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Housing Program Memo December 8, 2011 Page 4 Observations There are a couple of points worth mentioning. First, CEE emphasized the importance of program transparency and flexibility. Borrowers will be attracted to the program based on what is offered and whether they can qualify, as opposed to who provides funding. To the extent the program is easy to understand, there is a better likelihood of success. Second, program underwriting criteria will be a key factor in participation rates. If the standards are too tight, it will deter interest. Program Funding Program funding is always a concern. Potential local sources include money from the City's community reinvestment fund (not to be confused with the agency by the same name). According to Finance Director Maiers, the community reinvestment fund helps pay for debt service costs, which in turn has implications for the tax levy. Any reduction in this fund should be considered for its impact on the general fund and tax levy. Currently, there is about $3.8M of funds in this account. Observation The level of funding will impact program design. For example, $500,000 of City funds might be allocated differently than $1.0M. If the Council wanted to start a pilot program to gauge community interest, staff would recommend something in the neighborhood of $250,000. This would include funding for an MHFA Discount Loan program, mobile home loan fund, an emergency loan fund, plus marketing and other program administration expenses. The City could re-assess the program after a year and determine if additional funding is needed. In this case, the program would follow existing MHFA income (maximum of$95,190) and underwriting guidelines. If the Council would like to add a revolving loan fund, this would require additional capital of $500,000 or more. Since these loans could be potentially larger, adequate capital should be provided to ensure program success. Perhaps the greatest advantage a local program is the ability to target funds (if desired) and maintain control through program design. However, it is capital-intensive and does not leverage as much in the way of outside funds like a discount loan program would. To the extent Council can provide direction on the level of commitment, staff and CEE can better tailor potential funding allocations among the program options. Borrower Participation One final issue that was raised is the idea that borrower's should have "skin in the game" and assume some of the risk. Staff assumes this means requiring borrower's to