Comment Submitted by James Foley, California Housing Finance Agency

The California Housing Finance Agency (CalHFA) welcomes the HUD clarifications which allow us to continue to serve our California First-time Homebuyers. HUD’s interpretation of HERA allowing down payment assistance loans from Housing Finance Agencies (HFAs) provides assurance to our lending and business partners. There is an additional clarification which needs to be provided, specifically addressing the method of funding the down payment assistance loan. The Federal Register / Vol 77, No 234 states “It is HUD’s interpretation that the amended section 203(b)(9) does not exclude as a permissible source of cash investment, funds provided directly by Federal, State, or local governments, or their agencies or instrumentalities, as part of their respective homeownership programs.” In the case of CalHFA, the lender originating the first mortgage loan for purchase by CalHFA also directly funds CalHFA downpayment assistance junior mortgage loans, using its own funds. Then, after a review of documents, CalHFA purchases the junior mortgage loans along with the first mortgage loan. This process is necessary because CalHFA’s enabling statutes prohibit it from directly funding loans. HUD’s clarifying that State HFAs can also indirectly fund junior mortgage loans would permit CalHFA to continue to purchase junior mortgage loans from lenders making FHA guaranteed loans. If CalHFA were prohibited by HUD regulations from funding its second junior mortgage loans in this manner, CalHFA would be statutorily prohibited from providing downpayment assistance to homebuyers purchasing their homes with FHA guaranteed first mortgage loans.