BILL NUMBER: AB 1422 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Bass
FEBRUARY 27, 2009
An act to add and repeal Chapter 7 (commencing with Section 33700)
to Part 1 of Division 24 of the Health and Safety Code, relating to
redevelopment.
LEGISLATIVE COUNSEL'S DIGEST
AB 1422, as introduced, Bass. Redevelopment: affordable housing.
The Community Redevelopment Law requires a redevelopment agency to
deposit not less than 20% of all taxes the agency receives in a Low
and Moderate Income Housing Fund and allocate those funds for the
purposes of increasing, improving, and preserving the community's
supply of low- and moderate-income housing available at affordable
housing cost, as defined, to persons and families of low or moderate
income, lower income households, very low income households, and
extremely low income households, unless the agency makes specified
findings.
This bill would authorize a redevelopment agency, until January 1,
2013, to expend any money that is not held in the fund to (1)
purchase, assume, or refinance, or assist lenders or nonprofit or
for-profit developers in purchasing, assuming, or refinancing,
subprime or nontraditional mortgages on homes owned by persons
meeting a specified income level within its jurisdiction, or make
loans to those homeowners and (2) purchase, or assist lenders or
nonprofit or for-profit developers in purchasing, homes within its
jurisdiction that have been foreclosed and are vacant and sell those
homes, without regard to income.
The bill would require that funds be expended pursuant to these
provisions in a manner that preserves the exemption from federal and
state income taxes of interest on the bonds or notes issued by the
agency under the Community Redevelopment Law.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Chapter 7 (commencing with Section 33700) is added to
Part 1 of Division 24 of the Health and Safety Code, to read:
CHAPTER 7. HOME MORTGAGE LOANS
33700. The Legislature finds and hereby declares all of the
following:
(a) The end of the housing boom in 2005 has led to declining
housing prices and the reduced availability of mortgage credit.
(b) As housing prices fall, delinquencies and foreclosures on
subprime and nontraditional mortgages have increased to historically
high levels. Lenders with exposure to subprime and nontraditional
mortgage losses have tightened their lending standards. Consequently,
homeowners with subprime and nontraditional mortgages are having
difficulty refinancing into more affordable loans.
(c) With many subprime and nontraditional mortgages facing their
first interest reset during 2008 and 2009, mortgage foreclosures will
increase significantly and, along with falling housing prices, may
overwhelm the ability of mortgage markets to restructure or refinance
loans for creditworthy borrowers.
(d) Home foreclosures impose significant costs not only on
borrowers and lenders, but also on local governments, neighboring
homeowners, and others with a financial stake in nearby properties.
This is particularly true of subprime and nontraditional mortgage
foreclosures because they tend to be concentrated geographically. The
effect of multiple foreclosures in limited geographic areas can
cause declines in property values, accelerating the decline of entire
neighborhoods. Increased crime and vandalism, lack of proper
maintenance, and the spread of blight are other consequences of
concentrated foreclosures in limited geographic areas.
(e) Decent housing for all of the people of this state is vital to
the state's future peace and prosperity.
(f) A fundamental purpose of redevelopment is to expand the supply
of low-income and moderate-income housing.
(g) In order to more effectively respond to the current crisis in
subprime and nontraditional mortgage foreclosures, redevelopment
agencies should be given greater flexibility on a temporary basis to
do all of the following:
(1) Acquire, assume, or refinance existing subprime and
nontraditional mortgages in default or at risk of default, or make
loans to eligible homeowners faced with foreclosure.
(2) Acquire and then maintain, resell, or rent foreclosed homes.
33701. For purposes of this chapter, the following terms have the
following meanings, unless the context clearly requires otherwise:
(a) "Eligible homeowner" means the trustor of a subprime or
nontraditional mortgage who occupies a home encumbered by the
subprime or nontraditional mortgage as his or her principal place of
residence, if either of the following applies:
(1) The obligation secured by the subprime or nontraditional
mortgage has a payment that is 30 days or more past due or has a
scheduled interest rate increase that will create a financial
hardship likely to produce a default.
(2) A notice of default has been recorded against the obligation
secured by the subprime or nontraditional mortgage pursuant to
Section 2924 of the Civil Code.
(b) The "fund" is the Low and Moderate Income Housing Fund
established pursuant to Section 33334.3.
(c) "Nontraditional mortgage" means a consumer loan that allows
the borrower to defer payment of principal and, under certain
circumstances, interest, as set forth in the "Interagency Guidance on
Nontraditional Mortgage Product Risks" (71 Fed. Reg. 58609 (Oct. 4,
2006)).
(d) (1) "Subprime mortgage" means a deed of trust securing a loan
that was originated on or after January 1, 2002, was issued for the
purchase of a single-family home, residential condominium, or
townhome, but not a mobilehome, and meets any of the following
conditions:
(A) Has an annual percentage rate that is more than one of the
following:
(i) For a senior loan, 3 percent, plus the yield on United States
Treasury notes with comparable maturities.
(ii) For a subordinate loan, 5 percent, plus the yield on United
States Treasury notes with comparable maturities.
(B) Has interest-only payments, or an adjustable rate that may
lead to negative amortization.
(2) "Subprime mortgage" does not include a subordinate home equity
line of credit or a reverse mortgage.
33702. (a) The agency may expend any money that is not held in
the fund to purchase, assume, or refinance, or assist lenders or
nonprofit or for-profit developers in purchasing, assuming, or
refinancing, subprime or nontraditional mortgages on homes owned by
eligible homeowners who reside within its jurisdiction, or make loans
to those eligible homeowners, if the combined annual income of the
members of the eligible homeowner's household does not exceed 150
percent of area median income, adjusted for family size by the
department in accordance with adjustment factors adopted and amended
from time to time.
(b) The amount of assistance provided under subdivision (a) for
any single eligible homeowner shall not exceed an amount equal to the
loan to value ratio applied by the Federal Housing Administration
for an insured loan for the applicable geographic area, multiplied by
the current value of the home.
(c) The agency may also expend money that is not held in the fund
to provide mortgage or credit counseling services to existing or
prospective homeowners who qualify for assistance under subdivision
(a).
33703. (a) The agency may expend any money that is not held in
the fund to purchase, or assist lenders or nonprofit or for-profit
developers in purchasing, homes within its jurisdiction that have
been foreclosed and are vacant, for sale to any purchaser, regardless
of income.
(b) Homes purchased under this section may be managed, maintained,
and rented prior to resale.
33704. Funds shall be expended pursuant to this chapter in a
manner that preserves the exemption from federal and state income
taxes of interest on the bonds or notes issued by the agency under
this division, if applicable.
33705. This chapter shall apply notwithstanding any other
provision of this division.
33706. Consistent with this chapter, the agency may adopt local
criteria governing the use of funds and provision of other assistance
authorized under this chapter, including, but not limited to,
limiting assistance to defined neighborhoods or a geographic area, or
targeting specific income categories.
33707. This chapter shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.