California advances 0 down, no payment home 'loans' for undocumented immigrants

(The Center Square) - The California Senate Appropriations Committee advanced a bill to allow undocumented immigrants to make use of the state’s zero down, no payment home “loan” program, an expansion the legislature says would create “significant cost pressures.”

“The social and economic benefits of homeownership should be available to everyone. As such, the California Dream for All Program should be available to all,” wrote bill author Assemblymember Joaquin Arambula, D-Fresno. “When undocumented individuals are excluded from such programs, they miss out on a crucial method of securing financial security and personal stability for themselves and their families.”

AB 1840, which already passed the Assembly and now faces a floor vote in the Senate, would prevent the state’s California Dream for All Shared Appreciation Loans program from denying individuals on the basis of their immigration status. This program allows applicants to secure “loans” of up to 20% of the home’s purchase price — or, about what a typical down payment is — with zero down payment on this state loan, and no payments.

The state’s “loan” can potentially be repaid to the state when the home is refinanced, sold, or transferred, with the borrower paying back the original loan amount plus 20% of any increase in value on the property. It’s not clear what happens if a family decides to hold on to a home as there are no provisions on how long a property can be held for, which means certain kinds of trusts could potentially allow the loan to not be paid back.

The Appropriations Committee analysis said expansion would create “unknown significant cost pressures, potentially in the millions annually, to provide additional funding for the Home Purchase Assistance Program to accommodate the expanded eligibility population.”

This year, 18 thousand individuals applied for the $255 million “loan” program through a lottery, leaving 1,700 lucky winners with up to $150,000 each towards down payment and closing costs.

President George W. Bush’s home down payment assistance program for less qualified individuals is widely blamed for fueling the housing bubble — by increasing housing prices and decreasing loan recipient quality — that led to the 2007-2008 global financial crisis.

The median home in California costs nearly $1 million and requires a household income of over $200,000, or more than triple the median household income, to afford.