Convention Center
Sacramento, California
Wednesday, June 3, 2009; 3:00 pm – 4:30 pm

Presiding:
Steve White, Chair
Cas Pinkowski, Vice Chair
Georgia Richardson, Vice Chair
LeFrancis Arnold, Committee Liaison

C.A.R. Staff:
Dave Milton
Matt Roberts

I. Opening Comments

II. State Legislation

A. C.A.R-sponsored Bill

SB 206 (Dutton) State Parity with Federal Housing Tax Credit for First-time Homebuyers - In Early may the C.A.R. Officers, in order to pursue a proactive course of action on housing, decided to sponsor SB 206 which creates a first-time homebuyer's tax credit, equal to 10% of the sale price of a home (not to exceed $8,000) for homes purchased as a principal residence of the taxpayer. This credit will only be available to first time homebuyers whose income does not exceed $95,000 and married couples whose combined income does not exceed $170,000. SB 206 also provides this tax credit to any buyer of an REO property for a principal residence. The bill will be effective for one year from the date of its enactment.
Status: Senate Revenue and Taxation Committee

B. Other Housing Tax Credit Legislation

AB 765 (Caballero) Lifting of Funding Cap on Housing Tax Credit for Purchase of New Homes - This is the Assembly version of SB 49 (see below), which both seek to modify the current housing tax credit enacted by SB 2X 15 (Ashburn), enacted as part of the Budget Compromise earlier this year. The credit is equal to an amount equal to the lesser of 5% of the purchase price or $10,000 in the case of the purchase of a qualified principal residence on and after March 1, 2009, and before March 1, 2010, but not to exceed an aggregate limitation of $100,000,000 for all credits allowable. This bill would extend the credit to purchases made on or after March 1, 2009 and before December 1, 2010, and would increase the aggregate credit limitation to $300,000,000.
Position: Support      Status: Assembly Revenue & Taxation Committee

AB 902 (Torres) Housing Tax Credit for Purchase of Foreclosed Homes - This bill would, for taxable years beginning on or after January 1, 2009 and before January 1, 2012, allow a housing tax credit in an amount, not to exceed $3,000, that is otherwise equal to 2% of the amount paid or incurred for the purchase as a primary residence of a foreclosed dwelling by a taxpayer whose gross income does not exceed 120% of the region's median income. It would fund this tax credit by suspending the mortgage interest deduction on second homes for tax years 2010 and 2011. C.A.R. will oppose this legislation until an alternative funding mechanism is amended into the bill.
Position: Oppose Unless Amended      Status: Assembly Revenue & Taxation Committee

SB 49 (Dutton) New Home Tax Credit - The C.A.R. Officers, in light of the inclusion in the state budget (February) of the new home tax credit, adopted a support position on SB 49 (Dutton). In January C.A.R. adopted an “oppose unless amended” position on SB 49 because it only extended the tax credit to new homes. SB 49 was changed after the January meetings. It now removes the cap on the amount of state funds committed to the $10,000 tax credit for new homes enacted by SB 2X 15 after the C.A.R. January meetings as part of the state budget.
Position: Support      Status: Senate Revenue & Taxation Committee Suspense File

C. Other Housing Bills of Bills of Interest

AB 498 (Hayashi) Multifamily Housing for Veterans - This bill would require the California Department of Veterans Affairs (CDVA) to collaborate with the Department of Housing and Community Development to facilitate the development of multi-family housing for military veterans and their families. It requires CDVA to take action to ensure that if land is donated to the state for the express purpose of providing land for military veterans' housing, or if the department receives funding for a housing project restricted for the use of military veterans, any such housing built on that land, or
using that source of funds, shall, only may be used only for housing for military veterans.
Position: Favor      Status: Assembly Veterans Affairs Committee

AB 720 (Caballero) Housing Element Units Rehabilitation - Makes changes in housing element law related to the use of certain existing units in meeting a local government's share of the regional housing need. AB 720 proposes to delete the requirement that a local government must provide committed assistance within the first two years of the housing element planning period in order to count certain substantially rehabilitated units and other types of affordable housing units towards meeting its share of the regional housing need. It also provides that a city, county, or city and county may include weatherization and energy efficiency improvements, including measures improving the efficiencies of heating, cooling and electrical systems, as part of its efforts to substantially rehabilitate a unit.
Position: Watch      Status: Assembly Floor

AB 897 (Torres) Homeless Prevention and Rapid Re-housing Program - This bill would establish the Homeless Prevention and Rapid Re-Housing Program within the department of Housing and Community Development (HCD) for the purpose of distributing funds to 2 qualified populations of individuals and families facing housing instability, estimated at approximately $44 million, provided by the federal Homeless Prevention and Rapid Re-Housing Program established under the American Recovery and Reinvestment Act of 2009. This bill would also establish the Homeless Prevention and Rapid Re-Housing Account within the Federal Trust Fund, a continuously appropriate fund, for the purpose of accepting and distributing these federal funds
Position: Favor      Status: Assembly Housing & Community Development Committee

AB 1246 (Jones) Housing Cooperative Trust and Workforce Housing Trust - This bill, sponsored by Associated Cooperatives, Inc., expands existing law, developed over 30 years, that authorizes limited-equity cooperative housing, by creating new opportunities for low- and moderate-income workforce housing. It is intended to provide incentives for sponsors to invest in affordable work force housing projects. AB 1246
authorizes creation of a new type of housing cooperative: the "workforce housing cooperative trust." It additionally provides that, in the event that a housing cooperative must dissolve, if it has received public subsidies, the dissolution must take place in a public and transparent manner, including a hearing and notice to other cooperatives in the state.
Position: Favor      Status: Assembly Floor

AB 1422 (Bass) Redevelopment Agency Refinancing of Subprime Mortgages - California Redevelopment Association (CRA), the sponsor of this bill, "believes legislative proposals for the use of redevelopment funds during this critical time should emphasize flexibility and enable local response. The provisions in this bill are a re-introduction of 2008's AB 2594 (Mullin) and would enhance the ability of local government to serve people in their communities during this foreclosure crisis by permitting redevelopment agencies to use tax increment funds, that are not held in the 20 percent Low &Moderate fund set aside, to acquire, assume or refinance mortgages or make loans to income-eligible homeowners faced with foreclosure. Local redevelopment agencies would also be authorized to assist lenders or for-profit or non-profit developers in purchasing, assuming or refinancing subprime or nontraditional mortgages. This bill also allows agencies to purchase vacant and foreclosed homes and sell them to any purchaser regardless of income and, if necessary, manage, maintain and rent the home prior to sale.
Position: Support      Status: Assembly Floor

AB 1432 (Mendoza) Expenditure Control of TARP Funds - The California Housing Finance Agency (CalHFA)'s primary purpose is meeting the housing needs of persons and families of low or moderate income. Existing law authorizes the agency to make loans to qualified mortgage lenders under terms and conditions requiring the proceeds to be used for making construction loans and mortgage loans for the purpose of financing housing developments and residential structures. This bill provides that if CalHFA receives funds from the federal Troubled Asset Relief Program (TARP), established pursuant to the Emergency Economic Stabilization Act of 2008, the agency would be limited to using the funds to make or refinance acquisition, construction, or development loans for housing developments or residential structures for persons meeting an income test.
Position: Favor      Status: Assembly Housing & Community Development Committee

SB 326 (Strickland) Required Quantification of Local Foreclosure Rate in Housing Element - This bill requires cities and counties to include within the housing needs assessment portion of their housing elements a quantification of their existing and projected foreclosure rates and an analysis of the impact of foreclosures on housing needs. The purpose of this measure is to help local government agencies address the fact that foreclosure rates are at historic highs, and with the recession and banks tightening their lending guidelines, many foreclosed homes cannot be sold. These homes are generally left vacant and can become a blight on the community. They can also become a magnet for crime. By requiring cities and counties to analyze the impact of foreclosures, this bill seeks to facilitate local efforts to address the impacts.
Position: Favor      Status: Senate Appropriations Committee

III. Federal Issues

A. Discussion Items

1. Federal First Time Homebuyer Tax Credit
The First-time Homebuyer Tax Credit (HTC) was changed as part of the 2009 Stimulus Package. Below is a description of the previous HTC and the updated HTC.

If the home was purchased between April 8, 2008 and December 31, 2008:

 - The tax credit is 10% of the purchase price, capped at $7,500.
 - The tax credit does need to be repaid, therefore working more as an interest free loan. The credit is repaid out of your taxes over 15-years.
 - You cannot get the credit if the property is financed by a tax exempt qualified mortgage issue/bond.

If the home was purchased between January 1, 2009 and November 30, 2009:

 - The tax credit is 10% of the purchase price, capped at $8,000.
 - The tax credit does not need to be repaid – the only exception being if the property is sold within 3-years of purchase.
 - You can get the credit if the property is financed by a tax exempt qualified mortgage issue/bond.

REALTORS® are working to extend the first-time homebuyer tax credit for another year.

2. GSE Update
While there are many ideas being floated about what Congress should do in regards to the future of the GSE (Fannie Mae and Freddie Mac now that they are in conservatorship, Congress itself does not appear ready to begin moving any legislation.  Without proposed legislation introduced, it is still too early to know how Fannie and Freddie will be brought out of their current state of conservatorship.  Making the issue more difficult is the increased reliability by the housing market for the GSE to maintain an affordable and stable supply of capital due to the lack of private investors.

3. Community Reinvestment Act
The Community Reinvestment Act (CRA) was created over 30 years ago to encourage FDIC insured banks to lend in low and moderate income areas.  Recently, it has come under attack as being a significant contributor to the current housing and financial crisis.  The CRA has and is being blamed for forcing lenders to take on risky loans to qualify homebuyers under the CRA program. 

Supporters of the CRA point out that during the height of subprime mortgage lending, only about one in four of these mortgages were made by CRA-covered banks, and the rest were made by private independent mortgage companies and lenders not covered by the CRA rules.

Whether the CRA did or did not actually play a role in the housing crisis, it would appear that many in Congress are looking to raise CRA as an issue for debate.

4. Assumable Loans
At the NAR Midyear Meetings in D.C., the NAR Board of Directors voted on and approved the following policy:

“That NAR support eliminating the “due on sale” clause for FHA and VA loans for all loans – new and retroactive.”

In 1996, C.A.R. took the following position:

“That C.A.R., in conjunction with N.A.R., seek the reinstitution of freely assumable FHA-insured loans to owner-occupant purchasers.”

It is unclear if there is enough support either in Congress, or by the FHA and VA to remove the “due on sale” clause.  As this is a new idea, there aren’t currently any proposals out there for legislation. 

5. FHFA Considers Relaxing GSE Affordable Housing Goals
The Federal Housing Finance Agency (FHFA) has issued a proposed rule that would lower Fannie Mae and Freddie Mac affordable housing goals.  Fannie and Freddie both have goals that state how much of their home loan activity for a year should be focused on low- and moderate-income housing, special affordable housing, underserved areas, low and moderate-income home purchases, special affordable home purchase, underserved areas home purchase.  In addition, they are recommending that the modifications made under the Administrations loan modification program count towards the goals; however, FHFA is proposing that jumbo-conforming loan not be counted toward the goals.

The affordable housing goals have historically hurt high-price areas, including those in California, because of how the goals are calculated.  Low and moderate-income is defined as a household whose income is at or below an area’s median.  High-cost areas often require more income for home purchases; therefore fewer loans in high-cost areas help Fannie and Freddie to meet their goals.

NAR has submitted a supporting comment letter to HUD on the proposed rule.

IV. Other Business

V. Adjournment