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EXHIBIT 2 <br />Judson Brown, City of Santa Ana January 18, 2019 <br />Lacy Street Project: Preliminary Financial Gap Analysis Page 9 <br />that the total of the liens accepted by a home buyer cannot exceed the unrestricted <br />market value of the home. Thus, the amount of junior liens that can be supported is <br />equal to the difference between the defined Affordable Sales Price and the estimated <br />market value of the home. <br />KMA assumes that the junior liens will be deferred payment loans which are commonly <br />known as silent second mortgages. These loans typically become due and payable when <br />the home is resold. It is a fundamental assumption of this analysis that the City <br />assistance to the Project will fall second in the lien hierarchy behind the conventional <br />first trust deed mortgage. <br />The calculations used to estimate the supportable silent mortgages are presented in the <br />following sections of this analysis. <br />Market Rate Sales Prices <br />KMA conducted a survey of recent home sales comparables for the French Park market <br />area. Based on this survey and the information provided by Habitat, KMA estimates the <br />market rate sales prices as follows: <br />Three -Bedroom Unit $525,000 <br />Four -Bedroom Unit $595,000 <br />Available Silent Second Mortgage Revenue <br />Based on the estimated market rate sales prices, the available silent second mortgage <br />revenue is estimated at as follows: <br />Market Rate Sales Price <br />(Less) Affordable Sales Price <br />Silent Second Mortgage Amounts <br />Total Silent Second Mortgage Revenue <br />80A-21 <br />Three- Four - <br />Bedroom Unit Bedroom Unit <br />$525,000 $595,000 <br />(471,900) (452,100) <br />$107,100 $142,900 <br />$250,000 <br />1901009:SA:TRB <br />19090.017.011 <br />