BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1084 (Davis)
Hearing Date: 8/25/2011 Amended: 8/15/2011
Consultant: Maureen Ortiz Policy Vote: VA: 7-0
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BILL SUMMARY: AB 1084, an urgency measure, expands the use of
the CalVet Home Loan Program to include shared equity
cooperative housing, and consolidates the California National
Guard Members' Farm and Home Building Fund into the CalVet Home
Loan Fund.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Share equity coops loans -------unknown, potentially
significant------ Special*
Fund consolidation -----------approximately
$5,400 ----------- Special**
-----------approximately ($5,400)---------- Special*
*CalVet Home Loan Fund **Cal Guard Home Loan Fund
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Author's amendments require the funds to be transferred within
30 days of enactment of this measure. There is approximately
$5.4 million currently in the National Guard Members' Farm and
Home Building Fund that AB 1084 will require the transfer of
into the CalVet Home Loan Fund for the purpose of providing
loans to qualified veterans for shared equity cooperative
housing. Currently, the bill contains an unspecified time frame
for the transfer of the funds upon enactment of the bill.
Specifically, AB 1084 does the following:
a) Repeals the California National Guard Members' Farm and Home
Purchase Act of 1978, to be effective on an unspecified date.
AB 1084 (Davis)
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b) Repeals the California National Guard Members' Revenue Bond
Act of 1978, to be effective on an unspecified date.
c) Transfers all moneys in the National Guard Home Loan Fund
and the National Guard Members' Revenue Bond Revenue Account
that are not needed to meet revenue bond obligations to the
CalVet Home Loan Fund within an unspecified number of days.
d) Provides that any future revenue that would be deposited
into the National Guard Home Loan Fund instead be directed to
the CalVet Home Loan Fund.
e) Continuously appropriates all moneys deposited into the
CalVet Home Loan Fund.
f) Includes "shared equity cooperative" within the definition
of "cooperative housing corporations" to authorize the use of
the CalVet Home Loan Program for shared equity cooperative
purchases; and outlines administrative procedures regarding the
program.
g) Requires the Department of Veterans Affairs to continue to
administer any outstanding loans made pursuant to the National
Guard Members' Home Loan Program.
The National Guard Members' Farm and Home Purchase Act was
established in 1978 and the bond funds were used to provide home
loans to members of the California National Guard who were not
eligible for the CalVet Home Loan Program at that time. The
program has not been operative for several years and there are
currently only four outstanding loans. AB 1084 will transfer
the remaining money in the National Guard loan fund to the
CalVet Home Loan Fund so that the money can be used to provide
loans for shared equity cooperative housing. Expanding the use
of the CalVet Home Loan Program to shared equity cooperatives is
intended to provide an additional path for low income veterans
to become homeowners.
The CalVet Home Loan Program is funded from general obligation
bonds that are repaid through monthly mortgage payments. The
program has no General Fund costs. While AB 1084 will expand
the use of the funds which will likely deplete the account
sooner and potentially require future bond sales, there is
currently about $1 billion available in the home loan fund.
Voters have passed 23 veterans bonds since 1943, the last of
AB 1084 (Davis)
Page 2
which was passed in 2008 as Proposition 12 and authorized $900
million in bonds for the CalVet Home Loan program. The revenue
from these bond sales is used by the Department of Veterans
Affairs to purchase farms, homes and mobile homes which are then
resold to California veterans. Each participating veteran makes
monthly payments to the Department. These payments are set in
an amount sufficient to do all of the following: 1) reimburse
the department for its costs in purchasing the farm, home, or
mobile home, 2) cover all costs resulting from the sale of the
bonds, including interest on the bonds, and 3) cover the costs
of operating the program. The CalVet home loan is advantageous
to veterans since it requires little down payment and offers
competitive market rates.
The CalVet Program has historically been fully supported by
participating veterans. If, however, payments made by program
participants do not fully cover principal and interest payments
on the bonds, because general obligation bonds are backed by the
State, the difference would come from the General Fund. This,
however, has not been necessary since the inception of this
program. The default rate on the CalVet home loans is very
little as compared to conventional home loans. These loans are
not sold on the secondary market, and because the DVA holds the
papers on the homes, if there is a foreclosure, they then sell
the home to recoup the loan proceeds. In the rare event that
there is a short sale, the DVA has a mechanism in place referred
to as "loan loss reserves" which is a set-aside that is required
by their independent auditors and can be used to further prevent
any costs to the General Fund.
AB 1330 (Chapter 524, Statutes of 2009) authorized the DVA to
establish a pilot project for cooperative housing. In a
cooperative housing project, people collaborate to own or
control the housing facilities in which they live. The
cooperative is comprised of members who own stock in a nonprofit
public benefit corporation. Rather than paying just a mortgage
payment each month, the tenant pays his or her share of the
total operating costs of the corporation which is formed,
thereby benefiting from such things as controlled maintenance
costs, and resident participation and control.
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AB 2266 (Chapter 834, Statutes of 2004) authorized the Cal-Vet
program to offer loans for the purchase of individual shares of
stock in cooperative housing corporations.