BILL NUMBER: SB 813 ENROLLED
BILL TEXT
PASSED THE SENATE SEPTEMBER 12, 2009
PASSED THE ASSEMBLY SEPTEMBER 11, 2009
AMENDED IN ASSEMBLY SEPTEMBER 4, 2009
AMENDED IN ASSEMBLY AUGUST 31, 2009
AMENDED IN ASSEMBLY AUGUST 17, 2009
AMENDED IN ASSEMBLY JULY 14, 2009
AMENDED IN ASSEMBLY JULY 1, 2009
AMENDED IN SENATE MAY 12, 2009
INTRODUCED BY Senator Kehoe
FEBRUARY 27, 2009
An act to add Sections 50517.12, 50650.8, 50862.6, and 50896.4 to
the Health and Safety Code, relating to community development.
LEGISLATIVE COUNSEL'S DIGEST
SB 813, Kehoe. Community development: deferred payment future
value loan programs.
Under existing law, there are programs providing assistance for,
among other things, multifamily housing, emergency housing,
farmworker housing, home ownership for very low and low-income
households, and downpayment assistance for first-time home buyers
administered by the Department of Housing and Community Development.
The Joe Serna, Jr. Farmworker Housing Grant Program provides grants
and loans for the construction or rehabilitation of housing for
agricultural employees and their families or for the acquisition of
manufactured housing to address and remedy the impacts of
displacement of farmworker families. The CalHome Program provides
grants and loans to enable low- and very low income households to
become or remain homeowners. The Building Equity and Growth in
Neighborhoods (BEGIN) Program is established to make grants and loans
to be used for downpayment assistance to qualifying first-time home
buyers of low- and moderate-incomes purchasing newly constructed
homes in a BEGIN project. Existing federal law establishes the HOME
Investment Partnership Act, which allocated funds to states and local
governments to eligible states to, among other things, expand the
supply of affordable housing. The department is the state agency
responsible for the state's allocation of HOME funds.
This bill would make legislative findings and declarations
relating to the securitization of second mortgage loans with funds
made available by the department. The bill would authorize, for the
purposes of each of the above programs, a grant or loan for an
individual household to include a deferred payment future value loan
due on sale or transfer, or when the property ceases to be
owner-occupied, as specified. The bill would require the department
to implement its provisions through guidelines exempt from a
specified provision of existing law.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) Many first-time homeowners have been challenged by a
combination of costs of land purchased before current market
conditions arose, low appraised values of proposed homes due to
foreclosures and related economic conditions, and the costs of land,
government fees, and construction.
(b) These potential homeowners are eligible for financial
assistance under the Joe Serna, Jr. Farmworker Housing Grant,
CalHome, Building Equity and Growth in Neighborhoods (BEGIN), and
HOME programs administered by the Department of Housing and Community
Development.
(c) As a result of current market conditions, financing to pay all
costs often exceeds the depressed level of current home values.
Therefore, neither adequate construction lending nor sufficient
permanent financing can be obtained.
(d) Authorizing an alternative but financially sound means of
securing second mortgage loans made with funds available through the
Department of Housing and Community Development would provide housing
for hard-working households and low- and moderate-income first-time
home buyers, stimulate the construction labor and materials industry,
and improve neighborhoods and areas with empty lots.
(e) An alternative unconventional means of securing loans by
utilizing future increases in value when market conditions stabilize
may be employed for up to four years in order to allow for orderly
resumption and continuation of these first-time homeowner programs.
SEC. 2. Section 50517.12 is added to the Health and Safety Code,
to read:
50517.12. (a) For purposes of this chapter, funds available
pursuant to contracts entered into by the department and a grantee on
or before July 1, 2009, may be used, with the approval of and
subject to conditions established by the department, to provide an
individual household with a deferred payment future value loan due on
sale or transfer, or when the property ceases to be owner-occupied.
The outstanding balance of the loan shall be payable only from the
increase in the home value, calculated as the difference between the
following:
(1) The appraised value at the time that the loan made pursuant to
this chapter is made to the buyer.
(2) The appraised value at the time repayment is due.
(b) All of the following shall apply to the deferred payment
future value loan specified in subdivision (a):
(1) The amount shall not be considered by a lender or other source
of financing in calculating the loan-to-value ratio of the financing
on the property at the time the Joe Serna, Jr. loan is made to the
buyer.
(2) The amount shall not exceed the difference between the total
development cost of the home as approved by the department and the
appraised value of the home at the time of the original sale.
(3) If the home buyer is credited with sweat equity towards the
purchase price of the home, the amount of sweat equity shall not
exceed 10 percent of the purchase price of the home.
(4) The interest rate on the loan shall be equal to the interest
rate of the standard loan otherwise made pursuant to this chapter.
(c) If necessary to achieve the housing cost payments required by
this chapter in order for a household to qualify for a first
mortgage, the department may approve both the deferred payment future
value loan authorized by this section and grants or loans otherwise
authorized by this chapter. However, the latter grants or loans shall
not be secured only by the increase in future value but, instead,
shall be payable upon sale or transfer after satisfaction of other
approved liens on the property.
SEC. 3. Section 50650.8 is added to the Health and Safety Code, to
read:
50650.8. (a) For purposes of this chapter, funds available
pursuant to contracts entered into by the department and a grantee on
or before July 1, 2009, may be used, with the approval of and
subject to conditions established by the department, to provide an
individual household with a deferred payment future value loan due on
sale or transfer, or when the property ceases to be owner-occupied.
The outstanding balance of the loan shall be payable only from the
increase in the home's value, calculated as the difference between
the following:
(1) The appraised value at the time that the CalHome loan is made
to the buyer.
(2) The appraised value at the time repayment is due.
(b) Both of the following shall apply to the deferred payment
future value loan specified in subdivision (a):
(1) The amount shall not be considered by a lender or other source
of financing in calculating the loan-to-value ratio of the financing
on the property at the time the CalHome loan is made to the buyer.
(2) The amount shall not exceed the difference between the total
development cost of the home as approved by the department and the
appraised value of the home at the time of the original sale.
(3) If the home buyer is credited with sweat equity towards the
purchase price of the home, the amount of sweat equity shall not
exceed 10 percent of the purchase price of the home.
(4) The interest rate on the loan shall be equal to the interest
rate of the standard loan otherwise made pursuant to this chapter.
(c) If necessary to achieve the housing cost payments required by
this chapter in order for a household to qualify for a first
mortgage, the department may approve the deferred payment future
value loan authorized by this section and loans otherwise authorized
by this chapter. However, the latter loans shall not be secured only
by the increase in future value but, instead, shall be payable upon
sale or transfer after satisfaction of other approved liens on the
property.
SEC. 4. Section 50862.6 is added to the Health and Safety Code, to
read:
50862.6. (a) For purposes of this chapter, funds available
pursuant to contracts entered into by the department and a grantee on
or before July 1, 2009, may be used, with the approval of and
subject to conditions established by the department, to provide an
individual household with a deferred payment future value loan due on
sale or transfer, or when the property ceases to be owner-occupied.
The outstanding balance of the loan shall be payable only from the
increase in the home's value, calculated as the difference between
the following:
(1) The appraised value at the time that the BEGIN loan is made to
the buyer.
(2) The appraised value at the time repayment is due.
(b) All of the following shall apply to the deferred payment
future value loan specified in subdivision (a):
(1) The amount shall not be considered by a lender or other source
of financing in calculating the loan-to-value ratio of the financing
on the property at the time the BEGIN loan is made to the buyer.
(2) The amount shall not exceed the difference between the total
development cost of the home as approved by the department and the
appraised value of the home at the time of the original sale.
(3) If the home buyer is credited with sweat equity towards the
purchase price of the home, the amount of sweat equity shall not
exceed 10 percent of the purchase price of the home.
(4) The interest rate on the loan shall be equal to the interest
rate of the standard loan otherwise made pursuant to this chapter.
(c) If necessary to achieve the housing cost payments required by
this chapter in order for a household to qualify for a first
mortgage, the department may approve both deferred payment future
value loan authorized by this section and loans otherwise authorized
by this chapter. However, the latter loans shall not be secured only
by the increase in future value but, instead, shall be payable upon
sale or transfer after satisfaction of other approved liens on the
property.
SEC. 5. Section 50896.4 is added to the Health and Safety Code, to
read:
50896.4. (a) For purposes of this chapter, funds available
pursuant to contracts entered into by the department and a grantee on
or before July 1, 2009, may be used, with the approval of and
subject to conditions established by the department, to provide an
individual household with a deferred payment future value loan due on
sale or transfer, or when the property ceases to be owner-occupied.
The outstanding balance of the loan shall be payable only from the
increase in the home's value, calculated as the difference between
the following:
(1) The appraised value at the time that the HOME loan is made to
the buyer.
(2) The appraised value at the time repayment is due.
(b) All of the following shall apply to the deferred payment
future value loan specified in subdivision (a):
(1) The amount shall not be considered by a lender or other source
of financing in calculating the loan-to-value ratio of the financing
on the property at the time the HOME loan is made to the buyer.
(2) The amount shall not exceed the difference between the total
development cost of the home as approved by the department and the
appraised value at the time of the original sale.
(3) If the home buyer is credited with sweat equity towards the
purchase price of the home, the amount of sweat equity shall not
exceed 10 percent of the purchase price of the home.
(4) The interest rate on the loan shall be equal to the interest
rate of the standard loan otherwise made pursuant to this chapter.
(c) If necessary to achieve the housing cost payments required by
this chapter in order for a household to qualify for a first
mortgage, the department may approve both the deferred payment future
value loan authorized by this section and loans otherwise authorized
by this chapter. However, the latter loans shall not be secured only
by the increase in future value but, instead, shall be payable upon
sale or transfer after satisfaction of other approved liens on the
property.
SEC. 6. The Department of Housing and Community Development shall
implement Sections 2, 3, 4, and 5 of this act through guidelines that
shall be exempt from Chapter 3.5 (commencing with Section 11340) of
Part 1 of Title 2 of the Government Code, following at least one
consultation with the grantees and housing sponsors. In developing
these guidelines and related transactional documents and implementing
the programs in Sections 2, 3, 4, and 5 of this act, the department
may require concessions and writedowns by the developer or local
government.