BILL ANALYSIS                                                                                                                                                                                                    Ó


          |SENATE RULES COMMITTEE            |                        AB 984|
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                                    THIRD READING

          Bill No:  AB 984
          Author:   Chau (D) and Gordon (D)
          Amended:  6/18/13 in Senate
          Vote:     27 - Urgency

          AYES:  DeSaulnier, Gaines, Beall, Cannella, Galgiani, Hueso,  
            Lara, Liu, Roth, Wyland
          NO VOTE RECORDED:  Pavley

           SENATE APPROPRIATIONS COMMITTEE  :  7-0, 6/24/13
          AYES:  De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg

           ASSEMBLY FLOOR  :  76-0, 4/25/13 (Consent) - See last page for  

           SUBJECT  :    The California Housing Finance Agency

           SOURCE  :     Author

           DIGEST  :    This bill makes a number of changes to the California  
          Housing Finance Agencys (CalHFA) statutes.

           ANALYSIS  :    Established in 1975, CalHFA is the states  
          affordable housing bank.  CalHFA issues tax-exempt revenue bonds  
          and uses the proceeds to make below market-rate loans to  
          income-eligible first-time homebuyers and the developers of  
          affordable rental housing.  CalHFA is a self-supporting entity.   
          It does receive money from the state's general fund, and its  
          debts obligate only CalHFA itself, not the State of California.   


                                                                     AB 984

          An 11-member board of directors, each of whom serves a six-year  
          term, governs CalHFA.  The board members include the Treasurer;  
          the Secretary of Business, Consumer Services, and Housing; and  
          the Director of Housing and Community Development, or their  
          designees, as ex-officio members.  In addition, the Governor  
          appoints six members, and the Speaker of the Assembly and the  
          Senate Rules Committee each appoint one member.  The Director of  
          Finance, the Director of Planning and Research, and the  
          Executive Director of CalHFA serve as non-voting ex-officio  
          members of the board.

          Existing law requires the Governor to select four of his  
          appointees from among the following categories:

          1. An elected official of a city or county engaged in the  
             planning or implementation of a housing, housing assistance,  
             or housing rehabilitation program.

          2. A person experienced in residential real estate, mortgage  
             banking, or the commercial banking industry.

          3. A person experienced in building residential housing.

          4. A person experienced in organized labor in the residential  
             construction industry.

          5. A person experienced in the management of rental or  
             cooperative housing occupied by lower-income households.

          6. A person experienced in manufactured housing finance and  

          7. A person representing the public.  

          CalHFA's California Homebuyer's Downpayment Assistance Program  
          (CHDAP) offers to income-qualified first-time homebuyers a  
          deferred-payment subordinate loan (also known as a "silent  
          second mortgage") in the amount of 3% of the purchase price or  
          appraised value, whichever is less, for the buyer to apply  
          towards a downpayment or closing costs.  Payments on this loan  
          are deferred, meaning that the homebuyer does not have to make a  
          payment on this second mortgage until the home is sold,  



                                                                     AB 984

          refinanced, or paid in full.  This program allows a homebuyer to  
          afford a more expensive home than he/she would otherwise qualify  

          The Federal Housing Administration (FHA) recently informed  
          CalHFA that California's statutory requirement for a CHDAP  
          borrower to repay the loan upon sale is prohibited for FHA loans  
          by FHA regulations.  

          CalHFA does not lend money directly to consumers.  Instead,  
          CalHFA works through and uses approved private lenders to  
          qualify consumers and to make all mortgage loans, including  
          CHDAP loans.  CalHFA then purchases closed loans that meet  
          CalHFA's requirements from these private lenders.  In late 2012,  
          FHA issued an interpretive rule defining "prohibited sources" of  
          downpayment assistance under the federal Housing and Economic  
          Recovery Act of 2008.  The new ruling states that "state and  
          local government agencies and instrumentalities can contribute  
          funds, if they do so directly, towards the minimum cash  
          investment even if they are otherwise involved in the  
          transaction."  FHA will apply this rule to all loans closed  
          after July 1, 2013.  CalHFA currently contributes CHDAP funds  
          indirectly through the purchase of the loans, not directly at  
          the loan closing, and will not be able to provide CHDAP loans to  
          FHA borrowers after this date without changing its legal  
          authority and practice.    

          CalHFA currently participates in FHA's Energy Efficient Mortgage  
          (EEM) Program, which helps homebuyers save money on utility  
          bills by enabling them to finance the cost of adding energy  
          efficiency features to new or existing housing as part of their  
          FHA insured mortgage.  The program recognizes that reduced  
          utility expenses can permit a homeowner to pay a higher mortgage  
          to cover the cost of the energy improvements.  The total cost of  
          the financed energy improvements may not exceed the total dollar  
          value of the energy that will be saved during the improvement's  
          useful life as determined by a Home Energy Rating Systems  
          report.  In addition, the cost of the improvements that may be  
          financed may not exceed 5% of the property's value (not to  
          exceed $8,000) or $4,000, whichever is greater.  

          This bill makes a number of changes to CalHFA's statutes.  This  
          bill specifically:



                                                                     AB 984

          1.Adds the Secretary of Veterans Affairs and an additional  
            gubernatorial appointment to the CalHFA board. 

          2.Requires that one of the Governor's appointments have specific  
            knowledge of bonds and related financial instruments, interest  
            rate swaps, and risk management.

          3.Provides that a CHDAP loan shall not be due and payable upon  
            sale of the home if FHA owns or insures the first mortgage  
            loan or if a repayment requirement is otherwise contrary to  
            HUD (U.S. Department of Urban Development) regulations  
            governing FHA insured first mortgage loans.     

          4.Allows CalHFA to fund any second mortgage loan directly.

          5.Allows CalHFA to make a grant to a homebuyer who is seeking a  
            CalHFA first mortgage under the FHA's EEM Program for the  
            purpose of making repairs or improvements to increase energy  
            efficiency in the home.  CalHFA must fund the cost of the  
            program through revenues realized from the grantee's first  
            mortgage loan, or securities backed by it, except that CalHFA  
            may provide short term interim funding of the grant to  
            facilitate the transaction.

          6.Contains an urgency clause that applies to all provisions of  
            the bill except for the provisions relating to CalHFA board  
            membership and board member qualifications.

          7.Contains double-jointing language with AB 637 (Atkins).

          According to the author's office, this bill implements the  
          California State Auditor's recommendation to add to the  
          financial expertise to the CalHFA board.  In addition, this bill  
          adds the Secretary of Veteran Affairs to the board to increase  
          coordination between CalHFA and the Department of Veterans  
          Affairs, which provides mortgage loans to veterans through the  
          CalVet Home Loan Program.  The bill also seeks to bring CalHFA's  
          statutes regarding CHDAP into conformance with recent federal  
          policy changes and allows CalHFA to provide grants for energy  
          efficiency improvements over and above what the EEM program  
          currently provides.



                                                                     AB 984

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee:

           Initial expenditures from California Housing Finance Fund  
            (CHFA) operating funds (non-state revenue bond funds) of up to  
            $3 million for short-term interim funding to finance initial  
            allocations related to the new energy efficiency grant  
            program.  The program must ultimately be funded through a  
            grantee's CHFA mortgage loan, or securities backed by those  
            loans, but CHFA is authorized to finance startup costs on a  
            short-term basis.  

           Potential delays in downpayment assistance loan repayments in  
            future years to the extent those loans are assumed by persons  
            purchasing homes partially financed through a CHFA downpayment  
            assistance loan.  Currently, these loans must be repaid when a  
            home is refinanced or sold, but this bill would allow  
            downpayment assistance loans to be assumed by a new owner or  
            repaid as part of the home purchase.

           SUPPORT  :   (Verified  6/25/13)

          Housing California 

           ASSEMBLY FLOOR  :  76-0, 4/25/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,  
            Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,  
            Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,  
            Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray,  
            Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones,  
            Jones-Sawyer, Levine, Linder, Logue, Maienschein, Mansoor,  
            Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,  
            Nestande, Olsen, Pan, Patterson, Perea, V. Manuel Pérez,  
            Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting,  
            Torres, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams,  
            Yamada, John A. Pérez
          NO VOTE RECORDED:  Cooley, Lowenthal, Nazarian, Vacancy



                                                                     AB 984

          JA:d  6/25/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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