In response to questions raised by Senate President pro Tempore Darrell Steinberg and Senator Mark DeSaulnier over the California Housing Finance Agency’s policies that increase the hardships on mortgage borrowers acting in good faith to stay current on their loans, CalHFA has now revised its policies to ease those pressures on its borrowers.

As requested by Steinberg and DeSaulnier, CalHFA has now agreed to allow borrowers to rent out their properties if they have remained current on their mortgage payments, lived in the residence for at least one year after obtaining the CalHFA mortgage, had a reasonable expectation at the time they took out the loan that the home would be their principal residence, and cannot realistically sell or refinance the loan because they are “upside down” in relation to the current market value and the current loan balance. The revised policy goes into effect today, February 6, 2012.

“The earlier policy unfairly punished Californians who were trying to do the right thing despite changing personal circumstances. CalHFA’s change of heart will now eliminate an unnecessary burden on more than 200 borrowers,” said Steinberg (D-Sacramento). “I’m gratified that CalHFA Executive Director Claudia Cappio and the board of directors moved quickly to resolve this issue. The new policy brings CalHFA back to its mission of providing affordable housing opportunities and reducing foreclosures in California.”

Last month, Senator DeSaulnier amended SB 447 to prohibit CalHFA from foreclosing on single-family borrowers who were forced to rent out their properties.

“This policy change recognizes that these homeowners are doing the right thing,” said DeSaulnier (D-Concord). “While they are upside down in their mortgage, they continue to make payments and are not walking away from their obligation. With this policy change, there seems no further need to pursue a change in law and I will be dropping SB 447. I thank CalHFA for changing its policy.”

The issue first came to light through an investigation by the Senate Office of Oversight and Outcomes, “Good Deeds Punished: State Run Mortgage Lender Forecloses on Californians Current on Their Loans.” The report issued last fall found CalHFA was following excessively strict policies, “with borrowers who are trying to avoid severe losses by renting out their residences, in some cases foreclosing even though the borrowers are willing and able to continue paying.” The report, which can be viewed here, also found that those foreclosures were actually increasing costs to CalHFA.

Attached please find the CalHFA letter to Senator Steinberg detailing the policy change.

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Related Documents: 

2012-02-06 Steinberg CalHFA letter.pdf