BILL ANALYSIS
SB 224
Page 1
Date of Hearing: July 1, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 224 (Correa) - As Amended: May 27, 2009
Policy Committee: Housing and
Community Development Vote: 6-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill makes several changes to 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)Restricts local agencies administering CalHOME program funds
from denying funding applications, or applying different
underwriting guidelines, to manufactured homes or mobilehomes.
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 the California Housing Finance Agency (CalHFA) to
permit a downpayment assistance loan to be subordinated to a
refinancing if it determines the borrower has demonstrated
hardship, subordination is required to avoid foreclosure, and
the new loan meets the agency's underwriting requirements.
FISCAL EFFECT
1)No significant impact on state GF costs.
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2)Possible avoidance of defaults on downpayment assistance loans
(supported by bond funds), to the extent that provisions
allowing homeowners to retain downpayment assistance loans
during mortgage refinancings enable them to avoid foreclosure.
COMMENTS
1)Background . The CalHOME program provides grants and loans to
low income and very-low income individuals to become or remain
homeowners. The Department of Housing and Community
Development (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 provided in the form of a forgivable loan to
rehabilitate, repair or replace a manufactured or mobilehome.
Last year, HCD adopted emergency regulations to require that
mobilehomes in specified high wildfire hazard zones be
retrofitted with ignition resistant exterior components,
including roofs and siding, when those homes are moved or are
undergoing renovations that require issuance of a building
permit. Newer mobilehomes already meet this standard.
CHDAP provides three to five percent downpayment assistance in
the form of a second mortgage loan that can be combined with
first mortgage loans from CalHFA, the California Department of
Veteran Administration (CDVA), or from other sources to assist
low-and moderate-income residents in the purchase their first
home. The loan is subordinated to the principal mortgage,
meaning that, in the event of a foreclosure, the lender has
second claim on proceeds of a foreclosure sale. Under current
law, the loan must be fully at the end of the term or when the
borrower refinances or sells the property. The program
operates as a revolving loan fund which means that repayments
are loaned to new borrowers.
In November 2002, the voters approved Proposition 46 which
provided $2.1 billion in general obligation bonds for various
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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.
2)Purpose . The bill is intended to deal with several issues
related to the CalHOME and downpayment assistance programs.
The provisions related to the CalHOME program are to ensure
that that mobilehomes are eligible for CalHOME funds - in
particular those needed to upgrade homes with ignition
resistant exterior components to meet new HCD fire
regulations.
The provisions related to downpayment assistance are prompted
by the current downturn in the housing market and the economy,
which have pushed many homeowners to the edge of foreclosure.
The author indicates that new federal program guidelines are
intended to assist these homeowners in the refinancing of
existing mortgage in order to avoid foreclosure. However,
current state law requires that downpayment assistance loans
must first be paid off before the mortgage loan can be
refinanced, making refinancing an impractical option in cases
where home values have fallen below the purchase price. CalHFA
is sponsoring this provision to give the agency authority to
allow a homebuyer to retain the loan and subordinate it to the
newly refinanced first mortgage. The authority would be
provided in cases where a borrower has a demonstrated hardship
and the retention is required to avoid foreclosure on the
property.
3)Proposed amendments would add an urgency clause and coauthors.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081