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 ****