Governor’s Housing Plan

I read with interest your editorial “Housing Relief With the Two-Step” (March 7).

I wanted to bring to your attention the governor’s housing proposal which would also assist in addressing the housing needs for moderate-income borrowers who do not qualify for current programs and cannot obtain a conventional loan.

The governor’s proposal is designed to make homeownership affordable to Californians by providing secondary financing available in the amount necessary to reduce either the principal or to lower the interest rate of the first loan to the point where an eligible buyer can afford to buy a home. The program will be administered by the California Housing Finance Agency.

Under the governor’s proposal, first-time home buyers could purchase a home with a minimum 5% down payment. Debt service on the first loan would be a 30-year fixed term at conventional rates. The second loan would accrue simple, below market rate interest and would not be payable until the first loan is repaid or upon sale or transfer of the property. The program is structured to provide an option of an interest rate buy down, a deferred second mortgage, or both in order to provide the most effective assistance to home buyers.

This program would generate $1 billion in new mortgage capital for purchase and construction of housing in the high-cost areas of California.

It is estimated that this program will provide homeownership opportunities for 5,000 to 6,000 California families.

KARNEY HODGE

Director, California Housing Finance Agency

Sacramento