delta counties home mortgage finance authority single family

Delta Counties Home Mortgage Finance AuthoritySingle Family Mortgage Revenue Bond Funds 1998 Series A

Financial StatementsJune 30, 2011


June 30, 2011

Table of Contents

Independent Auditor's Report

Management's Discussion and Analysis

Financial Statements

Statement of Net Assets

Statement of Revenues, Expenses and Changesin Net Assets

Statement of Cash Flows

Notes to Financial Statements

Supplemental Information

Schedule of Cash Receipts, Cash Disbursements and Cash Balances

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II I

Certified Public Accountant

Independent Auditor's Report

Board of DirectorsDelta Counties Home Mortgage Finance AuthorityContra Costa County, California

I have audited the statement of net assets, statement of revenues, expenses and changes in net assets, and thestatement of cash flows of the Delta Counties Home Mortgage Finance Authority's Single Family Mortgage RevenueBond Funds 1998 Series A, California, as of June 30, 2011, and for the fiscal year then ended. These financialstatements are the responsibility of the management of the Delta Counties Home Mortgage Finance Authority. Myresponsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Thosestandards require that I plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. Ibelieve that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position ofthe Delta Counties Home Mortgage Finance Authority's Single Family Mortgage Revenue Bond Funds 1998 Series Aas of June 30, 2011, and the results of its operations and cash flows for the fiscal year then ended in conformity withaccounting principles generally accepted in the United States of America.

Accounting principles generally accepted in the United States of America require that the Management Discussion andAnalysis on pages 2 through 6 be presented to supplement the basic financial statements. Such information, althoughnot a part of the basic financial statements, is required by the Governmental Accounting Standards Board whoconsiders it to be an essential part of financial reporting for placing the basic financial statements in an appropriateoperational, economic, or historical context. I have applied certain limited procedures to the required supplementaryinformation in accordance with auditing standards generally accepted in the United States of America, which consistedof inquiries of management about the methods of preparing the information and comparing the information forconsistency with management's responses to my inquiries, the basic financial statements, and other knowledge Iobtained during my audit of the basic financial statements. I do not express an opinion or provide any assurance on theinformation because the limited procedures do not provide me with sufficient evidence to express or provide anyassurance.

My audit was made for the purpose of forming an opinion on the financial statements that collectively comprise the bondfunds basic financial statements. The supplementary information listed in the table of contents is presented for thepurposes of additional analysis and is not a required part of the basic financial statements of the Delta Counties HomeMortgage Finance Authority's Single Family Mortgage Revenue Bond Funds 1998 Series A. Such information is theresponsibility of management and was derived from and relates directly to the underlying accounting and other recordsused to prepare the financial statements. The information has been subjected to the auditing procedures applied in theaudit of the basic financial statements and certain additional procedures, including comparing and reconciling suchinformation directly to the underlying accounting and other records used to prepare the financial statements or to thefinancial statements themselves, and other additional procedures in accordance with auditing standards generallyaccepted in the United States of America. In my opinion, the information is fairly presented in all material respe s inrelation to the basic financial statements taken as a whole.

November 30, 2011

131-A Stony Circle, Suite 500, Santa Rosa, California 95401P: 707-544-5684 E: [email protected]

MANAGEMENT'S DISCUSSION AND ANALYSIS

This section of the Delta Counties Home Mortgage Finance Authority's annual financial reportpresents our discussion and analysis of the Authority's financial performance during the year thatended on June 30, 2011.

FINANCIAL HIGHLIGHTS

• The net assets of the Authority's business-type activities in fiscal 2011 increased $3,355 orabout 0.7 percent compared to the net assets of the Authority at June 30, 2010.

• Total expenses for 2011 decreased by $7,400 or about 2.6 percent less than total 2010expenses. Lower administrative and bond interest expenses were the primary reasons for thetotal cost decrease.

• The Authority's interest revenues from its investments, on a cash flow basis, were $ 35,936 andthis was sufficient to cover the $ 18,430 in interest actually paid on the outstanding revenuebonds during fiscal year 2011.

• During fiscal year 2011, the Authority collected $125,814 in principal repayments and earlyprepayments of the GNMA certificates as a result of home owners refinancing the underlyinghome mortgages.

• The Authority ended the 2011 year with about $133,332 in cash invested in money marketfunds. Most of this cash and cash equivalent amount, about 90 percent, was held by therevenue fund.

OVERVIEW OF THE FINANCIAL STATEMENTS

This annual report consists of three parts - management's discussion and analysis (this section),the basic financial statements, and optional supplementary information. The basic financialstatements include one kind of statements that present both a short-term and long-term view ofthe Authority:

- Proprietary enterprise fund-type statements offer short- and long-term financial informationabout the activities that the Authority operates like businesses, such as the Authority's singlefamily home mortgage program.

The financial statements also include notes that explain some of the information in the financialstatements and provide more detailed data. The statements are followed by a section of optionalsupplementary information that provides more data about the cash flows of the various funds ofthe Authority.

Figure A-1 summarizes the major features of the Authority's financial statements, including theportion of the Authority they cover and the types of information they contain. The remainder ofthis overview section of management's discussion and analysis explains the structure andcontents of each of the statements.

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MAINAC3ERIIENIT'S "".""',,",""'IJ'lJIII'='II" AND ANALYSIS

FIGURE A-1 Major Financial Statement Features


Scope

Required financial statements

Accounting basis and measurement focus

Type of asset/liability information

Type of inflow/outflow information


Activities the Authority operates similar to privatebusinesses such as the home mortgage financing

program.

Statement of net assetsStatement of revenues, expenses, and changes in net

assets. Statement of cash flows.

Accrual accounting and economic measurement focus

All assets and liabilities, both financial and capital, andshort-term and long-term focus.

All revenues and expenses during the year, regardlessof when cash is received.

The financial statements report information about the Authority as a whole using accountingmethods similar to those used by private-sector companies. The statement of net assets includesall the Authority's assets and liabilities. All of the current year's revenues and expenses areaccounted for in the statement of revenues, expenses, and changes in net assets regardless ofwhen cash is received or paid.

The financial statements report the Authority's net assets and how they have changed. Netassets - the difference between the Authority's assets and liabilities - is one way to measure theAuthority's financial health, or position.

.. Over time, increases or decreases in the Authority's net assets are an indicator of whether itsfinancial health is improving or deteriorating, respectively.

The basic financial statements of the Authority's consist of one category:

• Business-type activities - The Authority recovers the costs ( in the form of debt service onthe revenue bonds) of providing financial assistance to home owners from its investments inthe mortgage backed certificates. All of the Authority's' operations are accounted for in thiscategory. The Authority uses proprietary enterprise fund type accounting principles toaccount for all operations. The funds of the Authority are all held in trust by U.S.Bank as theappointed Trustee for the bondholders. The Trustee maintains separate accounts and fundsin accordance with the Bond Indenture to account for the flow of monies into the Authority'saccounts and the use of those monies. Proprietary accounting provides both long-and shortterm financial information.

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FINANCIAL ANALYSIS OF THE AGENCY AS A WHOLE

Net Assets. The Authority's combined net assets increased by about $3,400 between years2010 and 2011. (See Table A-1.)

TABLE A-1 NET ASSETS OF THE AUTHORITY (Rounded to the Nearest $100)

Assets: Percentage2011 2010 Change

Current and other assets $ 190,700 $ 202,900 -6.1%Mortgage backed certificates at face value 507,000 632,800 -19.7%

Total assets $ 697,700 $ 835,700 -16.5%

LiabilitiesCurrent and other $ 38,600 $ 40,000 -3.5%Long-term debt - revenue bonds 180,000 320,000 -46.9%

Total liabilities 218,600 360,000 -39.30/0Net assets

Restricted for debt service $ 479,100 $ 475,700 0.7%

Net assets of the Authority at June 30, 2011 were about $479,100. Current and other assetsdecreased by about a net $12,200 during fiscal 2011. The primary reason for this change wasabout a $9,300 decrease in the market value of the certificates.

The investments in mortgage backed securities at the end of fiscal 2011 decreased by about 20percent or about $139,000 less the amount held at the end of fiscal 2010 as a result of normalrepayments and prepayments of the home mortgages backing these pass-through certificates.

Current and other liabilities decreased by about $ 1,400 at the end of fiscal 2011 compared tofiscal 2010. There was at the end of 2011, an accrued payable for about $35,000 due to theCounty for program related expenses that were paid by the County on behalf of the Authority. TheCounty paid these expenses as the bond fund program expense accounts did not have sufficientcash to pay these expenses.

Revenue bonds payable at the end of fiscal 2011 decreased by about 44 percent to $180,000compared to the $ 320,000 payable at the end of fiscal 2010. Monies on deposit in the revenuefund were used for early bond redemptions in fiscal 2011.

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FINANCIAL ANALYSIS OF THE AGENCY AS A WHOLE

Changes in net assets. The Agency's total revenues decreased by about $ 51,800 in fiscal2011; or about 68 % less than in fiscal 2010 (See Table A-2.) Most all of the Authority's revenuescomes from investment interest on the GNMA and FNMA investments.

The investment interest from money market funds in fiscal 2011 was about the same as realizedin fiscal 2010.

There was about a 70 percent decrease in interest revenues from the GNMA and FNMAcertificates in fiscal 2011 as a result of a continuing decline in the estimated market value of thecertificates. On a cash flow basis, interest receipts from the certificates in fiscal 2011 were$35,665 compared to $38,394 in fiscal 2010. In fiscal 2011, there was just a single reported loanprepayments.

The total program expenses in fiscal 2011 were relatively lower at about $21,000.

TABLE A-2 Authority's Revenues, Expenses and Changes in Net Assets (Rounded to theNearest $100)

TotalYears Ended June 30 Percentage Change

2011 2010 2010-2011

RevenuesInvestment interest:

From money market funds $ 300 $ 400 -25.0%

From GNMA and FNMA certificates 22,600 75,300 -70.0%

Other revenues 1,600 600 166.7%

Total revenues 24,500 76,300 -67.9%

ExpensesAdministration and related costs 4,100 7,700 -46.8%

Bond interest 17,000 20,800 -18.3%

Total expenses 21,100 28,500 -25.9%

Increase (decrease) in net assets 3,400 47,800 -92.9%

Net assets, beginning 475,700 427,900

Net assets, ending $ 479,100 $475,700 0.70/0

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CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

The Authority owns no capital assets such as land, equipment, buildings or improvements,

Long-Term Debt

The Authority has $180,000 in revenue bonds outstanding at the end of fiscal 2011. The Authorityretired $140,000 of the bonds during fiscal 2011 as a result of a bond call. At the end of fiscal2011, the Authority held $133,322 in cash equivalents and $507,109 in GNMA certificates atface\principal value for an aggregate total of $640,351. Additional information about the bondscan be found in the notes to the financial statements starting on page 15 of this report.

ECONOMIC FACTORS AND NEXT YEAR'S OPERATING PLAN AND RATES

For the 2012 year, the Authority expects very little prepayments from home owners as a result ofthe general economy. Such prepayments are passed through to the Authority, placed in theprepayment account, and then used to retire bonds early. Receipts from the pass throughcertificates are expected to be adequate to pay bond debt service in fiscal 2012.

CONTACTING THE AGENCY'S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, investors and creditors with a generaloverview of the Authority's finances and to demonstrate the Authority's accountability for themoney it receives. If you have questions about this report or need additional financial information,contact the Deputy Director of Redevelopment, Contra Costa County, 2530 Arnold Drive, Suite190, Martinez, California, 94553.

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AssetsCurrent assets:Cash and cash equivalents:

Money market fundsTotal current assets

Other assetsInvestments:GNMA and FNMA Certificates

Deferred bond issuance costs

Total assets

IUllftll"'l'nA'5IIn.a Revenue Bond Funds 1998 Series

Statement of Net AssetsJune 2011

(;OlmDaraDle Totals At June

June 30

2011 2010

$ 133,332 $ 131,089133,332 131,089

563,222 702,0681,162 2,590

$ 697,716 $ 835,747

Liabilities and Net AssetsLiabilities:Current liabilities:

Accrued bond interest payable $ 890 $ 1,586Current portion of long-term debt 20,000

Total current liabilities 890 21,586Long-term debt:Reimbursements payable to Contra Costa County 34,905 32,193Single family mortgage revenue bonds payable, net 182,812 326,214Less current portion of long-term debt (20,000)

Total liabilities 218,607 359,993

Net Assets:Restricted for debt service 479,109 475,754

Total liabilities and net assets $ 697,716 $ 835,747

See notes to financial statements 7

DELTA COUNTIES HOME MORTGAGE FINANCE AUTHORITYSingle Family Mortgage Revenue Bond Funds, 1998 Series AStatement of Revenues, Expenses and Changes in Net Assets

For The Fiscal Year Ended June 30, 2011(With Comparable Totals For The Fiscal Ended June 30,2010)

Operating expenses:Accounting and audit feesTrustee feesLegal feesAdministration feesBond insuranceArbitrage calculationsAmortization of bond issuance costs

Total operating expenses

Operating income (loss)

Other revenues (expenses):Interest revenues from money market fundsInvestment revenues from GNMA and FNMA securitiesBond interestGain (Ioss)on early extinguishment of long-term debt

Total other revenues (expenses)

Net income (loss) before transfers

Transfers:Transfers inTransfers out

Total transfers

For The Fiscal Year EndedJune 30

2011 2010

$ 2,100 $ 3,50054 64

613 850708 801316

2,000294 485

4,085 7,700

(4,085) (7,700)

271 43922,636 75,254

(17,054) (20,750)1,587 641

7,440 55,584

3,355 47,884

160,209 24,011(160,209) (24,011 )

Change in net assets

Net assets, beginning of period

Net assets, end of period

See notes to financial statements

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3,355

475,754

$ 479,109 $

47,884

427,870

475,754

DELTA COUNTIES HOME MORTGAGE FINANCE AUTHORITYSingle Family Mortgage Revenue Bonds, 1998 Series A

Statement of Cash FlowsFor The Fiscal Year Ended June 30, 2011

(With Comparable Totals For The Fiscal Year Ended June 30,2010)


2011 2010

Cash flows from operating activities:Cash payments to suppliers for services $ (1,077) $ (865)

Net cash used for operating activities (1,077) (865)

Cash flows from noncapital financing activities:Single family mortgage revenue bond interest payments (18,430) (21,970)Principal payments on single family mortgage revenue bonds (140,000) (50,000)Transfers in 160,209 24,011Transfers out (160,209) (24,011 )

Net cash flows from noncapital financing activities (158,430) (71,970)

Cash flows from investing activities:Principal pay downs received on GNMA and FNMA certificates 125,814 23,266Interest received from money market funds 271 439Interest received from GNMA and FNMA certificates 35,665 38,054

Net cash flows from investing activities 161,750 61,759

Net change in cash and cash equivalents 2,243 (11,076)

Cash and cash equivalents, beginning of period 131,089 142,165

Cash and cash equivalents, end of period $ 133,332 $ 131,089

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Reconciliation of ODleraltlnl(:l income to netcash activities:

2011 2010

Operating loss $ (4,085) $ (7,700)Adjustments to reconcile operating incometo net cash provided by (used for) operating activities:Amortization 294 485

Change in assets and liabilities:Increase in reimbursement payable to Contra Costa County 2,714 6,350

Net cash used for operations $ (1,077) $ (865)

See notes to financial statements10

COUNTIES HOME MORTGAGE FINANCESingle Family Mortgage Revenue Bond Funds 1998 Series A

Notes To Financial StatementsJune 30, 2011

Note 1. Summary of Significant Accounting Policies

A. Reporting Entity

The Authority is Joint Powers Agency formed in 1992 by the County of Sacramento, County of Contra Costa,and the City of Vallejo for the purpose of financing the acquisition of single family homes located within suchcounties and city.

The Authority is a stand alone legal entity and is administered by a governing Board consisting of twoindividuals appointed by the Board of Supervisors of Sacramento County, two individuals appointed by theBoard of Supervisors of Contra Costa County, and one individual appointed by the City Council of the City ofVallejo.

These financial statements present only the financial resources, liabilities, revenues and expenses of theAuthoritys Single Family Mortgage Revenue Bonds, 1998 Series A. The 1998 Series A revenue bonds are acomponent unit of the Authority because the Authority is financially accountable for the bond funds. TheAuthority, in 1992, issued a 1992 Series A Single Family Mortgage Revenue Bonds, which bonds were alsoa component unit of the Authority. However, the 1992 Series A bond funds and related financial activity areexcluded from the accompanying financial statements. The 1992 Revenue Bonds were fully redeemedusing proceeds from the 1998 Revenue Bonds. The Authority has no other component units and no otherfinancial resources or known obligations.

B. Measurement Focus, Basis of Accounting and Basis of Presentation

The accounts of the 1998 Series A Revenue Bond Funds are organized and operated on the basis of funds.A fund is an independent fiscal and accounting entity with a self-balancing set of accounts. Fund accountingsegregates funds according to their intended purpose and is used to aid management in demonstratingcompliance with finance related legal and contract provisions. The Authority has the following fund type:

Proprietary Funds. Proprietary funds are accounted for on the flow of economic resources measurementfocus and use the accrual basis of accounting. Under this method, revenues are recorded when earned andexpenses are recorded at the time liabilities are incurred. The Authority has elected to follow paragraphnumber 6 of Governmental Accounting Standards Board (GASB) Statement Number 20 and applies allaccounting standards of the GASB and applicable Financial Accounting Board Statements andInterpretations issued before November 30, 1989 unless they conflict or contradict GASB pronouncements.

The Bond Trustee maintains separate funds and accounts as required by the Trust Indenture to account forand control the cash receipts and disbursements of the bond funds. The various funds and accounts aregrouped in the financial statements into one combined fund for financial reporting purposes using the accrualbasis of accounting and are reported as a proprietary enterprise fund. Enterprise funds are used to accountfor those operations that are financed and operated in a manner similar to private business or where thegoverning Board has decided that the determination of revenues earned, costs incurred and/or net income isnecessary for management accountability.

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DELTA COUNTIES HOME FINANCE AUTHORITYSingle Family Mortgage Revenue Bond Funds 1998 Series A


Note 1. Summary of Significant Accounting Policies (Continued)

B. Measurement Focus, Basis of Accounting and Basis of Presentation (Continued)

The various funds combined into one financial reporting entity in the accompanying financial statementsinclude:

Revenue fund. The revenue fund is used to account for the collection of revenues as defined in the TrustIndenture and to account for transfers to other funds and accounts.

Interest fund. This fund is used for the purpose of accumulating monies to pay interest on the revenuebonds.

Principal fund. This fund is used to accumulate monies to pay principal on the bonds and to pay mandatorysinking fund payments as they become due and payable.

Rebate fund. This fund is used to accumulate monies for the payment of any arbitrage rebate amountspayable to the Federal Government.

Audit and Rebate Expense Account. This account is to be used to pay the costs of audits and rebatecalculations.

Redemption Fund. The fund is used to account for monies to be used to redeem the revenue bonds.

Program Expense Fund. This fund is used to account for monies set aside to pay program operating costs.

Prepayment Account. This fund is to be used to account for monies from the prepayment of theGNMA\FNMA certificates and to redeem bonds from such resources.

C. Assets, Liabilities and Equity

1. Cash Equivalents and Investments

The Authority's cash and cash equivalents are considered to be cash on hand, demand deposits and shortterm investments including money market funds with original maturities of three months or less from the dateof acquisition. Such cash and cash equivalents are carried at fair value in the accompanying financialstatements.The investments in GNMA Certificates represent investments in fully modified pass throughcertificates. The certificates represent undivided interests in pools of mortgage loans insured under theNational Housing Act and constitute general obligations of the United States backed by its full faith andcredit. These investments are reported at fair value in the accompanying financial statements based uponquoted market prices.

Premiums paid to acquire the GNMA and FNMA certificates are recorded as a component of the purchaseprice of the related security.

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DELTA COUNTIES HOME MORTGAGE FINANCE AUTHORITYSingle Family Mortgage Revenue Bond Funds 1998 Series A


Note 1. Summary of Significant Accounting Policies (Continued)

C. Assets, Liabilities and Equity (Continued)

2. Prepaid Items

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded asprepaid items.

3. Deferred Bond Issuance Costs

Costs incurred to issue the revenue bonds are capitalized as an asset and are amortized to expense overthe life of the bond issue using the straight line method of amortization.

4. Arbitrage Liabilities

Arbitrage liabilities are estimated using amounts developed as a result of periodic calculations. Suchliabilities are adjusted periodically over time as additional calculations are updated.

5. Long-Term Debt and Bond Premiums

Bond premiums from the sale of the revenue bonds are reported as deferred liabilities and are amortized tointerest expense over the life of the revenue bonds using the straight line method of amortization. Revenuebonds payable are reported net of the applicable bond premium and gains on refunding transactions.

When revenue bonds are called for early redemption, a proportionate amount of the bond issuance costsand the bond premium as well as accumulated amortization applicable to the bonds called for earlyredemption is written off, and is recorded as a gain or loss from the early extinguishment of long-term debt.

D. Transfers

Transfers between the various funds and accounts maintained pursuant to the Trust Indenture are recordedas transfers in and transfers out in the accompanying financial statements.

E. Gain on Refunding

Because of favorable market conditions, GNMA and FNMA certificates purchased by the Authoritys 1992Series A revenue bonds were sold at a sale price at least equal to their par value. The majority of theproceeds from their sale were contributed to the 1998 Series A revenue bond trustee by the 1992 Series Arevenue bond trustee. The majority of the proceeds from the sale of the 1998 Series A revenue bonds weretransferred to the 1992 Series A revenue bond trustee to provide monies to redeem the 1992 revenuebonds. The difference between contributions made and contributions received is recorded as a deferredliability and is being amortized as a reduction to interest expense over the life of the 1998 Series A bonds.

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DELTA COUNTIES HOME MORTGAGE FINANCE AUTHORITYSingle Revenue Bond Funds 1998 Series A


Note 2. Cash and Investments

Investments at June 30,2011 consisted of:

Investment Maturities

Money market funds Not availableGNMA certificates August 20,2028 to

January 20, 2030

Totals

Fair Value

$ 133,332

563.222

$ 696.554

Interest Rate Risk -Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of aninvestment. The investment agreement is not subject to interest rate risk as it is a fixed rate arrangement. The GNMAcertificates are subject to interest rate risk. The Authority's exposure to fair value losses arising from rising interestrates is limited by the Authority's policy and the inherent structure of the bond indenture which requires that theGNMA certificates be held to maturity or until full recovery of their face values through pass-through repayments orprepayments.

Credit Risk - State law limits investments in various securities to certain levels of risk ratings issued by nationallyrecognized statistical rating organizations. Investments in GNMA certificates are not considered to have credit risk asthey are guaranteed by the U.S. Government.

Custodial Credit Risk - For an investment, custodial credit risk is the risk that, in the event of the failure of thecounterparty, the Authority will not be able to recover the value of its investments. The investments in the GNMAcertificates are held by the counterparty's trust department in the name of the Authority. Investments in moneymarket funds are not subject to custodial credit risk as they are not evidenced by specific securities.

Of the $133,332 in money market funds, $212 is held by the audit rebate fund, $120,460 is helq by the revenue fund,$8,361 is held by the program expense fund and the remaining $4,299 is held by the prepayment fund.

GNMA and FNMA Certificates. The carrying value of the certificates at June 30 consisted of:

Par value of certificatesUnamortized premiumsCumulative pass through repaymentsChange in fair value

2011

$ 19,981,20014,948

(19,474,181)41,255

2010

$ 19,981,20018,662

(19,348,377)50,583

Carrying value

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$ 563,222 $ 702,068

HOME MORTGAGE FINANCE AUTHORITY1II-~"'lfUn.8 lIUI"kll"'ll'~II~l"lIlft Revenue Bond 1998 Series


Note 2. Cash and Investments (Continued)

GNMA is a wholly owned corporate instrumentality of the United States of America within the Department ofHousing and Urban Development. Each GNMA certificate is a fully modified pass through security whichrequires a mortgage servicer to pay to the Bond Trustee amounts representing the regular monthlypayments on the pools of home mortgage loans underlying the certificates whether or not the servicerreceives such payments from the mortgagors. The servicer is also required to pass through to the bondtrustee any prepayments of principal of the mortgage home loans received by the servicer. GNMAguarantees to the Bond Trustee as holder of the certificates the timely payment of principal and interest onthe certificates.

The Federal National Mortgage Association (FNMA) is a federally chartered and stockholder ownedcorporation organized and existing under Federal Law. Although the Secretary of the Treasury has certaindiscretionary authority to purchase obligations of FNMA, neither the United States or any agency thereof isobligated to finance FNMA obligations or to assist FNMA in any manner. The related FNMA certificates areobligations solely of FNMA and are not backed by, or entitled to, the full faith and credit of the United States.FNMA guarantees that it will distribute amounts at the applicable pass-through rates representing scheduled

interest and principal on the mortgage loans in the pools representing such FNMA certificates, whether ornot received, and the full principal balance of any foreclosed or other finally liquidated mortgage loan,whether or not such principal is actually received.The certificates bear interest at rates of 5.7 percent or 6.2percent and generally mature in 30 years from the date of issue with such maturity dates ranging fromAugust 20, 2028 through January 20, 2030.

Note 3. Deferred Bond Issuance Costs

The $1,162 and $ 2,590 in deferred issuance costs represent the balance of unamortized bond issuancecosts net of $2,648 and $ 4,207 respectively, in accumulated amortization. The original costs of issuancewere $630,480 of which $623,683 has been written off to the gain or loss on early extinguishment of longterm debt resulting from early bond redemptions.

Note 4. Arbitrage Rebate Payable

The latest arbitrage rebate analysis report, dated April 5, 2010 represents the estimated rebate payable tothe United States to be zero as of the latest calculation date which covered the period from March 11, 1998through March 11, 2010. Bond counsel has made a determination that rebate calculations are no longerdeemed necessary after the 2010 rebate analysis.

2011 201020,000 30,00080,000 145,00080,000 145,000

180,000 320,000

1,945 4,318867 1,896

182,812 $ 326,214$Net bonds outstanding

Note 5. Single Family Mortgage Revenue Bonds

Single Family Mortgage Revenue Bonds outstanding at June 30 were:Term bonds maturing December 1, 2014Term bonds maturing June 1, 2024Term bonds maturing June 1, 2024 (the premium bonds)

Subtotal bonds outstandingAdd:

Unamortized premium on sale of bondsUnamortized gain on refunding

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DELTA HOME MORTGAGE FINANCE AUTHORITYSingle Family Mortgage Revenue Bond Funds 1998 Series A


Note 5. Single Family Mortgage Revenue Bonds (Continued)

Changes in long-term debt during the 2011 fiscal year were:

Bonds outstanding beginning of year

Bonds retired and called for redemption

Bonds outstanding end of year

$ 320,000

(140,000)

$ 180JOOO

The Authority issued $34,810,000 of Single Family Mortgage Revenue Bonds, 1998 Series A, (Mortgage BackedSecurities Program), dated March 1,1998. The 1998 bonds were issued to provide funds to redeem the Authority's1992 Series A Single Family Mortgage Revenue Bonds and to make monies available to be used to purchase passthrough certificates the payment of which is guaranteed by GNMA or FNMA (GNMA certificates or FNMA certificates)backed by mortgage 10ans.The bonds were issued in denominations of $5,000 or integral mUltiples thereof. The1998 bonds were to be registered in the name of Cede &Co., as the nominee of The Depository Trust Company(DTC). DTC or its nominee are the holder of record of all issued and outstanding 1998 bonds and beneficial ownersof the 1998 bonds may not obtain physical possession of the 1998 bonds beneficially owned by them. Interest on thebonds is payable each June 1 and December 1 commencing on June 1, 1998. Interest on and principal of the 1998bonds is payable by the Trustee to Cede &Co. as registered owner and nominee for DTC, and by wire transfer. DTCwill receive payments on the 1998 bonds from the Trustee and will remit such payments to DTC participants forsubsequent disbursement to beneficial owners.

The original issue consisted of:

$2,850,000 in term bonds due December 1, 2008 and bearing interest at 4.85 percent$3,110,000 in term bonds due December 1,2014 and bearing interest at 5.20 percent$14,105,000 in term bonds due June 1,2024 and bearing interest at 5.35 percent$14,745,000 in term bonds due June 1, 2024 and bearing interest at 5.50 percent

to, but not including, September 1, 1998 and 6.70 percent thereafter(the premium term bonds)

Term bonds due December 1,2014 are subject to mandatory sinking fund early redemption without premiumcommencing June 1, 2009. The term bonds due on June 1, 2024 are subject to mandatory sinking fundearly redemption without premium commencing June 1, 2015. Term bonds maturing June 1, 2024 (thepremium term bonds) are also subject to mandatory sinking fund early redemption commencing June 1,2000 without premium. Future debt service on the bonds at June 30, 2011 assuming scheduled sinking fundredemptions and no prepayments of mortgage loans is estimated to be:

Fiscal Year Principal Interest Total

2012 $ $ 10,680 $ 10,6802013 10,680 10,6802014 10,680 10,6802015 20,000 10,680 30,6802016 9,640 9,640

2017-2021 48,200 48,2002022-2024 160,000 28,920 188,920

Totals $ 180,000 $ 129,480 $ 309,480

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Note 6.



Reimbursements Payable to Contra Costa County

The $34,905 payable to the County represents amounts where the County has paid program expenses on behalf ofthe Authority, and the Authority intends to reimburse the County when cash resources become available either beforeor after the retirement of all outstanding Single Family Mortgage Revenue Bonds.

Note 7. GNMA and FNMA Investment Revenues

The interest revenues from the GNMA and FNMA securities consisted of interest revenues passed throughto the Bond Trustee and a provision for the change in fair value of investments as follows:

Pass through interest receiptsWrire off of premium on prepaid GNMAsChange in fair values GNMAlFNMAs

Totals

June 30,2011$35,665(2,713)

(10,316)

$22,636

June 30, 2010$38,054(2,910)40,110

$75,254

Note 8. Insurance

A financial guaranty insurance policy was issued by MBIA Insurance Corporation wherein the MBIAguarantees the full and complete payment required to be made in an amount equal to the principal andinterest on the bonds as such shall become due and not paid. MBIA also issued a Debt Service Surety Bondwherein such payments were limited to a maximum amount of $11,526,000. The surety bond expires June30, 2024 or upon the full payment of all obligations related to the revenue bonds.

Note 9. Gain on Early Extinguishment of Long-Term Debt

The gain or loss on early extinguishment of long-term debt consists of amounts written off in connectionwith the early mandatory redemption of the revenue bonds as follows for the fiscal years ended June 30:

Bond Premium:Proportionate share of original bond premiumProportionate share of accumulated amortizationBond issuance costs:Proportionate amount of original issue costs

Gain of Refunding:Proportionate amount of refunding gain 1992 bondsProportionate amount of accumulated amortization

Net gain (loss) from early extinguishment

Fiscal Year 2011 Fiscal Year 2010

$ 4,880 $ 1,738(2,989) (941)

(1,134) (480)

2,009 716(1,179) (392)

$ 1,587 $ 641

17

Note 10.



Transfers

Transfers between the various funds and accounts were made primarily for the following purposes:

Transfers out of the revenue fund:To bond interest fund for debt serviceTo program expense fund

Transfers out to redemption fund

Total transfers out

18

$

$

18,4301,779

129.394

149,603

SUPPLEMENTARY INFORMATION


Combining Schedule of Cash Receipts, Cash Disbursments and Cash BalancesFor The Fiscal Year Ended June 30, 2011

Rebate andRevenue Program Audit\Rebate Bond Bond Bond Prepayment

Fund Expense Fund Principal Redemption Interest Funds TotalsCash receipts:GNMA and FNMA principal $ 125,814 $ $ $ $ $ $ $ 125,814GNMA and FNMA interest 35,665 35,665Money market interest 227 15 29 271

Total cash receipts 161,706 15 29 161,750

Cash disbursements:Bond principal 140,000 140,000Bond interest 18,430 18,430Bond insurance 316 316Trustee fees 54 54Administrative fees 707 707

Total cash disbursements 1,077 140,000 18,430 159,507

Excess of cash receipts over(under) cash disbursements 161,706 (1,062) (140,000) (18,430) 29 2,243

Transfers:Transfers in 1,779 140,000 18,430 160,209Transfers out (149,603) (10,606) (160,209)

Total transfers (149,603) 1,779 140,000 18,430 (10,606)

Excess of cash receipts over(under) cash disbursementsand transfers 12,103 717 (10,577) 2,243

Cash, beginning of period 108,357 7,644 212 14,876 131,089

Cash, end of period $ 120,460 $ 8,361 $ 212 $ $ $ $ 4,299 $ 133,332

Cash and InvestmentsEnd of Period:

Cash and equivalents $ 120,460 $ 8,361 $ 212 $ $ $ $ 4,299 $ 133,332GNMA and FNMA at principalamount without premium paidat purchase 507,019 507,019

Total cash and investmentsEnd of Period $ 627,479 $ 8,361 $ 212 $ $ $ $ 4,299 $ 640,351

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