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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 homes in Pleasanton. The 2008 maximum household income for a low income (80% of the Area Median Income, or AMI) family of four is $68,900, while the moderate income level (120% AMI) is $103,320. The program, which is limited 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 and the seven townhomes in the recent Birch Terrace project). Since its inception, the DPA has been funded through agrant/loan from CaIHFA's HELP program and the City's Lower Income Housing Fund (LINE). To date a total of $627,972 ($338,986 CaIHFA and $288,986 LIHF) has been loaned to assist 15 first time homebuyers in achieving home ownership in Pleasanton. Loan amounts have ranged from $20,000 to $60,000. CaIHFA funds are allocated to the City in the form of a ten- year loan at 3.5% interest. The City draws down on these funds as necessary and consolidates them into a single loan supplemented with money from the City's LIHF. Borrowers are required to enter into a Promissory Note and Deed of Trust with the City. In the event of a default, the City is obligated to repay the CaIHFA portion of the loan. To date, no loans have defaulted. The basic terms of the Promissory Note are: • The loans are "partially deferred" (i.e., divided into two separate loans, one of which is amortized over the first 10 years while the other is deferred for 10 years). As a result, borrowers make fixed monthly payments for 20 years (or until paid off). • DPA loans carry a 3.5% interest rate (the same interest rate at which the HELP funds are "loaned" to the City by CaIHFA). • There is no penalty if a buyer chooses to prepay a loan. Funds from repaid loans are recycled back into the DPA program. • DPA loans are not assumable and must be paid off if the home is resold. • The DPA loan does not impose any restrictions on the resale price for the home (unless the loan is used to buy one of the specific below-market priced homes with resale restrictions that the City has made available through the Pleasanton Homeownership Assistance Program). • DPA loans can only be used to purchase a home that will be the borrower's primary residence. The City may approve, under certain circumstances, the rental of a home purchased with a DPA loan provided that the borrower agrees to rent the unit to a low income tenant at a restricted rent level for a designated term. In April 2007, the City Council reviewed the DPA and discussed options to address CaIHFA's termination of funding for the program due to the inability to match an adequate number of qualified borrowers with appropriately priced housing. The basic problem with the program was that the price of housing exceeded the amount that could be afforded by low income/moderate households, even with the benefit of the loans. At the time, the Council approved moving forward with another application for CaIHFA funds and providing interim City funding necessary to continue the program. In August Page 2 of 5