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

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Judson Brown, City of Santa Ana February 10, 2025 Habitat Wellington – Preliminary Financial Gap Analysis Page 10 2412002v3.SA.TRB 19090.018.035 concluded that the proposed Down Payment Assistance Program Allocation is warranted by the project economics. However, KMA estimates that the Project exhibits an unfunded financial gap of $27,800. Habitat will need to secure funding sources for any unfunded financial gap in order for the Project to be financially feasible. The City should confirm that Habitat has secured all necessary funding sources before formally disbursing any City funds. 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 deferred payment loans which are commonly known as silent second mortgages. These loans typically become due and payable when the home is resold to a non-affordable home buyer. 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. Market Rate Sales Prices KMA researched sales comparables for similar units in the market area for the purpose of estimating the current silent second mortgage amount. The appraisal provided by Habitat included additional sales comparable data. Based on this information, KMA estimates the market rate sales price for the units as follows: 1. One-Bedroom Units: $345,600 2. Two-Bedroom Unit: $389,700 EXHIBIT 5