BILL ANALYSIS
SB 224
Page 1
Date of Hearing: June 17, 2009
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
SB 224 (Correa) - As Amended: May 27, 2009
SENATE VOTE : 37-0
SUBJECT : Housing assistance
SUMMARY : Makes changes to two programs, the CalHOME program and
the California Homeownership Downpayment Assistance Program
(CHDAP) funded by voter-approved housing bonds. Specifically,
this bill :
1)Permits local public agencies and nonprofit corporations to
make grants of CalHOME funds specifically for the installation
or retrofit of ignition resistant exterior components on
existing mobilehomes and accessory structures.
2)Permits a local public agency or nonprofit corporation to
consider the condition and age of the mobilehome when making a
CalHOME grant including whether or not the home was built on
or after June 15, 1976 or if the funds would be more effective
if used to replace the mobilehome.
3)Prohibits a local public agency and nonprofit corporation from
conditioning home rehabilitation funds under CalHOME upon the
rehabilitation of additional unrelated home components unless
also required under the applicable state building code.
4)Allows California Housing Finance Agency (CalHFA) to
subordinate a downpayment assistance loan made through the
CHDAP to refinance the mortgage if the Agency determines the
following:
a) the borrower has demonstrated hardship;
b) subordination is required to avoid foreclosure; and
c) the new loan meets the agency's underwriting
requirement.
5) Allows CalHFA to permit subordination on such terms and
conditions as it determines are
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reasonable.
EXISTING LAW
1)Establishes the CalHOME program, within the Department of
Housing & Community Development (HCD), to provide grants and
loans to local public agencies and nonprofit corporations for
projects or programs that enable low and very low-income
people to become or remain homeowners (Health and Safety Code
Section 50650.3).
2)Directs CalHFA to administer a downpayment assistance program
that includes but is not limited to the following:
a) The downpayment assistance includes but is not limited
to a deferred payment, low-interest, junior mortgage loan;
b) Restricts the downpayment assistance that may be
provided to 3% of the home sales price, except for the
following:
i. Allows for up to 5% down payment assistance
for transit village development districts or
transit-oriented development specific plan areas, as
defined; and
ii. Allows for up to 6% down payment assistance to
first-time low-income buyers who, as documented to
CalHFA, by a nonprofit organization that is certified to
provide homeownership counseling by a federally funded,
national nonprofit corporation, is purchasing a home in a
community revitalization area targeted for economic
stimulation, renovation, and rehabilitation.
c) Requires the downpayment assistance is due at the end of
the term of the loan or if the home is refinanced;
d) Requires the junior mortgage loan securing the
downpayment assistance to be repaid in full if the mortgage
on the home is refinanced; or
e) Requires a repayment of a down payment to be reallocated
by the agency back into CHDAP for future downpayments.
(Health & Safety Code Section 51504)
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FISCAL EFFECT : Unknown
COMMENTS : In November 2002, the voters approved Proposition 46
which provided $2.1 billion in general obligation bonds for
various low-and moderate-income housing programs, including
CalHOME and CHDAP. In November 2006, the voters approved
Proposition 1C, which authorized an additional $2.85 billion in
general obligation bonds for numerous affordable housing related
programs, including an additional $200 million for the CHDAP
program and $300 million for CalHOME.
CalHOME program :
The CalHOME program provides grants and loans to low income and
very-low income individuals to become or remain homeowners. HCD
administers the program and distributes the funds to local
public agencies and private nonprofit corporations that then
make loans and grants directly to low-income households. The
grants can be used for homebuyer downpayment assistance,
rehabilitation, homebuyer counseling, self-help mortgage
assistance programs, or shared housing homeownership. Loans may
be used for the purchase of real property, site development,
predevelopment, construction and other expenses incurred to
develop homeownership development projects including single
family subdivisions. CalHOME funds can be used in the form of a
forgivable loan to rehabilitate, repair or replace a
manufactured or mobilehome.
According to the author, although state law allows CalHOME funds
to be used for both stick-built as well as manufactured housing,
the criteria for making individual loans for qualifying low
income households living in manufactured homes versus
conventional homes is discretionary on the part of each local
community or nonprofit corporation administering the program.
The author, in his function as Chair of the Senate Select
Committee on Mobile and Manufactured Homes, has heard reports
that in some jurisdictions administering CalHOME funds do not
consider low-income residents living in mobilehome parks
eligible for the program.
The need to clarify that mobilehomes qualify under CalHOME has
become more important in light of recent wildfires in the
southern part of the state which damaged mobilehomes. HCD, who
regulates code requirements for the installation of homes in
mobilehome parks, is in the process of adopting emergency
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regulations mandating various fire proofing upgrades for
existing manufactured homes in parks located in wildfire-prone
areas upon the replacement of windows, doors siding decks or
roofing. At recent hearings of the Select Committee, an HCD
representative estimated the cost of the upgrades could be as
high as $15,000 per home.
The author introduced this bill to clarify that mobilehomes are
in fact eligible for CalHOME funds for rehabilitation and
specifically that the regulations recently adopted by HCD to
upgrade homes with ignition resistant exterior components to
protect them from wildfires qualify.
California Homebuyer's Downpayment Assistance Program (CHDAP) :
CHDAP provides three to five percent downpayment assistance in
the form of a junior mortgage loan that can be combined with
virtually any first mortgage loan either from CalHFA, the
California Department of Veteran Administration (CDVA) or other
conventional loan products, to assist low-and moderate-income
residents at 120% or less of area median income (AMI) to
purchase their first home. As of February 28, 2009, 25,078
first-time homebuyers have been assisted by this program with
over $192 million in junior mortgages.
When this program was created, the statute mandated that this
loan be repaid in full at the end of the term or if the borrower
refinances or sells the property. The program operates as a
revolving loan fund which means as the funds are repaid to the
program they are loaned to new borrowers. For example, more
than $35 million has been repaid by borrowers from the original
Proposition 46 allocation and over $500,000 from Proposition 1C.
With the downturn in the economy over the past year, many
homeowners have found that their homes are worth less than the
outstanding balance on their mortgage, have encountered
increases in payments or other costs, or are suffering a loss of
income and may be subject to foreclosure.
New federal program guidelines will assist many homeowners to
refinance exiting mortgage in order to avoid foreclosure and
will likely result in numerous request to re-subordinate junior
liens. However, under current state law any CHDAP down payment
assistance loans must first be paid off before the mortgage loan
can be refinanced. Often borrowers facing foreclosure cannot
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afford to pay the CHDAP loan in order to refinance the mortgage.
CalHFA is sponsoring this bill to give the agency authority to
re-subordinate downpayment assistance loans made under CHDAP if
a borrower has a demonstrated hardship and the subordination is
required to avoid foreclosure on the property.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
(AFSCME)
California Housing Finance Agency
Golden State Manufactured-Home Owners League
Opposition
None on file.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085