~ CalHFA Launches "Keep Your Home" Site to Help Struggling Homeowners
~ New Board Members
~ Subordination of CHDAP Loans
~ Obama Opens Door for State Housing Finance Agencies
Message from Steve Spears, Acting Executive Director
This year has, to say the least, been difficult and challenging for CalHFA, for the housing industry as a whole, and for California. CalHFA was forced to suspend products and projects, and our employees have soldiered on through job and income shifting. There are some who would say, "Good riddance to 2009," but I don't look at it that way.
Our 2009 challenges gave CalHFA an incentive to focus on our business model as the credit rating agencies combed through the most minute details of our operations. What they found was that we were doing things right, and the factors that were contributing to our declining business were essentially out of our control—there were very few things we could have done differently that would have changed any outcomes.
Fortunately, there is some good news that came out of 2009, contained in the Obama administration's announcement of aid for housing finance agencies. The myriad state HFAs, working in concert with the National Council of State Housing Agencies, were able to help the US Treasury craft a plan along with Fannie Mae and Freddie Mac to help state HFAs get back on their feet. This plan will go into effect in January—you can read more about it in the article below, titled "Obama Opens Door for State Housing Finance Agencies."
CalHFA has continued working on internal projects to ensure we are competitive once the new year comes around, and we've also worked on external projects. One I'm very proud of is CalHFA's new "Keep Your Home" web site to educate homeowners about the reasons not to walk away from a home. More about that below in the "Keep Your Home" article.
More help for homeowners comes through some work we've done with the California Legislature with regard to refinancing home loans that carry a CalHFA second mortgage. Read all about Subordinating CHDAP.
Finally, I'd like to welcome three New Board Members to the fold. Please take a moment to get to know more about Paul Hudson, Michael Gunning, Barbara Macri-Ortiz and their impressive resumes and history.
It would be easy to be upset, or sad, or even bitter about the events of 2009. At CalHFA, we're continuing to look to the future, as evidenced by our Annual Report, entitled "New Directions" . We eagerly anticipate ringing in 2010, and making more progress on our mission to provide safe, decent affordable housing to low and moderate income Californians.
CalHFA Launches "Keep Your Home" Site to Help Struggling Homeowners
Thousands of homeowners in California are confronted with a horrible decision: sacrifice all unnecessary items and continue paying the mortgage, or walking away from their home and giving it up to foreclosure. While there are reasons for either of these courses, foreclosure is truly a losing proposition for everyone involved: Homeowners lose their residences and credit standing, banks lose money, home values plummet, neighborhoods become blighted, and communities become destabilized.
CalHFA wants to make sure homeowners know the pros and cons of each side, so we recently launched a new web site dedicated to sharing information about how and why homeowners can and should keep their homes. CalHFA's "Keep Your Home" site (keepyourhomecalifornia.org) is full of information and resources to help all homeowners—not just CalHFA borrowers—learn more about what to do when faced with the possibility of foreclosure.
Even if you are making your payments on time and keeping your home, take a look at what we've put together. You'll probably learn something, and you may be able to pass it on to someone who could use some straight information.
New Board Members
CalHFA would like to welcome the newest members of our Board of Directors, Paul Hudson, Michael Gunning, and Barbara Macri-Ortiz.
Mr. Hudson is Chairman and Chief Executive Officer of Broadway Federal Bank, the largest and only publicly owned, African American bank west of the Mississippi. Broadway Federal has assets exceeding $400 million and operates five full service branches servicing the South Central and Mid-City Los Angeles market.
Prior to joining Broadway Federal in 1980, Mr. Hudson practiced law with the Washington, D.C. firm of Wilmer Cutler Pickering Hale and Dorr. He returned to Los Angeles in 1975 and joined the law firm, Hudson, Sandoz and Brown which was established by his father.
Mr. Hudson was born and raised in Los Angeles. He obtained his bachelor degree from University of California at Berkeley, earned his juris doctorate from Boalt Hall School of Law, and continued his education by completing the Graduate School of Savings Institution Management Program at the University of Texas.
Mr. Hudson's community service background and board experience are extensive. Just a few examples include Mr. Hudson's term as President of the Los Angeles NAACP, Chairman of the Los Angeles City Community Redevelopment Agency and member of the board of the Boy Scouts of America.
Mr Gunning, a resident of Elk Grove, has served as the vice president for the Personal Insurance Federation of California since 2001. He represents PIFC's member companies before the California State Legislature on personal insurance matters including auto, homeowners, community investment, finance and other issues. Mr. Gunning also provides assistance on issues before the California Department of Insurance. Prior to PIFC, Mr. Gunning was the managing director of the Nehemiah Community Reinvestment Fund from 1999 to 2001 and director of the California Organized Investment Network for the California Department of Insurance from 1996 to 1999.
From 1983 to 1984, Mr. Gunning participated in The Coro Foundations' (St. Louis, Missouri) prestigious fellow's program. Also, Mr. Gunning has served as the senior policy consultant for the California State Assembly Republican Office of Policy and the executive assistant for the Missouri State Treasurer. Mr. Gunning holds a BA in Political Science and History from Claremont McKenna College and an MA in Public Policy from Claremont Graduate School.
Our third new board member, Ms. Macri-Ortiz, is an attorney in private practice in Oxnard, specializing in housing, education, civil litigation, and labor and employment issues. Throughout her 22-year legal career she has focused on issues of importance to farm workers and other low wage earners.
Ms. Macri-Ortiz was employed at Channel Counties Legal Services Association for over ten years and worked with the United Farm Workers Union for twenty years. Her advocacy and litigation efforts have resulted in the development of over 850 units of low-income housing, with 125 units designated for farm worker families. She has served on numerous housing committees, including the Southern California Association of Governments' Regional Housing Needs Advisory Committee, representing the interests of very low and low income communities within Los Angeles, Ventura, San Bernardino, Riverside, Orange and Imperial Counties.
Ms. Macri-Ortiz received her legal education through the UFW's Legal Apprenticeship Program, and was admitted to the California State Bar in June, 1987. She currently sits on the Board of Directors of the Ventura County Bar Association and is a member of the Los Angeles County Bar Association, the Mexican American Bar Association of Ventura County, and Ventura County Women Lawyers.
Subordination of CHDAP loans
One of the most difficult challenges faced by homeowners who want to take advantage of new federal legislation to refinance their homes is that of junior loans. A refinance under federal programs such as Fannie Mae's "Refi Plus" and others, may require junior loans to be paid off immediately as a condition of the refinance.
CalHFA, until recently, was one of lien holders who required immediate payoffs of junior loans. Many of our CalHFA first loans had the California Homebuyer's Downpayment Assistance Program (CHDAP) attached, in addition to many non-CalHFA loans, and one of the restrictions on CHDAP was that the entire balance comes due whenever the home is sold or refinanced. This was part of the language of the statutes authorizing CHDAP, meant to protect taxpayers from losses.
The number of homeowners attempting to refinance has increased, however, and CalHFA realized that this language was actually hurting homebuyers more than it was helping taxpayers. If the home was worth less than its loan amount, the homeowner could have to pay up to tens of thousands of dollars to refinance the loan and pay off the CHDAP loan, and homeowners who are underwater and struggling to pay their mortgage simply do not have that kind of cash.
This was a problem that needed to be fixed. Working diligently with members of the Legislature, CalHFA's legislative division was able to help craft bills to allow the subordination of CHDAP loans. What this means, essentially, is that the CHDAP loan would carry over to the new first loan, and would not have to be immediately paid off in a refinance situation.
Subordination does have a few requirements, again in place to protect the taxpayer: there must be a documented hardship, the subordination must be necessary to prevent foreclosure, and the property must be a principal residence, among other requirements.
CalHFA is pleased that we were able to work with the California Legislature to make this happen for those who have used the CHDAP loans, and we look forward to continuing to help distressed homeowners though these difficult times.
Obama Opens Door for State Housing Finance Agencies
Months of negotiation between the various arms of the Federal government and state housing finance agencies have finally paid off with the Obama Administration's announcement of a plan to help HFAs get back in the lending game. President Obama had promised to help housing finance agencies in February as part of his announcement of the Homeowner Affordability and Stability Plan, and CalHFA is pleased to have helped bring the plan to fruition.
The Obama Administration's initiative has two parts: a new bond purchase program to support new lending by housing finance agencies and a temporary credit and liquidity program to improve housing finance agencies' access to liquidity for outstanding HFA bonds.
- The New Issue Bond Program (NIBP) will be able to support several hundred thousand new mortgages, as the Treasury buys securities of Fannie Mae and Freddie Mac, backed by new mortgage revenue bonds issued by state housing finance agencies.
- The Temporary Credit and Liquidity Program (TCLP) will provide replacement credit and liquidity instruments (e.g., converting variable-rate bond debt to fixed-rate debt) that will help stabilize HFAs and relieve the financial strains they are currently experiencing.
"This plan will breathe life into new lending and provide great opportunities for first-time homebuyers in California, all at a time when we are seeing the highest level of affordability in the state in two decades," said Governor Arnold Schwarzenegger. "I applaud President Obama and his team for understanding the important role state housing finance agencies play in affordable housing for low and moderate income Americans. Across the nation and right here in California these agencies have been forced to suspend lending programs due to turmoil in financial markets – and with this support they will now be able to re-start programs and provide more housing opportunities for Californians."
An important aspect of the plan is the long-term goal of returning HFAs to self-sufficiency. HFAs will pay a fee to have access to the TCLP, which will grow over time as a financial incentive for HFAs to find alternatives in the private market as quickly as possible. The NIBP is only available for 2010, and HFAs that issue bonds under this program must also prove their ability to issue bonds to private investors. In addition to these measures, the programs include other features that will keep costs to the taxpayer to a minimum.
The California Housing Finance Agency will receive approximately $1.4 billion of bond authority under the NIBP, which will be used to fund more than 8,000 first-time homebuyer loans and hundreds of affordable rental units in our state. More than $3.7 billion of credit support and liquidity were awarded, which will be used to restructure existing debt. This is almost 100% of the amount CalHFA requested.