BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 304|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 445-6614 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 304
Author: Mullin (D)
Amended: 9/4/03 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 and guaranty
insurance
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. The bill also makes changes to the California
Housing Loan Insurance Fund.
Senate Floor Amendments of 9/4/03 remove the reference to
CONTINUED
AB 304
Page
2
using Proposition 46 funds for insuring mortgages on
multifamily housing, thereby limiting the use of these
funds to insurance for single family homes.
Senate Floor Amendments of 8/27/03 (1) allow the California
Housing Finance Agency to provide mortgage insurance to
homebuyers making more than 120 percent of the area median
income if necessary to meet the requirements for
participation in an affordable housing program or product
offered by Fannie Mae or Freddie Mac, and (2) make other
clean-up amendments to the codes relating to the agency's
mortgage insurance program.
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
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.
AB 304
Page
3
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.
The bill limits the downpayment assistance only to
community revitalization areas identified by qualified
nonprofit organizations.
California Housing Loan Insurance Fund
CalHFA administers the California Housing Loan Insurance
Fund which provides mortgage insurance to low and moderate
income homebuyes. In general, the agency assists
homebuyers not well served by the private market. Under
current law, the agency is limited to serving households
that make no more than 120 percent of the area median
income.
Over time, private mortgage insurers have moved more and
more into the market niche historically served by CalHFA.
Along with Fannie Mae and Freddie Mac, CalHFA has
identified new markets that remain underserved by private
insurers. CalHFA would now like to partner with Fannie Mae
and Freddie Mac on their respective emerging market
programs. However, in order to meet Fannie and Freddie's
program criteria, CalHFA needs to be able to serve families
making up to 140 percent of the area median income.
This bill allows CalHFA to serve households earning more
than 120 percent of the area median income and makes a
number of other cleanup amendments to the statutes relating
to CalHFA's mortgage insurance program. Specifically, this
AB 304
Page
4
bill:
1.Allows CalHFA's mortgage insurance fund, until January
1, 2011, to serve families making more than 120 percent
of the area median income if necessary to meet the
requirements for participation in an affordable housing
program or product offered by Fannie Mae and Freddie
Mac.
2.Requires CalHFA to report to the Legislature by January
1, 2009 the types of programs offered with this new
authority and the incomes of households served.
3. Provides that funds allocated to the mortgage insurance
program from Proposition 46 may only be used to insure
households earning less than 120 percent of the area
median income.
4.Clarifies that the Administrative Procedures Act does
not apply the CalHFA's development of mortgage insurance
products.
5.Clarifies that CalHFA may pledge funds from its general
reserves to support the Loan Insurance Fund without
having to make an actual loan.
6.Clarifies that CalHFA is not subject to the Insurance
Code.
7.Repeals the prohibition on providing mortgage insurance
in areas where there exists widespread damage from
natural disasters.
8.Allows CalHFA to insure bonds related to affordable
housing development issued by entities other than the
state or local governments.
9.Limits, with respect to CalHFA's School Facilities Fee
Program, the maximum home sale price to 100 percent of
the area median sales price in counties whose average
sales price over the previous five years exceeds Fannie
Mae and Freddie Mac's conforming loan limit.
10.Makes other technical amendments.
AB 304
Page
5
11.Is double-joined to AB 1475 (Steinberg).
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
specifically allows the Legislature, from time to time, to
AB 304
Page
6
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: Yes Fiscal Com.: Yes
Local: No
No change in total state funding. Reduction in total
number of loans available.
SUPPORT : (Verified 8/27/03)
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 9/5/03 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****