ASSEMBLY SPEAKER BROWN INTRODUCES LEGISLATION THAT WILL ASSIST AN ESTIMATED 55,000 FIRST-TIME HOMEBUYERS
Bill Will Also Help Improve California's Struggling Economy SACRAMENTO, Calif. Jan. 26 /PRNewswire/ -- Assembly Speaker Willie L. Brown Jr., D-San Francisco, has introduced legislation designed to help thousands of families buy their first homes in California's urban areas, where home prices are among the highest in the nation. Brown and the California Association of REALTORS (C.A.R.) announced the legislation today, at a news conference in Sacramento. The legislation will create a state-sponsored mortgage insurance fund that will assist homebuyers who are unable to use the Federal Housing Administration (FHA) program because California's urban home prices typically require mortgages that exceed the FHA maximum loan amount of $151,725. C.A.R. is sponsoring AB 214 and AB 215 (Brown), which are projected to help an estimated 55,000 California families purchase their first homes with downpayments as low as 3 percent of the home purchase price. "This legislation is going to help thousands of families in California discover that homeownership is no longer an impossible dream," Brown said. "Our goal is to create an affordable, consistent and long-term mortgage insurance fund that will help first-time homebuyers. Year after year, many homebuyers are blocked from using the FHA program because of its low loan limit, and many of those buyers may also find private mortgage insurance unavailable," Brown added. California Association of REALTORS officials have been working closely with Brown for more than a year to create a program that will help tackle California's housing affordability crisis by getting much-needed assistance to first-time buyers in the state's urban areas. "We applaud Speaker Brown for introducing this legislation, and we are confident that the entire Legislature will recognize how critical this program is to helping first-time homebuyers and the overall California economy," said McDonald. "These bills will help put the state's troubled economy on the road to recovery, since home purchases create jobs linked directly to new construction or the sale of existing homes," said McDonald, a Riverside REALTOR. "Virtually every home sale also triggers ripple effects in many other areas of the economy -- resulting in everything from loan processing to business for moving companies to furniture and appliance sales," McDonald said. Here is a look at how the first-time homebuyer assistance program contained in AB 214 and AB 215 will be structured and examples of what it will mean for families in several California urban areas: The legislation will establish a state-sponsored mortgage insurance fund called the California Housing Loan Insurance Fund (CaHLIF) to provide mortgage insurance similar to that provided by the FHA program. Lenders usually require mortgage insurance to provide default protection against borrowers who make downpayments of less than 20 percent when purchasing homes. General obligation bonds will provide the seed money for the CaHLIF program. Proposition 5 authorized $200 million of bond funding in 1982 to assist first-time homebuyers, but only $15 million of the bond offering was used. The remaining $185 million would be reauthorized to use for this program. Other sources of funding for CaHLIF are being explored and could include pension fund investments. In general, $15 of loans can be extended for every $1 in the insurance fund. Therefore, $2.8 billion of mortgage financing will be available under the reauthorized Proposition 5 funding. Under provisions of AB 214 and AB 215, a family in the San Francisco Bay Area would be able to purchase a home costing as much as $237,337 with a downpayment of $7,120, according to C.A.R. estimates. The maximum loan amount under CaHLIF in this example would be $230,217 -- or $78,492 higher than the maximum FHA loan amount of $151,725 allowed in San Francisco. In Orange County, a family would be able to purchase a home costing as much as $213,230 with a downpayment of $6,397. The maximum CaHLIF loan amount for this example would be $206,833, or $55,108 higher than the maximum FHA loan amount. An analysis conducted by C.A.R. also showed that significantly more home sales in the state's various regions would be eligible for the CaHLIF program, compared with the FHA program. In the San Jose area, for example, an estimated 48.3 percent of last year's home sales would have been eligible for CaHLIF financing, compared with only 6.7 percent that were eligible for FHA financing, according to C.A.R. analysis. In Los Angeles County, an estimated 45.4 percent of last year's home sales would have been eligible for CaHLIF financing, compared with only 25.7 percent
that were eligible for the FHA program.
"This program will go a long way toward addressing the home price environment in California, where our statewide median price is nearly double the national figure," said McDonald. In the third quarter of last year, for example, three of the four most expensive housing markets in the entire United States were located in California, according to the National Association of REALTORS. Only Honolulu had a higher median price than the San Francisco Bay Area, Orange County and Los Angeles. The California Mortgage Bankers Association is among the organizations supporting AB 214 and AB 215. The California Association of REALTORS is a statewide trade association with 126,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
EXAMPLES OF HOW THE CALIFORNIA HOUSING LOAN INSURANCE FUND (CaHLIF)
PROGRAM WOULD APPLY TO SEVERAL MAJOR CALIFORNIA REGIONS Maximum Maximum Home Minimum Maximum Region Qualifying Purchase Price Down-Payment Home Loan Income Amount Los Angeles County $58,900 $199,988 $6,000 $193,988 Orange County $62,800 $213,230 $6,397 $206,833 San Diego County $51,900 $176,221 $5,287 $170,934 San Francisco Bay Area $69,900 $237,337 $7,120 $230,217 San Jose area $68,400 $232,244 $6,967 $225,277 Ventura County $61,100 $207,458 $6,224 $201,234 NOTE: These examples assume a 3 percent downpayment on the purchase price, a 30-year fixed-rate mortgage at an interest rate of 8 percent and that 29 percent of a household's monthly gross income will be used for principal and interest payments. All of these figures are based on an analysis of how the CaHLIF program is envisioned to function, given proposed legislation. SOURCE: California Association of REALTORS PROPORTION OF 1992 HOME SALES ELIGIBLE FOR FHA-FINANCING AND CALIFORNIA HOUSING LOAN INSURANCE FUND (CaHLIF) FINANCING FHA CaHLIF Los Angeles County 25.7 pct. 45.4 pct. Orange County 17.5 pct. 37.5 pct. San Diego County 34.6 pct. 44.6 pct. San Francisco Bay Area 17.8 pct. 42.1 pct. San Jose area 6.7 pct. 48.3 pct. Ventura County (a) 40.3 pct. (a) Insufficient data available SOURCE: California Association of REALTORS PROPORTION OF NEWLY ORIGINATED MORTGAGES THAT WERE FHA-INSURED IN 1992 Los Angeles County 6.5 pct. Orange County 5.5 pct. San Diego County 6.5 pct. San Francisco Bay Area 1.5 pct. San Jose area 1.5 pct. Ventura County (a) (a) Insufficient data available SOURCE: California Association of REALTORS 1992 Housing Finance Survey -0- 1/26/93 /CONTACT: Jeff Hershberger or Lotus Lou of the California Association of REALTORS, 213-739-8304/
CO: California Association of REALTORS ST: California IN: FIN SU: LEG
KJ-LS -- LA018 -- 9298 01/26/93 17:00 EST
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|Date:||Jan 26, 1993|
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