BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1797 (Torres) - Mobilehome Park Purchase Fund.
Amended: June 26, 2012 Policy Vote: T&H 6-3
Urgency: No Mandate: No
Hearing Date: August 6, 2012
Consultant: Mark McKenzie
This bill may meet the criteria for referral to the Suspense
File.
Bill Summary: AB 1797 would authorize the Department of Housing
and Community Development (HCD) to charge a lower interest rate
on loans from the Mobilehome Park Purchase Fund (MPPF).
Fiscal Impact:
Unknown loss of interest, potentially in excess of $150,000
after several years (Mobilehome Park Purchase Fund), to the
extent HCD charges a lower interest rate. Actual impact
would depend upon actual rates charged, the repayment terms
of the loan, and volume of loans subject to lower rates.
Likely minor costs to HCD to provide, or contract for,
technical assistance on MPPF loans. Costs could be added to
loan principal and repaid through loan payments.
Background: Existing law establishes the Mobilehome Park
Resident Ownership Program (MPROP), which allows HCD to make
loans to mobilehome park resident organizations, individual
low-income residents of mobilehome parks, qualified nonprofit
housing sponsors, and local public entities to finance
mobilehome park conversions to resident ownership and reduce
monthly housing costs for low-income residents. Loans under
certain provisions are for a maximum term of three years, and
for a term of up to 30 years under other provisions, as
specified, and interest rates must be three percent per annum.
HCD may establish flexible repayment terms for certain loans if
the terms are necessary to reduce the monthly housing costs for
low-income residents to an affordable level, and the terms do
not jeopardize the security of the MPPF.
Proposed Law: AB 1797 would authorize HCD to charge an interest
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rate of less than the standard three percent rate on loans for
mobilehome park conversions, if the department finds that a
lower rate is necessary and it will not jeopardize the financial
stability of the MPPF. The bill would also authorize HCD to
provide technical assistance, or contract with a qualified
nonprofit entity for that purpose, and include related costs
into the loan principal.
Staff Comments: Between 1985 and 2001, MPROP provided loans to
assist with the conversion 66 mobilehome parks statewide to
resident ownership. Since 2002, new loan activity under the
program has slowed and activity continues to decline. The
program had no successful applications in 2010 and only two in
2011. HCD indicates that the increasing cost and complexity of
park conversions are two of the primary reasons for the
reduction in the number of loan applications. In addition,
financing for mobilehomes is simply more difficult, and there
have been fewer park owners willing to sell, and fewer residents
partnering with others to purchase parks under mutually
favorable terms. This bill is intended to provide increased
flexibility in the program and stimulate more interest in loans
for mobilehome park conversions.
The MPPF is a continuously appropriated fund that was originally
capitalized with a $3 million transfer of funds from the
Mobilehome-Manufactured Home Revolving Fund. The MPPF currently
has a balance of approximately $14 million and receives revenues
from a $5 fee that owners of older mobilehomes pay with their
annual registration fees, as well as loan repayments from the
outstanding portfolio of loans. Currently up to $2 million in
fees and loan payments are deposited into the MPPF annually, but
this amount is expected to decrease moderately each year as
older mobilehomes reach the end of their useful life and are
eventually removed from parks.
AB 1797 authorizes HCD to apply a lower interest rate to loans
from the MPPF, which could result in a decrease in revenues to
the fund over time. The magnitude of potential revenue losses
would depend upon actual interest rates, repayment terms, and
the overall volume of loans to which a discounted rate would
apply. As an example, using a normal amortization schedule of
repayment for a loan volume of $5 million with a term of 30
years, a one percent difference in interest would yield
approximately $50,000 in lower interest payments in the first
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year. If the total volume of loans over multiple cycles
exceeded $15 million under these same terms, the loss of
interest income to the MPPF would be greater than $150,000. It
is unlikely that this volume would be reached in the near term.