BILL ANALYSIS �
AB 984
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 984 (Chau and Gordon)
As Amended June 18, 2013
2/3 vote. Urgency
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|ASSEMBLY: |76-0 |(April 25, |SENATE: |38-0 |(June 27, |
| | |2013) | | |2013) |
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Original Committee Reference: H. & C.D.
SUMMARY : Adds two positions to the board of directors of the
California Housing Finance Agency (CalHFA), allows CalHFA to
make grants to homebuyers for energy improvements, and makes
changes to the California Homebuyer Downpayment Assistance
Program (CHDAP) to comply with changes in federal law.
The Senate amendments :
1)Allow CalHFA to make grants to homebuyers in combination with
a first mortgage financed by the agency and in conjunction
with the Federal Housing Administration (FHA) Energy Efficient
Mortgage Program to make repairs or improvements to increase
the energy efficiency of the home.
2)Require the energy efficiency grants authorized by this bill
to be financed from revenues realized by the agency, from the
grantee's first mortgage loan, or securities backing it.
3)Prohibit the use of bond funds for the energy efficiency
grants, authorized by this bill, except for short-term interim
loans to facilitate the transaction.
4)Allow CalHFA to fund any second mortgage loan directly.
5)Provide that a CHDAP loan shall not be due and payable upon
sale of the home if Federal Housing Administration (FHA) owns
or insures the first mortgage loan or if a repayment
requirement is otherwise contrary to Department of Housing and
Urban Development (HUD) regulations governing FHA insured
first mortgage loans.
6)Add chaptering amendments to avoid conflicts with AB 637
(Atkins) of the current legislative session.
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7)Add an urgency clause allowing this bill to take effect
immediately upon enactment.
AS PASSED BY THE ASSEMBLY , this bill added the following voting
members to the board of directors of CalHFA, increasing the
number from 11 to 13:
1)The Secretary of Veterans Affairs or his or her designee.
2)A person appointed by the Governor that has specific knowledge
of housing finance agencies, single family mortgage lending,
bonds and related financial instruments, interest rate swaps,
and risk management.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1) Initial expenditures from CHFA operating funds (non-state
revenue bond funds) of up to $3 million for short-term
interim funding to finance initial allocations related to
the new energy efficiency grant program (California Housing
Finance Fund). The program must ultimately be funded
through a grantee's CHFA mortgage loan, or securities backed
by those loans, but CHFA is authorized to finance startup
costs on a short-term basis.
2) Potential delays in downpayment assistance loan repayments
in future years to the extent those loans are assumed by
persons purchasing homes partially financed through a CHFA
downpayment assistance loan. Currently, these loans must be
repaid when a home is refinanced or sold, but this bill
would allow downpayment assistance loans to be assumed by a
new owner or repaid as part of the home purchase.
COMMENTS : The Senate amendments to the bill add several new
provisions. CalFHA's main lending program is the CHDAP which
provides grants for first-time low and moderate-income
homebuyers. The grants are secured as a second mortgage which
is repaid by the borrower when the home sells. The bill makes
several changes to conform CalHFA's statute governing its major
loan program, CHDAP. FHA recently advised that it would no
longer allow downpayment assistance for FHA insured loans to
come from state and local government agencies unless they are
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made directly to the borrower. CalHFA is not authorized to fund
loans directly but rather work through private lenders to make
the grant to a homebuyer. This bill would allow CalHFA to fund
a second mortgage directly which will allow the program to
continue to function.
CHDAP statutes also require a loan to be remade by a borrower
when a home is sold. CalHFA was recently informed that FHA
prohibits a repayment requirement on loans with an FHA insured
first mortgage. The majority of loans in California for
moderate- and low-income homebuyers are insured by FHA, this
ruling further jeopardizes CalHFA's ability to lend through the
CHDAP program. This bill provides that a CHDAP loan associated
with an FHA first mortgage shall not be due and payable upon
sale of the home. A new buyer may assume the CHDAP loan when
the CHDAP borrower sells the home. It is not clear how many new
buyers may choose to assume these loans. It would only make
sense for the new buyer if the interest rate on a new loan were
higher than the rate on the existing loan and the seller had
equity in the property. To the extent that new buyers do assume
CHDAP loans, it will result in a slower repayment, which may
affect CalHFA's ability to make new CHDAP loans. Absent this
legal change, however, CalHFA will be unable to make very many
CHDAP loans because so many of their potential CHDAP borrowers
have FHA loans.
CalHFA currently participates in FHA's Energy Efficient Mortgage
(EEM) program to increase loan amounts to pay for a limited
amount of qualified energy efficiency improvements. CalHFA
would like to offer grants to pay for energy efficiency
improvements over and above the amount the homebuyer may finance
through the EEM program. CalHFA intends to provide grants to
fund any remaining improvements recommended in the property's
Home Energy Rating Systems report. CalHFA further intends to
pay for the grants and program costs by increasing interest
rates on the first mortgages of program participants. While
CalHFA will have to front the grant money, ultimately the
borrowers will fully fund the program. Reflecting these
intentions, the bill prohibits CalHFA from using bond proceeds
for this program and requires CalHFA to fund the cost of the
program through revenues realized from the grantee's first
mortgage loan, or securities backed by it, except that CalHFA
may provide short term interim funding of the grant to
facilitate the transaction.
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This bill has an urgency clause to make the changes needed to
allow CalHFA to continue lending under the CHDAP program and
conform to FHA's new regulations.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085
FN: 0001354