HomeMy WebLinkAboutMINUTES - 05062008 - C.37 ContraTO: CONTRA COSTA COUNTY `%�`� ���'
REDEVELOPMENT AGENCY �-`y'�� i',.
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'� Costa
FROM:.
JOHN CULLEN,
Count
County Administrator -CON
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DATE: May 6, 2008
SUBJECT: SUPPORT POSITION on AB 2594 (Mullin): Affordable Housing
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND.IUS'I-IFICATION
RECOMMENDATION
SUPPORT AB 2.594 (Mullin), a bill that authorizes a redevelopment agency to expend money to
purchase, assume, or refinance subprime and nontraditional mortgages on homes owned by persons
of low or moderate income or make loans to those homeowners, to purchase homes within its
jurisdiction that have been foreclosed and are vacant and sell those homes to persons of low or
moderate income, and to provide mortgage and credit counseling services to low or moderate income
homeowners, as recommended by the Redevelopment Director and the County Administrator.
FISCAL IMPACT:
No fiscal impact to the County.
BACKGROUND:
The subprime mortgage/foreclosure issue is a significant one for California. As housing prices fall,
delinquencies and foreclosures on subprime and nontraditional mortgages have increased to
historically high levels. Lenders with exposure to subprime and nontraditional mortgage losses have
tightened their lending standards. Consequently, homeowners with subprime and nontraditional
mortgages are having difficulty refinancing into more affordable loans. With many subprime and
nontraditional mortgages facing their first interest re=set during 2008 and 2009, mortgage foreclosures
will increase significantly and, along with falling housing prices, may overwhelm the ability of
mortgage markets to restructure or refinance loans for creditworthy borrowers. Home foreclosures
impose significant costs not only on borrowers and lenders, but also on local governments,
neighboring homeowners, and others with a financial stake in nearby properties.
The State Legislature is considering a variety of legislative responses to the issue, among them AB
2594 (Mullin). Redevelopment agencies in California have an interest in the subprime mortgage
issue because of neighborhood impacts resulting from vacant and boarded-up homes, the potential
for revenue loss, and because of their affordable housing obligations. Given this interest, the State
Legislature requested the California Redevelopment Association (CRA) prepare legislation on how
redevelopment agencies could assist in addressing the issues. AB 2594 is the result of CRA's work.
CONTINUED ON ATTACHMENT: X YES SIGNATURE:
L RECOMMENDATION OF COUNTY ADM INIS'IRATOR IZECOMMENDA'I'ION Ol-'BOARD COQ y'EE
i APPROVE OTHER
SIGNATURE(S):
ACTION OF B( r1i2 ON APPROVED AS RECOMMENDED O/Z
VOTE OF SUPERVISORS I HEREBY CERTIFY TI IAT THIS IS A'TRUE AND CORRECT COPY
OF AN ACTION TAKEN AND ENTERED ON MINUTES OI' TIME
BOARD OF SUPERVISORS ON THE DATE SHOWN.
.UNANIMOUS(ABSENT �� )
AYES: NOES:
ABSENT: ABSTAIN: _
Contact:
I.,.UcLancy 5-1097
Cc: ATTESTED
L. DeLancy,CAO's Ofticc JOI IN C ' I N.CLERK OF-1.111:130AIZD OFSUPERVISOIZS
J.Kennedy,Redevelopment Agency
BY: DEPUTY
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AB 2594 .(Affordable Housing))—p. 2
May 6, 2008
The CRA approach embodies the following principles:
It emphasizes local flexibility by enabling local responses, i.e., it is not prescriptive;
• It is limited in duration, sunsetting in 5 years;
It allows both Housing and Non-Housing funds to be used; and
It permits responses that use pre-foreclosure assistance to homeowners and post-foreclosure
activities that involve the acquisition of foreclosed units for subsequent resale or rental of units
to further affordable housing goals.
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In the pre-foreclosure assistance to homeowners, AB 2594 would permit agencies to use housirig
funds to acquire or refinance mortgages or make loans to eligible homeowners faced with foreclosure
anywhere in their community. Flexibility would be allowed as to the length of affordability covenants
required to be imposed, with the basic principle being that a shorter covenant would result in less
production credit to an agency. Maximum mortgage amounts (as a percent of area median price) arid
maximum income limits of 150% of area median income would be imposed. The bill would also
permit housing funds to be used for credit and mortgage counseling.
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Post-foreclosure acquisition and resale/rental of housing units would allow housing and non-housirig
funds to be used anywhere in the community. If using their housing funds, agencies would be
allowed to impose 45 year affordability covenants on for-sale homes (55 year covenants on rental
property) and receive full production credit. Alternatively, an agency could choose a more limited 15
year covenant and receive 1/3 production credit. If using their non-housing funds, agencies could
acquire and resell homes without affordability covenants.
In Contra Costa County, the communities of Richmond, San Pablo, Pittsburg, Antioch, Oakley,
Brentwood, and Bay Point have seen a significant amount of foreclosure activity. Staff is aware that
Richmond, Pittsburg and Antioch have an interest in pro-actively addressing the issue in the manner
that AB 2594 would allow.
In order to more effectively respond to the current crisis in subprime and nontraditional mortgage
foreclosures, redevelopment agencies should be given greater flexibility on a temporary basis to do
the things that AB 2594 proposes to address these problems.
AMENDED IN ASSEMBLY APRIL 21, 2008
AMENDED IN ASSEMBLY MARCH 24, 2008
CALIFORNIA LEGISLATURE-2007—o8 REGUi.AR SESSION
ASSEMBLY BILL No. 2594
Introduced'by Assembly'Menibers Mullin and Nunez
(Coauthors:Assembly Members DeSaulnier and Lieu)
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February 22, 2008
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An act to add and repeal Chapter 7(commencing with Section 33700)
of Part 1 of Division 24 of the Health and Safety Code, relating to I
redevelopment. i
LEGiSLATIVE COUNSEL'S DIGEST
AB 2594, as amended, Mullin. Redevelopment: affordable housing.
The Community Redevelopment Law requires a redevelopment
agency to deposit not less than 20% of all taxes the agency receives in
a .Low and Moderate Income Housing Fund and allocate those funds
for the purposes of increasing, improving, and preserving the
community's supply of low- and moderate-income housing available
at affordable housing cost, as defined, to persons and families of low
or moderate income, lower income households, very low income
households, and extremely low income households, unless the agency
__--. ._._...:......makes specified findings:-- - - -
This bill would authorize a'redevelopinent agency, until January 1,
2013, to expend money from the fund to (1) purchase, assume, or
refinance subprime a1017017t7•ciditional mortgages,as defined,on homes
owned by persons of low or moderate Income residing within its .
jurisdiction, or make loans to those homeowners; (2) purchase homes
within its jurisdiction that have been foreclosedand are vacant,and sell
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AB 2594 —2--
those homes to persons or families of low or moderate income; and(3)
provide mortgage or credit counseling services to existing or prospective
low- or moderate-income homeowners within its jurisdiction.
The bill would authorize the agency to expend any money that is not
held in the fund to provide similar services without regard to income.
The bill would require that funds be expended pursuant to these
provisions in a manner that preserves the exemption from federal and
state income taxes of interest on the bonds or notes issued by the agency j
under the Community Redevelopment Law.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
The people of the State of California do enact as follows:
1 SECTION 1. Chapter 7 (commencing with Section 33700) is
2 added to Part I of Division 24 of the Ilealth and Safety Code, to
3 read:
4
5 CHAPTER 7. HOME MORTGAGE LOANS
6
7 33700. The Legislature finds and hereby declares all of the
8 following:
9 . (a) The end of the housing boom in 2005 has led to declining
10 housing prices and the reduced availability of mortgage credit.
11 (b) .As housing prices fall, delinquencies and foreclosures on
1.2 subprime and nontraditional mortgages have increased to
13 historically high levels. Lenders with exposure to Subprime and
14 17017traclitional mortgage losses have tightened their lending
15 standards. Consequently, homeowners with subprime and
16 nontraditional mortgages are having difficulty refinancing into
17 more affordable loans.
18 (c) With many subprime afid nontraditional mortgages facing.
_ 19 .their first ..interest reset_._during..2008 ..and _2009, mortgage
20 foreclosures will increase significantly and, along with falling .
21 housing prices, may overwhelm the ability of mortgage markets .
22 to restructure or refinance loans for creditworthy borrowers.
23 (d) Home foreclosures impose significant costs not only on.
24 borrowers and lenders,but also on local governments,neighboring
25 homeowners,and others with a financial stake in nearby properties.
26 This is particularly true of subprime aricl nontraditional mortgage
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1 foreclosures because they tend to be concentrated geographically.
2 The effect of multiple foreclosures in limited geographic areas can
3 cause declines in property values,accelerating the decline of entire
4 neighborhoods. :Increased crime and vandalism, lack of proper
5 maintenance, and the spread of blight are other consequences of
6 concentrated foreclosures in limited geographic areas.
7 (e) Decent housing for all of the people of this state is vital to
8 the state's future peace and prosperity.
9 (f) A fundamental purpose of redevelopment is to expand the
10 supply of low-income and moderate-income housing.
11 (g) In order to more effectively respond to the current crisis in
12 subprime and nontraditional mortgage foreclosures,redevelopment
13 agencies should be given greater flexibility on a temporary basis
14 to do all of the following:
15 (.1) Acquire, assume, or refinance existing subprime and
16 nontraditional mortgages in default or-at risk of defirr.rlt, or make
17 loans to eligible homeowners faced with foreclosure.
18 (2) Acquire and then maintain,resell,or rent foreclosed homes.
19 33701. For the purposes of this chapter, the following terms
20 have the .following meanings, unless the context clearly requires
21 otherwise:
22 (a) "Eligible homeowner' means the trustor of a subprime or•
23 nontraditional mortgage who occupies a home encumbered by the
24 subprime or•nontraditional mortgage as his or her principal place
25 of residence, if either of the following applies:
26 (1) The obli- d by the subprime mortgage is more
27 than 90.days in defitult.
28 (1) The obligation .secarr•ed by the subprime or- nontraditional
29 mortgage has a payment that is 30 days or-amore past due or•has
30 a scheduled interest rate increase that will create a financial
31 hardship likely to produce a default.
32 (2) A notice of default has been recorded against the obligation
. .. 33_. secured by the subprime or• nontraditional mortgage pursuant to
34 Section 2924 of the Civil Code.
35 (b) The"fund"is the Low and Moderate Income Housing Fund
36 established pursuant to Section 33334.3.
37 (c) "Nontraditional mortgage" means a eonsznner loan that
38 allows the borrower- to defer payment of principal and., under
39 certain circumstances, interest, as set.forth in the "Interagency
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AB 2594 —4—
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4—l Guidance on Nontraditional Alortgcrge Product Risks (71 Fecl
2 Reg,. 58609 (Oct. 4. 2006)).
3
4 (1) "Subprime mortgage"means a deed of trust securing
5 ,that
8 andthat meets one of the f6il....:._._ eonditions.- a loan thai was
9 originated on or afie,-Januai-y 1, 2002, x,as issued for•the purchase
10 of a single-family home, residential condonzinizinz, or torl,rrhorrre.
11 but not a nrobilehonre, and meets one of'the.1bl1mving conditions:
12 (A) Has an annual percentage;rate that is more than one of the
13 following:
.14 (1) For a senior loan, 3 percent, plus the yield on United States
15 Treasury notes with comparable maturities.
16 (ii) For a subordinate loan, 5 percent, plus the yield on United
17 States Treasury notes with comparable maturities.
18 (B) Has interest-only payments, or an adjustable rate that may
19 lead to negative amortization.
20 (2). "Subprime mortgage"docs not include a subordinate home
21 equity line of credit or a reverse mortgage.
22 33702. (a) (1) The agency rnay expend money from the fund
23 to purchase, assume, or refinance subprime or nontraditional
24 mortgages on homes owned by persons eligible honleolvnels of
25 low or moderate income residing within its jurisdiction, or make
26 loans to those eligible homeowners. The agency shall require that
27 housing units assisted from the fund pursuant to this subdivision
28 remain available to, and occupied by,persons and families.of low .
29 or moderate income for either of the following periods:
30 (A) Forty-five years, in which case the agency shall be entitled
31 to receive full hottsing produetioti. credit under subdivision (b) of
32 Section 33413 for each unit assisted.
33 (13) Fifteen years, in which case the agency shall b.e entitled to
34 receive one-third housing production credit under subdivision(b)
35 of Section 33413 for each unit assisted.
36 (2.) The agency may permit sales of housing units prior to the
37 expiration of the 45-year or 15--year period, as the case may be,
38 pursuant to an adopted program that protects the agency's
39 investment of moneys from the fund, including, but not limited
40 to,an equity sharing program that establishes a schedule of equity
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1 sharing that permits retention by the seller of a portion of the
2 proceeds of sale based on the length of occupancy. The remainder
3 of the proceeds of the sale shall be allocated to the agency and
4 deposited in the fund. The agency shall require the recording in
5 the office of the county recorder of documents implementing this
6 subdivision that are substantially similar in forni and content to
7 those required by paragraph. (3) of subdivision (f) of Section
8 33334.3.
9 (b) The amount of assistance provided under subdivision (a)
10 from the fund for any single eligible homeowner shall not exceed
1] dollafs
12 (e) The ageney may also expend money ftom the fttnd to pfovi
13 s bprospeetive
14 low or moderate ineome homeowners within its jttfisdietion. an
1.5 6111701117t equal to the loan to valine ratio applied by the Federal
16 Housing Adrninistration for an insured loan for the applicable
17 geographic area, 117111tiplied by the current valine of'the home.
18 (c) Section 33334.4 shall apply to moneys expended fiom the
19 find under this section.
20 33703. (a) The agency may expend any money that is.not held
21 in the fund to purchase, assume, or refinance subprinte., or assist
22 Ie17ders or nonprgfit or for-profit developers u7 purchasing,
23 assuming, or refr17ar7c7r7g, subprilne oi- nontraditi017al mortgages
24 on homes owned by-. l afe not oF low or mode
25 ineome and eligible hon7eotvners who reside within its jurisdiction,
26 or make loans to those eligible homeowners, if the combined
27 annual income of the members of the eligible homeowner's
28 household does not exceed 150 percent of area median income,
29 adjusted for family size by the department in accordance with
30 adjustment factors adopted and amended from time to time.
3.1 (b) The amount of assistance provided under subdivision (a)
32 from the fund for any single eligible homeowner shall not exceed
33 doll.af s a17 ar17ount equal to the loan to valine ratio
34 applied by the Federal Housing Administration fol• a17 ins1rred
35 loan.for the applicable geographic area, lnullipliecl hl,the current
36 i)allle of the ho117e.
37 (c) The agency may also expend money-that is not held in the
38 fund to provide mortgage or credit counseling services to existing
39 or prospective homeowners who qualify for assistance under
40 subdivision(a).
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AS 2594 —6--
1. 33704. (a) The agency may expend money from the fund to
2 purchase homes within its jurisdiction that have been foreclosed
3 and are vacant, and sell those homes to persons or families of low
4 or moderate income. The agency shall require that housing units
5 purchased and sold pursuant to this section remain available to,
6 and occupied by,persons and families of low or.moderate income
7 for either of the following periods:
8 (1) Forty-five years, in which case the agency shall be entitled
9 to receive full housing production credit under subdivision (b) of
10 Section 33413 for each unit assisted.
11 (2) Fifteen years, in which case the agency shall be entitled to
12 receive one-third}.sousing production credit under subdivision(b)
13 of Section 33413 for each unit assisted.
14 (b) The agency may permit sales of housing units prior to the
15 expiration of the 45-year or 15-year period, as the case may be,
16 pursuant to an adopted program that protects the agency's
17 investment of moneys from the fund, including, but not limited
1.8 to, an equity sharing program that establishes a schedule of equity
19 sharing that permits retention by the seller of a portion of the
20 proceeds of sale based on the length of occupancy. The remainder
21 of the proceeds of the sale shall be allocated to the agency and
22 deposited in the fund. The agency shall require the recording in
23 the office of the county recorder of documents implementing this
24 subdivision that are substantially similar in form and content to
25 those required by paragraph (3) of subdivision (f) of Section
26 33334.3.
27 (c) Homes purchased under- this section may he man ged,
28 maintained and rented prior to resale.
29 (cl) Section 33334.4 shall apply to honeys expended from the
30 fund under this section.
31 33705. (a) The agency may expend any money that is not held
32 in the fund to purchase, of assist lenders of nonprofit of fOr profit
33 . .clevelopels in purchasing, homes within its jurisdiction that have
34 been foreclosed and are vacant,for sale to any purchaser,regardless
35 of income.
36 (b) Hoines purchased uncler this section may be managed,
37 maintained, and rented prior to resale.
38 33706. Funds shall be expended pursuant to this chapter in a
39 manner that preserves the exemption from federal and state income
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—7-- AB 2594
1 taxes of interest on the bonds or notes issued by the agency under
2 this division, if applicable .
3 33707. This chapter shall apply notwithstanding any other
4 provision of this division.
5 33708. Consistent with this chapter, the agency may adopt
6 local criteria governing the use of fiindv and provi ion of other-
7 assistance authorized under-this chapter including, but not limited
8 to, limiting assistance to defined neighbor•hood.v or a geographic
9 urea, or targeting specific income categories.
10 33709.
11. 33709. This chapter shall remain in effect only until January
12 1, 2013, and as of that date is repealed, unless a later enacted
13 statute, that is enacted before January 1, 2013, deletes or extends
14 that date.
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