The California Housing Finance Agency has revised a policy that resulted in it foreclosing on homeowners who were current on payments but had been renting out homes financed through the agency. The policy went into effect Monday.
CalHFA had been foreclosing on such homeowners because it was afraid of jeopardizing its tax-exempt bond status, according to a report by the California Senate Office of Oversight and Outcomes.
The policy, which required homeowners to receive a waiver before renting, was designed to ensure that the agency’s tax-exempt bonds met Internal Revenue Service guidelines by making sure first-time homebuyers received the loans, not real estate investors, said John Hill, the report’s author.
The policy change came after Senate President pro Tem Darrell Steinberg and Sen. Mark DeSaulnier put pressure on the agency to review its policy. Last month, DeSaulnier amended SB 447 to prohibit CalHFA from foreclosing on single-family borrowers who were forced to rent out their properties.
The agency outlined several requirements homeowners must meet to qualify for the exception allowing them to rent out their house.
Borrowers must show they have remained current on mortgage payments, lived in the residence for at least one year, had a reasonable expectation that the home would be their principal residence, and demonstrate they can’t sell or refinance because they are “upside down” on the loan.