This November, California voters will decide whether to establish a second-mortgage program to help eligible middle-income homebuyers purchase qualifying homes.
Proposition (Prop 37), the Second Mortgage Homebuyer Program and Revenue Bond Initiative, would create the program to expand homeownership opportunities for middle-income Californians. It would be financed through $25 million in bonds issued by the California Housing Finance Agency. (CalHFA).
Prop 37 would require qualified buyers to meet specific conditions outlined in the measure.
Buyers would be required to have been California residents for at least one year, agree to occupy and state the home as their primary residence within 60 days of closing, hold an income that is at or below 200 percent of the area’s median income for a similar-sized family in the city or county where the qualified home is located and provide a down payment that is at least 3 percent of the total purchase price of the qualified home.
Under the initiative, a “qualified home” could be a newly built single-family home, townhome, row house or condominium. It could also be a residence in a former nonresidential building converted for residential use.
In each case, the borrower must be the property’s first purchaser.
Supporters say Prop 37, also known as the Middle-Class Homeownership and Family Home Construction Act, would make homeownership more attainable for middle-income families while encouraging the construction of new housing.
“I wanted to create something that would support the building of, and therefore supply, more middle-class housing. We need to increase supply. Because these subsidy programs, most of them, just end up increasing the cost of housing,” former Senate Majority Leader and Assembly Speaker Robert Hertzberg said.
“You wind up buying your grandma’s house with bad pipes and a leaky roof, and then you’re stuck with all those expenses. The subsidies raise prices, but they don’t add supply,” Hertzberg added. “And lately, everything has been focused on affordable rental housing. This is about ownership. Because, as I always say, home is where the wealth is.”
Pete Rodriguez, second general vice president of the United Brotherhood of Carpenters and Joiners of America, made a similar argument.
“The home affordability crisis has put homeownership out of reach for too many working families. That’s why Union Carpenters strongly support the California Middle-Class Homeownership and Family Home Construction Act,” said Rodriguez. “The ballot measure makes homeownership more affordable with low-interest down payment assistance loans and encourages new home construction, creating good-paying jobs and homeownership opportunities for California’s working families.”
Prop 37 would cap second-mortgage loans at 17 percent of a home’s purchase price. Buyers would be required to finance the remaining cost from a first mortgage.
CalHFA would oversee the repayment of the bonds used to fund the second mortgages. The agency would set loan interest rates and terms sufficient to cover bond interest and the program’s administrative costs. It would also contract with one or more lenders to operate and support the program.
A “yes” vote would establish the second-mortgage homebuyer program for homes that meet CalHFA’s eligibility standards and authorize the agency to issue up to $25 million in bonds to finance it.
A “no” vote would reject the proposed second-mortgage homebuyer program.
Note: Edward Henderson contributed research used in this article.
