BILL ANALYSIS �
AB 984
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Date of Hearing: April 17, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 984 (Chau) - As Amended: April 9, 2013
Policy Committee: Housing and
Community Development Vote: 7-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill adds two additional members to the board of directors
of the California Housing Finance Agency (CalHFA). The members
are the Secretary of Veterans Affairs and a person appointed by
the Governor who has specific knowledge of finance issues.
FISCAL EFFECT
Minor and absorbable.
COMMENTS
1)Purpose. The author argues AB 984 adds financial expertise to
the CalHFA board to assist the board in its mission of making
housing more affordable to Californians. The author notes the
Bureau of State Audits released a report in 2011 which found
that while state law requires the governor's appointees to the
CalHFA board to include members with certain types of
experience, existing law does not appear to call for the kind
of sophisticated financial expertise that would have been
valuable in determining whether CalHFA should launch into
variable-rate bond debt and interest-rate swaps to the degree
that it did. The author states that although profitable for
many years, CalHFA suffered significant losses in fiscal years
2008-09 and 2009-10, as a result of these actions.
2)Background . Established in 1975, CalHFA was chartered as the
state's affordable housing bank to make below market-rate
loans for single-family and multi-family housing through the
sale of tax-exempt bonds. CalHFA is a self-supporting entity
and its costs and debts, including those related to the
AB 984
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compensation and retirement costs of its employees, are
separate from the State of California. Investor capital,
through the sale of bonds, provides the agency's source of
revenue, not taxpayers' proceeds. Existing statutes and bond
indentures state that the agency's debts are not a debt or
liability of the state or any political subdivision thereof
and are not backed by the faith and credit of the State of
California.
According to the State Auditor, CalHFA experienced losses on
its single-family portfolio of $146 million and $189 million
in fiscal years 2008-09 and 2009-10, respectively. These
losses were a result of the high delinquency rates on its
single-family loans and the risk the agency was exposed to
because it had issued so much variable-rate debt. These
factors led to a downgrade in the credit rating. The Bureau of
State Audits identified several actions that CalHFA's board
could take to shore up the financial viability of the agency.
The auditor recommended the Legislature amend CalHFA's statute
to require that the board include appointees with knowledge of
housing finance agencies, single-family mortgage lending,
bonds and related financial instruments, interest-rate swaps
and risk management.
3)CalHFA Board . The board of directors of CalHFA is composed of
11 voting members, including the Treasurer, the Secretary of
Business, Transportation and Housing and the Director of
Housing and Community Development, or their designees, one
member appointed by the Speaker of the Assembly, one member
appointed by the Senate Committee on Rule, and six members
appointed by the Governor, of which two must be residents of
rental or cooperate housing financed by the Agency or have
experience in counseling, assisting or representing tenants.
The Director of Planning and Research, the Director of Finance
and the Executive Director of CalHFA are non-voting members.
4)Previous legislation. AB 1222 (Gatto) Chapter 408, Statutes
of 2011, responded to the Bureau of State Audits audit by
amending CalHFA's conflict of interest statutes to give the
agency more flexibility to include board members who are
single-family lenders.
5)There is no registered opposition to this bill.
AB 984
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Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081