BILL ANALYSIS                                                                                                                                                                                                    Ó






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                                   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  








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            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  
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          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  







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            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


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