BILL ANALYSIS
AB 304
Page 1
Date of Hearing: April 9, 2003
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Alan Lowenthal, Chair
AB 304 (Mullin) - As Introduced: February 6, 2003
SUBJECT : Downpayment assistance.
SUMMARY : Increases California Housing Finance Agency (CalHFA)
downpayment assistance from three percent to six percent of the
home sales price.
EXISTING LAW
1)Requires CalHFA to administer a downpayment assistance program
not to exceed three percent of the home sales price.
2)Provides that the downpayment assistance program shall include
a deferred payment, low interest, junior mortgage loan to
reduce the principal and interest payments and make financing
affordable to first-time low- and moderate-income homebuyers.
3)Requires the downpayment assistance to be secured to the home
in a junior position to the primary loan and due and payable
at the end of the term or upon the sale or refinancing of the
home.
FISCAL EFFECT : Unknown.
COMMENTS :
The California Homebuyer's Downpayment Assistance Program
(CHDAP) administered by CalHFA provides downpayment assistance
to first-time low- and moderate- income homebuyers.
As noted under existing law, this program offers a
deferred-payment junior loan of an amount up to three percent of
the purchase price or appraised value. Homebuyers are able to
use these funds to help with their downpayment and closing costs
without the need to make monthly payments on the loan. Interest
will be calculated at three percent simple interest. The
assistance may be combined with any CalHFA or non-CalHFA
conventional or government first mortgage loan.
Homebuyers using a CalHFA first mortgage may combine the
AB 304
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assistance with a CalHFA Housing Assistance Program (CHAP) loan,
High Cost Area Home Purchase Assistance Program
(HiCAP) loan and with other downpayment assistance programs
offered by local government agencies and nonprofit organization,
if the subordinate program is pre-approved by
CalHFA. The CHDAP loan cannot be combined with loans under
CalHFA's Extra Credit Teacher Program and Homeownership
Revitalization Areas Program (HIRAP).
CHDAP is available on a statewide basis for first-time
homebuyers purchasing a single family
residence anywhere in California, that is within CalHFA's sales
price limits, is intended as their primary residence, and whose
family income does not exceed the program's moderate income
limit requirements. Homebuyers must also meet all first mortgage
eligibility requirements according to the lender, investor,
mortgage insurer, or guarantor criteria.
As the California economic slowdown and struggles with the
largest state budget shortfall in history continue - the housing
affordability crisis also continues.
In its October 2002 publication Locked Out 2002: California's
Affordable Housing Crisis Continues , the non-partisan California
Budget Project (CBP) notes that the "American Dream" of
homeownership is just a dream for many Californians.
"California's 2001 homeownership rate of 58.2 percent was the
fourth lowest in the nation, behind the District of Columbia,
New York, and Hawaii. California's 2001 homeownership rate was
about ten percentage points below that of the nation." The CBP
notes (citing data from the California Association of Realtors)
that "the state's homeownership rates are lower than national
ownership rates largely due to the state's high cost of housing.
Nationally, 57 percent of households could afford to purchase
the median-priced home in 2001, as compared to just 34 percent
of households in California."
In November 2002 the voters of California approved Proposition
46 which will provide $2.1 billion in funds for various
low-income housing programs. The bond provides resources to help
fund the construction, rehabilitation and preservation of
affordable rental housing, emergency shelters and homeless
facilities, as well as funds that can be used to provide
downpayment assistance to low and moderate income first-time
homebuyers. Seniors, families with children, teachers, disabled
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persons, veterans and working people will benefit from the bond.
Of that amount $117.5 million is available for downpayment
assistance.
According to the sponsor, California Neighborworks Network,
"this measure would permit, for example, homeowners to receive
$10,000 rather than $5,000 in downpayment assistance. This
would provide a greater level of assistance, particularly in
higher cost areas, and assist in the Governor's efforts to spend
housing bond funds rapidly in order to create jobs."
Staff Comments :
By allowing a larger amount of assistance per applicant, fewer
applicants will be served. According to CalHFA, it is estimated
that it is estimated that the CHDAP program will assist
approximately 22,500 homebuyers. Therefore, under this measure,
approximately half as many applicants may be assisted.
The committee should know that HiCAP loans, referenced above,
are designed to assist first-time homebuyers in the highest
housing cost areas of the state. Eligible counties are: San
Francisco, San Mateo, Santa Clara, Alameda, Contra Costa and
Sonoma counties.
HiCAP provides assistance to first-time homebuyers in the
designated high cost areas who otherwise, without this
assistance, would not be able to purchase a home. The program is
a combination of a CalHFA 30-year, below- market, fixed-rate
first loan and a deferred payment low interest rate second loan
up to $25,000. Borrowers must meet CalHFA guidelines for sales
price limits and income limits as well as meet the borrower
qualifications of a CalHFA approved lender. Additionally, CalHFA
will permit homebuyers to use other CalHFA-approved down
payment assistance loans or grants to help in
the acquisition of the home.
The committee may wish to consider whether the potential for a
decrease in the total number of loans made available as a result
of this measure is equitable to other areas of the state which
continue to have affordable housing needs, given CalHFA's
existing programs, which are designed specifically for "high
cost areas".
Another program provided by CalHFA, created by Proposition 46,
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is the Homeownership In Revitalization Areas Program (HIRAP)
which provides deferred payment, simple interest rate junior
loans of an amount up to three percent of the purchase price or
appraised value, whichever is less. Interest will be calculated
at three percent simple interest. The junior loan may be used
for downpayment or closing costs and may be combined with a
CalHFA or non-CalHFA conventional or government first mortgage
loan.
HIRAP is intended for low income first-time homebuyers anywhere
in California. If homebuyers are using a CalHFA first mortgage,
they may combine the assistance with a CHAP loan, HiCAP loan and
with other downpayment assistance programs offered by local
government agencies and nonprofit organizations.
The committee may wish to consider limiting the increase,
proposed by this measure, to HIRAP.
REGISTERED SUPPORT / OPPOSITION :
Support
California Neighborworks Network (Sponsor)
Cabrillo Economic Development Corporation, Saticoy
California Rural Legal Assistance Foundation
Gray Panthers California
Los Angeles Neighborhood Housing Services
Neighborhood Housing Services of the Inland Empire
Neighborhood Partnership Housing Services, Montclair, Chino,
Ontario, Upland and Pomona
Neighborhood Housing Services, San Jose
South County Housing
Opposition
None on file.
Analysis Prepared by : Hubert Bower / H. & C.D. / (916)
319-2085