BILL ANALYSIS �
AB 1551
Page 1
( Without Reference to File )
CONCURRENCE IN SENATE AMENDMENTS
AB 1551 (Torres)
As Amended August 22, 2012
2/3 vote. Urgency
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|ASSEMBLY: | |(May 31, 2012) |SENATE: |36-0 |(August 31, 2012) |
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(vote not relevant)
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|COMMITTEE VOTE: |6-0 |(August 31, 2012) |RECOMMENDATION: |concur |
|(H. & C.D.) | | | | |
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Original Committee Reference: INS.
SUMMARY : Allows the California Housing Finance Agency (CalHFA) for
the Home Purchase Assistance Program and the Extra Credit Teacher
Home Purchase Program and the Department of Housing and Community
Development (HCD) for the CalHome Program to subordinate a second
mortgage to refinancing if CalHFA or HCD determines that the
borrower has demonstrated hardship, subordination is required to
avoid foreclosure, and the new loan meets underwriting
requirements.
The Senate amendments delete the Assembly version of this bill, and
instead:
1)Allow CalHFA for the Home Purchase Assistance Program and the
Extra Credit Teacher Home Purchase Program and HCD for the
CalHome Program to subordinate a second mortgage to refinancing
if CalHFA or HCD determines that the borrower has demonstrated
hardship, subordination is required to avoid foreclosure, and the
new loan meets underwriting requirements.
2)Allow CalHFA and HCD to permit subordination on those terms and
conditions as they determine are reasonable, but prohibit
subordination if the borrower has sufficient equity to repay the
loan.
AB 1551
Page 2
3)Include an urgency clause and declare that the urgency is
necessary in order for underwater homeowners to participate in
the federal Home Affordable Refinance Program (HARP) at the
earliest possible time.
EXISTING LAW :
1)Establishes the CalHome Program, administered by HCD, to enable
low- and very low-income households to become or remain
homeowners and requires HCD, under the program, to provide grant
or loan funds to local public agencies or nonprofit corporations
for specified purposes relating to the promotion of home
ownership.
2)Requires that financial assistance provided to an individual
household under CalHome be in the form of a deferred payment
loan, repayable upon sale or transfer of the home, when the home
ceases to be owner-occupied, or upon the loan maturity date.
3)Requires CalHFA to administer the Home Purchase Assistance
Program for the purpose of assisting first-time homebuyers
utilizing existing mortgage financing and to administer the Extra
Credit Teacher Home Purchase Program and any other school
personnel home ownership assistance program that is set forth by
the California Debt Limit Allocation Committee.
4)Requires CalHFA to administer the California Homebuyer's
Downpayment Assistance Program (CHDAP) for the purpose of
assisting first-time low- and moderate-income homebuyers
utilizing existing mortgage financing, and authorizes a borrower
under the program to refinance a mortgage under specified
circumstances.
5)Authorizes CalHFA, at its discretion, to permit the subordination
of a CHDAP loan to refinancing if it determines that certain
criteria have been met.
6)Authorizes CalHFA to permit subordination of a CHDAP loan under
those terms and conditions as it determines are reasonable.
AS PASSED BY THE ASSEMBLY , this bill provided an exemption from the
duty to report automobile accidents to a private insurer if the
accident occurred while a public safety officer was driving his or
her personal vehicle at the request or direction of the employer in
the course of the officer's duties.
AB 1551
Page 3
FISCAL EFFECT : According to the Senate Appropriations Committee,
this bill could cause delays in loan repayments in future years,
the impacts of which would likely be offset by reduced risk that
state-financed loans would be extinguished during a foreclosure.
The bill would have minor administrative costs to CalHFA and HCD.
COMMENTS : The California Housing Finance Agency (CalHFA) currently
has authority to subordinate loans provided under its California
Homebuyer Downpayment Assistance Program (CHDAP) to a refinancing
of a homeowner's first mortgage �AB 224 (Correa), Chapter 172,
Statutes of 2009]. However, two other CalHFA programs, the Home
Purchase Assistance Program and the Extra Credit Teacher Program,
continue to require the homeowner to pay off the CalHFA second
mortgage before the first mortgage may be refinanced. The CalHOME
program, administered by HCD, has a similar requirement. For those
California homeowners currently underwater in their mortgages, this
is not possible. Moreover, this requirement effectively prohibits
underwater homeowners from participating in the federal Home
Affordable Refinance Program. As a result, these homeowners cannot
get the benefit of saving hundreds of dollars per month through
refinancing and, in worst-case scenarios, may lose their homes to
foreclosure.
This bill allows HCD to subordinate its second mortgages under the
CalHOME program and allows CalHFA to subordinate its second
mortgages under the Home Purchase Assistance Program and the Extra
Credit Teacher Program, as is already allowed under CHDAP. In
order to qualify, the borrower must demonstrate hardship,
subordination must be required to avoid foreclosure, and the new
loan must meet underwriting requirements. The bill prohibits
subordination if the borrower has sufficient equity to repay the
second mortgage.
Analysis Prepared by : Anya Lawler / H. & C.D. / (916) 319-2085
FN: 0005912