California’s budget crisis has forced the state’s Housing Finance Agency to suspend its 30-year fixed-rate mortgage loan and down-payment assistance programs.
CalHFA, which purchases more than $1 billion in mortgage loans a year, is among state agencies that depend on a line of credit from a pooled money investment account that’s funded by state bond issues.
The board that administers the account determined on Dec. 17 that with California facing a $40 billion budget shortfall, the state cannot issue either commercial paper or bonds. That decision led the Pooled Money Investment Board (PMIB) to shut down $3.8 billion in funding for infrastructure projects, and also prohibit state agencies from spending any more funds under existing loans.
California Treasurer Bill Lockyer, who sits on the board, called the decision "extremely regrettable" but said that with the state’s "fiscal house … burning down" the board had no other choice.
CalHFA on Friday issued a bulletin announcing temporary suspension of 30-year fixed-rate mortgage programs for moderate-income and low-income families, as well as down-payment assistance programs.
CalHFA uses a PMIB loan to initially fund its conventional 30-year fixed mortgage and down-payment assistance programs, the agency said, and all such loans have been frozen until progress is made in resolving the state’s budget crisis.
The board will hold a special meeting in early January, and it may be more clear at that time when the programs will be restored.
Affected are 30-year fixed mortgage products for low-income and moderate-income home buyers, and loans offered through the Nonprofits and Affordable Housing Partnership Program (AHPP) and the Extra Credit Teacher Home Purchase Program (ECTP).
In its most recent annual report, CalHFA said its homeownership division purchased 13,799 loans with a combined total value of $1.24 billion in the 12 months ending June 30. Of those, about 68 percent were 30-year fixed-rate mortgages totaling $741 million. Another $418 million in loans were 35-year interest-only loans.
During the same period the AHPP program — a partnership with more than 330 cities, counties, redevelopment agencies, housing authorities and nonprofit housing organizations — generated more than 500 first mortgages totaling $96 million.
The Extra Credit Teacher Home Purchase Program (ECTP), which helps teachers and other school employees, funded 365 first mortgages for $105.8 million and 339 junior mortgages totaling $4.1 million. The program was particularly popular in Los Angeles County, where 37 percent of all ECTP first mortgages were originated, CalHFA said.
Also affected by PMIB’s action are the CalHFA California Homebuyer’s Down Payment Assistance Program (CHDAP) and School Facility Fee Down Payment Assistance Program (SFF). CHDAP junior mortgages funded 4,464 loans totaling $36 million in the 12 months ending June 30, while SFF provided 1,481 grants totalling $7.5 million for down payment and closing costs to buyers of newly constructed homes.
CalHFA did not respond to a request for comment by press time. In its bulletin to lenders, the agency said it will continue to accept reservations for loans under the Community Stabilization Home Loan Program (CSHLP) and SMART Loan Program, but that CHDAP funds will not be available for use with those programs.
California is among 44 states facing budget shortfalls, according to the Center on Budget and Policy Priorities, a policy research and analysis organization.
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