BILL ANALYSIS Ó
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|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
SENATE TRANSPORTATION & HOUSING COMMITTEE : 10-0, 6/4/13
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
vote
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.
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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
development.
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,
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refinanced, or paid in full. This program allows a homebuyer to
afford a more expensive home than he/she would otherwise qualify
for.
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:
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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).
Comments
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.
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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
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JA:d 6/25/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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