California state housing agency reverses on foreclosures
A state-run housing agency at least temporarily has suspended the practice of foreclosing on a small number of borrowers who rented out their homes.
The office of Senate President Pro Tem Darrell Steinberg (D-Sacramento) on Friday announced that the California Housing Finance Agency had agreed to his request to halt the foreclosures, even though the homeowners had not fallen behind on their monthly payments.
Earlier this week, Senate investigators issued a report that said the agency, known as CalHFA, initiated or threatened foreclosures on about 200 borrowers because they were no longer living in the homes as required by state regulations and interpretations of federal tax law.
The borrowers, who owed more on their properties than their market values, moved out for a variety of personal reasons but did not want to sell the homes at losses.
"The agency is making the right decision during difficult economic times," said Steinberg. "Struggling families, who are working to do the right thing in meeting their obligations, shouldn't be saddled with an extra, unnecessary burden."
The agency said it finances $4.2-billion worth of low-interest mortgages through the sale of tax-free bonds. U.S. Internal Revenue Service Rules specifically prohibit that the money from the sale of bonds be lent to home buyers who do not live in the properties.
Nevertheless, the agency in a letter to Steinberg and Senate Housing Committee Chairman Mark DeSaulnier (D-Concord) said it asked its board of directors to revisit the issue of owner-occupancy at its January board meeting. In the meantime, it is temporarily ceasing foreclosure proceedings against "those who may be renting out their residence while staying current on their payments."
DeSaulnier said he is asking the agency to make the change permanent. "CalHFA serves predominately low-income, first-time home buyers," he said. These Californians should not fear foreclosure when they are doing everything right."
-- Marc Lifsher
Photo: A foreclosed Glendale home in September. Credit: Kevork Djansezian / Getty Images