BILL ANALYSIS Ó
AB 1551
Page 1
Date of Hearing: August 31, 2012
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 1551 (Torres) - As Amended: August 22, 2012
SUBJECT : Housing.
SUMMARY : Allows the California Housing Finance Agency (CalHFA)
for the Home Purchase Assistance Program and the Extra Credit
Teacher Home Purchase Program and the Department of Housing and
Community Development (HCD) for the CalHome Program to
subordinate a second mortgage to refinancing. Specifically, this
bill :
1)Allows CalHFA for the Home Purchase Assistance Program and the
Extra Credit Teacher Home Purchase Program and HCD for the
CalHome Program to subordinate a second mortgage to
refinancing if CalHFA or HCD determines that the borrower has
demonstrated hardship, subordination is required to avoid
foreclosure, and the new loan meets underwriting requirements.
2)Allows CalHFA and HCD to permit subordination on those terms
and conditions as they determine are reasonable, but prohibits
subordination if the borrower has sufficient equity to repay
the loan.
3)Includes an urgency clause and declare that the urgency is
necessary in order for underwater homeowners to participate in
the federal Home Affordable Refinance Program (HARP) at the
earliest possible time.
EXISTING LAW
1)Establishes the CalHome Program, administered by HCD, to
enable low- and very low-income households to become or remain
homeowners and requires HCD, under the program, to provide
grant or loan funds to local public agencies or nonprofit
corporations for specified purposes relating to the promotion
of home ownership.
2)Requires that financial assistance provided to an individual
household under CalHome be in the form of a deferred payment
loan, repayable upon sale or transfer of the home, when the
AB 1551
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home ceases to be owner-occupied, or upon the loan maturity
date.
3)Requires CalHFA to administer the Home Purchase Assistance
Program for the purpose of assisting first-time homebuyers
utilizing existing mortgage financing and to administer the
Extra Credit Teacher Home Purchase Program and any other
school personnel home ownership assistance program that is set
forth by the California Debt Limit Allocation Committee.
4)Requires CalHFA to administer the California Homebuyer's
Downpayment Assistance Program (CHDAP) for the purpose of
assisting first-time low- and moderate-income homebuyers
utilizing existing mortgage financing, and authorizes a
borrower under the program to refinance a mortgage under
specified circumstances.
5)Authorizes CalHFA, at its discretion, to permit the
subordination of a CHDAP loan to refinancing if it determines
that certain criteria have been met.
6)Authorizes CalHFA to permit subordination of a CHDAP loan
under those terms and conditions as it determines are
reasonable.
FISCAL EFFECT : According to the Senate Appropriations
Committee, AB 1551 could cause delays in loan repayments in
future years, the impacts of which would likely be offset by
reduced risk that state-financed loans would be extinguished
during a foreclosure. The bill would have minor administrative
costs to CalHFA and HCD.
COMMENTS :
The California Housing Finance Agency (CalHFA) currently has
authority to subordinate loans provided under its California
Homebuyer Downpayment Assistance Program (CHDAP) to a
refinancing of a homeowner's first mortgage ƯAB 224 (Correa),
Chapter 172, Statutes of 2009]. However, two other CalHFA
programs, the Home Purchase Assistance Program and the Extra
Credit Teacher Program, continue to require the homeowner to pay
off the CalHFA second mortgage before the first mortgage may be
refinanced. The CalHOME program, administered by HCD, has a
similar requirement. For those California homeowners currently
underwater in their mortgages, this is not possible. Moreover,
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this requirement effectively prohibits underwater homeowners
from participating in the federal Home Affordable Refinance
Program. As a result, these homeowners cannot get the benefit of
saving hundreds of dollars per month through refinancing and, in
worst-case scenarios, may lose their homes to foreclosure.
AB 1551 allows HCD to subordinate its second mortgages under the
CalHOME program and allows CalHFA to subordinate its second
mortgages under the Home Purchase Assistance Program and the
Extra Credit Teacher Program, as is already allowed under CHDAP.
In order to qualify, the borrower must demonstrate hardship,
subordination must be required to avoid foreclosure, and the new
loan must meet underwriting requirements. The bill prohibits
subordination if the borrower has sufficient equity to repay the
second mortgage.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Anya Lawler / H. & C.D. / (916)
319-2085