BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2280|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 2280
Author: Ridley-Thomas (D)
Amended: 4/21/16 in Assembly
Vote: 21
SENATE TRANS. & HOUSING COMMITTEE: 8-3, 6/28/16
AYES: Beall, Cannella, Bates, Gaines, Galgiani, Leyva,
McGuire, Mendoza
NOES: Allen, Roth, Wieckowski
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 74-4, 6/2/16 - See last page for vote
SUBJECT: California Housing Finance Agency: program
eligibility requirements: changes
SOURCE: Author
DIGEST: This bill requires the California Housing Finance
Agency (CalHFA), within five business days of making a change to
the eligibility requirements for a program it administers, to
provide a lender or other party participating in the program
notice of the change.
ANALYSIS:
Existing law:
1) Provides that the primary purpose of CalHFA is to meet the
AB 2280
Page 2
housing needs of persons and families of low or moderate
income.
2) Authorizes CalHFA to make loans to housing sponsors for
housing developments and to qualified mortgage lenders, among
others.
3) Provides that CalHFA is administered by a board of directors
and is supervised on a day-to-day basis by an executive
director.
This bill:
1) Requires CalHFA, within five business days of making a
change to the eligibility requirements for a housing or
lending program that the agency administers, to provide a
lender or other party participating in the program with notice
of the change, unless providing notice within five days would
impose an undue burden on the agency.
2) Provides that the notification may be provided by means of a
program bulletin board.
Comments
1)Purpose. According to the author, there have been instances
in which a family "assumes it qualifies for a down payment
assistance program" only to later find out that it doesn't.
That family must then find other financing and risk losing the
opportunity to become first-time homebuyers. The author
asserts that that this bill provides certainty to potential
homebuyers who participate in programs like the California
Homebuyer's Downpayment Assistance Program. The bill
increases confidence in these programs because families can
determine acquisitions costs without the fear of eligibility
requirements being changed without their knowledge. If
changes in a program are made after a prospective homebuyer
has entered into a contract to purchase a home, the bill helps
those individuals secure other means of financing as soon as
possible. Also, directing the public to the agency's website
will reinforce the details of the program administered by the
agency and foster improved understanding of the downpayment
assistance process.
AB 2280
Page 3
2)CalHFA background. CalHFA is the state's affordable-housing
bank. CalHFA borrows money from the private financial market
at below-market interest rates by issuing tax-exempt revenue
bonds. CalHFA passes these interest rate savings on to low-
and moderate-income first-time homebuyers and affordable
rental housing developers by offering below market-rate
mortgages. These bonds are backed only by CalHFA revenues and
not by the state General Fund. One program that CalHFA
operates is the Mortgage Credit Certificate (MCC) Tax Credit
program. The MCC Tax Credit is a federal credit which can
reduce potential federal income tax liability, creating
additional net spendable income which borrowers may use toward
their monthly mortgage payment. This MCC Tax Credit program
may enable first-time homebuyers to convert a portion of their
annual mortgage interest into a direct dollar-for-dollar tax
credit on their U.S. individual income tax returns.
3)Current practice for changing eligibility requirements. Due
to variable market conditions and bondholder requirements,
CalHFA is required to modify aspects of its housing programs,
such as income eligibility criteria. Any changes to CalHFA's
policies or eligibility requirements are announced via Program
Bulletins which are sent directly to lending partners/loan
officers, prominently posted on the Agency's website, and
broadcast through Enews Announcements to anyone who has signed
up to receive them. Also, when eligibility requirements
change, general program information is immediately updated in
CalHFA's Lender Program Manual, located on CalHFA's website.
It should be noted that CalHFA does not work directly with
prospective homebuyers, but rather with lending institutions.
Therefore, lending institutions are the primary audience for
program change notifications and are responsible for working
with a potential homebuyer to determine if the homebuyer meets
eligibility requirements. When changes are imposed on CalHFA
programs and products, lenders and consumers with an existing
reservation (meaning the loan has been submitted to CalHFA for
review and approval) are always honored under the rules in
force at the time that reservation is made.
4)Is there a problem to solve? According to the author, a
member of the author's staff was in the market to buy a house
and assumed that he qualified for the MCC Tax Credit. The
staff member was about to put an offer on a house with the
AB 2280
Page 4
assumption, after working with his broker, that the offer
would include financing under the MCC tax credit program.
When the program changed, he was left scrambling for another
financing option. The author's office asserts that the issue
of informing the public of program changes to the CALHFA
programs is broader than this one incident.
When buying a home, financing options and rates often change
dramatically from day to day. Even if the lender had received
the five days' notice as required under this bill, it is not
clear if that notice would have changed the staffers'
assumption as he searched for a house.
This bill codifies the current CalHFA practice of requiring
CalHFA, within five business days of making a change to the
eligibility requirements for a housing or lending program that
the agency administers, to provide a lender or other party
participating in the program with notice of the change, unless
providing notice within five days would impose an undue burden
on the agency.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified8/1/16)
None received
OPPOSITION: (Verified8/1/16)
None received
ASSEMBLY FLOOR: 74-4, 6/2/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brown, Burke, Calderon,
Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper,
Dababneh, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Roger Hernández, Holden, Irwin, Jones,
AB 2280
Page 5
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Quirk, Ridley-Thomas,
Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond,
Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
NOES: Brough, Dahle, Beth Gaines, Harper
NO VOTE RECORDED: Hadley, Patterson
Prepared by:Alison Dinmore / T. & H. / (916) 651-4121
8/3/16 18:23:07
**** END ****