Item 10 - Fiscal Year 2023-24 Homeownership Initiatives

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Fiscal Year 2023-24 Homeownership Initiatives October 17, 2023 Page 4 Update to the Down Payment Assistance Program On November 2, 2021, the City Council approved an update to the Down Payment Assistance Program. The City Council also allocated $1.2 million in Inclusionary Housing Funds to expand the program. Since that last update, staff has awarded over $2,240,000 in down payment assistance for 21 families to purchase a home in Santa Ana. This includes $800,000 in Inclusionary Housing Funds and $1,440,000 in Community Development Block Grant (CDBG) Program funds. Staff proposes to update the Down Payment Assistance Program again and allocate additional funds because more families have been assisted in the last two years with down payment assistance than in the previous ten years combined. College Graduate, Veteran, and Active Military Incentive The first update to the program is for the City's high school loan forgiveness incentive. Currently the incentive is that prospective homebuyers who graduated from a high school located in the City and have a 4-year college degree are eligible for loan forgiveness. Under the loan forgiveness incentive, $10,000 will be forgiven every five (5) years over a 20-year period up to a maximum of $40,000. Staff is recommending an update that prospective homebuyers who also had a Santa Ana address while attending any high school and have a 4-year college or trade school degree are eligible for this loan forgiveness incentive. Staff is also recommending that U.S. Military Veterans and Active Duty Military will be eligible for this loan forgiveness incentive up to $40,000. Increase Debt to Income Ratio per Recent Underwriting Standards The second update to the program will be an increase to the maximum debt -to -income ratios. Currently the program allows a maximum debt -to -income ratio of 38/43 percent, which in today's lending market is considered conservative. This means that the buyer's prospective mortgage payment cannot exceed 38 percent of the household's gross monthly income, and all of the household's monthly debt payments (inclusive of the prospective mortgage payment) cannot exceed 43 percent of their gross monthly income. This ratio ensures that a buyer is not paying an excessive amount of their income toward their mortgage and other debt payments, which would increase their risk of foreclosure. Staff is proposing to increase the maximum debt -to -income ratio to 40/45 percent to align with today's underwriting standards and lower this barrier for families. With these two updates, staff is confident that more homebuyers will be able to qualify for the Down Payment Assistance Program. These updates are reflected in the Down Payment Assistance Program Guidelines attached as Exhibit 2. To launch the updated Down Payment Assistance program, staff will market these new guidelines and conduct additional outreach to prospective homebuyers. Staff will begin providing one (1) City -run workshop every month on the Down Payment Assistance Program. This will be in addition to the outreach, workshops, and events staff is continuously invited to on a monthly basis, which includes a monthly workshop with NeighborWorks Orange County. Additional marketing will include: