BILL ANALYSIS Ó
AB 1224
Page 1
Date of Hearing: August 28, 2012
ASSEMBLY COMMITTEE ON VETERANS AFFAIRS
Paul J. Cook, Chair
AB 1224 (Veterans Affairs) - As Amended: August 14, 2012
SUBJECT : Veterans: veterans' farm and home purchases
SUMMARY : This bill makes technical changes to allow the
Department of Veterans Affairs (CalVet) to implement a
cooperative housing program. Specifically, this bill :
1)Authorizes CalVet to adopt regulations necessary for
cooperative dwelling units in accordance with the
Administrative Procedure Act;
2)Revises provisions relating to forfeiture and the calculation
of net gain in connection with the sale of a cooperative
dwelling unit;
3)Requires the purchaser to make an initial payment of at least
2 percent of the selling price of the property or a higher
amount that shall be determined based upon the
creditworthiness of the purchaser, and with consideration of
his or her military record, employment record, financial
condition, and other similar factors as determined by CalVet;
and
4)Contains an urgency clause allowing it to take effect
immediately.
EXISTING LAW :
1)Permits CalVet to implement a cooperative housing program
using CalVet Home Loan program funds.
2)Allows CalVet to contract with a veteran for the construction
of a dwelling and other improvements for a farm or home if the
veteran is the owner of the real property on which the
dwelling and other buildings are to be constructed, or is the
owner of an undivided interest in common in a portion of a
parcel of real property is to be situated, and the owner
agrees to convey that property to CalVet without cost.
3)Requires the purchaser to make an initial payment of at least
AB 1224
Page 2
2 percent of the selling price of the property or a higher
amount that shall be determined by the department, based upon
the creditworthiness of the purchaser.
4)States that the department may, in the contract of purchase
with a veteran, provide that, in the event of default by the
veteran and forfeiture of his or her rights under the contract
and subsequent sale of the property by the department, it may
pay to the veteran any net gain realized by the department
upon the sale. The department is the sole judge of the net
gain.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, there are negligible
state costs.
COMMENTS : This bill left the Assembly with different contents.
It was amended in the Senate to remove the contents pertaining
to the Employment Training Panel and insert the current contents
pertaining to cooperative (co-op) housing. Co-op housing is a
form of home ownership in which a corporation owns residential
property, typically a condominium style property. Owners
purchase a share in the corporation which gives them an
exclusive right to occupy a particular unit owned by the
corporation. A shared equity co-op is similar to a regular
co-op except that a portion of the corporation is owned by a
non-profit who "shares" the unit with the buyer/homeowner.
Purchase of the shared equity units is limited to defined
low-income buyers, seniors, families, veterans, etc. When the
homeowner sells, a portion of the equity gain is shared with the
non-profit partner and shared equity co-ops provide low income
individuals and families the opportunity to become homeowners.
This bill is at the request of CalVet in order to implement a
program already authorized in statute (AB 1084 (Davis, 2011)) to
expand the supply of housing for veterans through a co-op
housing program. According to CalVet, most of these changes
are technical in nature but necessary to allow it to move ahead
with the program. In particular, due to the differences in
cooperative dwelling unit projects from typical farm and home
loans, CalVet requires explicit statutory authority for it to
enact regulations for cooperative dwelling units in the areas
of:
1)Appraisal requirements;
AB 1224
Page 3
2)Drafting of the purchase contract;
3)Insurance replacement cost coverage;
4)CalVet discretion to discharge delinquent taxes, encumbrances,
etc. to keep property in good repair;
5)CalVet's options in the event of a contract cancellation and
property repossession; and
6)CalVet's obligations to the purchaser in the event of a
default, sale and realization of net gain on the sold
property.
This bill also alters the down payment provision which requires
for CalVet loans a down payment of two percent or a higher
amount based on the creditworthiness of the purchaser. As
amended by this bill, the law would still require a two percent
down payment and would still permit a higher down payment based
on the creditworthiness of the purchaser. In addition, not in
lieu of creditworthiness, CalVet in determining the higher
amount, shall consider the purchaser's military record,
employment record, financial condition, and other similar
factors as determined by CalVet.
REGISTERED SUPPORT / OPPOSITION :
Support
CalVet, Sponsor
Opposition
None on file.
Analysis Prepared by : John Spangler / V. A. / (916) 319-3550