Item 18 - Approve a Pre-Commitment for HOME Program Funds

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Judson Brown, City of Santa Ana December 10, 2024 Habitat Alton – Preliminary Financial Gap Analysis Page 9 2412001v2.SA.TRB 19090.018.038 Financial Gap Calculation The financial gap is estimated by deducting the Project’s available revenue from the Project’s total development costs. Based on the preceding analysis, KMA estimates the Project’s financial gap as follows: KMA Total Development Costs $27,281,000 (Less) Total Available Revenue (17,438,000) Estimated Financial Gap $9,843,000 Per Unit $246,100 As shown in the preceding table, KMA estimates the Project’s financial gap at $9.84 million. Comparatively, Habitat is requesting $9.81 million in financial assistance from the City. Since this amount is less that the financial gap identified by KMA, it can be concluded that the proposed City financial assistance is warranted by the project economics. The City will need to confirm that Habitat has secured all necessary funding sources before formally committing HOME funds to the Project. SILENT SECOND MORTGAGE REVENUE CALCULATION (TABLE 4) As a basic premise it must be assumed that the total of the liens accepted by a homebuyer cannot exceed the unrestricted market value of the home. Furthermore, based on previous City homeownership projects, the City will record a second trust deed equal to the difference between the Affordable Sales Price and the estimated market value of the home. KMA assumes that the City’s second trust deed will be structured as a deferred payment loan which are commonly known as silent second mortgages. These loans typically become due and payable when the home is resold to a non-affordable homebuyer. KMA assumes that the City’s silent second trust deed will fall second in the lien hierarchy behind the conventional first trust deed mortgage. The calculations used to estimate the supportable silent mortgages are presented in the following sections of this analysis. EXHIBIT 3