BILL ANALYSIS
AB 1538
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Date of Hearing: May 16, 2007
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mark Leno, Chair
AB 1538 (Lieu) - As Amended: April 30, 2007
Policy Committee: Banking and
Finance Vote: 6-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill establishes a home loan refinance assistance program,
to be administered by the California Housing Finance Agency
(CHFA), to assist first time homeowners in refinancing variable
interest loans into fixed rate loans. Specifically, this bill:
1)Provides that that CHFA may accept donations from public and
private sources into the California Housing Trust Fund for the
purpose of assisting first time homebuyers facing foreclosure.
2)Authorizes CHFA to refinance home loans if (a) the original
lender agrees to waive penalties and fees, (b) the borrower's
income complies with the current CHFA income limits for
first-time homebuyers, (c) the property is the sole residence
of the borrower, and (d) the borrower has recently
participated in a housing counseling program approved by the
Department of Housing and Urban Development.
FISCAL EFFECT
Potentially significant costs, in the range of $150,000, to CHFA
to establish and administer new program.
COMMENTS
1)Background . Existing law establishes CHFA within the Business,
Transportation and Housing Agency with the primary purpose of
meeting the housing needs of persons and families with low or
moderate incomes. The agency administers first-time homebuyer
loan and down payment assistance programs through the issuance
of revenue bonds. The programs are self-sustaining, to the
AB 1538
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extent that bond debt repayments are secured by mortgage
repayments. Federal and state laws prohibit the use of
tax-exempt bond proceeds for refinancing of existing loans.
2)Rationale . The author indicates this bill is an initial
attempt to provide California with the authority to assist
homeowners facing foreclosure proceedings, particularly those
related to subprime variable rate loans.
3)Issues . While the bill authorizes CHFA to accept public and
private donations for debt refinancing, it does not specify
sources of funds that would be used to assist first time
homebuyers facing foreclosure. Any use of public financing in
this area would likely be costly because (a) bonds would not
be eligible for tax exempt status, and (b) they would be
perceived as risky by the financial markets. This is because,
in contrast to existing CHFA programs, which require borrowers
to meet specified credit and income qualification standards,
financial assistance under this bill would be provided to
homeowners facing considerable financial hardship.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081