BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 304|
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THIRD READING
Bill No: AB 304
Author: Mullin (D)
Amended: 7/21/03 in Senate
Vote: 21
SENATE HOUSING & COMM. DEV. COMMITTEE : 6-2, 6/16/03
AYES: Ducheny, Alarcon, Cedillo, Dunn, Florez, Torlakson
NOES: Hollingsworth, Ackerman
SENATE APPROPRIATIONS COMMITTEE : 7-4, 8/18/03
AYES: Alpert, Bowen, Escutia, Karnette, Machado, Murray,
Speier
NOES: Battin, Aanestad, Ashburn, Poochigian
NO VOTE RECORDED: Burton, Johnson
ASSEMBLY FLOOR : 46-27, 5/8/03 - See last page for vote
SUBJECT : Housing: downpayment assistance
SOURCE : The California Neighborworks Network
DIGEST : This bill raises the limits on downpayment
assistance available to home buyers through the Housing in
Revitalization Areas Program and the Extra Credit Teachers
Program both administered by the California Housing Finance
Agency.
ANALYSIS : Created in 1975, the California Housing
Finance Agency (CHFA) serves as the state's mortgage bank
to provide below market rate mortgage financing to meet the
CONTINUED
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housing needs of low to moderate income families.
In addition to providing below market rate mortgage loans,
CHFA also provides deferred "silent second" loans for up to
three percent of the home purchase price to income-eligible
first-time homebuyers under the California Homebuyer
Downpayment Assistance Program (CHDAP).
Proposition 96, the Housing and Emergency Shelter Trust
Fund Act of 2002, provided $130 million for this program.
The Act allocated $25 million for downpayment assistance
to fund part of the Extra Credit Teacher Home Purchase
Program. The bond's proceeds are available to assist
teachers and other school personnel who are first-time low-
and moderate-income homebuyers by utilizing existing
mortgage financing. Under existing law, assistance is
limited to $7,500 or three percent of the home sales price.
The Act reserved $12.5 million of these funds for
low-income first-time homebuyers who have received
homeownership counseling from a nonprofit organization that
is funded and certified by a federally-funded national
non-profit (generally a Neighborworks organization) and are
purchasing a residence in a community revitalization area
targeted by the nonprofit. This setaside is available for
30 months and is marketed by the agency through the
Homeownership in Revitalizaiton Areas Program (HIRAP). Any
money left over after 30 months reverts to the standard
CHDAP program.
The bill authorizes CHFA to establish higher assistance
limits for that downpayment assistance to teachers and
school personnel in high-cost housing areas.
This bill allows CHFA to make downpayment assistance loans
of up to six percent of the home sale price, as opposed to
three percent, to low-income first-time homebuyers in
identified neighborhood revitalization areas under the
HIRAP Program.
This bill confines the increase in percent of assistance to
six percent from the HIRAP to half of the bond funds
available for that program ($6.25 million of $12.50
million) and only for the period of calendar year 2004.
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The bill limits the downpayment assistance only to
community revitalization areas identified by qualified
nonprofit organizations.
Comments
Purpose of the Bill . According to the author's office and
the sponsor, this bill makes the HIRAP program more
responsive to today's housing prices. In many high-cost
areas, low-income families require up to 420,000 in
deferred financing just to purchase the most affordable
homes in the community. With the current assistance
limits, it often requires combining four or more subsidy
sources, not all of which are available at the same time.
By increasing the amount of assistance available under the
HIRAP program, it will be much easier to assembly the
necessary financing to make a low-income household into
homeowners.
More Assistance vs. More Families . Given that the
resources of the HIRAP program are capped at $12.5 million
under the housing bond, the fundamental question posed by
this bill is whether it is better to provide more
assistance to fewer families or less assistance to more
families. By doubling the amount of assistance that can be
provided to each family, the bill could potentially cut the
number of assisted families in half. That said, the
parameters of the current program may make it difficult to
use the full $12.5 million within the allocated 30 months.
Only homebuyers who have worked with certified nonprofits
can access the HIRAP program, and to date, no nonprofit has
been certified for the program and only four applications
are pending. While more nonprofits will surely become
certified over time, it may be difficult for the small
number of organizations to generate enough business to use
the full allocation. In addition, in many areas of the
state three percent down payment assistance loans are
simply insufficient to cover the gap between home prices
and what a low-income family can afford to pay for a new
home. Increasing the amount of downpayment assistance will
allow lower-income families to make the jump to
homeownership.
Altering the Use of Bond Funds . The housing bond
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specifically allows the Legislature, from time to time, to
amend bond programs "for the purpose of improving the
efficiency and effectiveness of the program, or for the
purpose of furthering the goals of the program." The goal
of the HIRAP program is to facilitate homeownership by
lower-income families in neighborhood revitalization areas.
Increasing assistance levels will make it easier for
low-income families to qualify and achieve homeownership,
thereby meeting the criteria to amend the bond program.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
No change in total state funding. Reduction in total
number of loans available.
SUPPORT : (Verified 8/19/03)
The California Neighborworks Network (source)
Neighborhood Housing Services of Orange County
ASSEMBLY FLOOR :
AYES: Berg, Bermudez, Calderon, Chan, Chavez, Chu,
Corbett, Correa, Diaz, Dutra, Dymally, Firebaugh,
Frommer, Goldberg, Hancock, Jerome Horton, Jackson,
Kehoe, Koretz, Laird, Leno, Levine, Lieber, Liu,
Longville, Lowenthal, Matthews, Montanez, Mullin, Nakano,
Nation, Negrete McLeod, Nunez, Oropeza, Parra, Pavley,
Reyes, Ridley-Thomas, Salinas, Simitian, Steinberg,
Vargas, Wiggins, Wolk, Yee, Wesson
NOES: Aghazarian, Bates, Benoit, Bogh, Cogdill, Cox,
Daucher, Dutton, Garcia, Harman, Haynes, Shirley Horton,
Keene, La Malfa, La Suer, Maldonado, Maze, McCarthy,
Mountjoy, Nakanishi, Pacheco, Plescia, Richman, Runner,
Samuelian, Spitzer, Wyland
NC:cm 8/20/03 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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