directly through the Lower Income Housing Fund for PHAP homes on the Bernal property. Payments on the first 10- year loan would commence at the beginning of the fourth year and would be amortized over the remaining eight years of the loan. Therefore, the payments would be slightly higher (for example, about $550 per month versus about $300 per month fora $30,000 loan). However, borrowers would be able to increase their buying power by an additional $35,000 (or reduce their monthly housing payments by an additional $300). The BEAR Housing Opportunities Council suggested the three-year deferral period since it is the minimum accepted period in the lending industry in order to eliminate consideration of the loan payments in a borrower's initial qualifying ratios. In addition, staff and the Housing Commission recommend using a 50/50 split between City and HELP funds. When the program was first developed, City funds were matched to CaIHFA funds on a 25/75 basis (i.e., 25% City, 75% CaIHFA). However, the transition to a 50/50 split will help to extend the CaIHFA funds given the apparent demand that is developing for the DPA program. However, staff also recommends it have the flexibility to increase the CaIHFA portion of the loan if Page 4 of 10